The Secret of The Scandinavian Economic Miracle

if you look at almost any list measuring human development around the world you can be sure about one thing that these five countries will be somewhere in the top ten whether it's the state of democracy human rights lack of corruption trust between citizens social cohesion gender equality human development index happiness index it's always the same looking at those lists scandinavia just seems to be best at well everything it looks like these few countries somehow found a recipe for success a unique combination of economic policies and social values that became known as the nordic model but what is the nordic model exactly and why is it so successful is the reputation of the scandinavian countries deserved and if it is then why don't we replicate their model everywhere this is the secret of scandinavian success the nordic model the answer to all of this is a little complicated but the best way to start might be at a time when scandinavia was not doing so well and when it was going through one of its biggest crises and facing a number of pretty severe economic and political challenges in the interwar period of the 1930s back then the region was like most of the world badly affected by the great depression the worst economic crisis of the 20th century and the nordic countries were hit pretty hard the unemployment was extremely high almost at 40 in denmark businesses were bankrupting and even independent farmers who made up a backbone of the economy were struggling just to get by and just as in other parts of europe the economic hardship was fueling political radicalism and populism as extremists on both sides of the spectrum were becoming more popular scandinavian communists were trying to overthrow the system through class warfare creating rifts in the society and turning the lower classes against the elites while fascists were attacking the nature of democracy itself presenting it as ineffective and weak to get through the crisis the nordic countries had to respond in a way that would address both the economic crisis and the political challenges and the solutions that all of them chose defined what the nordic model is and what scandinavia would have looked like in the following decades first the nordic countries decided that the way to keep the society together in the times of the crisis is through a massive state spending and government-funded programs to help the people affected by the economic hardships previously existing measures like unemployment benefits and old age pensions were massively expanded aiming to provide at least some means for people who were out of job or too old to get one and they were complemented by a number of other welfare measures aimed at improving the lives of the lower classes subsidies for decent public housing or benefits for families with children this is when the modern welfare state was born and became a first key part of the nordic model in the following decades the nordic countries continued to expand on those core programs established in the 1930s but the basic idea is still the same to keep the society together and to keep different classes from clashing you need to help the lower classes that need helping the most and you need to integrate them into the society rather than to exclude them and the idea is that even though this can cost a lot of money it's still worth it because if you don't help them the poverty homelessness and unemployment will end up costing you even more that's why the welfare state in scandinavia casts a wide social safety net making sure that even when you lose your job you won't hit rock bottom and the state is actively trying to help you to get back on your feet and back into the workforce as fast as you can because as opposed to what many people might think the point of the scandinavian welfare state is not to keep people hooked on the state benefits forever but rather the opposite scandinavian countries are surprisingly strict and generous at the same time people who are left without a job are given generous unemployment benefits but only as long as they are actively seeking work and following the same pragmatic logic the scandinavian welfare state puts a lot of effort into trying to elevate the poor to become the middle class the idea is the same a strong middle class and economically equal society is good for social cohesion while having a lot of very poor people is both expensive and creates a divided society that's why the nordic education healthcare and social services are free or almost free for everyone and focus at least in theory on making sure that everyone has a more or less equal opportunity to build a solid career and have a decent quality of life the downside of this is that the welfare state doesn't come free and the nordic countries have famously high taxes in denmark the average person pays 45 of their income on taxes compared to 22 percent in the united states and 24 in the uk but taxes in scandinavia are not just a way to provide the state with enough money to pay for everything but they also serve as a tool for redistributing wealth and helping to keep the income inequality low basically it's harder to become really wealthy and it's also harder to become extremely poor but it's relatively easy to stay somewhere in the middle when this concept was first formed in the 1930s in sweden it was called folk hemet people's home implying that the state is not just a detached bureaucratic body but rather a home or a family for its people in this concept all citizens are part of this family and as such everyone needs to be treated fairly and equally and even more importantly the common good of everyone of the family as a whole is what really matters and it is more important than the good of the individual this is somewhere in the middle between the super individualistic model in the united states where the state is there only to provide the basic minimum and everyone should rely on themselves and the totalitarian communist model in the soviet union where the rights of the individual were basically non-existent that's why