13385 the nordic way 120202

The Nordic Way

equality, individuality and social trust

What’s so Special about the Nordics?In international comparisons of global competitiveness, the Nordic countries are almost always found at or near the top. In one meta-index that is an aggregate of 16 different global indices (competitiveness, quality of life, equality, etc.) the four main Nordic countries top the list.1

What are the reasons? Is there such a thing as a common “Model” particular to the Nordic region and if so, will it last? Is it transferable to other parts of the world?

In this brief we provide bits and pieces of some plausible explanations for the relative success of the Nordic societies. We hope these experiences can improve the under-standing of our way of doing things and inspire debate and development in other parts of the world. Shared values are also about sharing experiences with others.

The fact that Nordic countries show resilience during the recent financial crisis largely seems to be the result of deep crises in the Nordic region in the 1980s and 90s. During these crises, the Nordic countries renewed and modernized their re-spective economies.

Klas Eklund (senior economist at SEB and adjunct professor of economics at Lund University) consequently claims that what we ought to search for is not a crisis-free “Nordic model” but rather a “Nordic experience,” efficient ways to handle deep cri-ses. Social cohesion and political transparency seems to have played a role in mak-ing tough reforms possible.

The second article by Henrik Berggren (historian, former political editor of Dagens Nyheter) and Lars Trägårdh (historian, professor at Ersta Sköndal University Col-lege) addresses precisely this issue. Many people see the Nordic countries as some kind of compromise between socialism and capitalism. According to Berggren-Trägårdh, it is instead the combination of extreme individualism and a strong state that has shaped the fertile ground for an efficient market economy.

Kristina Persson (Executive President of Global Utmaning and Chairman of the Nordic Association) underlines the dimension of inclusion in the previous authors’ arguments. She takes a closer look at the Swedish welfare system and presents policies that focus on productivity, social protection and inclusion. She sorts out the importance of local self-governance and the role of taxes in Sweden and in other Nordic countries.

Barbro Hedvall (journalist, special advisor and former editorial writer) describes a region in which women do not have to choose between family and career, in which women have essentially the same political posts as men, and in which they are slowly getting a footing in the corporate power sphere. On paper women have long had the same opportunities as men, and in recent years attitudes in Nordic societies regarding gender roles have begun to genuinely change.

Economic performance also benefits from low transaction costs, generally delivered by social trust, adherence to laws and low levels of corruption. According to several well-known studies2 it is the most modern and individualistic countries, most nota-bly the Nordic countries, that are characterized by such broad social trust.

We believe—like the five authors— that it is not enough to share values. Values also have to be translated into institutions, rules and legislation. Cultural and social values are not easily transferable across borders, but systems and policies that have proved to work well might still serve as an inspiration for others.

Stockholm, February 1, 2010

Annika Rembe Kristina Persson

Director-general, Swedish Institute Director, Global Utmaning and The Nordic Association

1 Tällberg Foundation, 2009 2 World Values Survey, Eurobarometer, European Social Survey, European Values Survey

NORDIC CAPITALISM: LESSONS LEARNED

rency tightly pegged to the euro. Sweden is also an EU member with no opt-out—yet is none-theless not a member of the euro zone and has a floating currency. Norway, finally, is neither in the EU nor in the euro zone. Four countries, four different strategies.

Of course, there are economic similarities. All four are small, open economies with high per capita incomes. All have a rather large public sector with high taxes, and all have inclusive welfare states. But they have different histories and structures. The richest Nordic country—Norway—largely bases its accumulating wealth on oil and gas rev-enues. Denmark’s economy is based on transport and agriculture. Sweden is successful in manu-facturing, pulp and paper, telecom and design. Finland’s industrial structure is similar to that of Sweden but the manufacturing sector is not as broad. Denmark and Sweden have the high-est tax-to-GDP ratios in the world. Finland has lower taxes.

During the recent financial crisis, the four main Nordic countries showed resilience. They suffered during the downturn but

rebounded fairly quickly. None of them went through any devastating banking crisis. Although the Danish real estate market took a beating, none of these countries is showing dangerous budget deficits, and none of them has current ac-count problems.

Their resilience has rekindled international in-terest in what is sometimes called “The Nordic Model.” However, one should be very careful about using such a term. It is difficult to find any kind of common Nordic economic blueprint that is transferable to other countries. Actually, in im-portant respects, the Nordic countries follow dif-ferent economic strategies. This is most visible in their stance toward the euro. Finland is a member of the European Union (EU) and has adopted the euro. Denmark is an EU member, with an opt-out from the currency union—but still keeps its cur-

Nordic Capitalism: Lessons LearnedKlas Eklund

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NORDIC CAPITALISM: LESSONS LEARNEDNORDIC CAPITALISM: LESSONS LEARNED

Learning from Previous Crises

More importantly, the Nordic countries have not been free from crises. On the contrary, I would claim that one important reason for their relative success today is the fact that they suffered deep crises in the 1980s and 1990s—and were able to learn from them. All of them used their crises to modernize their economies, reforming rather staid systems and making them more flexible.

In this sense the Nordic countries are turnaround cases. Within a few decades they have gone from poorly performing to strongly performing econ-omies. But there is no clear common pattern in their crisis strategies. The Danes started their turnaround as far back as the late 1970s, the Nor-wegians had their crisis in the 1980s, while the Swedes and Finns did not suffer theirs until the 1990s—then in a more brutal way.

Denmark used to have the most troubled economy in the Nordic area, suffering from both inflation and high unemployment. It joined the European Union as early as 1973 (far ahead of Finland and Sweden) and decid-ed early on that a fixed currency was necessary to overcome inflation and lack of economic policy credibility. In 1982 the Danish krone was pegged to the D-Mark. A number of tough austerity programs in the 1980s—notably the “potato cure”—made stability possible and the exchange rate credible, but at the same time pushed up unemployment. As a response, la-

bor market policy became much more flexible. Eventually, the result was low inflation and a gradually improving labor market.

Norway suffered a prolonged financial and real estate crisis in the late 1980s, after a mis-managed credit boom, which ended in a sys-temic crisis and the nationalization of major banks. In the early 1990s, government, labor and management made an agreement accord-ing to which tight fiscal policy should contrib-ute to stabilizing production and employment and wage policies should aim at competi-tiveness in the export sector, while monetary policy was initially geared toward a stable ex-change rate. During the European currency crisis in 1992, monetary policy makers instead adopted an inflation target and accepted a floating currency.

In both Finland and Sweden, the 1980s were years of high inflation and weak currencies. Both nations had gone through several de-valuation cycles, with ensuing high inflation. Both—like Norway—had problems in control-ling the aftermath of credit market deregula-tion, and both were hit by economic shocks in the early 1990s. Finland suffered from the col-lapse of trade with the Soviet Union, and Swe-den from high interest rates to protect a fixed exchange rate. The result was banking crises, followed by severe recessions with falling GDP levels and rapidly rising unemployment. The numbers were astounding. In Sweden, the

When the World Economic Forum compiles its competitiveness index, this is based on a weighting of twelve “pillars,” such as education, infrastructure, market efficiency, etc. In the recent Report, the four main Nordic countries beat the EU in all different pillars. At the same time the Nordics beat the US in nine out of twelve pillars, losing out only in market size (of course), innovations and “labor market efficiency.” The latter definition, however, is debatable since the “flexicurity” of the Nordic economies is another way of organizing the labor market than the Anglo-Saxon way—different, but not necessarily less “efficient.”

Source: World Economic Forum Global Competitiveness Report 2010-2011

Strong Nordic Competitiveness

Innovation

Institutions

Infrastructure

Macroeconomic environment

Health and primaryeducation

Higher education and training

Goods market efficiency

Labor market efficiency

Financial marketdevelopment

Technological readiness

Market size

Business sophistication

7

6

5

4

3

2

1

Nordic (FI, DK, SE, NO) United States EU 27

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This framework has given both countries a stable low-inflation environment. In Sweden, a new partly-defined-contribution public pension sys-tem replaced the old defined-benefit system.

On top of that, Finland and Sweden were well positioned to reap huge benefits from the “new economy.” They have world class IT and telecom companies, as well as a tradition of good inter-national management. The result has been rapid productivity growth. Denmark has benefited from expanding global trade and increasing demand for agricultural products. Norway, of course, has gained from the ever-growing demand for com-modities and energy.

