WHY ARE SCANDINAVIAN COUNTRIES GOOD AT SIMPLY EVERYTHING?

From GDP per capita and Gini coefficient to HDI and happiness, Scandinavian countries are the best application of social democracy in today’s world. This situation has its roots on the consensus driven political culture. Today the term called Nordic Model demonstrates government and economic models in Denmark, Sweden, Norway, Finland and Iceland. This model includes both free market capitalism and welfare state. The United Nations World Happiness Report shows that the happiest nations of the world are the Scandinavian & Nordic nations. There are some economic and basic cultural features of this region.

When we look at the case from the glasses of economics, social corporatism is a considerable feature of Scandinavian countries. What does that mean? For instance, in Sweden and Denmark, by the mediation of government employer federations and labour unions negotiate on issues such as wages. This negotiations preserve the rights of labourers and capital owners. Social corporatism is a well performed example of the mixture of market capitalism and social democracy. Economists refer Scandinavian countries as cuddly capitalism, rather than the cut throat capitalism as in the USA. Free market capitalism is an important part of the growth of the Scandinavian economies, however, in Norway there are lots of state owned enterprises. Important point that must be underlined is that free market capitalism did not lead to great inequality rates. If you look at Sweden’s case, after 1990’s, in contrast with neoliberal economic policies, inequality rate did not change so much. On the other hand, after-accounting tax and transfer payments poverty rates in all of the Scandinavian countries are under the 10%, and this rate can be considered as a success compared to the world.

There is no doubt that, welfare is not just about the numbers, also certain main characteristics are required to maintain the welfare. Some principal institutions are so much developed in these countries. Actually when there is no law, there would be a dangerously unstable situation in terms of all aspects for a country. In Scandinavian countries, rule of law is a highly respected phenomena. If we think in a causal relation, strict rule of law lowers corruption, so government resources are allocated well. Reallocation without corruption results in lowest inequality rates in the world. On the other hand, rule of law causes another path to make growth rates stable: property owning and investment. Residents and non-residents of the Scandinavian countries are aware of the fact that because of the rule of law, their property rights are protected. This awareness increase people’s tendency to invest in these countries. Additionally, Scandinavian countries have openness policies to foreign investment, this also eases to make investment in these countries. There is the last but the most influential feature for all of the phenomena that have been mentioned in these essay: trust. Simple, people trust each other in institutions in their countries. This is a hard topic to measure but there are empirical data[1] from studies of European Commission, OECD and World Values Survey that show that trust in these welfare countries at public level is high.

 

[1] http://ec.europa.eu/public_opinion/index_en.htm

http://www.worldvaluessurvey.org/wvs.jsp

https://ourworldindata.org/trust

http://www.oecd.org/governance/trust-in-government.htm

 

Furkan Demirbaş

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