Nordic model

The Nordic model (also called Nordic capitalism [1] or Nordic social democracy ) [2] [3] refers to the economic and social policies common to the Nordic countries (Denmark, Finland, Norway, Iceland, the Faroe Islands and Sweden). This includes a combination of free market capitalism and a comprehensive welfare state and collective bargaining at the national level. [4] [5] The Nordic model began to earn attention after World War II. [6] [7]

Although there are significant differences among the Nordic countries, they all share some common traits. These include the support for a „universalist“ welfare state avocation SPECIFICALLY at Enhancing individual autonomy and Promoting social mobility ; a corporatist system involving a tripartite arrangement where representatives of labor and employers negotiate wages and labor market policy mediated by the government; [8] and a commitment to widespread private ownership , free markets and free trade . [9]

Each of the Nordic countries has its own economic and social models, sometimes with large differences from its neighbors. [10] According to sociologist Lane Kenworthy , in the context of the Nordic model „social democracy“ refers to a set of policies for promoting economic security and opportunity within the framework of capitalism rather than a replacement for capitalism. [11]


„The Nordic Model – Embracing Globalization and Sharing Risks“ [12]

  • An elaborate safety net social in addition to public services Such as free education and universal healthcare . [12]
  • Strong property rights, contract enforcement, and overall ease of doing business. [13]
  • Public pension plans. [12]
  • Low barriers to free trade. [14] This is combined with collective risk sharing ( social programs , labor market institutions) which has provided a form of protection against the risks associated with economic openness. [12]
  • Little product market regulation. Nordic countries rank very high in product market freedom according to OECD rankings. [12]
  • Low levels of corruption. [12] In Transparency International’s 2015 Corruption Perceptions Index , Denmark, Finland, Sweden, and Norway were ranked among the top 10 least corrupt of the 167 countries evaluated. [15]
  • High percentage of workers belonging to a labor union . [16] In 2013, labor density was 86% in Iceland, 69% in Finland, 68% in Sweden, 67% in Denmark and 52% in Norway. In comparison, labor density was 14% in Mexico and 11% in the United States. [17] The lower union density in Norway is Mainly Explained by the lack of a Ghent system since 1938. In contrast, Denmark, Finland and Sweden-have all union-run unemployment funds. [18]
  • A partnership between employers, trade unions, and the government, [19] Sweden has decentralized co-ordination while Finland is ranked the least flexible. [12] The changing economic conditions of the world [12] At the same time, the pace of change has increased, and it has increased. Denmark’s Social Democrats managed to push through reforms in 1994 and 1996 (see flexicurity ).
  • The United Nations World Happiness Reports show that the cities are concentrated in Northern Europe. The per capita GDP growth rate, the ratio of people living in poverty, to the number of people living in poverty [20] The Nordic countries aplace in the top 10 of the World Happiness Report 2017 , with Norway and Denmark taking the top spots. [21]
  • The Nordic countries received the highest ranking for the International Trade Union Confederation’s 2014 Global Rights Index, with Denmark being the only nation to receive a perfect score. [22]
  • Sweden at 56.6% of GDP , Denmark at 51.7% and Finland at 48.6% reflect very high public spending . [14] One key reason for public spending is the large number of public employees. These employees work in various fields including education, healthcare, and for the government itself. They often have a greater job security and a third of the workforce (more than 38% in Denmark). Public spending in social transfers such as unemployment benefits and early retirement programs is high. In 2001, the wage-based unemployment benefits were around 90% in Denmark and 80% in Sweden, compared to 75% in the Netherlands and 60% in Germany. The unemployed are also able to receive benefits in several countries.
  • Denmark, Sweden, and Norway in comparison with the OECD average. [23]
  • Overall tax burdens are among the world’s highest-Sweden (51.1%), Denmark (46% in 2011) [24] and Finland (43%). The Nordic countries have relatively low tax rates, which are relatively high. [25] [26]


Labor market policy

See also: Social corporatism

The Nordic countries share active labor market policies as part of a corporatist economic model intended to reduce conflict between labor and the interests of capital. The corporatist system is most extensive in Sweden and Norway, where employing national and national level federations and labor representatives. Labor market interventions are aimed at providing job retraining and relocation. [27]

The Nordic Labor Market is flexible, with laws making it easy for employers to hire workers or introducing labor-saving technology. To mitigate the negative effect on workers, the government labor market policies are designed to provide generous social welfare, job retraining and relocation to limit any conflicts between capital and labor that might arise from this process. [9]