It should be noted, though, that these four Nordic countries have not been immune to the strains suffered by other countries during the recent cri-sis. The Danish real estate market has taken a se-vere hit, due to its high pre-crisis valuation, and private debt is still high. In Sweden, some banks lent heavily to the Baltic countries, which suf-fered a terrible crash. Swedish real estate prices have until recently been soaring—leading some economists to fear that a new bubble is under way. Still, as a group, the Nordics have fared bet-ter than most countries. And scarred from the banking crises of the early 1990s, Nordic banks did not venture into exotic and dangerous credit derivatives.

In my mind, this relative Nordic success story is largely due to the crisis management of the

1980s and 1990s. Here, of course, is a lesson to be learned by continental European countries: a swift and resolute reform strategy may yield bet-ter results than a wishy-washy, drawn-out one.

A Nordic Experience in Crisis Management?

The policy lessons from the Nordic experience show it is possible to regain stability, and for crises-ridden economies to recover. We should, however, be aware that in all countries it took deep crises to trigger the necessary reform programs.

But this conclusion, of course, raises a more fun-damental issue. What made it possible for the Nordic countries to actually make good use of their respective crises? President Obama’s former Chief of Staff, Rahm Emanuel, famously quipped “Never let a good crisis go to waste.” But many countries do. How come the Nordic countries did not waste theirs? Are there some common ele-ments in the Nordic way of handling crises which are beneficial and could be emulated in other countries? Is there a certain “Nordic experience” from which we might learn?

Once again, it is almost impossible to create blue-prints for other countries, with different charac-teristics, in different times. And as seen above, the four countries followed different strategies as regards currency policy, income policy, etc. Nonetheless, there are certain common traits in

budget deficit peaked at 12 percent of GDP, and the central bank’s key interest rate peaked at 500 percent. Unemployment quadrupled. In Finland, joblessness reached almost 20 per-cent. Not until hard currency policies were abandoned in 1992 was it possible to lay the foundations of a turnaround, but a period of tight fiscal policies made the recovery painful.

Nordic economic performance in the 1970s and 80s was not very successful, to put it mildly. In-stead, all four countries suffered deep recessions.

Since then, these countries have shaped up. The reason, however, is not that taxes have been hiked or benefits have become more generous or any other such actions which many people may associate with a “Nordic model.” On the contrary, economic policy in all four countries, but to a dif-ferent extent, has been modernized, not least by market reforms.

Policy Makeover

The high inflation policy of previous decades has been replaced by national inflation targets in both Sweden and Norway, whose central banks have been pioneers. Denmark and Finland, of course, adhere to the ECB target. In this sense, they all have inflation targets, albeit in the Danish case via a fixed exchange rate. The sloppy budget prac-tices of yesteryear have been replaced by strict budget rules. In both Sweden and Finland, fiscal

tightening amounted to some 7-8 percent of GDP in the mid-90s, mainly through expenditure cuts. In Sweden, the national budget targets today are much tougher than in the euro zone, requiring the government to show a hefty surplus in good years in order to obtain a small surplus over the economic cycle as a whole, aiming to reduce gov-ernment debt.

In Norway, revenues from oil and gas now have to be handled according to strict rules in order to keep the government budget more or less bal-anced. The bulk of revenues is put into a sov-ereign wealth fund—the Government Pension Fund Global—for future needs and investments. Moreover, a “fiscal policy rule” limits the structural non-oil budget deficit over a full economic cycle to the 4 percent expected real return on the fund.

In all four countries, several markets have been deregulated. Taxes have been cut, as well as ben-efit levels. In Sweden, the tax ratio (total tax reve-nue as a share of GDP) has fallen from 56 percent in the late 1980s to 47 percent this year. Expendi-ture has come down even faster, turning a budget deficit into a structural surplus.

Both Finland and Sweden—mainly because of the political trauma created by deep recessions—were able to push through comprehensive reform programs. In only a few years in the mid-90s, a radically new macroeconomic framework was put in place, with independent central banks, strict budget rules, deregulation and lower benefit levels.

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how these countries answered the challenges. All four have a tradition of consensus-seeking policy solutions—the obvious example here is the Nor-wegian deal between the government, labor and management.

Also, their economies are open and protectionism is out of the question. Labor unions are positive toward new tech-nology. And they all—more or less—adhere to the view that sick leave and unemployment insurance systems should be shaped in ways which are both generous and growth-promoting. This creates a certain social cohesion, which may have beneficial effects on policy-making and growth. The combination of liberal labor laws (it is comparatively easy to hire and fire) with gen-erous benefit levels and an active labor market policy has been dubbed “flexicurity”, since it aims to combine both flexibility and security.

This system, however, does not always function as intended. It has not prevented unemployment from rising over the long-term or during the re-cent crisis. And it has not been able to fully prevent

the creation of a large group of structurally unemployed immi-grants, who are now creating rifts in previous homogeneous countries. Nonetheless, it may be an important part of the an-swer to the questions about the Nordic experience.

However, this raises new questions and pushes us to the next analytical level: How come the Nordic countries have adopted this “flexicurity” model, with its strong emphasis on labor and work ethics? Here, the wretched economist must leave the floor to the historians. Precisely this is-sue is analyzed in the next essay by Lars Trägårdh and Henrik Berggren.

Is there a certain “Nordic experience” from which we might learn?

One of the indices in the World Economic Forum Competitiveness report concerns the transparency and efficiency of public institutions. In the recent report, four out of the six top spots in this “pillar” were clinched by the main Nordic countries.

Source: World Economic Forum Global Competitiveness Report 2010-2011

Trustworthy Public Institutions in the Nordics

7

6

5

4

3

2

1

Global Competetiveness Index 2010–2011

1st pillar: Institutions

1 2 3 4 5 6 7

DK

NO

FI

SE

10 11

SOCIAL TRUST AND RADICAL INDIVIDUALISM

In a broad global perspective, the Nordic re-gion may seem of marginal significance. The combined population of the Nordic countries

is only 25 million people, but in qualitative terms there is an argument to be made for the viability of the Nordic strand of capitalism.

As Klas Eklund shows in his article, the region has emerged in good shape from the recent fi-nancial crisis, with budget surpluses and low lev-els of public debt. In a longer perspective the four main Nordic countries are characterized by steady growth, long-term political stability, transparent institutions, technological adaptability, flexible la-bor markets, open economies and high levels of education. All these factors tend to put the Nor-dic countries at the top of international ranking lists both in terms of economic clout and quality of life. It has also been argued that this makes the Nordic countries better equipped to deal with fundamental challenges concerning sustainabil-ity in general and global warming in particular.

How, then, can we explain the relative success of Nordic capitalism in a globalized world? One possibility is that Nordics by nature are unusually cooperative, rational and less prone to succumb to the lure of market egoism than other people. If that is the case, there is not much to be learned from the outside—other than that the world might be a more reasonable but also possibly duller place if it were inhabited solely by Swedes, Danes, Norwegians and Finns.

However, if we assume that the citizens of the Nordic countries are on the whole similar to oth-er human beings in their passions, both good and bad, other factors come into play: the social prac-tices, the long-term institutions and historical ex-periences that underpin Nordic capitalism. This is not to imply that there is a free-floating Nordic model that can be applied to other countries. But it does mean that some aspects of Nordic capital-ism might be relevant in addressing the problems of globalization, social fragmentation and the in-stability of modern finance capitalism.

Social Trust and Radical IndividualismThe Paradox at the Heart of Nordic Capitalism

Henrik Berggren / Lars Trägårdh

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SOCIAL TRUST AND RADICAL INDIVIDUALISMSOCIAL TRUST AND RADICAL INDIVIDUALISM

Individual Autonomy and Social Trust

What then, are the most outstanding characteris-tics of Nordic society that are specifically relevant to the efficiency of its economy? Traditionally, outside observers have put a strong emphasis on social solidarity—an ability to subordinate indi-vidual interest to collective rationality. Often, this stress on solidarity has been under-stood in opposition to the fun-damental logic of the market: certain collective goods have been “decommodified” and effectively removed from the cold logic of the market society. Indeed, this was a perspective that Marquis Childs made famous as early as the 1930s, when he wrote Sweden: the Middle Way, suggesting that Sweden had found a way to a healthy balance between altruistic socialism and selfish capitalism, to use the crude binary of that period.

