Public policy

The prevailing economic doctrine in the Nordics and Europe has it that, the lower the public debt, the more room there is for economic stimulation in downturns, such as the current covid-19 crisis. Denmark, Norway and Sweden with their comparatively low levels of public debt were able to announce relatively large economic crisis packages fairly quickly. Finland has a high level of public debt and is generally less economically flexible due to it being part of the eurozone. Despite the pressure to keep public debt down, the Nordics would do well not to sacrifice important public spending.

A look back at how Sweden and Finland dealt with two key crises in the twentieth century may be enlightening during the current Corona crisis. Firstly, the depression in 1930s, which led to Keynesian interventionalism - with some key differences - brought with it a series of steps throughout the following decades in both countries. Secondly, the global oil crisis in 1970s, when the two countries embraced an approach which heavily steered their national economies into becoming guarantors of smooth-functioning capitalism. While their responses were similar to other western democracies, certain aspects were divergent. There are similarities between the economic policies leading up to 1930s and the post-Bretton Woods capitalism that has lasted since 1970s. The current corona crisis may provide an opportunity for political elites in the Nordics as elsewhere to choose similar paths to back then, namely, either a Keynesian-type of countermovement to free market capitalism, or inward-looking xenophobic nationalism.

Given the striking similarity of the Nordic societies, it is interesting to note how differently some of them have reacted to the current covid-19 crisis. For example, Denmark and Norway were quick to implement a work and school lockdown and close their borders. In contrast, Sweden has raised international interest with a comparatively lax approach to enforcing social distancing by legal measures. Irrespective of which approach is ‘correct’, the diverse reactions have disclosed the different ways each country is run, particularly with respect to the relationship between government and administrative authorities, such as, health boards, as well as to the concerns over the fragility of the democratic system as a whole. These differences are often rooted in historical traditions and experiences. Here, Johan Strang, Associate Professor at the Centre for Nordic Studies at the University of Helsinki, considers some of the reasons for these differences.

The Nordic countries have some of the highest trade union rates of membership in the world. This has by some been attributed to unemployment insurance being largely administered by trade unions. Since around 1910, unemployment insurance in the Nordic countries Denmark, Finland and Sweden has been based on a voluntary system (‘Ghent’), rather than the compulsory system which is common in most other welfare states. However, since 1992, these countries have reformed their insurance schemes, which has had a negative effect on union density. In 1992, Finland introduced an independent fund which is not linked to trade unions, and this has provided workers with a greater number of options concerning unemployment benefits. To workers with low or precarious incomes, the cheaper option of the independent fund can be attractive. While it seems clear that different types of precarious workers choose different types of unemployment insurance options, the introduction of funds not linked to trade unions is likely to have contributed to the already decreasing level of trade union membership in the Ghent countries.

There have been drastic changes to the political and economic climate since the inception of the Nordic welfare states in the twentieth century. Changes are required to meet the needs of today’s populations. People are less static than they once were; their roles both in and out of the job market change over time, and integration with the surrounding world’s economy and peoples influence national systems. Some academics within the Nordics view the welfare state as in crisis, while others believe that bold political choices can help the ‘model’ to adjust to new times.

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.

The entire resident population of the Nordic region is covered by publicly financed comprehensive healthcare systems. These guarantee access to high quality healthcare at minimal or no direct patient cost. Access, treatment and public health are the three key dimensions to healthcare policy in the Nordic countries. Each element is tackled differently on a national or local level, but the overall structure and operation are similar throughout the region. The Nordic countries enjoy some of the best health statistics in the world and are rated highly by the World Health Organisation and in comparative studies.

Hydroelectricity is a significant source of energy particularly in Norway and Iceland. While Greenland has invested in hydroelectricity since 1990, the establishment of new facilities has stagnated elsewhere in the Nordics due to concern about the environmental impact.

Corporatism is about the influence of organisations and interest groups on policy making. The Nordic countries are societies with strong interest groups, acknowledged and privileged by the state, that wield considerable influence on policy making and implementation. Corporatism, or neo-corporatism, is found within industrial relations, but is also relevant in areas like agriculture, traffic, environment, and many others. In the Nordic countries, a number of alternative terms (e.g. ‘negotiating economy’, ‘mixed economy’, or ‘mixed administration’) have frequently been used to describe the same phenomena.

Immigration has been described as one of the policy areas where Denmark, Norway and Sweden have differed most since 1995. In 2018, Denmark was amongst the most restrictive countries in Western Europe, Sweden the most liberal and Norway somewhere in-between. These differences can be explained, at least to some extent, by divergent approaches to national identity and party political dynamics in each country. Increasing politisation of immigration and integration has occurred in all three countries, but has been more marked in Denmark.