Economic system

The Nordic model is underpinned by a free market capitalist economic system that features high degrees of private ownership [5] with the exception of Norway, which includes a large number of state-owned enterprises and state -owned enterprises. [28]

The Nordic model is described as a system of competitive capitalism combined with a large percentage of the population employed by the public sector (roughly 30% of the work force). [29] In 2013, The Economist described its countries as „stout free-traders who resist the temptation to intervene even to protect iconic companies“ while also looking for ways to temper capitalism’s harsher effects, and declared that the Nordic countries „are probably best-governed in the world „. [29] [30]Some economists have referred to the Nordic economic model as a form of „cuddly“ capitalism, with low levels of inequality, and the „cut-throat“ capitalism of the United States , which has high levels of inequality and a higher concentration of top incomes . [12] [31] [32]

Beginning in the 1990s, the Swedish economy pursued neoliberal reforms [33] [34] that reduced the role of the public sector, leading to the fastest growth in any OECD economy. [35] However, Sweden’s income inequality still remains lower than most other countries. [36]

Norway’s particularities

The state of Norway has the largest number of companies in the world, owning 37% of the Oslo stockmarket [37] and operating the country’s largest non-listed companies including Statoil and Statkraft . The Economist reports that 44% of Norsk Hydro’s shares in the Norsk Hydro’s shares. Where possible. ‚We invented the Chinese way of doing things before the Chinese,‘ says Torger Reve of the Norwegian Business School. [37]

The government also operates a sovereign wealth fund, the Government Pension Fund of Norway -whose partial objective is to prepare Norway for a post-oil future, but „unusually among oil-producing nations, it is also a big advocate of human rights a powerful one, thanks to its control of the Nobel peace prize „. [38]

Nordic welfare model

The Nordic welfare model refers to the welfare policies of the Nordic countries, which also tie into their labor market policies. The Nordic model of welfare in the field of social participation , the promotion of equality , the promotion of equality , and the promotion of equality . [39]

While there are differences between different countries, they all share a broad commitment to social cohesion, a universal nature of welfare provision in order to provide protection for vulnerable individuals and groups in society and maximizing public participation in social decision-making. It is characterized by flexibility and openness to innovation in the provision of welfare. The Nordic welfare systems are mainly funded through taxation . [40]

Despite the common values, the Nordic countries take different approaches to the practical administration of the welfare state. Denmark features a high degree of private sector provision of public services and welfare, alongside an assimilation immigration policy. Iceland’s welfare model is based were „welfare-to-work“ (see: workfare ) model while share of Finland’s welfare state includes the voluntary sector playing a significant role in providing good care for the elderly. Norway relies most extensively on public provision of welfare. [40]

Poverty reduction

The Nordic model has been successful at reducing poverty. [41] In 2011, the percentage was 24.7% in Denmark, 31.9% in Finland, 21.6% in Iceland, 25.6% in Norway and 26.5% in Sweden. After accounting for taxes and transfers, the rates for the year became 6%, 7.5%, 5.7%, 7.7% and 9.7% respectively, for an average reduction of 18.7%. [42] Compared to the United States, which has a poverty level pre-tax of 28.3% and post-tax of 17.4% for a reduction of 10.9%, the effects of tax and transfers on poverty in the Nordic countries are substantially larger. [42]However, in comparison to France (27 pp.) And Germany (24.2 pp.) The taxes and transfers in the Nordic countries are smaller on average. [42]

Religion as a factor

Scandinavian countries have Lutheranism as their main religion. Schroder argues that Lutheranism promotes the idea of ​​a nationwide community of believers and promotes economic and social life. This allows for nationwide solidarity and economic coordination. [43]

Currently, a large number of Scandinavians have been described as being irreligious . [44]


The Nordic model has been positively received by some American politicians and political commentators. Jerry Mander has likened the Nordic model to a kind of „hybrid“ system which features a blend of capitalist economics with socialist values, representing an alternative to American-style capitalism . [45] United States Senator Bernie Sanders (I-VT) has pointed to Scandinavia and the Nordic model as something in the United States . [46] [47] [48] According to Naomi Klein, form Soviet leader Mikhail Gorbachev sought to move the Soviet Union in a similar direction to the Nordic system, combining free of charge with a social safety net but still retaining public ownership of key sectors of the economy – ingredients that he would have believed transformed the Soviet Union into a socialist beacon for all mankind. [49] [50]