But this is, at best, a half-truth. This emphasis on social solidarity hides the strong, not to say ex-treme, individualism that defines social relations and political institutions in the Nordic countries. Indeed, it is precisely the fundamental harmony between the Nordic social contract and the ba-sic principles of the market—that the basic unit of society is the individual and a central purpose of policy should be to maximize individual au-tonomy and social mobility—that we see as the key to the vitality of Nordic capitalism. In a Eu-ropean perspective, the Nordics do not hold par-

ticularly strong leftist attitudes in terms of equal-ity of classes versus individual freedom, equality of pay versus merit-based differentials or state versus private ownership of industries. As Ole Listhaug has put it: “This could well demonstrate a higher level of individualism and support for market principles than is traditionally attributed

to the citizens of Scandinavia.” Indeed, while recent stud-ies underline the link between relative equality and a well-functioning economy typical of the Nordic societies, even more

significant may be data that show higher rates of social mobility in the Nordic countries compared to, for example, the United States.

Nordic Individualism

While much has been written about the insti-tutionalized aspects of the Nordic welfare state, few have paid much attention to its underlying moral logic. Though the path hasn’t always been straight, one can discern over the course of the twentieth century an overarching ambition in the Nordic countries not to socialize the economy but to liberate the individual citizen from all forms of subordination and dependency within the fam-ily and in civil society: the poor from charity, the workers from their employers, wives from their husbands, children from parents—and vice versa when the parents become elderly.

In practice, the primacy of individual autonomy has been institutionalized through a plethora of laws and policies affecting Nordics in matters minute and mundane as well as large and dra-matic. Interdependency within the family has been minimized through individual taxation of spouses; family law reforms have revoked obli-gations to support elderly parents; more or less universal day care makes it possible for women to work; student loans without means test in re-lation to the incomes of parents or spouse give young adults a large degree of autonomy; children are given a more independent status through the abolition of corporal punishment and a strong emphasis on children’s rights.

All in all this legislation has made the Nordic countries into the least family-dependent and most individualized societies on the face of the earth. To be sure, the family remains a central so-cial institution in the Nordic countries, but it too is infused with the same moral logic stressing au-tonomy and equality. The ideal family is made up of adults who work and are not financially depen-dent on the other, and children who are encour-aged to be independent as early as possible. Rath-er than undermining “family values” this could be interpreted as a modernization of the family as a social institution. While accepting the fact that long-term spousal commitment is no longer the norm, the “new Nordic family” takes parenthood seriously, both in a demographic sense (the Nor-dic countries have higher birth rates than more traditional family cultures in southern Europe)

A strong emphasis on social solidarity

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and in terms of the time that parents, married or not, spend with their children.

In quantitative terms, data from the World Val-ues Survey (WVS) confirm this picture, indicating that the Nordic countries stand out as a cluster of societies in which people put a strong emphasis on the importance of individual self-realization and personal autonomy. In the language of WVS, the Nordics are characterized by their embrace of “emancipatory self-expression values” on the one hand, and “secular-rational values,” on the other.

One effect of this radical individualism is that, relatively speaking, people in the Nordic coun-tries are more willing to accept the market econ-omy both as consumers and producers. Less tied down by legal and moral obligations within the family, yet still protected from extreme risk by a universal safety net, they become more flexible on the labor market, while as individual consumers they have developed far-reaching needs of prod-ucts and services that previously were satisfied within the traditional family. This market orienta-tion is enforced in a number of ways in the Nordic countries, not least by a social insurance system based on the recipient’s level of earned income on the open labor market, thereby creating an incentive to work while at the same time pro-viding adequate coverage for illness, unemploy-ment and parental leave. Currently, the most fa-mous example is the Danish “flexicurity system.”

To this should be added the historical legacy em-phasizing equal access to fundamental goods, not just healthcare and pensions, but also education. This has translated into a long history of investing in individuals and providing access to resources that allow them to maximize their value in the market place. Historically the countries with the highest rates of literacy, Nordic countries have for a long time scored at the very top when it comes to basic education and investment in research. For this reason, rather than speaking of a “welfare state,” which many English speakers associate with social assistance and long term dependency on the state, some scholars now prefer the term “social investment state.”

The Institutional Foundations of Social Trust

The image of a strongly individualized market society filled with solitary consumers might seem bleak and materialistic. But although this may be true in some sense, the significant social phe-nomenon is that Nordic individualism has not led to the anomie, alienation and breakdown of general trust that traditional social theory has as-sociated with the shift from warm Gemeinschaft to cold Gesellschaft.

The underlying assumption of these theories is that trust arises in small, closely-knit communi-ties where there is large degree of interdepen-dence. More recent research has shown, however, that it is the most modern and individualistic

Secu

lar-

Ratio

nal V

alue

sTr

aditi

onal

Val

ues

2.0

1.5

1.0

0.5

0

-0.5

-1.0

-1.5

-2.0

Survival Values

-2.0 -1.5 -1 -0.5 0 0.5 1 1.5 2

RussiaBulgaria

Estonia

BelarusUkraine

MontenegroLatvia

AlbaniaMoldova

Macedonia

Bosnia

Romania

Serbia

Hungary

China

S. Korea

East Germany

Czech

Slovenia

Slovakia

Croatia

Poland

GeorgiaAzerbaijan

Armenia

India Vietnam

Turkey

BangladeshIndonesia

PhillippinesIran

JordanZimbabwe

MoroccoAlgeria Egypt

Portugal

Chile Argentina

Dominican RepublicPeru

Brazil

MexicoVenezuela

Colombia

El SalvadorPuerto Rico

Ireland

N. Ireland

U.S.A

Australia

Canada

New Zeeland

Great Britain

France

Belgium

Luxembourg

Austria

Italy

Spain

Uruguay

Uganda

Sweden

Norway

Japan

West Germany

Finland

Denmark

Netherlands

Switzerland

Iceland

Taiwan

Self-expression Values

ProtestantEurope

Englishspeaking

Latin America

Africa

Factor Score

Tanzania

Ghana

Confucian

CatholicEurope

Ex-Communist

Pakistan South Africa

South Asia

Nigeria

Lithuania

Greece

Israel

Rational and Self-expression Values Dominate in the Nordic Region

Source: World Values Survey (WVS), fourth wave (1991-2001). See also, Ronald Inglehart and Christian Welzel, Modernization, Cultural Change, and Democracy: The Human Development Sequence. Cambridge: Cambridge University Press, 2005.

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countries, most notably the Nordic countries, that are characterized by a broad social trust extended beyond the intimate sphere of family and friends to include other members of society.

Again we find that the Nordic countries (and the Netherlands) stand out in studies such as World

Values Survey, European Social Survey, European Values Survey and Eurobarometer. In addition to putting a strong emphasis on individual self-realization these countries are characterized by a high degree of social trust: well over 50 percent of respondents claim to trust other people, in-cluding strangers. This social trust furthermore

co-varies with a high degree of trust or confi-dence in common institutions, such as the system of justice, public administration, the institutions of the state, etc.

From an economic point of view, social trust and adherence to the rule of law translate into a great systemic advantage, which we fundamentally can describe in economic terms as “low transac-tion costs.” Here, it should be added, we include not only sheer or direct economic transaction costs related to a lower need to resort to written contracts, legal protections, law-suits, and huge amounts of bureaucratic paperwork, but also so-cial and political transaction costs that constitute indirect burdens and inefficiencies that ultimately translate into added financial costs.

One clear example of how a combination of so-cial trust and respect for the rule of law results in lower transaction costs is the Land Survey of Sweden (Lantmäteriet) which has been registering the ownership of property since the 17th century. Because of the exact recording of property bound-aries and the general trust in the impartiality of this state agency, the amount of litigation over property rights has been negligible, which both lessens the economic costs for the individual and pre-empts many possibilities of social conflict.

Another example is labor market relations in the Nordic countries, which, though not always peaceful, have been characterized by a mutual respect for negotiated contracts among both

Generalized Trust: An International Comparison

DENMARKSWEDEN

NETHERLANDSFINLAND

UNITED KINGDOMSPAIN

IRELANDGERMANY

EU15ESTONIAAUSTRIA

LUXEMBOURGEU25

BELGIUMTOTAL

HUNGARYSLOVENIA

PORTUGALMALTAITALY

FRANCEBULGARIA

CYPRUS (SOUTH)GREECE

ROMANIACZECH REPUBLIC

SLOVAKIANMS10LATVIA

LITHUANIAPOLAND

0 10 20 30 40 50 60 70 80

Source: the EuroBarometer 62.2 (2004). Data weighted.% of respondents

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employers and unions. It should be noted that for most of the 20th century, political legislation has played a much smaller role in regulating la-bor market relations than voluntary agreements between strong unions and equally strong em-ployer’s federations, often at the national level.

of a democratic decision-making process and grounded in common values, will determine how well they work. The more accepted and internal-ized, the less prominent is the specter of corrup-tion and lawlessness.

