The Nording model is a controversial topic in the economic, political and social spheres, as it is comprised of a series of ideologies and practices that to outsiders seem fanciful rather than feasible. Subsequently, the Scandinavian model has received both praise and criticism in its holistic approach on aspects concerning human life.
In their Nordic Model Book, the authors, who are both trained in the field of Economics and well acquainted with the inner workings of this model, give not only an ample overview of its functions, but also express the need for reform in the near future. As stated in the preface of the book, they present the characteristics as well as possible flaws of the principles which have been governing the Scandinavian countries for over sixty years. While they praise its sustainability and economic sector as a whole, they also criticise the rising costs that are a result of the extensive welfare benefits and give warnings concerning easy fixes (Torben M. Andersen, 2007) such as encouraging immigration.
The model is again criticised in two articled which aim to debunk the myth that the Scandinavian economy is the pinnacle of advancement, Misconceptions about the Nordic Economies and Why Scandinavia is not the model for global prosperity we should all pursue. In the first article, the author, a Spanish citizen frustrated by the comparison made between Spain’s welfare system and the Nordic one, argues that the two situations are not at all equal and, therefore, it is impractical to suggest that the Scandinavian model would have the same effects as it does in the North. The second article echoes the same sentiment while pointing out that prosperity comes at a price.
In Esping-Andersen’s Three Worlds of Welfare Capitalism, the sociologist identified a system of welfare regime that is distinctly adopted by the Nordic countries, terming it the social-democratic welfare regime. The prime feature of this regime was the principle of universalism which implies that the Scandinavian countries use special policies in order to maintain social equality. Basically the social-democratic welfare system was designed to eliminate social stratification between the working class and the middle class. This strong advocacy for social equality differentiates the Nordic countries from the rest of the Western world.
Other sociologists had also provided further insights regarding the features of the model, describing it as more state-based and emphasising that the state has more vested interests in the provision and financing of social welfare and insurance services and education.
A research paper conducted at the University of Gothenburg (Jörgen Winkel, 2017) states that the Nordic model has regulated industrial relations in the world and has evolved gradually over a long period of time in special historical circumstances. The Nordic Council of Ministers has been studying and discussing the Nordic model. The concept is based on ‘gentlemen's agreement’ and trust between the parties which is reflected in the way the management strategies in the Scandinavian countries have been selected and implemented. There is a great importance is given to social capital that includes three cornerstones: teamwork, trust and justice. Recent studies show that Denmark, Norway, Sweden and Finland occupy leading positions in the world regarding social capital and this may have been the key to the impressive economic growth in these countries.
3. An overview of the Nordic model
The Nordic model, also referred to as Nordic capitalism or Nordic social democracy, is specific to the five Scandinavian countries, Norway, Sweden, Finland, Denmark and Iceland, and it is based on economic and social policies.
Although the model is implemented in all five countries, there are important differences between their policies. The most obvious one is that while Finland, Denmark and Sweden are members of the EU, Norway and Iceland are not and thus appears one of the differences in the fact that they rely heavily on oil and fishing respectively to sustain their economies.
The Scandinavian countries have, according to many indicators, succeeded relatively well in fulfilling their social ambitions. Recently, this has been combined with a satisfactory economic performance in terms of employment and productivity levels as well as growth of GDP per capita. There is indeed a Nordic success story in the sense of a favourable combination of economic efficiency and social equality. The Nordic economic system is, as a result, well-developed and famous for its sustainability. It consists of a free market capitalism, which encourages more and more people to become entrepreneurs and own real estate. Despite their capitalist inclination, a great number of people work in the public sector, amounting to about 30% of the population.
The social sector is progressive and very people-oriented. The Scandinavian countries offer the highest social protection in the world and a large proportion of their GDP is allocated annually to this sector. Their welfare state is very different from other countries, as the government focuses on finding solutions to benefit everyone. This, in turn, builds a relationship between it and the citizens based on trust stemming from the mentality so characteristic of the Nordic countries.
The main goals of this model is to diminish as much as possible the social differences, to bridge the gap between genders and combat the income inequality which is a major issue, especially in the USA. This is achieved especially by enabling an egalitarian income distribution through tax reforms and offering considerable welfare benefits, as well as encouraging labour force participation.
