Book in review: What future for the Nordic model?

So it comes as a breath of fresh air when a book like Social Policy and Economic Development in the Nordic Countries comes along and builds a convincing case in favour of the opposite.

Edited by Olli Kangas and Joakim Palme, this is the first volume in a new series about social policy published by the United Nations Research Institute for Social Development.The book analyses how the Nordic welfare model has been able to develop, the impact it has had and the challenges it faces in the future. 

The authors are very clear that Scandinavian welfare policies have achieved numerous victories, such as reducing hardship, inequality and social exclusion. For instance, in their study about the effectiveness of different types of family policies in reducing child destitution,Tommy Ferrarini and Katja Forssén show that the ones used by the Nordic countries have worked best because they assume both parents are breadwinners, and they are universal and income-related. In addition, they provide services that encourage more women to seek paid employment and more men to do care work. 

But the main point the authors are trying to make is that high welfare spending, far from impeding economic development, has helped it.Taking the example of Sweden, Walter Korpi explains that there is no evidence that high taxes hampered the functioning of the market. About the economists who argued that the country was suffering from “Swedosclerosis”, Korpi says:“We must unfortunately say that, as far as empirical evidence is concerned, this was not their finest hour.” 

Kangas and Palme also argue that, since the Nordic countries have enjoyed high levels of and growth “despite” important levels of social spending and state intervention,“ this suggests … that there are ways in which properly designed social policies can contribute to growth”. 

However, that does not mean that the authors are unconditional defenders of the Nordic model: Kangas and Palme dismiss as “wishful thinking”,“myth” and “Candidelike” the belief that the Nordic welfare model is the perfect solution to all the problems in the world. 

In fact, the most appealing part of the book is Kangas’ and Palme’s analysis of how the Nordic model can survive future challenges. In their opinion, it is vital that Scandinavia and Finland increase the number of people in work, because they are the ones who will finance the pensions of rapidly ageing baby-boomers.

To do that, the Nordic countries need to ensure that benefits and services are universal.“As soon as we start means-testing,” write Kangas and Palme,“it will affect the profitability of, particularly, lowincome persons – often women – engaging in paid employment.” In addition, benefits must be linked to earnings, so that “the more they earn and pay, the better benefits entitlement will be”. 

But Kangas and Palme also point out that none of these measures will work if individuals do not have the right resources, such as relevant skills or the adequate social services to take care of their dependants. Most important of all is that governments must apply efficient economic policies.“If there are no, or too few, jobs to apply for, good skills may not be enough to get employment.” 

Ultimately, the authors argue that Nordic governments need to focus on social issues that are relevant to all and allow a greater degree of individual choice, even in areas that have become subject to state intervention.

It is a very interesting argument and this makes Social Policy and Economic Development in the Nordic Countries an absorbing read on the relevance of the Nordic model.