The central axis around which the Nordic social contract is formed is the alliance between state and individual, what we call “statist individual-ism.” Here an emphasis on individual autonomy coincides with a positive view of the state as an ally of not only weaker and more vulnerable citi-zens, but the citizenry at large. This is coupled with a negative view of unequal power relations

between individuals in gen-eral and hierarchical institu-tions in particular, such as the traditional patriarchal family and demeaning chari-table organizations in civil society. In this regard, the Nordic model differs from both their Anglo-American

and continental European counterparts.

Above we try to capture these different dynamics of power in modern welfare states graphically as a “triangle drama” by contrasting the position of state, family and individual in the U.S., Germany, and Sweden. In the Nordic countries, as we have indicated, the state and the individual form the dominant alliance. In the U.S., individual (rights) and family (values) trump the state (always seen as threat to liberty). In Germany, finally, the

Power Relations in Modern Welfare States

State

Germany

FamilyUnited States

Individual

Sweden

Dynamics of power in modern welfare states. Graphically illustrated as a “triangle drama” by contrasting the position of state, family and individual in the U.S., Germany, and Sweden.

Source: Henrik Berggren och Lars Trägårdh, “Pippi Longstocking: The Autonomous Child and the Moral Logic of the Swedish Welfare State” in Helena Matsson and Sven-Olov Wallenstein (eds.), Swedish Modernism: Architecture, Consumption and the Welfare State. London: Black Dog Publishing, 2010.

More recent examples include the radical refor-mation of the pension system, the handling of the financial and banking crisis and the introduction of a voucher system for preschools and primary and secondary schools, as well as the freedom for citizens and residents to choose among competing

private as well as public providers of primary healthcare and elderly care, all dating back to the early 1990s. What is remarkable is that these were bold political decisions that carried political risk and challenged many long-held positions in the differ-ent parties. Agreement was possible only because of shared fundamental confidence in the political institutions as such, as well as trust in the goodwill of members of parties other than one’s own.

What Are the Historical Roots of the Nordic Social Contract?

As we noted, social trust and trust in institutions also co-vary with low levels of corruption. Historically the Nordic region also stands out as a “community of law”; indeed it was a community of law before the individual Nordic states were consoli-dated. Rule of law was central to the social contract that un-derpinned the emerging state, and adherence to the law by the King and his administration was crucial to the legitimacy of the state.

The trust in and reliability of institutions thus depend on the acceptance of the rule of law, but even more important is the extent to which the values implicit in formal law are also internalized and embedded as social norms. Or put differ-ently, the extent to which laws, rules and insti-tutions are viewed as legitimate, as the outcome

Has Sweden found a way to a healthy balance between altruistic socialism and selfish capitalism?

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and (statist) individualism are inextricably linked to each other. Whatever political and cultural drawbacks there might be to this commitment to personal autonomy, a strong state and social equality—the usual criticisms are conformity, loneliness and an intrusive bureaucracy—one should note the upside: citizens, who feel em-powered, accept the demands of modernity and are willing to make compromises to achieve eco-nomic efficiency and rational decision-making.

Is the Nordic Instantiation of Capitalism Sustainable?

The imminent death of the Swedish or Nordic model has been announced many times. It dates back to the Cold War disenchantment with Childs more celebratory account of a “middle way,” which resonated better during the era of the Depression and the New Deal. And since then it has been a recur-ring trope, especially in the U.S. To some extent, the failure of these predictions can be traced to a misunderstanding that has been shared by en-thusiasts and critics alike, namely that the Nordic countries were built on a compromise between socialism and capitalism. For critics that meant that given enough time, the costly and unproduc-tive “socialist” elements of the model were bound to overwhelm the productive “capitalist” aspects that had been allowed to remain. However, as we

have argued in this essay, these arguments rest on flawed assumptions that tend to underplay the fundamental coherence and vitality of Nordic capitalism.

Of course, this is not to say that these countries are any more immune to recessions and global financial crises than other capitalist countries, or that they have not been set back economically from time by bad policy decisions at the national level. However, on the whole Nordic capitalism has proved remarkably sustainable, certainly ac-cording to the measures and data that we have available today.

Still, questions can be raised about the future sustainability and relevance of the model. Some argue that the increased ethnic, racial, and re-ligious diversity linked to the influx of refugees

constitutes a deep chal-lenge to the social cohe-sion of Nordic society. The political consequences are already visible in the rise of anti-immigrant parties

throughout the Nordic countries. Insofar as im-migrants and minorities are perceived as both burdens to the welfare system and as a threat to national culture, questions are also raised as to whether broad support of a tax-based system of social services can be sustained.

Another pessimistic line of argument centers on the impact of neoliberalism on the Nordic social

On the whole Nordic capitalism has proved remarkably sustainable

central axis is the one connecting state and fam-ily, with a much smaller role of either U.S.-style individual rights or a Nordic emphasis on indi-vidual autonomy.

This came to the forefront after World War I, when the Nordic countries undertook a joint effort to modernize family legislation in each country that, with some variances, resulted in the most gender-equal marriage laws according to the general Euro-pean standards of that era. These laws determined that man and wife were equal in terms of the mar-riage contract, though still responsible for different spheres within the domestic arrangement.

The egalitarianism of Nordic society is, of course, an often noted feature of social and political life in these societies. This is also true of the promi-nence of gender equality. It has been noted in comparative research that both equality and gen-der equality are correlated with a number of other social virtues and collective goods, including so-cial trust, happiness, and economic development. What is less noted, since equality in the academic literature is often linked to social engineering and collectivist politics, is that equality in the Nordic context is inseparable from individualism and the value of autonomy.

According to what we have called “a Swedish theory of love,” authentic relationships of love and friendship are only possible between individuals who do not depend on each other or stand in un-equal power relations. Thus autonomy, equality

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social trust has not declined—indeed it has ris-en slightly. Similarly, according to the recurrent so-called “diversity barometer” Swedes are more open to immigration than ever. However, we need to take these data with a grain of salt. Other studies focusing on trust at the local level indicate higher levels of distrust in highly diverse commu-nities, especially those which also experience so-cioeconomic inequality. And other data from the diversity barometer suggest that acceptance of immigrants depend on a willingness to integrate and accept Swedish norms and values: evidence for tolerance of “deep” difference is lacking.

And with respect to the neoliberal challenge—the rhetoric of “free schools,” “free choice” of health-care producers and the introduction of a private component in the government pension plan package—these systems still remain highly reg-ulated within the confines of the moral logic of equal access to fundamental public goods. Even if these market elements within the public sector raise questions concerning accountability, qual-ity and fair distribution of health, education and other services, they still operate within a system that is very different from a society like the United States where individual wealth as well as commu-nity finances often determine access to high quali-ty schools, universities, hospitals, and elderly care.

Thus, the combination of cultural and moral forces that underpin the Nordic social contract and the firm institutional framework that pro-motes this seemingly paradoxical coexistence of

contract. Alarmists point to trends toward in-creased economic inequality and the introduction of voucher systems and privatization in education, healthcare, and pensions. Such developments, it is argued, will over time undermine the univer-salism of the classic Nordic welfare state in favor of a more pluralistic system characterized by pri-vate, market-based alternatives leading to segre-gation and a decline in social trust.

Against this gloomy account, currently focused on the rise of anti-immigrant political parties in the Nordic countries, it is nonetheless quite possible to counter with a more optimistic scenario. The central argument is at heart very simple and rests on two ideas: (1) that the striving for individual freedom and prosperity (life, liberty, the pursuit of happiness) is a rather universal drive, and (2) that this desire can only be realized in an enabling social, legal and institutional context. From this point of view, the Nordic institutional framework is characterized precisely by its capacity to pro-mote both social trust (confidence in institutions and rule of law), and individual autonomy consis-tent with the logic of the market society.

In this more optimistic account, the combined lure of individual freedom and social security is more likely to “naturalize” immigrants over time than seriously challenge the Nordic culture and its institutional system. If we return to the data on social trust cited above and look at the rate of trust over time, it appears that during the recent decades of increased immigration and diversity,

emancipatory individualism and social security may well prove both a major systemic advantage in a globalized market society and an attractive arrangement from the individual’s point of view. Whether it is strong enough to withstand the polarizing impact of immigration and increased diversity—combined with widening differences in wealth, income and access to education and work—is an empirical question to be continu-ously revisited.

Are There Lessons to Be Learned from the Nordic Variety of Capitalism?

