The Scandinavian Model

A letter from a US academic published in the FT a few days ago suggested that the Scandinavian model of the economy had features worth emulating, in particular, the greater participation by the governments in those countries.

People often look to Scandinavia as a social, political and economic exemplar and argue that Scandinavian practices should be adopted elsewhere. This suggests a lack of knowledge and understanding of that part of the world, by which, presumably, they mean Norway, Denmark, Sweden and Finland.

In the first place, the four countries are very different, having had different histories. The whole region is insignificant in terms of population; to put this in perspective, there are probably nearly as many people living inside the M25. All of the countries were late to industrialise, at the end of the nineteenth century, and effectively avoided the age of coal and steam power, going direct into manufacturing of products based on electrical and internal combustion technologies.

Finland has a different language and culture from the other three. It was long occupied by Sweden and from 1809 it was a Grand Duchy of Russia. Sweden, the largest, with a population of around 9 million, was a major colonial power until the beginning of the eighteenth century, after which it had to re-invent itself and has not been involved in a major war for about 200 years. There was major emigration due to famine in the 1880s to the United States, but for the past 40 years Sweden has seen successive waves of immigration, to the point that immigrants and their children now make up around 15% of the population. There is a strong tradition of neutrality and mere talk of joining NATO will bring people on to the streets. Norway was first part of Denmark and, after the Napoleonic wars, of Sweden. Norway did not become independent until 1906. It, and Denmark, were occupied during World War 2. Norway is strongly supportive member of NATO, with troops in Afghanistan. The small population enjoys the benefits of the substantial oil revenues which go to the government. Denmark is closely aligned to Germany in its economy and culture, though being a "small" language has particular effects due to the widespread use of English.

The reasons why these societies appear to work well are complex, but perhaps the most important is simply that there are relatively few people with a lot of space to move around in. This means that, for example, outside the three main cities, land values are very low, making housing inexpensive, so that people are not paying out a huge proportion of their earnings in mortgages to cover the amounts paid to the previous owners for plots of land - what, in the UK, is complacently referred to as the "housing ladder". Without this relentless pressure, first, there are fewer fat cats living off property deals and second, life is just easier as people can afford to be relaxed.

But because of these fundamental differences, there is virtually nothing that can be translated from Scandinavia to, for example, Britain, in the expectation that it will work. There is no harm in looking at what happens in other countries, but people need to realise that individual countries need to analyse their own situations and work out their own solutions.