All five countries fare at par or even better than their counterparts in Europe and in the Far West. For example, the rate of unemployment is less than many of other West European countries. All of these countries have lower budget deficits than both their neighbours and the USA. They have also survived the global financial crisis of 2007 and bounced back better than any other European country, to the surprise of EU members. Another one of their greatest accomplishments is having decreased the poverty level from an average of 26% to roughly 7%.
To highlight the impact of the Nordic model on the well-being and continued advancement of the Scandinavian people, it should me mentioned that when it comes to measuring performance and comparing different nations of the world, they generally occupy the top position. This is somewhat surprising and poorly received because the Nordic countries don’t boast about vision shattering figures and neither of them are powerhouses in the international economy. Additionally, in the Human Development Index of 2015 computed by the United Nations Development Program (UNDP) Norway features at the top, along with three other Nordic countries in top 15 and Finland in the 23rd place.
One of the issues that the model has successfully dealt with in the past is globalisation by means of embracing it (Torben M. Andersen, 2007).
There is a balance between high taxes and high social services as the Nordic countries rely on taxes to pay for their social benefits. As a consequence, Denmark and Sweden are at the top of the OECD chart for total tax revenue as a percentage of GDP and Finland is not far behind.
The Nordic Model is not the product of a single plan. It has been constructed step-by-step over more than a century through a series of reforms involving parties from both sides of the political opinions. This model has developed gradually by a long series of reforms and is based on basic rights to tax financed public services for all citizens. Historically it has demonstrated its ability to meet the challenges of globalisation.
Today the european union looks to the Nordic countries in search of role models for how low inequality can be combined with good economic performance (Herald Tribune, 17.9.05).The high employment level is the most remarkable aspect of the Scandinavian model. With the exception of Finland it is running at around 75 percent of the working age population (15 to 64 years of age). Only the Netherlands, although qualified by a very high number of part-time jobs, Switzerland, and the Anglo-Saxon countries reach anything like this level (Iceland, which is also Scandinavian but very small, has the highest level).
An important thing for this results is its educational system, which is based on thinking, not memorizing. For example, the Finland educational system, has no standardized tests. The only exception is the National Matriculation Exam, which everyone takes at the end of a voluntary upper-secondary school. Each student takes a different test and each student has the possibility to choose the subjects.
Nordic people think that "Schools are a shop and parents can buy whatever they want". Every child has the same opportunities to learn, no matter the family background, income, or geographic location. Its educational system is based on innovative teaching methods, an invested government, a commitment to research and development.
4. Case studies
4.1. Norway
Norway, also known for being one of the most heavely taxed countries in the world, is part of the Nordic Model. In this country, the authorities collect taxes from discretionary spending, and also from automobiles, cosmetics, alcohol and tobacco. Not only do people help the government to collect more money for welfares in this way, but they also reduce the pollution (by not owing pollutant cars) and diminish their vices. Still, the greatest government revenue is from the VAT collection. The standard VAT rate is 25%, for food and drink is 15%, and even for the movie theatre tickets and public transportation is 8%. That’s why Norway is one of the most expensive countries in the world. However, the government decided to cut the corporate taxes in order to attract foreign investors, who will also be provided with heavy protection of property rights.
Fig. 1- Norwegian Oil Production
Source:
Even though oil exporting is a significant revenue maker for Norway since the 1970s (representing 66% of their GDP), this thing has caused some problems for the economy. The vast majority of entrepreneurs invest in petroleum related businesses which do not required skilled workforce. This thing concerned the Government Pension Fund of Norway. As a solution, the government applied incentives for creating new industries in the private sector and new small businesses in order to create places to work.
Fig. 2 – Norway's GDP
The welfare system is very beneficial for Norwegians: first of all, the education is well-structured, the state gives a lot of grants and loans for students, and even the university is free. The only downside is that the students have to pay for the housing, books and computer.
The work life is amazing: five week vacation fully paid every year with an average of 37.5 hours of work per week. You can retire at 67 years and, because they really care about one’s health, sickness gives you about one year to recover with full pay. A welfare scheme like this is realised by direct and indirect taxation (people, companies, VAT, special taxes for commodities), the revenue from oil transactions (which is one of the main sources of revenues for the government).
This system showed its efficiency by a low unemployment level (only 4.8%) at a population of 5.3 million people. Moreover, their GDP is incredible ($364.4 billion) with an inflation of only 3.6%.
