Susanna Fellman

As small, open economies, all the Nordic countries (Denmark, Finland, Island, Norway and Sweden) have been well integrated in the regional and international economy. There have been moves to further intra-Nordic integration, such as, the NORDEK project in 1960s and the establishment of Nordic companies. Each of the five countries has had differing economic relationships with Europe, with Finland currently being the only country to have adopted the euro, and Iceland and Norway the only Nordic countries not to have become members of the EU.

The Nordic countries are today among the richest countries in the world measured by GDP per capita. These countries also come top in more or less every international comparison of competitiveness. This was not the case 150 years ago. In the mid-nineteenth century the Nordic economies lagged behind those of the leading industrialised nations. The economic development in these countries has therefore been swift. At the same time these countries do not resemble the ‘textbook model’ of efficiency: the Nordic economies have been marked by large public sectors, extensive and generous welfare systems, a high level of taxation and considerable state involvement. As a result the ‘Nordic model’ has received considerable international attention.

The five Nordic countries (Denmark, Finland, Iceland, Norway and Sweden) are often characterised as being welfare capitalist, featuring a combination of free market activity and government intervention. However, the institutional frameworks and economic policy models have changed over time, and the ‘model’ used has varied between countries and throughout their history. The success of the Nordic economies has arguably shown that economic prosperity can go hand in hand with the welfare state. Current challenges include increasing wage differentials and an ageing population, however.