The promised land

The debates in the primaries of the democratic presidential candidates so far have led to one startling conclusion: The Nordic socio-economic model has become the utopia – the promised land – for what was once a land of opportunity – America.

by Jón Baldvin Hannibalsson

Listening to the leading candidates – Bernie Sanders certainly and to some extend Elizabeth Warren – the proposed solutions to the malaise of Americans in the era of neo-liberalism, is to emulate the Nordic model. Denmark has become the favorite example. Norway deserves no less of an attention, especially when it comes to utilitation of natural resources. And both Sweden and Finland have been highly successful, during the era of globalisation in their chosen fields of specialisation. In his paranoia, caused by China‘s competitive edge in 5G, President Trump has proposed that Americans gain control of Ericson and Nokia, Scandinavia‘s high-tec companies. Not to forget his proposal to buy Greenland to preempt China‘s advance in the high-north in the age of climate change.

Why is it that pretenders to the American presidency are looking to Scandinavia for solutions to their social problems? It is because of their generally acclaimed success. One witness, the Economist, in a special survey on the Nordic model, came to the conclusion that the Nordic model is „the most successful socio-economic model on the planet, during the era of globalisation. It combines both efficiency and equality. It is both the most competitive and egalitarian society on earth.“

In historical terms, the Nordic model is a response to the existentialist crisis of unregulated capitalism, during the Great Depression. The basic elements of the Nordic model took shape as a response to the socio-economic upheavals in the interwar period of the last century. In the west, we observed the market failure of unregulated capitalism which led to the Great Depression (1929-1940). In the east we observed the Soviet experiment with communism (abolition of private property and nationalisation of the means of production), a centralised command economy run by a police-state, which enforced the abolition of human rights, democracy and rule of law.

Nordic Social-Democrats rejected both. We decided that we would follow „the Third Way“. We recognised the utility of a competitive market system, where applicable, to allocate resources and create wealth. But we put markets under strict democratic control to avoid market distortions (monopolies, booms and busts, and extreme concentration of wealth). We insisted on public service rather than for-profit solutions in the provision of education, health care and the running of general utilities (energy, water, public transport etc.).

The means are familiar. Social insurance (sickness -, accident-, old-age- and unemployment insurance), free access to quality health care and education. All of this paid for by progressive taxation. This was followed up by active labour market policies to uproot unemployment and secure affordable housing for all. We emphasise the equlity of the sexes and strong support for families with children. These are redistributive policies aimed at increasing equality and social mobility. As a matter of human rights, not as alms.

The result is a society where equality of income and wealth is greater than elsewhere. This means that individual freedome is not a privilege of the few, but a matter of emancipation of the many. Social mobility – the ability to advance in society if you work hard and play by the rules – is de facto greater in the Nordic countries than elsewhere. The Nordic model has long ago replaced the United States of America as „the land of opportunity“. In a comparison of a social mobility in advanced countries, the Nordics occupy the first four places. America and Britain came last.

The Nordics, according to the Economist, „have largely escaped the social ills that plague America. On any measure of the health of a society – from economic indicators like productivity and innovation to social ones like inequality and crime – the Nordic countries are gathered around the top“.

The Nordic model is the only socio-economic model which emerged in the last century and has withstood the test of time in the era of globalisation in the 21st century. Communism has been buried on the trash heap of history; and unregulated capitalism – under the neo-liberal model – has crashed twice in the same period – only to be saved from oblivion by the greatest rescue operations by the state in history.

The neo-liberal era began in the ´80s as a revolt against the Social-Democratic welfare state. According to the neo-liberals‘ creed, the social welfare state, with its high progressive taxes and strong public sector, is non-competitive. State intervention in the workings of the markets will only hamper growth and innvation and result in stagnation, according to the neo-liberal creed. The system was said to be inherently unsustainable. The bottom line was this: Due to its lack of dynamism, the welfare state was said to be non-competitive in the long run. And the proliferation of state bureaucracy was even said to threaten individual freedome and ultimately end in a totalitarian state (Hayek).

Now we know better. The facts speak for themselves. Innumerable reports of performance of nation-states in the competitive era of globalisation are there to prove the point. No matter which criteria we apply, the Nordic model is invariably in the top league. The only serious challenges come from the so-called „Asian tigers“ where state intervention in formulating policy and regulating the functions of markets, is strong.

This applies no less to economic performance than other criteria. Economic growth, research and development, technological innovation, productivity of hour of work, job creation (not the least in high-tech sectors), level of education, social mobility, equality of the sexes, absence of poverty, health and longivity, quality of infrastructure, access to unspoiled nature, the overall quality of life. Less inequality than in most places. And a vibrant democracy. Where is it easiest to start a company? In the US? No, they are number 38 on the list. Denmark is number one.

What more do you want?

In the words of Daron Acemoglu, professor of economics at MIT (see „Social-Democracy, broadly construed became the foundation of the post-war prosperity everywhere in the industrialised world. That includes the United States, where the New-Deal and subsequent reforms strengthened or introduced important components of the Social-Democratic compact, including collective bargaining, social welfare policies and public education.

And further:

„What is needed, then, is not market fundamentalism or democratic socialism, but Social-Democracy. The US needs effective regulation to rein in concentrated market power. Workers need a greater voice and public services, and the safety net needs to be strengthened. Last but not least, the US needs a new technology policy to ensure that the trajectory of economic development is in everyones‘ interest.“

And finally: „The market must be regulated, not sidelined.“

The Nordic model was never about dismantling capitalism, but about taming it. It was never about disrupting markets, but about keeping them competitive and under social control. It is exactly the failure to follow this example which is causing all the troubles in America and parts of Europe in the current era of inequality.

As Tage Erlander– Sweden‘s Social-Democratic PM for a quarter of a century and arguably the greatest reformer of his time – famously said: „The market is a useful servant, but an intolerable master“.

(The author was the leader of Iceland‘s Social-Democratic party (1984-96). His most recent book is „The Nordic model vs. The Neo-Liberal challenge (Lambert Academic publishing, see