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The Nordic model (or Nordic capitalism or Nordic social democracy) refers to the economic and social models of the Nordic countries (Denmark, Finland, Iceland, Norway and Sweden), which involves the combination of a market economy with a welfare state.
Although there are significant differences among the Nordic countries, they all share some common traits. These include support for a "universalist" welfare state (relative to other developed countries) which is aimed specifically at enhancing individual autonomy, promoting social mobility and ensuring the universal provision of basic human rights, as well as for stabilizing the economy; alongside a commitment to free trade. The Nordic model is distinguished from other types of welfare states by its emphasis on maximizing labor force participation, promoting gender equality, egalitarian and extensive benefit levels, the large magnitude of wealth redistribution, and liberal use of expansionary fiscal policy.
The Nordic model is described as a system of competitive capitalism combined with a large public sector (roughly 30% of the work force). 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 the best-governed in the world." The Nordic combination of extensive public provision of welfare and individualism has been described by Lars Trägårdh, of Ersta Sköndal University College, as “statist individualism.” Some economists have referred to the Nordic economic model as a form of "cuddly" capitalism, with low levels of inequality, generous welfare states and reduced concentration of top incomes, and contrast it with the more "cut-throat" capitalism of the United States, which has high levels of inequality and a larger concentration of top incomes.
The Nordic model however is not a single identical set of policies and rules in every country; each of the Nordic countries has its own economic and social models, sometimes with large differences from its neighbors. While Sweden's neoliberal reforms have reduced the role of the public sector over the last decades, and saw the fastest growth in inequality of any OECD economy, Sweden still remains more equal than most societies.
Economic publications, such as "The Nordic Model - Embracing globalization and sharing risks", characterize the system as follows:
- An elaborate social safety net in addition to public services such as free education and universal healthcare.
- Strong property rights, contract enforcement, and overall ease of doing business.[broken citation]
- Public pension plans.
- Low barriers to free trade. This is combined with collective risk sharing (social programs, labour market institutions) which has provided a form of protection against the risks associated with economic openness.
- Little product market regulation. Nordic countries rank very high in product market freedom according to OECD rankings.
- Low levels of corruption. In Transparency International's 2012 Corruption Perceptions Index all five Nordic countries were ranked among the 11 least corrupt of 176 evaluated countries.
- High percentage of workers belonging to a labour union. In 2010, labour union density was 69.9% in Finland, 68.3% in Sweden, and 54.8% in Norway. In comparison, labour union density was 12.9% in Mexico and 11.3% in the United States. The lower union density in Norway is mainly explained by the absence of a Ghent system since 1938. In contrast, Denmark, Finland and Sweden all have union-run unemployment funds.
- A partnership between employers, trade unions and the government, whereby these social partners negotiate the terms to regulating the workplace among themselves, rather than the terms being imposed by law. Sweden has decentralised wage co-ordination, while Finland is ranked the least flexible. The changing economic conditions have given rise to fear among workers as well as resistance by trade unions in regards to reforms. At the same time, reforms and favourable economic development seem to have reduced unemployment, which has traditionally been higher. Denmark's Social Democrats managed to push through reforms in 1994 and 1996 (see flexicurity).
- Sweden at 56.6% of GDP, Denmark at 51.7%, and Finland at 48.6% reflects very high public spending. 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 lifelong job security and make up around a third of the workforce (more than 38% in Denmark). Public spending in social transfers such as unemployment benefits and early-retirement programmes is high. In 2001, the wage-based unemployment benefits were around 90% of wage in Denmark and 80% in Sweden, compared to 75% in the Netherlands and 60% in Germany. The unemployed were also able to receive benefits several years before reductions, compared to quick benefit reduction in other countries.
- Public expenditure for health and education is significantly higher in Denmark, Sweden, and Norway in comparison to the OECD average.
- Overall tax burdens (as a percentage of GDP) are among the world's highest; Sweden (51.1%), Denmark (46% in 2011), and Finland (43.3%), compared to non-Nordic countries like Germany (34.7%), Canada (33.5%), and Ireland (30.5%).
- The Nordic model has been successful at significantly ameliorating poverty. Poverty rates pre-tax/transfer are 24.4% in Denmark, 32.3% in Finland, 21% in Iceland, 25.7% in Norway, and 27.8% in Sweden, and post-tax/transfer poverty rates become 6%, 7.3%, 6.4%, 7.5%, and 9.1% respectively.