4.2. Sweden
Environmental issues have long been at the “forefront of Sweden’s agenda” (OECD, p. 228) despite being a country with low population density and moderate economic growth.Sweden’s environmental issues also have a strong international focus due to its strong international interdependencies, such as entry into the European Union and other Nordic cooperative initiatives. Sweden has continued to prove over the years its sustainable development commitment through many national and international undertakings.
Sweden is an export-oriented mixed economy. Sweden has a high standard of living with a mixed system of capitalism and extensive welfare benefits (CIA 2003).Sweden’s economic freedom score is 76.3 running in 15th place in the 2018 Index .Sweden is above the regional and world averages,being ranked 8th among 44 countries in the Europe region .The GDP is estimated at US $511 billion with a real growth rate of 3.2% in 2016(The World Bank).GDP per capita in 2016 was US $ 51.599,87 (The World Bank). The labour force by occupation is 74% services, 24% industry, and 2% agriculture (CIA 2003). Unemployment was estimated at 6.5% in january 2018(The World Bank).(https://www.heritage.org/index/country/sweden)
The Sweden government is a constitutional monarchy. King Carl XVI Gustaf is the chief of state. There are three democratically elected levels of government. the Swedish people are represented by The Riksdag (Swedish parliament) at the national level, which has legislative powers. At a regional level Political tasks are undertaken on the one hand by the county councils, on the other, by the county administrative boards.At the local level each municipality has an elected assembly, the municipal council.( http://www.government.se/how-sweden-is-governed/the-swedish-model-of-government-administration/ ). Sweden’s human development index ranked 14 in 2016 out of 179 countries according to http://hdr.undp.org/en/data .
Sweden has an environmental performance index of 78,being ranked number 9 out of 178 in 2014.( (http://archive.epi.yale.edu/epi/country-profile/sweden)
4.3. Finland
In the 80’s Finland had become an example of a country, where it was possible to combine a high standard of living with a complex social service network. With an economic growth of 4% a year, Finland is at the forefront of Western powers.
Finland provides its citizens generous pensions, high-level healthcare and social benefits for the unemployed.
Something interesting in the Finnish educational system is that, there is a very high trust in the skills of teachers and the system is decentralized, there are no school inspectors.
“Our educational system is based on sampling, not on hierarchy. The purpose of the evaluation is to support development and learning, teachers are not made redundant if students do not get the best grades, but we try better ways” said Reijo Aholainen, experienced international educational policy expert.
4.4. Denmark
The Danish study discusses that transport is essential for the economy and lifestyle of a modern society. At the same time, transport is the source of a number of significant environmental impacts; thus, transport accounts for about 25 per cent of the total end-consumption of energy and about 20 per cent of the emission of CO2 in Denmark.
In the Danish study on factors 4 and 10 related to the transport sector, the focus is on the possibilities for absolute reductions in the pressures from the transport sector by factors of 4 and 10 in the years 2030 and 2050 respectively. In the case study, the activity in question is transport of persons by motor car in Denmark and the environmental aspects in focus are consumption of materials and energy and emissions of CO2. A focus on the life-cycle perspective implies that resource inputs associated with the production, operation and disposal of the selected products and components are incorporated. In addition, the study deals with emissions of NO, and HC and gives a qualitative description of a number of other environmental impacts. Potentials discussed for reducing material consumption, energy use and emission of CO2 are: improved technology, change of transport organisation, change in urban structures and change in lifestyle.
The case study shows that with the present knowledge, it does not seem possible to reach factor 4 and 10 targets – as they have been interpreted in the case study – by the years of 2030 and 2050 respectively, without substantial changes to and reductions of the service offered to motorists by the present modes of transport.
4.5. Iceland
5. Adopting the Nording model in Romania analysis
The Nordic model is open to debate. On one hand, there are those who think that the Nordic welfare state is the best of all possible worlds, a cornucopia that provides everyone with enough resources to fulfil various life projects. On the other hand, there are those with a more grim view, predicting a miserable end for the Scandinavian countries, as a result of the cardinal sin of interfering with the free play of market forces. Therefore, it is undecided at present whether this model will prevail or not.
We propose analysing the impact of such a model on the Romanian economic, political and social systems. Our goals are to determine whether or not it is feasible to even consider implementing it, the possible longevity and sustainability and the pros and cons.
6. Conclusion