Obviously many of the salient features of Nor-dic capitalism are idiosyncratic. They have been created by a combination of contingent factors, ranging from geography and natural resources to religious inclinations and political coincidenc-es. But this is also true of the classical model of market economy that is often been presented as “universal.” Specific British and American expe-riences of modernization have been generalized into historical truths that have been applied to other cultures, sometimes with great success but also with astounding failures. The point is not that it is wrong in principal to try to emulate other successful cultures (how else is mankind to learn anything?), but rather that we should do so with great deliberation and—most importantly—not assume a priori that only one kind of capitalism is relevant as a source of inspiration.

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of social trust and confidence in the common institutions of the state is, of course, not pecu-liar to the Nordic countries, nor is the aware-ness that a positive view of the state cannot be upheld if social and economic divisions grow too large. Indeed, the objectives of keeping unemployment down and having welfare sys-tems that are tied to employment and the work ethic constitute central goals for most Europe-an welfare states. However, they are pursued with varying degree of success. In the Nordic countries social trust, confidence in state insti-tutions and relative equality coincide.

The big question is, of course, how to promote greater trust in countries that experience low rates of social trust and confidence in common institutions. Perhaps most crucial to the positive feedback cycle that has managed to stabilize the Nordic economies at a productive equilibrium—allowing for individual social mobility, economic efficiency and sustained relative equality—is the degree and extent of inclusion of citizens and civil society in the governance process. The Nor-dic experience suggests that the more this occurs, the more trust and confidence-building will re-sult, and the more likely it is that key values and social facts will remain in harmony. In this vein it is advisable to encourage the development of deliberative processes of governance. Churches, labor unions, charities and other associations in civil society should be supported, consulted and involved through commissions, round tables and other forums of interaction between state and

What is needed is a down–to–earth analysis of concrete institutions and policies

However, it is not an easy task to identify and transfer such experience in a form that becomes useful and accessible. To be sure, there are a num-ber of important lessons implicit in the develop-ment of Nordic capitalism. The first one is that vague references to “values” and “culture” would not be helpful; what is needed is a down-to-earth analysis of concrete institutions and policies. However, even specific laws, policies and institu-tions are far from easily translated and transferred to other environments with different traditions and historical experiences. Still, we would like to point to a cluster of institutions and policies that do tend to instrumental-ize a set of experiences in the Nordic countries, which have kept the socially destructive aspects of capitalism at bay while still retaining the dy-namics of market economy, with an eye to whether they might be applicable in other parts of the world.

1. Nordic capitalism shows that individualism need not lead to social fragmentation, dis-trust and short-term maximization of mate-rial interests. Promoting individual autonomy through policy can, on the contrary, lead to greater social cohesion if it is done in an egali-tarian way. Less dependence and weaker pa-triarchal structures mean that more people feel empowered and satisfied with their lives. This is especially relevant for women, who want to participate in the labor market without relin-

quishing the possibility of becoming moth-ers. In authoritarian and hierarchical societies where the individual desire for autonomy is given insufficient space, political tensions are likely to arise while social trust and confidence in institutions are likely to decrease.

In this perspective, promoting policies like gen-der-equal educational systems, individual taxa-tion, universal day care and anti-patriarchal fam-ily laws seems to be a generally good idea, even if obviously in conflict with longstanding tradi-tional norms in some cultures. To suggest that

the European Union should expand its mandate in rela-tion to the member states’ national sovereignty may seem controversial, but in a longer perspective it might be necessary to develop a common and more indi-

vidualized family policy if Europe is to remain economically viable. The interest that Germany has shown in the school, pre-school, and family policy of the Nordic countries—against the back-drop of relatively low levels of female participa-tion in the labor market—is one indication that such thinking is beginning to take hold.

2. Nordic capitalism also demonstrates the sys-temic advantage of having a positive view of the state, not just as an ally of the weak but as the promoter of ideals of equality and individ-ual autonomy. Awareness of the importance

26 27


society. In the Nordic countries such state/civil society interaction has been institutionalized and made routine in ways that may provide useful inspiration.

3. A strong state and individual autonomy are not a threat to civil society, but are instead its prerequisites. Citizens who join together not mainly to protect themselves from arbitrary abuse by vested state or business interests but rather to increase their potential for self-real-ization and personal independence are more likely to make positive contributions to society as a whole. This allows for a more constructive engagement, at best, or too close an entangle-ment with the state (the corporatist dilemma), at worst. One example is labor market rela-tions in the Nordic countries, where the unions have generally not had a narrow self-interest-

ed view of their role in society but rather have assumed a macroeconomic responsibility. To achieve this social responsibility, it is necessary that these and other grassroots organizations be supported both through legislation and economic subsidies that encourage the forma-tion of an effective and inclusive civil society network.

In the face of reality, the above suggestions might seem like the ultimate expression of a delusional kind of Nordic naïveté. But even if there is very little in the Nordic historical experience that is transferable to other cultures, it does bring one important point to the discussion: economic poli-cies that cater both to our desire for individual au-tonomy and our need of community and security can be remarkably successful.

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A CLOSER LOOK AT INCLUSION AND THE SWEDISH WELFARE SYSTEM

What explains the relative success of the Nordic model? The two previous ar-ticles have given two different answers.

Klas Eklund stresses the fact that the Nordic countries, when struck by serious economic cri-ses in the 1980s and 90s, mounted successful re-sponses and practiced good crisis management. The Berggren–Trägårdh article highlights individ-ualism, supported by a strong state. Both articles acknowledge widespread trust in society as an important factor.

I would like to add a fourth factor: inclusion. The Nordic welfare model is not primarily a policy to benefit the poor but a whole array of policies fo-cusing on employment, productivity, social pro-tection and inclusion on the basis of citizenship and solidarity.

Thandika Mkandawire, professor of African De-velopment at the London School of Economics, observes that the Nordic countries adopted social

policies at an early stage of industrialization and at much lower levels of per capita income than other countries. According to Mkandawire, the Nordic model shows that social pacts and simi-lar arrangements in a democratic order can pro-duce the political stability required for economic growth. Strong social cohesion and trust are un-derpinned by a number of policies for inclusion.

The Nordic Welfare Model: More than Public-sector Service Provision

Welfare provision in the Nordic countries is uni-versal and based on the core values of equal op-portunities, social solidarity and security, health services, education and culture for all.

There are, however, interesting differences be-tween the Nordic countries in terms of how the welfare policies are organized. Denmark has gone further than the other countries in involving the

A Closer Look at Inclusion and the Swedish Welfare System

Kristina Persson

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A CLOSER LOOK AT INCLUSION AND THE SWEDISH WELFARE SYSTEMA CLOSER LOOK AT INCLUSION AND THE SWEDISH WELFARE SYSTEM

private sector in welfare services. The Danes are also notable for their “flexicurity” model on the la-bor market, as well as for their emphasis on assim-ilation in immigration policy—as opposed to the integration strategy that has characterized Swe-den. In Finland, the voluntary sector has played a significant role in providing care for the elder-ly. In Norway, public-sector provision of welfare services has been more dominant than elsewhere.

In the following text, I have chosen to explain how the welfare model is built up by using Swedish examples rather than trying to provide a comprehensive Nordic picture. The Swedish welfare system has been reformed over time due to new economic conditions. A number of structural reforms were pursued in the 1990s as part of crisis management, in particular a major reform of the pension system.

Taxes: The Basis for Universal Welfare

Sweden is among the countries of the world that spend the highest percentage of gross domestic product (GDP) on social services, according to 2007 statistics from the Organisation for Eco-nomic Co-operation and Development (OECD), surpassed only by France. The money goes among other things to entirely tax-financed education and heavily tax-subsidized healthcare.

All Swedish residents have access to medical ser-vices, education is tax-financed and retirement includes a basic pension guaranteed by the state. For those who lose their jobs, unemployment in-surance is available and many continuing educa-tion and retraining programs are tax-financed. On top of these basic benefits, many workers en-

joy other advantages based on their salary, sector or workplace.

To support these social ser-vices, all levels of govern-ment receive their share of tax revenues: the municipal-ity, the county council and

the national government. All taxes, including mu-nicipal, are collected by the Swedish Tax Agency (Skatteverket). Sweden, however, has neither an inheritance tax nor a wealth tax, and the real es-tate tax rate has been replaced by a lower munici-pal fee. Earned income taxes have been reduced since 2007, as well as social insurance contribu-tions for young people.

Tax burden as percentage of GDP in 2008:

Denmark: 48.2%

Sweden: 46.3%

Finland: 43.1%

Norway: 42.6%

OECD average: 34.8%

Local Self-government

Swedish municipalities, county councils and re-gions are responsible for providing a significant proportion of all public services. The right of local self-government, including the right to levy taxes, is stipulated in the Constitution. Taxes are levied as a percentage of income, and the municipalities and county councils set their own tax rates. The average local tax rate is 30 percent.

