Finland ranked 1st in the Global Happiness Report of 2021.Out of the 165 countries evaluated, Norway topped the Democracy Index for 2021. Iceland, for the past 5 consecutive years has been leading in the Global Peace Index. Surprisingly, all three of them belong to the group of Scandinavian Nations (Norway, Denmark, Finland, Sweden and Iceland). The exceptional performance shown by these countries spreads across state of democracy and political rights, equal distribution of incomes, lack of corruption, trust between citizens, gender equality, Human Development Index and many other global comparisons. The answer to the nordic citizens living a highly satisfied lives lies in the common socio-economic setup they follow i.e THE NORDIC MODEL.
The crux of the model revolves around improving the ability of the countries to master the problems and create an egalitarian society. They have a mixed market economic system, that is, an amalgamation of socialism and capitalism. The robust public system is involved in serving it’s citizens with free education, healthcare system and pension payments to the retirees. The tax revenue generated helps fund these top-class social services. The average tax rate in the nations’ is around 55%. This is much higher than that of the world’s 31.37%.The policymakers also guarantee redistribution of taxes and bridge the gap between rich and poor. This has helped keep the income inequalities at the minimum. The government also has the power to decide how the resources are efficiently utilised for achieving social benefits.
All these attributes do not undermine the capitalistic aspect of the model. A fine balance is maintained between Government intervention and private participation. The private players are encouraged to implement creative destruction. The term implies innovation and disruptive technologies that have the power to boost economic growth. It is one of the driving forces of capitalism. The laws are made favourable for the companies to shed workers and carry out transformative business models. The employees, in return, are then protected by the welfare programmes. No minimum wage laws exist in these nations. The main reason behind this is high union membership which ranges from 50%-80%. The unions are efficacious in ensuring workers receive high wages for the services offered.
All of this has resulted in creating a healthy working environment. Gender equality has been a hallmark outcome of the model. This not only includes greater participation of the women in the workforce but more involvement of men in household chores.
The features of the model are quite similar to the one followed by India. Then why is it that India is ranked 59th in the Digital Quality of Life Index as against Denmark which ranks 1st. According to analysts, the key to the success of these nations lies in the high degree of trust shown by citizens in the government, public institutions and executives. The shared history of working for collective benefit drives the public to support the administration for tackling societal challenges through democratic proceedings. There exists high tax slabs as per the .Yet, the Scandinavians are willing to pay that in return for the benefits enjoyed by them and their family members. Ofcourse, it’s an ideal but not a quintessential model.
The Scandinavian countries have surely achieved high quality of living, thanks to the Nordic framework. Yet, many researchers have pointed out certain flaws that can act as serious impediments for the nations’ further progress. Timely corrections need to be made in order to keep this model running.
First hiccup is the overreliance on taxes for funding the administrative-run social services. We have already seen the presence of enormous public spending in providing free education, health, childcare, care for the elderly in these nations. If the government does not look for alternate sources of revenue to finance such schemes, the model may become unsustainable over time.
Second is the aging population. The average years a Scandinavian denizen is expected to live is 82.96 years. This surpasses the US’s 78.79 years. The number reflects the presence of a strong and effective healthcare system. Simultaneously, the proportion of elderly is rising. Young taxpayers over the elder retired population availing social benefits is desirable for any economy. Nordic countries are facing an undesirable shift in the population. If no corrective measures are taken, the model may become financially unsustainable in the long run.
Thirdly is the high immigration rates. The nations attract notable outsiders who wish to enjoy generous public benefits. Not all the newcomers align with the natives’ perspective of working for the collective good. The differences in the mindset of new arrivals can be burdensome for the economy. Ultimately resulting in their downfall.
“One of the basic rules of the universe is that nothing is perfect”
As long as the policymakers are ready to make adjustments in the current structure,
the Scandinavians stand to benefit. The nations will continue to be popular destinations for migration. Whether or not the model is suitable for other nations solely depends on how well it is implemented. The bottom line is, the people – their trust, their mindset , their outlook is what creates the difference.
- What Characterise Nordic State Model
2022. [online] Available at: <https://www.researchgate.net/publication/26618949_What_Characterise_the_Nordic_Welfare_State_Model> [Accessed 2 May 2022].
- World Happiness Report
World Happiness.report. 2022. The Nordic Exceptionalism: What Explains Why the Nordic Countries Are Constantly Among the Happiest in the World. [online] Available at: <https://worldhappiness.report/ed/2020/the-nordic-exceptionalism-what-explains-why-the-nordic-countries-are-constantly-among-the-happiest-in-the-world/> [Accessed 2 May 2022].
(The Nordic Exceptionalism: What Explains Why the Nordic Countries Are Constantly Among the Happiest in the World, 2022)