- The United Nations World Happiness Report 2013 shows that the happiest nations are concentrated in Northern Europe, with Denmark topping the list. The Nordics ranked highest on the metrics of real GDP per capita, healthy life expectancy, having someone to count on, perceived freedom to make life choices, generosity and freedom from corruption.
- Mixed economy
- Rhine capitalism
- Social democracy
- Social market economy
- Swedish welfare
- Welfare capitalism
- The Nordic Way, Klas Eklund, Henrik Berggren and Lars Trägårdh. 2011.
- Nik Brandal, Øivind Bratberg, Dag Einar Thorsen. The Nordic Model of Social Democracy. Palgrave Macmillan, 2013. ISBN 1137013265
- Pontusson, Jonas (2011). Once Again A Model: Nordic Social Democracy in a Globalized World. pp 89-115 in What's Left of the Left: Democrats and Social Democrats in Challenging Times. Edited by James E. Cronin , George W. Ross, and James Shoch. Duke University Press. ISBN 0822350793.
- "The surprising ingredients of Swedish success - free markets and social cohesion". Institute of Economic Affairs. June 25 2013. Retrieved January 15 2014.
- Esping-Andersen, G. (1991). The three worlds of welfare capitalism. Princeton, NJ: Princeton University Press.
- "The Nordic countries: The next supermodel" The Economist. Retrieved 27 July 2013.
- "The secret of their success". The Economist. 2013.
- Jonathan Hopkin, Victor Lapuente and Lovisa Moller (25 January 2014). Lower levels of inequality are linked with greater innovation in economies. London School of Economics. Retrieved 23 February 2014.
- Kenworthy, Lane (2014). Social Democratic America. Oxford University Press. ISBN 0199322511 p. 88-93.
- Kenworthy, Lane (2014). Social Democratic America. Oxford University Press. ISBN 0199322511 p. 138.
- Olsson, Per (28 May 2013). The reality of Swedish neo-liberalism. CWI Sweden. Retrieved 26 February 2014.
- Swedish riots rage for fourth night. The Guardian. 23 May 2013.
- Higgins, Andrew (26 May 2013). "In Sweden, Riots Put an Identity in Question." The New York Times. Retrieved 29 June 2013.
- Torben M. Andersen, Bengt Holmström, Seppo Honkapohja, Sixten Korkman, Hans Tson Söderström, Juhana Vartiainen. The Nordic Model - Embracing globalization and sharing risks
- Index of Economic Freedom
- "CPI 2012 table". Transparency International. Retrieved 2013-04-23.
- "Trade Union Density" OECD StatExtracts. 2010. Accessed: 3 May 2013.
- Kjellberg, Anders "The Swedish unemployment insurance - will the Ghent system survive?", Transfer – European Review of Labour and Research no 1 2006, pp. 87-98, ISSN 1024-2589. Accessed: 19 January 2014.
- OECD. Growing Unequal? Income Distribution and Poverty in OECD Countries. Organisation for Economic Co-Operation and Development. 2008. p. 232, p. 233
- "Skattetrykket". Danish Ministry of Taxation. Retrieved 2012-06-24.
- Kevin Drum (26 September 2013). We Can Reduce Poverty If We Want To. We Just Have To Want To. Mother Jones. Retrieved 5 October 2013.
- Income distribution and poverty - OECD. OECD
- Carolyn Gregoire (10 September 2013). The Happiest Countries In The World (INFOGRAPHIC). The Huffington Post. Retrieved 1 October 2013.
- Jerry Mander (24 July 2013). "There Are Good Alternatives to US Capitalism, But No Way to Get There." Alternet. Retrieved 27 July 2013.
- Bucken-Knapp, Gregg (2009). Defending the Swedish Model: Social democrats, trade unions, and labor migration policy reform. Lexington Books.
- Christiansen, Niels Finn et al. The Nordic Model of Welfare (2006)
- Hilson, Mary. The Nordic model: Scandinavia since 1945 (2008)
- Kvist, Jon, et al. Changing social equality: The Nordic welfare model in the 21st century (2011)
- Nik Brandal, Øivind Bratberg, Dag Einar Thorsen. The Nordic Model of Social Democracy (2013) ISBN 1137013265
- The Nordic Way — World Economic Forum. Davos 2011
- Utopia sustained: The Nordic model of social democracy. Dag Einar Thorsen, Nik Brandal, Øivind Bratberg. Fabian Society, 8 April 2013.
- The secret of their success. The Economist. 2nd Feb 2013.
- What Can We Learn From Denmark? Bernie Sanders, Huffington Post. 26 May 2013.
- What Is Scandinavia Doing Right? The New York Times. September 25, 2013.