Sweden’s local and regional governments have a great deal of freedom to organize their activities. Their responsibilities are regulated partly in the Local Government Act and partly in laws and or-dinances covering specific areas. The scope of lo-cal and regional self-government is also affected by decisions made by the European Union.

In order to ensure fairness, a system has been in-troduced with the aim of redistributing the rev-enues of the municipalities and county councils according to regional needs. This equalization system is managed on state level. In addition there are state grants which may be either gen-eral, i.e. per inhabitant, or targeted.

Privately run activities that are tax-financed must offer services to inhabitants on the same condi-tions as those which apply to public services. People pay the same for a service whether it is provided by the public sector or a private com-pany. In some fields, such as refuse collection, public transport and dental care, it has long been

The Swedish welfare system has been reformed over time due to new economic conditions

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common for municipalities and county councils to procure services externally. A 1992 reform al-lowed private companies to run tax-financed schools, and recently the same system has been extended to preschools and care facilities.

Children and Parenthood

In 1979, Sweden became the first country to crim-inalize beating or spanking children. To protect the rights of children and look after their interests, the Swedish Government has also appointed an ombudsman for children, obliged to enforce the 1989 United Nations Convention on the Rights of the Child in Swedish society.

Parents get to share a total of 480 days of paid leave per child, which must be claimed before the child turns eight. In reality, the bulk of parental leave is taken by mothers. Fathers now claim about 20 percent of all parental leave, but the figure is in-creasing. Each parent has 60 days of leave reserved specifically for him or her, which means that these cannot be transferred to the other parent.

Education

The Swedish Education Act states that all chil-dren and young people are to have equal ac-cess to education regardless of gender, place of residence or socioeconomic factors. There are no school fees and everyone has to attend school for

at least nine years in Sweden. Sweden and Fin-land are the only countries in the world that serve free school lunches to all students.

Children are offered a place in a preschool class from the year they turn six until they start com-pulsory schooling at seven. Preschool is followed by three years each of elementary school, middle school and junior high school. They then have a choice of staying on for senior high school (gym-nasium), which is non-compulsory and also free of charge. Virtually all students who finish com-pulsory school start senior high school.

The number of independent schools in Sweden is growing. Independent schools must be approved by the Schools Inspectorate and follow the na-tional curricula and syllabuses. Nine percent of compulsory school students and 20 percent of senior high school students attend independent schools in Sweden.

The largest proportion of municipal budgets, 45 percent, is spent on education.

About 70 percent of education, and of munici-pal operations as a whole, is financed by mu-nicipal taxes.

Municipalities also provide nursery schools for children from age one until school starts. Parents pay 8 percent of the cost. In the fall of 2008, 85 percent of all children between the ages of one and five were registered in preschool or family day

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care homes. The percentage has been increasing for many years, especially among one-year-olds.

Higher education in Sweden is financed largely by tax revenue. In 2011, however, tuition fees were introduced for students from outside the EU/EEA and Switzerland with the motivation that Swed-ish higher education should compete in terms of quality, not just by providing free education. To enable students who cannot pay the tuition fees to study in Sweden, the Government has allocat-ed resources for new scholarship programs.

The Government provides 80 percent of funding for Sweden’s universities and university colleges. A further 7 percent comes from other public sources and the remaining 12-13 per-cent from private sources and financial revenue. All Swed-ish students who study at a university or university col-lege are entitled to financial assistance, which consists of a grant component and a loan. Repayment of the loan is income-dependent, with the loan to be re-paid by the student’s 60th birthday.

Healthcare

The Swedish healthcare system is tax-funded and largely decentralized. All care providers that meet county council requirements are entitled to

start a health center that is reimbursed with pub-lic funds. In 2005, the county councils and cen-tral government agreed to introduce a healthcare guarantee. Anyone who needs care must be treat-ed by a doctor within seven days. After referral, specialist care is supposed to be provided within 90 days. If the time limit expires, patients are of-fered care elsewhere.

Patient fees for primary care vary between SEK 100 (USD 14) and 200 depending on the county council. After a patient has paid a total of SEK 900 during one year, medical consultations with-in 12 months of the first consultation are free of charge. There is a similar ceiling for prescription

medication, so nobody pays more than SEK 1,800 over a 12-month period.

The general social insurance system includes sickness benefits. Employers are re-sponsible for providing sick pay for the first 14 days of an

employee’s illness. For longer illnesses, the so-cial insurance system grants a maximum of 364 days of benefits at 80 percent of the employee’s income. Longer benefit periods may be granted for severe illnesses.

General social welfare programs in Sweden extend to everyone, but there are also special programs to address the needs of people with disabilities. The Act concerning Support and Service for Persons

with Certain Functional Impairments (LSS) was adopted in the 1990s by the Swedish Parliament. An important feature of this wide-ranging reform program was to give disabled people the right to personal assistance free of charge.

In addition to general social benefits, municipali-ties are responsible for providing social assistance in the form of financial support. This is intended as a last-resort safety net for people with tempo-rary financial problems, and it is disbursed after an individual assessment. Social assistance in-cludes income support based on a national stan-dard and also covers other common expenses needed to ensure a reasonable standard of living.

The Labor Market

Sweden’s long tradition of government labor market policies has resulted in a wide variety of employee benefits, including at least five weeks of paid vacation, well over a year of parental leave and employer pension contributions. Collective bargaining has played a central role for achiev-ing these benefits, along with a well-established culture of cooperation between employers, em-ployees and unions. Nearly 70 percent of Swedish workers belong to a trade union. For their mil-lions of members, trade unions provide special insurance policies, coaching and representation for contract negotiations as well as legal support.

An important feature was to give disabled people the right to personal assistance free of charge

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Wages are regulated primarily in collective agree-ments. Trade unions and employer organizations negotiate collective agreements which regu-late working conditions such as wages, working hours, sick pay, etc. There is no government in-tervention in the wage negotiations or in the en-forcement of collective agreements, although in the final phase of negotiations—if the two sides reach an impasse—a public mediator may be called in to help achieve an agreement.

Since 2006 the Government has taken measures to enhance the incentives to work. Earned income taxes have been reduced. Employers’ social insur-ance contributions have been lowered for young people as well as for groups who are returning to the labor market after a long absence. The unem-ployment benefit system has also been tightened. All these reforms have been important factors in Swedish crisis management during the recession that began late in 2008.

The Elderly

Of Sweden’s 9.3 million inhabitants, 18 percent have passed the retirement age of 65. This num-ber is projected to rise to 23 percent by 2030. Sweden has the largest proportion of people aged 80 or over among the EU member states, total-ing 5.3 percent of the population. Since more and more citizens in this age group are in good health, their care requirements have declined since the 1980s. Most elderly care is funded by municipal

taxes and government grants. In 2008, the total cost of elderly care in Sweden was SEK 91.8 bil-lion. Only 4 percent of the financing came from patient charges.

The bulk of all elderly care is provided by the municipalities. Everybody is allowed to choose whether they want their home assistance or special housing to be managed by public or private operators. Older people who continue to live at home can obtain various kinds of support to make life easier. Disabled or severely ill people can obtain assistance around the clock, which means they can remain at home throughout their lives. The elderly and disabled also qualify for transporta-tion services in taxis or specially adapted vehicles.

Pension System

The Swedish pension system consists of three parts—a national pension, an (employer- financed) occupational pension and private pen-sion savings. People contribute to their national pension, which is income-based, for every year they work. There is also a small portion of the national pension called the guaranteed pension. This is for people who have had very little or no income at all in their life. Should the guaranteed pension still not be enough, maintenance support

for the elderly provides a last safety net to ensure a decent standard of living.

A total of 18.5 percent of your wages and other taxable benefits goes into your public pension ac-count each year. You can also choose when you would like to retire, with some people retiring as

early as 55 years of age. But the income-based pension and premium pension can only be drawn from the age of 61. In 2009, the average ef-fective age of retirement in Sweden was 66 years of age for men, compared to the OECD average of 65, and 64

years of age for women, compared to the OECD average of 63.

Regardless of when you retire, however, the to-tal amount of your pension remains the same. Hence, if you choose to go into early retirement, your monthly payments will be reduced accord-ingly. It is also possible to keep working and thereby increase your pension.

Gender equality—which Barbro Hedvall will take a closer look at in the following section—is an-other important aspect of the Swedish welfare system.