the scandinavian model became famous during the cold war in the english-speaking world as the middle way second part of the nordic model which was also born in the 1930s is what became known as the great compromise in sweden norway and denmark unions of employees and unions of employers agreed that in order to prevent a conflict between different classes they must find a compromise that would make everyone happy and so through different agreements employers in all the nordic countries agreed to guarantee decent wages safe working conditions and a maximum of 10 working hours per day for everyone while the employees agreed not to protest and strike as long as their employers kept their word this unique model of cooperation between workers and business owners remains until today and many of the working conditions are negotiated directly without the intervention of the state that's why for example nordic countries don't actually have a national minimum wages that would be mandated by the government at the same time a different compromise was reached in politics in most nordic countries social democratic parties have dominated politics since the 1930s but they formed a consensus with other parties like liberals conservatives and farmers not just to push through the necessary reforms but also to show that democracy still works and that compromise in politics is possible but there is one more aspect that makes the nordic model possible in the first place and which also explains why it doesn't work anywhere else this often overlooked aspect are the unique cultural values and social characteristics which can be summarized as social trust they have been dubbed the real nordic gold and they are what really makes scandinavia stand out the thing is that if you took any given country and try to introduce the nordic model redistribute the wealth through really high taxes to pay for free state-provided services for everyone chances are that it wouldn't really work people wouldn't want to give up the benefits of their hard work through high taxes and they wouldn't trust that the state is competent enough to redistribute them but scandinavians are willing to take part and willing to share not just because they have to but because they trust that it's the best thing to do i love to pay my taxes yeah i like paying taxes scandinavians just trust both each other and their governments a lot more than anyone else and that's the reason why they are willing to give up their wealth and support the welfare state and the crazy thing is that although the welfare state was born in the 1930s this high level of trust has been in scandinavia way before that according to andreas burke who researches this topic in sweden swedes have had higher levels of trust in each other and their state way back in the 19th century and possibly even before that which means that the high level of trust is not an outcome of the welfare politics the culture of compromise or the fair legal system it's what made it possible in the first place and that's why without this trust the nordic model just won't work somewhere else but as for why scandinavians trust people so much that's a more difficult question to answer some historians point to the influence of lutheranism a protestant branch of christianity which was historically the state religion in scandinavia and which has equality and egalitarian society as one of its core values others argue that it's the climate and point to a theory that people from colder climates generally have higher levels of social trust because they had to historically rely on each other and their close neighbors for survival another factor might be that the nordic countries have experienced a lot more internal and external stability the last time sweden was at war was in 1814 and the last time a leading political figure was killed in denmark was in 1286 and while the history of the nordic countries is obviously not entirely peaceful compared to the rest of the world it's marked by much less violence and internal conflicts and finally there is the geography historically the scandinavian states have had large territories with long distances between settlements which made it difficult for the nordic kings and nobles to exercise strict control over their population and this meant that the ruling class had to actually try to provide services for their citizens if they wanted to control their land rather than just collect taxes in other words even back then there was an expectation that those who rule the country should be actually doing something useful for their people and this limited control also enabled the rise of a class of independent farmers which became the foundation of the future strong middle class the backbone of the scandinavian societies until today and a big factor leading to a higher social trust between people it's difficult to pinpoint one specific reason and most likely it was a combination of all of them but the bottom line is that the reasons which made the nordic model possible date way back into history and that means that the birth of the nordic model is less about policy decisions and more about the unique combination of factors that have shaped the scandinavian societies for hundreds of years and that's why it's almost impossible to recreate the nordic model somewhere else because while you can replicate some of the policies without the underlying factors it's not going to work or at least not as well obviously the scandinavian countries are not perfect they definitely have their flaws and they are dealing with their own challenges as well but the fact is that their model has worked and while we don't know whether their model will survive in the future or not it has been one of the biggest success stories of the 20th century

Channel: Explained with Dom

Views: 431,441

Keywords: why scandinavia is so succesful, the nordic model, scandinavian economy, why scandinavian countries are rich, why scandinavian countries are happiest, why nordic countries so succesful, nordic economy

Id: vyTq5Q6qqUw

Length: 13min 4sec (784 seconds)

Published: Sat Sep 10 2022