The Nordic model: successes, challenges & the future

Philadelphia discussion digs into the famously prosperous region’s victories and issues

Photo: Michael Kleiner
Panel on the government view, left to right: moderator R. Anthony Salgado, Partner, Blank Rome Law Firm, which represents Aker Shipping AS; Jukka Pietikäinen, Consul General of Finland in New York; and Leif Trana, Minister Counsellor for Economic Affairs, Royal Embassy of Norway in Washington. Jarl Frijs-Maden, Consul General of Denmark in New York, was unable to attend.

Michael Kleiner
Philadelphia, Penn.

Every year surveys show the Nordic countries—Norway, Denmark, Sweden, and Finland—ranking among the world’s best in livability, prosperity, and gender equality. Is there some secret that these countries have that could be replicated elsewhere?

On December 15, the issues were discussed in a program: The Nordic Economic Model: Successes, Challenges, and the Future, at the Federal Reserve Bank of Philadelphia. The program was sponsored by Norwegian American Chamber of Commerce Philadelphia and Global Interdependence Center, in partnership with The Swedish American Chamber of Commerce Philadelphia, Global Philadelphia, and the law firm Blank Rome Maritime.

Speakers pondered whether there is a model or if particular characteristics pertain to the four nations, be they cultural or political. Ambassador Terry Miller, Director of the Center for International Trade and Economics and the Mark A. Kolokotrones Fellow in Freedom, The Heritage Foundation, was the keynote speaker. Two panels followed: The Government View featured Leif Trana, Minister Counsellor for Economic Affairs, Royal Embassy of Norway, Washington; Jukka Pietikäinen, Consul General of Finland in New York; and moderator R. Anthony Salgado, Partner, Blank Rome, while A View of the Markets included Robert Bergqvist, Chief Economist at SEB (Skandinaviska Enskilda Banken); Lars Björk, CEO of Qlik, a business intelligence software company; and moderator Kathleen Stephansen, Chief Economist at AIG. Jarl Frijs-Madsen, Consul General of Denmark in New York, was unable to attend.

Ambassador Miller had the difficult task of reconciling his conservative views with the success of Nordic social policies. He presented a balanced view and discussion was respectful. He also brought results of the index of economic freedom for 186 countries that The Heritage Foundation and the Wall Street Journal conduct annually. They look at regulatory efficiency, government size, openness of competition, rule of law, property rights, intellectual rights, judicial fairness, and tolerance for corruption. Denmark ranks 11, Finland 19, Sweden 23, Norway 27. “You have a conservative think tank and the leading business and financial newspaper in the United States ranking these so-called socialist or welfare-oriented countries in the top 15% of economic freedom, which is free market capitalism,” Miller said. “Words like socialism and capitalism can obscure, as much as illuminate, what is going on. When 25,000,000 people on the planet are happy, those countries must be doing something right.”

Miller’s struggle was in accepting the high taxes and government spending in the Nordic countries. He noted they have not been affected by the debt other countries with similar policies experienced. “Are the Nordic countries above average because of a Nordic model?” he posed. “What are the characteristics? Is it nothing more than welfare states or a form of socialism of high taxes and spending? Is it something else, individual and cultural characteristics? What is the interplay of culture and government?”

Ambassador Miller found six themes that were prevalent: Honesty, Fairness, Efficiency, Industriousness, Trust In Government, Gender Equality, and Cultural Homogeneity. Low tolerance of corruption scores are phenomenal, with Denmark tied for first, Finland second, Sweden fourth, Norway fifth. “Norway deserves special commendation because no country that relies on oil and drilling scores that high,” said Miller.

All the countries score high in business friendliness and easily accessible capital for entrepreneurs, which fell under Fairness. A higher percentage of people work in Norway, but work fewer hours; 73% of the Nordic people work, compared to 65% in developed countries. This he categorized as Industriousness. He found 66% of Norwegians and 58% of Swedes have a high level of trust in government. Personal income tax is high and corporate tax modest in Norway, Denmark, and Sweden. There is a standard Value Added Tax of 25% in all four countries.

“Part of the Nordic model is pro-government, but not anti-business,” he said. “There’s a strong investment in people, education, child care, making it easier to work. That is characteristic in other European countries. However, one characteristic that is quite different is gender equality. All four countries rank in the top five in OECD Gender Equality rankings.”

He doesn’t feel the model can be emulated elsewhere without the context of honesty, trust, integrity in government, and fairness throughout society. What works for 25,000,000 people may not work in the U.S., which has more than 300,000,000 people.

“They have a fundamentally ingrained idea of fairness, that they try to implement every day and through the government,” he said. “Government size is what we struggle with in our rankings. There is no one right size. It may change. The Nordic model is conducive to evolution, change, and experimentation.”

Trana objected to Norway being classified a small economy. “We are the 24th biggest economy in the world,” he said. “We don’t produce everything. Instead we compete for goods made elsewhere. We produce fewer things, import the rest. The discovery of oil makes Norway different. We have $850 billion in the sovereign wealth fund. Oil drives the economy.”

Norway also has different characteristics than other European countries, such as retraining programs for laid off workers when an industry closes, so “workers don’t have to be nervous about moving on.”

A collaboration of employers, employees, and the government came to an agreement on changing the retirement age. “We had change without the social unrest and massive strikes seen in other countries,” said Trana.

Gender equality in the boardroom, where 40% of spots must be held by women, is finally reaping benefits. “Initially, there were complaints ‘we can’t find qualified women.’ Ten years later, it’s good. It takes a while to get qualified candidates, but you have to force the innovation.”

Trana and the Swedes agreed that both countries’ “flat business structure” results in more being accomplished because one manager doesn’t have to consult another.

Björk moved the 20-year old company (Qlik) to the United States eight years ago because of better competition. “The first seven years we were in a small incubator in Sweden and now we’re a $150 million dollar business in the United States,” said Björk. “As a business, we have a Swedish soul. We’re consensus driven. We don’t have to go to another person and another person to get something done. My experience living in this country for eight years is that Swedes are pragmatic and practical. We built the culture by hiring the very best people, no matter where they lived in the world. We have accountability and ambitious targets. We have left the product innovation in Sweden, which is efficient and cost effective.”

“I’m not sure if we have a model as much as common Nordic experience,” Bergqvist said. Some of these were cost, real estate, fiscal, banking, and currency crises in the 1980s and 1990s, and common solutions to those crises. There are also challenges ahead.

“We’re facing challenges of financing the welfare state, an aging population, employment and immigration,” Bergqvist said. “Nordic countries start from a higher cost level with higher ambitions.”

Pietikäinen painted a different picture of Finland, which is the only Nordic country to adopt the euro, leaving the country without control of the currency.

“When we joined the European Union, we gained an image as a schoolmaster lecturing the poor Southern European countries how to deal with the economy,” he said. “We are not in that position any more because our own economy is down. If I was giving these remarks a few years ago, I would be praising Finland’s high credit rating. That is no longer the case. In the crucial 2008 crisis, we lost 80,000 jobs and our external debt doubled. Finns stopped looking for work. Finland is in the unique position between the East and the West. We have the largest border with Russia [in northern Europe]. They are our major trading partner. With the sanctions, our exports declined. We import our oil and gas from Russia. Turkey has now passed Finland as Russia’s favorite tourism spot.”

This article originally appeared in the Dec. 26, 2014, issue of the Norwegian American Weekly. To subscribe, visit SUBSCRIBE or call us at (206) 784-4617.