Regardless of when you retire, however, the total amount of your pension remains the same

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NORDIC GENDER EQUALITY40 41

In the Nordic region, we like to think of our-selves as world leaders in gender equality. It is not difficult to make a case for this, given

that women have such a high employment rate, educational level and political representation. The equality is beneficial to society in a number of ways, not least when it comes to the Nordic standard of living.

Between 75 and 80 percent of women aged 20-64 are employed, which means they are not far be-hind men. And while average wage discrepancies persist, they are on the decline. Women also make the most of educational opportunities. Statistics from Sweden’s higher education institutions show that well over 60 percent of graduates are women; men dominate only in the technical pro-grams. In Nordic political assemblies, too, wom-en are well represented. For almost two decades, they have held 40 percent or more of the available seats; women also hold top political posts. Nor-dic women do not have to choose between career

and family: in Iceland the fertility rate is 2.1 chil-dren per woman; in the other Nordic countries that number varies between 1.8 and 1.9.

Those are the basic facts. It is in these key areas that opinion-building efforts have been focused in the past. They still are. But while the Nordic countries may have progressed further than most, women and men in the region are still not on the same footing. Much remains to be done, not least in respect of pay gaps, unequal career opportuni-ties, and the under-representation of women in executive posts. Ultimately, this is a question of human rights—one that has a tremendous im-pact on a country’s social, democratic and eco-nomic situation.

Visible Patterns

Nordic gender equality is immediately apparent to the visitor. It can be seen out on the streets, where both women and men hurry to and from work and

Nordic Gender Equality Barbro Hedvall

NORDIC GENDER EQUALITYNORDIC GENDER EQUALITY42 43

go shopping. It can be seen in the many prams be-ing wheeled around by men, not just women.

Family schedules at the weekend are like a jigsaw puzzle where both parents are expected to con-tribute; whether shopping, cleaning or driving their children to their various activities. A daugh-ter who chooses to play soccer is not unusual in any way, nor is a mother who takes her to the game and cheers her on. Kids’ recreational activi-ties are something that the parents share alike.

This shared existence of the sexes begins early in life. Daycare centers and preschools are mixed as a matter of course, and this is the case through-out the school years. As early as preschool, teach-ers employ gender educa-tion techniques by actively combating stereotypes and roles, by freeing chil-dren from the expectations and demands that society has traditionally imposed on boys and girls re-spectively. The aim is to ensure that children have the same opportunities in life, regardless of gender.

At university, young women and men live and study together. Nevertheless, issues relating to sex-uality, unwanted approaches and abuse are identi-fied as significant problems. This may be surpris-ing, given the fact that the Nordic countries have long been known for their emancipated lifestyles.

Young people today may not have much difficulty understanding one another but they are definitely more open and demand respect from one another; the days when girls “accepted things” and boys “helped themselves” are a thing of the past.

The advertising industry, too, reflects modern Nordic lifestyles. Successful ad agencies like to play around with outdated gender roles, turn-ing them around or satirizing them in some way. Anyone trying to sell a car with the aid of scant-ily clad ladies nowadays would quickly be out of work. In general, people are sensitive to stereo-typed gender or parental roles, due to a long-run-ning critical debate that has frequently targeted

advertising and the media.

Women’s organizations have counted both the number of images of each gender and of references to each group in newspapers, in news bul-letins and in radio and TV

broadcasts. This has not led to any kind of abso-lute statistical balance but it has enhanced sen-sitivity to the single-sex perspective. The aim is to get out of the rut and deliberately highlight women who have something to say about the topic being discussed. Gender distribution in edi-torial offices is also under scrutiny. Today, journal-ism is one of the professions with the best gender balance; women are as likely as men to be po-litical reporters or to focus on hard news. As in other companies, however, men predominate at

the top, although a few women hold or have held prestigious executive posts.

Looking Back

Women hold a strong place in Nordic society. In principle, men and women are on the same footing both in family and professional life. This Nordic model is based on the individual and on individual opportunity. It is inclusive, it brings women and men together and accords them the same status; it does not separate them.

How did this situation come about? The Nordic countries’ small populations have been a factor, in that each individual’s work input has been need-ed. The popular movements that emerged in the 19th century also played their part; here, it was natural for women and men to stand side by side. The women’s movement was a part of this pow-erful Nordic grassroots tradition, which came to be radicalized in the 1970s.

In Denmark, the Red Stockings3 were active, in Sweden the gender role debate flared up, and in Norway politically interested women put to-gether lists of women candidates and seized local council seats. At the heart of this new women’s movement was the “baby boom” generation born in the 1940s, the first to have full access to educa-tion. They were versed in theory and sought to change people’s attitudes and lifestyles, quickly influencing both media and political parties.

3 The Red Stockings were a radical feminist organization with socialist links.

Today, journalism is one of the professions with the best gender balance


Today, their ideas concerning shared parenthood and an equal work life are generally accepted.

The pressure brought to bear has led to policy decisions, legislation and political governance. In the Nordic countries, policy-making bodies from central government to local coun-cils now have gender equal-ity plans and, ideally, funds for their implementation. The feminist debate has been taken over by a younger gen-eration. In recent times, more-over, the success stories of the Nordic societies have attracted the attention of those who regard gender equality as vital to prog-ress and development.

Financial Aspects

The legal obstacles that previously excluded women from certain professions (the police, mili-tary, priesthood and judiciary) have long since been removed. Nor is there anything to prevent young men from training in what used to be female-oriented professions such as midwifery and nursing. This gives individuals the freedom to choose.

It is however true that no one is absolutely free, except in theory. Women and men in the Nordic countries are affected by the attitudes of previous

generations; they often follow in their mother’s or father’s footsteps, and—not least—are influenced by the mood of the times, whether commercial or ideological. As a result, working life remains seg-regated in some fields. Women are to be found in

the caring and teaching pro-fessions to a far greater extent than men. And men tend to target the manufacturing, fi-nancial or construction sec-tors. Some, however, make unconventional career choic-es, and you can find women construction engineers and men preschool teachers.

But even women with equivalent training and the same work tasks as men do not enjoy the same pay; at present the pay gap is less than 10 per-cent. If we consider the differing jobs of women and men, the gap widens to around 15 percent; a greater number of men choose professions that enable them to earn more money than women and to acquire greater status.

Career choices and professional life are of crucial importance to people in our countries—to an ex-tent that may surprise others. A person’s identity is closely linked to his or her work. And this ap-plies equally to women and men. Today, hardly anyone would presume to introduce a woman simply as someone’s “wife.”

Career choices and professional life are of crucial importance to people in our countries


This is in fact the principal feature of our Nor-dic model: each and every one of us, women and men alike, are responsible for our own subsis-tence. Nordic legislation has reflected this per-ception since the 1970s. Taxation is individual, i.e. neither the family nor the household is a tax unit. Retirement pensions and sickness insur-ance are both linked to the individual. Couples are required to provide for their children, not for each other. At the root of this change is an explicit idea of adult maturity and individual responsibil-ity. There is also a freedom dimension. People are to live together of their own free will and to be linked together as free individuals by their feel-ings for each other, not by financial expedience or dependence. There is a direct historical link here to those who first claimed the right of girls to an education and the right of women to pursue their own careers.

Women’s work contributes a vast amount to the national economy. The increase in living stan-dards witnessed in the Nordic countries in the late 20th century would have been impossible without women in the labor market. Finland, and a short while later, Sweden, were at the forefront. In Finland’s case it was about rebuilding a coun-try ravaged by war, while Sweden was keen to take advantage of a prolonged economic boom.

The extensive development of the public sector that distinguishes the Nordic countries is ulti-mately dependent on policy decisions, but is also linked to women’s participation in working life.

The many working women in the region generate tax revenue that finances public activities which in turn provide jobs for women. At first, politicians debated whether there was any point in women leaving the home in order to perform similar tasks to men in the labor market. That discussion has long since been settled. The rules concerning specialization and restructuring also apply in the case of traditional women’s work. The demands of gender equality are a further factor: work in the home is to be shared between men and women.

As the level of education rises, it has become in-creasingly important to ensure that educational capital—that of both women and men—is turned to account. Once again, the demands of women are consistent with economic benefit.

Family Life

The family is the other flashpoint in the gender equality discourse. Here, too, legislation has been adapted to the fundamental concept of free indi-viduals. It is of no great consequence whether chil-dren are born in or out of wedlock. Parents have the same responsibility. Public support to children in the form of child allowances, free schooling, study support and the like is linked to the child and no one else—once again, the individual.

