The future of the Nordic Model

The digital revolution, globalization, and increasing life spans put pressure on the model

Photo: Johannes Jansson / Wikimedia Commons
From left to right, the flags of Denmark, Sweden, Norway, Iceland, and Finland, all considered Nordic countries.

Rasmus Falck
Oslo, Norway

The traditional image of the Nordic Model is a welfare state characterized by a large public sector that provides its citizens with generous benefits, welfare services, and a social safety net. At the same time, the Nordics have been careful to maintain strong public finances. The labor market is highly regulated by collective agreements, education is free and generally of high quality, and a lot of tax revenue is invested in research and development. Other successes are a high standard of living, high levels of employment, relatively small differences in income, and a high level of gender equality.

According to an independent research project on the model, financed by the Nordic Council of Ministers, the countries came through the financial crisis. But can its success continue into the future or is it outdated?

The Nordic Model is already under challenge, and the pressure will increase because of three megatrends: the digital revolution, globalization, and increasing life expectancy. Increasingly powerful digital technology may cause many of today’s workplaces to disappear. It will become increasingly difficult to maintain a large public sector and thereby a high tax burden, as national boundaries will become less significant and businesses and people will become more mobile. Average life expectancy continues to rise, and the proportion of the population that is of working age will decrease. Demand for public safety nets and services will increase, but scope for tax collection will decrease as tax bases become more volatile.

These three major challenges will call for extensive and revolutionary thinking in a number of areas. A highly skilled labor force is vital. The average retirement age has to be raised, and unemployment must be minimized. The labor force must be forced towards the most productive jobs. To accept “creative destruction” and remain at the cutting edge of global technological development is important. Taxes have to be reduced both on labor and corporations. Streamlining of the public sector must continue.

The report summarizes the strengths and weaknesses of reform proposals for Norway. We are one of the world’s richest countries due to oil and gas reserves, and we have low unemployment and high work-related immigration. Our main weaknesses are poor establishment of new businesses and weak results throughout the education system. The report proposes that we must improve productivity in the economy outside the oil and gas sector and review the quality in the educational system at all levels.

Implementing reforms that are necessary in the long term but painful in the short perspective is never easy. Openness to new ideas and methods is needed!

Rasmus Falck is a strong innovation and entrepreneurship advocate. The author of “What do the best do better” and “The board of directors as a resource in SME,” he received his masters degree from the University of Wisconsin-Madison. He currently lives in Oslo, Norway.

This article originally appeared in the April 21, 2017, issue of The Norwegian American. To subscribe, visit SUBSCRIBE or call us at (206) 784-4617.

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