Many countries in the global north are experiencing their worst economic crisis since the 1930s. Millions have plunged into unemployment, homelessness and general hopelessness. The annual deficits in government budgets and thus the total government debt are formidable in a number of countries in the EU and in the USA, and in several countries value creation (GDP) is declining . On top of that, the same countries face solid challenges related to global climate change and the coming “aging wave”.
- What is the Nordic model about?
- Why is there so much buzz about the Nordic model right now?
- How can we explain the Nordic region’s strong position in the global society?
- What challenges does the Nordic model face?
The situation creates great challenges and a lot of confusion about what is the right way to move forward. From several quarters – politicians, experts, researchers, commentators – the “Nordic model” is referred to as a possible way out of disability. Even the annual elite meeting in Davos ( World Economic Forum ) has begun to take an interest in what the open economies in the Nordic region have achieved.
So far, these countries (with the exception of Iceland) have benefited from the economic headwinds. They have also coped with important restructuring in production life better than most countries. Do the Nordic countries, which score high on very many «good statistics », have anything to offer other countries? If so, what?
2: Background – the emergence of the model
According to ehealthfacts.org, the industrialization of Norway took place quickly, and the number of industrial workers almost tripled – from 60,000 to 160,000 – in the period 1895−1915. The rapid pace of industrialization contributed to making Norwegian workers more politically radical than in neighboring countries. The extent, intensity and contradictions in the conflicts in the labor market were strong, and somewhat stronger in Norway than in Sweden and Denmark.
In several of the Nordic countries, the contradictions between the classes – ie workers and business owners – were dampened in the first half of the 20th century by the conclusion of so-called main agreements between the organizations in working life. In Norway, this happened in 1935, with the conclusion of the Main Agreement between the National Organization in Norway (LO) and the Confederation of Norwegian Enterprise (NHO), an agreement which is also called the «Constitution of working life». These agreements created a basis for resolving conflicts, and in this way one could reduce the use of weapons such as strikes and lockouts (when the employer excludes employees from work).
In the political sphere, democracy in Europe was threatened in the interwar period. Communist, fascist and Nazi dictatorships were established in many countries. In the Nordic Council’s (established in 1952) review of history, it is emphasized that both communist and Nazi movements had limited influence in the Nordic countries.
In 1933, the Danish Social Democrats and the bourgeois Liberal Party entered into an agreement, the “Kanslergade settlement”, which guaranteed parliamentary stability and state support measures for the economy. Within a few years, all the Nordic countries had entered into such crisis agreements between the Social Democrats and especially the fringe-based part of the bourgeoisie. In Finland, on the other hand, the contradictions between right and left led to civil war in 1918, where the bourgeois “white” side won over the “red”. The Finnish Civil War is an exception to the peaceful development in the Nordic countries, but the wounds healed quickly. As early as 1926, the Social Democrats, who had been on the red side, could form a government, writes the Nordic Council.
The spirit of co-operation led to the development of comprehensive welfare states and a working life characterized by strong organizations and close co-operation between these organizations – also called party co-operation – after World War II. The co-operation between the parties often also includes the authorities at the state, and is then often referred to as tripartite co-operation. These basic features have existed under governments of changing color and are the reason why it is meaningful to use “the Nordic model” as a common term, even though there are differences between the countries.
All the Nordic countries have an open economy to the outside world, with large foreign trade, large public investments and competitive industry – industry that is dependent on having its goods sold on an international market.
3: Characteristics of the Nordic model
The parties’ willingness to see the context of wage policy, the welfare state and the general economic policy – tax policy, interest rate policy and business policy – is an important explanation for and a prerequisite for the Nordic model. The social safety net and the role of the parties in wage formation and productivity development have made it possible to pursue an economic policy that promotes growth, adjustment and fair distribution.
Labor market policy in the Nordic region is characterized by the Swedish Rehn-Meidner model, which aimed to have low unemployment, low inflation, high growth and an even income distribution. The market forces in interaction with contractual wages at the national level mean that unprofitable and unproductive companies (which cannot pay the agreed wage level) are outcompeted. At the same time, an active labor market policy must ensure that vacant labor is moved to more productive enterprises.