To begin with a few words on the origins of the Nordic Model. I think it important to point out that the Nordic Model was not deliberately conceived. There never was any blueprint for a model bearing this name. It evolved over time and had been and it had been under construction before anyone thought of giving it the name, which was done more by outside observers of the Nordic countries.
Since then the Nordic countries have started to use the concept quite freely and the Nordic Council frequently invokes it without difficulties, as we do not usually engage in defining what we actually mean by it.
But if I was asked to name the particularly defining features of the Nordic model I would, without denying the importance of other features as well, first mention the concept of folkhemmet, or people’s home, as first used by Per Albin Hansson in 1928. Again there are many interpretations of this concept, but I refer to the way this changed the prevailing concept of social policy which started out from the premise that social services and social security were to be provided only for the needy poor in varying degrees, into a concept of universal services and universal benefits to which every citizen was equally entitled.
That this concept was introduced by the Social-Democrats lead originally to accusations of class betrayal by the more traditional and extreme left, but this has faded away as the result of the universal benefits model have become apparent in terms of the most equal distribution of income and wealth and the lowest incidence of poverty than with any other social models.
The concept of folkhemmet is no longer used except in a historical context, one reason being, I suspect, that after the Second World War it became somewhat tainted with Nationalist or even Fascist visions of unitary societies. What survives is the principle of universality in social policies which was a central corner stone in the post-war construction of the Nordic welfare modal. One way of explaining the principle is to say that everyone contributes and everyone benefits, and as long as the middle-classes also subscribe to this view the model will retain its support. Up to now this has been the case, as witnessed by the lack of any serious tax rebellions in the Nordic countries, where promises of tax reductions have not been great vote-winners, rather they are policies that have been forced by governments on the reluctant electorates who fear the run-down of public services as a consequence.
For the Nordic model to survive and continue to produce good results it is vital that the quality of public services be maintained. If people begin to perceive, as many in my country Finland have begun to, that public health services are deteriorating – not primarily the quality of the service offered, but rather its accessibility -then these services will be used mainly by the poorest people who have no alternative, as those with more means will prefer to use the booming private health service with slightly higher costs (but with a sizable public subsidy). And, as the saying goes, services for the poor are poor services. It therefore vital not to allow such a vicious circle to strengthen, otherwise it will undermine the Nordic model in a serious manner.
Nordic labour markets
Another way of expressing this defining feature of the Nordic model is inclusiveness. It can and does mean many things, but one of the central features is in the cooperative spirit of the modern labour market. It has been based on the free right to organize and the understanding, that everyone has more to gain through cooperation and agreement, than can be achieved through strife and strikes.
Strikes (and even lockouts by employers) do occur – indeed, the right to strike is recognized as one of the fundamental principles of a free society – but their incidence is low and their duration usually short, and they are managed in a very organised manner with zero-tolerance for violent or threatening behaviour.
The rate of labour organization has been historically very high in the Nordic countries and still remains so, even if there has been a slight decrease in the last decades. In Finland it remains overall close to 70 %, but in industrial occupations and the public sector it is almost 85 %. This also reflects a weakness of our modern labour markets, namely the low rate of organisation in the private service sector where wages are lowest and where part-time and temporary work has been increasing. The overall organisation rate is about the same 70 % in Denmark and Sweden, while in Norway it is slightly lower, 55-60 %. No other region in the world reaches comparable figures.
In Finland over 90 % of all wage-earners are covered by collective agreements, and over 70 % in the private sector. Also unorganized workers in a sector where there is a collective agreement are covered by it.
In past decades collective agreements used to be based on comprehensive income agreements which all the central organisations, both employers and trades unions, has signed and which were than more or less across the board applied in all sectors of the economy. It was common that the government was in one way or the other involved as a party to the agreements, some times more, some times less, even to the extent of agreeing to tax cuts or benefits to the parties as an inducement for them to come to agreement.
In the Nordic model it is common for the labour market parties to negotiate and make agreements not only on wages and conditions of work, but more broadly about pensions, unemployment benefits and other social policies. Today employers organisations are more reluctant than before to enter into national comprehensive agreements, leaving it to the organisations in each industry to come to agreement between them, but even when this is the case the agreements usually more or less follow the standard set by those representative parties which are the first to come to an agreement.
Today there is an increased tendency from the employers organisations and business to call for more flexibility in agreements, preferably even to replace national agreements with local agreement on the company level. This has remained absolutely marginal, also due to the fact that national agreements leave more and more leeway for taking into account local and company specific circumstances and needs, but the overall framework of national agreements ensures that this cannot take place unilaterally at the cost of the weaker party.
But even without centralized and national income agreements the labour market partners continue to discuss and cooperate on social issues. In almost all European countries one of the greatest challenges we face is aging population and how to ensure the sustainability of our pensions systems. This cannot be done without having people willing and able to stay in work until a later age. This today is the central issue that the Finnish government and social partners are negotiating about. Given the fact that our whole system of pensions was more or less created in negotiations between the social parties in the 60’s and that they have since then continued to cooperate on fine-tuning the system to ensure its sustainability, I remain fairly confident that adequate solutions can be reached even now.
Globalization and the Nordic model
Globalisation poses new challenges for everyone. Given the fact that the world’s population has trebled only in my own lifetime from 2,3 billion to 6,9 billion people it is obvious, that few if any of the ways mankind has interacted with its natural environment or arranged the interaction of human societies, nations and states, are workable in today’s globalized world where interdependence in all thing, good and bad, is a fact of life that no country, be it a military Hyper-Power or a small microstate, can escape.
The Nordic countries have not even tried to do so. On the contrary, as small open economies that have always been dependent on international trade we are usually identified as keen free-traders. This I think needs to be stressed: the Nordic countries have been essentially open free trade economies who have a keen interest in combating protectionism world-wide, but at the same time do not subscribe to market fundamentalist principles and understand, that for free trade to be sustainable it has also to be regarded as fair for the least developed countries.
That the Nordic countries are thus par excellence winners in globalisation can hardly be contested. This view is strongly supported by the fact that almost invariably all the five Nordic countries are to be found among the ten top countries in any of the international beauty contests where countries are ranked on the basis of their competitiveness, efficiency of administration, educational standards, lack of corruption, use of IT-technology, Human security, environmental standards and so on.
I call these beauty contests because they are based on perceptions rather than objective criteria, but the consistency of the favourable results for the Nordic countries indicate that there must be something more involved then what is in the eye of the beholder. Even many of those, who not so long ago were proponents of Neo-liberal solutions have reluctantly come around to a recognition, that the Nordic countries’ relative success has not come about in spite of our high-tax welfare states, but rather it is the Nordic welfare state and our model of labour market cooperation that is the key to this success.