Where parenthood is concerned, Nordic society has established clear principles: children are en-titled to both of their parents. If the parents live

apart, they are to share responsibility for the child. And in the vast majority of cases, they also man-age to do so. As someone once said: “The person with whom you become a parent is someone you will have a lifelong relationship with, whatever other loves you may have.”

Shared parenthood, then, is a reality, although not always distinguished by full gender equality. Women take parental leave to a much greater ex-tent than men, both when the children are born and when they fall ill. Women still put the chil-dren before their jobs. But for each passing year, more fathers are taking leave to be with their young children, and it is becoming increasingly common for fathers to stay at home from work to care for a sick child.

Where responsibility for the home is concerned, the distribution of duties in many families is the traditional one, i.e. the woman looks after the home while the man looks after the house and the car. On the other hand, we are now seeing a growing number of men cooking meals and women taking the car to the repair shop. Things are moving in the right direction. In Sweden, for instance, women’s unpaid daily work in the home was reduced by 14 minutes between 2000 and 2010, while men’s increased by 11 minutes. Even in homes with a decent level of gender equality, certain tasks are perceived as less glamorous than others. Washing clothes and cleaning belong to the former category, house painting and barbecu-ing to the latter.


One major challenge is violence between the sex-es. This is a focus of attention both in the media and in political debate. In the great majority of cases, the victims are women and the perpetra-tors men with whom they have or previously had a relationship. Society has responded through women’s emergency shelters and heightened awareness and understanding among police, care workers and social workers. Unfortunately, a greater openness on the subject of violent men and their vic-tims has not led to any marked improvement. Violence against women is a stain on the Nordic gender equality undertaking. Gender-based violence naturally causes suffering in Nordic society, but it also causes economic loss-es in the form of social and medical costs, legal fees and reduced work capacity. To fight for a more equal society and against violence directed at women (and men) is to fight for both social and economic gains.

Centers of Power

The distribution of power in everyday life is one aspect of what power is like at the top, in both the economic and political spheres. Here, too, the Nordic countries have made greater progress than most—although full gender equality is still far off.

Women are strongly represented in the political arena. In the Nordic parliaments, the gender bal-

ance is more or less even. The same applies to lo-cal, elected assemblies. The proportion of women at the highest level is even more striking. Since the mid-1980s, successive Norwegian govern-ments have comprised as many women as men. The same is true of Swedish governments since the mid-1990s. In the other Nordic countries, gov-ernments are approaching gender balance. This high level of women’s representation has been

achieved without the use of formal quotas, through external pressure, internally-established objectives, and initiatives on the part of individual politi-cians. Gro Harlem Brundtland,

three times the Prime Minister of Norway, was the pioneer. Once a head of government has ap-pointed a gender-balanced cabinet, her or his suc-cessor will not want to appear less progressive.

In politics, women have climbed to the very top in all countries with the exception of Sweden. Women either are or have been heads of gov-ernment in Denmark, Finland, Iceland and Nor-way. Finland and Iceland have also had women presidents: Tarja Halonen and Vigdís Finnboga-dóttir. Whether the situation in Sweden is due to chance, or reflects a covert backlash in society against women’s drive for power, is hard to say.

Where the distribution of economic power in the Nordic area is concerned, however, there is no doubt about it: women are clearly being shut out. One or two exceptions cannot shake male power

Women are strongly represented in the political arena

hegemony. It rests both on ownership—and active company ownership is usually practiced by men—and on career. Those promoted to the post of CEO in a major company are, with very few exceptions, men. As a result, company boards tend to be de-cidedly male-dominated.

In this power sphere, too, Norway has taken a lead. The law passed there a few years ago requir-ing the boards of listed companies to introduce gender quotas has yielded good results. Faced ultimately with the threat of liquidation, compa-nies listed on the stock exchange have filled their quota of 40 percent women on their boards. The Norwegian example has been copied by Iceland and has influenced the discourse in other coun-tries. In Sweden, Denmark and Finland, the poli-ticians are more hesitant and hope that the power of example will do the trick. In Sweden, only 22 percent of the board members and 2.7 percent of CEOs of listed companies are women. The issue of board representa-tion is mainly symbolic since company boards are a bas-tion of male power. The same was once true, however, of the region’s political assemblies.

In parliaments and local councils, it is a matter of exercising popular rule; it is there that we as citi-zens are able to influence matters. And our influ-ence should not be limited by money or gender.

The major companies may be privately owned but they also have owners of both genders, they have employees of both genders and they oper-ate in a society comprising both women and men. There is good reason why in reaching decisions they should have as broad a range of experience as possible available to them and also employees able to consider many different aspects. Conse-quently, political bodies are entitled to have a say in how their executive boards are put together. This is how the argument goes, and it is one that many find reasonable without wishing to intro-duce legislation.

A further aspect of the Nordic model is a strong belief in opinion-building and voluntary partici-pation: establish objectives, provide concrete fig-ures and trust that constant pressure from public

opinion will have the desired effect. By applying this meth-od, parties have managed to make more women candi-dates available for election, governments have been able to appoint more women as heads of public authorities,

and numerous organizations have boosted the proportion of women at the top.

In both Norway and Sweden, the giant trade union confederations have been led by women. The Swedish employer organization has also ap-pointed a woman at the helm. The fact that these

Parties have managed to make more women candidates available for election

50 NORDIC GENDER EQUALITY

organizations have become less influential may not be a coincidence. Women researchers have frequently noted that when women enter the corridors of power, that power tends to disappear elsewhere. This is what happened within such previous high-profile institutions as the church and the national defense when they opened up to women following a tough and prolonged debate.

Power is difficult to encapsulate and describe once we no longer confine ourselves to formal posts.

These can be counted and we can be pleased that their gender distribution is steadily improving. A different kind of challenge is the one we en-counter when formal power is to be translated into actual decision-making and the exercise of influence. Consequently, women as well as men must ensure that they understand the rules of the game and make use of their personal experience. Here, men have been at an advantage for gen-erations. In the Nordic area, however, women are steadily catching up.

Denmark Finland Iceland Norway Sweden EU

Occupation rate, ages 15-64 71.1 66.9 76.2 73.3 70.3 58.2

Occupation rate, ages 25-65 - 72.5 81.8 75.6 76.5 62.5

Fertility rate 1.80 1.80 2.14 1.95 1.90 1.56

Percent women in parliament 40 42 43 39 45 24

Percentage of women of total higher education graduates - - - 62 66 60

© 2012 Swedish Institute

Graphic design: FWD Reklambyrå AB

© Photos Cover: Anders Helgesson / Pixgallery, p. 4 Henrik Trygg / Johnér, p. 12 Johan Willner / Johnér, p. 15 Lena Paterson / Matton, p. 19 Tommy Andesson / Bildarkivet,

p. 22 Heléne Grynfarb / Bildarkivet, p. 25,29,30 Melker Dahlstand / imagebank.sweden.se, p. 27 Johan Willner / Johnér, p. 33 Ulf Lundin / imagebank.sweden.se,

p. 34 Adam Haglund / Maskot bildbyrå, p. 37 Hans Berggren / Johnér, p. 39 Helena Wahlman / imagebank.sweden.se, p. 40 Cecilia Larsson / imagebank.sweden.se,

p. 43 Katja Kircher / Matton, p. 44 Maskot bildbyrå, p. 47 Ulf Huett Nilsson / imagebank.sweden.se

Printed by: Åtta.45, Solna, Sweden

ISBN: 978-91-86995-13-3

The Swedish Institute (SI) is a public agency that promotes interest and confidence in Sweden around the world. SI seeks to establish cooperation and lasting relations with other countries through strategic communication and exchange in the fields of culture, education, science and business. SI works closely with Swedish embassies and consulates around the world.

The Norden Association is an NGO founded in 1919 with the aim to support the development of the cooperation between the Nordic countries. With its wide network of 60 000 members organized in local branches all over the region it has a major impact on the well-developed cross-border cooperation in the Nordic region.

Swedish Institute Slottsbacken 10, Box 7434 SE-103 91 Stockholm SWEDEN +46 8 453 78 00 www.si.se

Global Challenge is an independent think tank that promotes solutions to global challenges relating to the economy, environment and democracy.

“In international comparisons of global competitiveness, the Nordic countries are almost always found at or near the top. What are the reasons? Is there such a thing as a common “Model” particular to the Nordic region and if so, will it last? Is it transferable to other parts of the world?

In this brief we provide bits and pieces of some plausible explanations for the relative success of the Nordic societies. We hope these experiences can improve the understanding of our way of doing things and inspire debate and development in other parts of the world. Shared values are also about sharing experiences with others.”

13385 the nordic way 120202

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