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News : Innovation Last Updated: Jan 31, 2011 - 7:22 AM


The Nordic Way: Shared values for the new reality
By Michael Hennigan, Founder and Editor of Finfacts
Jan 31, 2011 - 7:13 AM

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Fredrik Reinfeldt, Prime Minister of Sweden, speaks during the session 'Confronting New Realities: The Nordic Experience' at the Annual Meeting 2011 of the World Economic Forum in Davos, Switzerland, January 28, 2011. © World Economic Forum swiss-image.ch/Photo by Michael Wuertenberg

The Nordic model was on display at the World Economic Forum in Davos, Switzerland last week and the government's of the regions produced a brief report on what has long been admired by the Left but is also getting attention across the political spectrum as governments scramble to make their economies more competitive.

Prime Minister Jens Stoltenberg Norway said his country has succeeded at combining a social welfare state with an efficient, market-oriented economy and spreading the wealth in the process. It’s not just Norway’s oil income that’s fueled the country’s success, he stressed. “It’s completely possible to ruin an economy, even with oil money,” Stoltenberg told newspaper Dagens Næringsliv (DN) before leaving for Davos.

“We have shown that it’s possible to have a society where we value fair distribution of wealth along with dynamic private business,” Stoltenberg said. “But we still have our unsolved problems.” Nor is it realistic for other countries to copy the Norwegian model or the systems of other Nordic countries that also sustain high standards of living.

Sweden's centre-right government said: "In a short period, the Swedish tax burden, particularly on low and middle income earners, has decreased markedly. In total, the implemented stages of the in-work tax credit and our declared reform ambitions equate to around 2 percent of GDP in 2011. Sweden is therefore making excellent progress in its ambition to shape income taxes in a way that counters marginal effects and poverty traps and enduringly raises the employment level.

Labour market policy has also been reorganised to focus on activity and adjustment. Alongside clearer requirements and rules for transfers and benefit payments, this has discernibly lowered the thresholds into the labour market. In addition, reforms to the sickness insurance system, with improved support and more paths back into work, mean that in a short space of time Sweden has lifted itself off the bottom of the Western world’s sick leave league.

In a time when other countries have acted for more closed borders and increased protectionism, Sweden is a clear exception. We have a solid reputation in efforts to increase free trade and bring down border barriers. Moreover, Sweden has proved that even a small and trade-dependent economy can assert itself relatively well in the face of growing global competition. We are among the top countries in world rankings for factors such as competitiveness, technology and innovation climate. Sweden’s investment in research, at nearly 4 percent of GDP, is exceeded only by Israel in the OECD statistics."

The Economists's columnist Bagehot, whose column this week is on the Nordic regions, comments in a blog note in relation to Europe's past worries about competitiveness: "The single biggest reason that Europe was not the most dynamic and competitive knowledge-based economy in the world, I argued, was that lots of Europeans (perhaps most) did not want to live in such a competitive place. For sure, they want to stay rich and comfortable, and they know that globalisation is a threat. But lots of Europeans are not prepared to do anything about it, if it means taking shorter holidays, working longer hours, graduating more quickly or retiring much later."

Every country has its pluses and minuses and I recall a Belgian remarking that the Swedes were the most boring people in Europe.

Aithníonn ciaróg, ciaróg eile (One hedgehog recognises another), I thought to myself!

During the property bubble, Ireland set 2013 as the target to be recognised as a 'world-class knowledge economy' as if it could be achieved in an unreformed broken governance system.

The report for Davos, The Nordic Way (pdf), says that in international comparisons, not least the World Economic Forum’s global competitiveness index, 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, productivity, growth, quality of life, prosperity, equality etc) the four main Nordic countries - - Sweden, Norway, Denmark and Finland -- top the list.

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

The report provides what it terms bits and pieces of what the governments believe are some plausible explanations for the relative success of the Nordic societies. It says if these experiences can improve the understanding of  their way of doing things and if it inspires debate and development in other parts of the world, they will be very pleased.

They say shared values are also about sharing values and experiences with others.

The fact that Nordic countries showed resilience during the recent financial crisis largely seems to be the result of previous deep crises in the Nordic region in the 1980s and 90s. During these crises, the Nordic countries renewed and modernized their respective economies in ways which sometimes constituted a break with previous regulations and tax systems.

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