The Nordic model has also been positively received by various social scientists and economists. Lane Kenworthy Advocates for the United States to make a gradual transition to a social democracy in the United States, defining social democracy as „The idea behind social democracy is to make capitalism better. and others might think the proposals in my book are not true social democracy.But I think of it as a commitment to utilize to make life better for people in a capitalist economy. -government transfers and services „. [51] Nobel Prize-winning economist Joseph StiglitzThe United States and argues that Scandinavia is now the land of opportunity that the United States once was. [52] American author Ann Jones , who lived in Norway for four years, said „the Nordic countries give their populations freedom from the market by using capitalism as a tool to benefit everyone“, while in the United States “ neoliberalpolitics puts the foxes in charge of the henhouse, and capitalists used the wealth generated by their enterprises and the pluck the chickens „. [53]

Economist Jeffrey Sachs is a proponent of the Nordic model, having pointed out that the Nordic model is „the proof that modern capitalism can be combined with decency, fairness, trust, honesty, and environmental sustainability.“ [54]

The Nordic combination of extensive public provision of welfare and is cultivation of individualism has-been Described by Lars Trägårdh, of Ersta Sköndal University College , as “ statist individualism“. [38]

A 2016 survey by the think tank Israel Democracy Institute found that nearly 60 percent of Israeli Jews preferred a „Scandinavian model“ economy, with high taxes and a robust welfare state. [55]


George Lakey, author of Viking Economics , asserts that the Americans generally misunderstand the nature of the Nordic „welfare state“:

Americans imagine that „welfare state“ means the US welfare system on steroids. Actually, the Nordics scrapped their American-style welfare system at least 60 years ago, and substituted universal services, which means everyone-rich and poor-gets free higher education, free medical services, free eldercare, etc. Drugs of the United States still has. [56]

In his post-socialist transitional period, Jeffery Sachs noted that the specific forms of Western-style capitalism such as Swedish-style social democracy and Thatcherite liberalism are essentially identical:

The main countries must reject any lingering ideas about a „third way“, such as a „market socialism“ based on public self-management or self-management, and go straight for a western-style market economy … The main debate in economic reform should therefore be about the means of transition, not the ends. Eastern Europe will still be arguing over the ends: for example, whether to favor for Swedish-style social democracy or Thatcherite liberalism. But that can wait. Sweden and Britain have complete private ownership, private financial markets and active labor markets. Eastern Europe today [in 1990] has none of these institutions; for it, the alternative models of Western Europe are almost identical. [57]

In a speech at Harvard’s Kennedy School of Government, Danish Prime Minister Lars Løkke Rasmussen addressed the American misconception that the Nordic model is a form of socialism: „‚I know that some people in the US associate the Nordic model with some sort of socialism, ‚he said.‘ Therefore, I would like to make a thing clear. „Denmark is a market economy. ‚“ [58]


The socialist economists John Roemer and Pranab Bardhan criticize Nordic-style social democracy for its questionable effectiveness in promoting relative egalitarianism and its sustainability . Point Out That They Nordic social democracy requires a strong labor movement to sustain the required heavy redistribution, arguing That It is idealistic to think similar levels of redistribution Can Be Accomplished in countries with Weaker labor movements. They note that even in the Scandinavian countries social democracy has been in decline since the weakness of the labor movement in the early 1990s, arguing that the sustainability of social democracy is limited. Roemer and Bardham argues that establishingmarket socialist economy by changing enterprise, would be more effective than social democratic redistribution and promoting egalitarian outcomes, particularly in countries with weak labor movements. [59]

Historian Guðmundur Jónsson argues that it would be inaccurate to include Iceland in one aspect of the Nordic model, that of consensus democracy. He writes that „Icelandic democracy is better than a consecutivist in the marketplace.“ The labor market was rife with conflict and strikes more frequent than in Europe, resulting in strained government trade union relationship. Nordic tradition of power-sharing or corporatism as regards labor markets policies or macro-economic policy management, mainly because of the weakness of Social Democrats and the Left in General. Government and opposition with regard to government and consultation in the United States.[60]

In their paper „The Scandinavian Fantasy: The Sources of Intergeneration Mobility in Denmark and the US“, Rasmus Landersøn and James J. Heckman Compared American and Danish social mobility and founding in Nordic countries . Danish and American social mobility are very similar. It is only after taxes and transfers that Danish economic redistribution policies simply give the impression of greater mobility. Additionally, Denmark’s greater investment in public education if this public investment has been made to improve cognitive skills among the poor. The researchers also found that they could be more confident in their education and training than in the past.[61]

Nima Sanandaji , a libertarian , has criticized the Nordic model, questioning the link between the model and socio-economic outcomes in Scandinavian Unexceptionalism and Debunking Utopia: Exposing the Myth of Nordic Socialism.