Responsible Employer

Happy birthday Nordic model

Analysis of the welfare model of the Scandinavian countries

Over the last 50 years, Scandinavian countries have developed a peculiar welfare model. The so-called “Nordic model” has been at the centre of several vivid debates dividing scholars and practitioners between its supporters and its detractors. Agreement on whether or not the Nordic model embodies a feasible, scalable system has yet to be reached. The debate is currently ongoing.


A welfare system encompasses the entirety of public policies implemented by the State which – within a market economy- guarantees public wellbeing by enhancing services through the revenues generated by market forces. A well-known, and simultaneously contested, example is the Nordic welfare model, a model renowned to be particularly keen in guaranteeing public wellbeing. It appears difficult to trace its genealogy, but history tells us that the first examples of welfare States appeared in Europe at the end of the 19th century. Between 1880 and the end of World War Two, almost all the current OECD countries witnessed the birth of various modern forms of welfare state. Nevertheless, in 1880, only the Scandinavian country of Norway was investing more than 1% of its GDP into welfare services.


What is historically certain is that the term ‘Scandinavian Model’ has been adopted since the end of World War Two. We can thus say, that the Nordic Model turns fifty years old, even if its ‘true’ origins date several decades before. According to the Polish philologist Kazimierz Musial, who has investigated the path that has lead the Nordic Model to become a cultural reference, “it was the period after World War Two that gave rise to this new coinage (…). The concept connoted welfare politics and political progressiveness in general. This very concept and appellation has since been elaborated and applied by historians and political scientists to describe social and political systems in Scandinavia. With time it also attracted the politicians and journalists who propagated it by making an extensive use of it. The term Scandinavian model was an embodiment of the belief that somewhere in Europe, in its northern part, there were progressive and modern countries which could possibly constitute an example for others to follow”.


To claim that the Scandinavian Model has passed its glorious days might sound as an oversimplification. Processes of formulation of social policies in the Scandinavian Peninsula began in the 1930s, presenting peculiar characteristics embodied by their singular bipartisan nature: for instance, it was the Social Democrats that, in 1938, introduced in Norway a mandatory social insurance, collecting contributions from the entrepreneurial, the labour and the public sectors. Nevertheless, it is interesting to note how it was the liberals that had initially developed such proposition. It was after the War that the model witnessed its major transformations, beginning to reach even out the national borders.


Providing a comprehensive definition of the Nordic Model seems quite difficult. As such, in our support, we can look at the contribution of two Indian scholars, Razi Iqbala and Padma Todia, whom, in 2015, stated: “This model is both unique and similar to both capitalism and socialism in the sense that it derives its features from both the models but is very distinct from both in its totality. We will term this “third” model as the Nordic model from here on with its political system being termed as social democracy and the economic structure being defined as free market welfare state”. The Nordic model thus embodies the so-called third, recently at the core of several research projects.


Despite various affirmations of eminent Scandinavian researchers (Alestato, Kuhnle, Hort), praising the universal applicability of Scandinavian Welfare by claiming that the “Nordic model of welfare” may today be exportable to other parts of the world, culturally close or distant”, several critiques have also emerged. In June 2015, commenting upon the loss of consensus of the Danish Social Democrats and the simultaneous rise of populist politics, Nima Sanandaji, author of “Scandinavian Unexceptionalism” (Institute of Economic Affairs, 2015), wrote: “The Nordic model has long been admired abroad. It has been seen as a way of combining economic growth with admirable social outcomes. But the simple idealization is misleading. Denmark, Finland, Norway and Sweden aren’t set apart only by social-democratic policies but also by a unique culture built upon trust, a Lutheran work ethic and a strong emphasis on personal responsibility. These cultural features, combined with healthy lifestyles, allowed Nordic nations to develop high living standards, income equality and long lifespans during the first half of the 20th century. The success also arose during a period when policies were based upon low taxes and free markets”. According to Sanandaji therefore, the Nordic Model represents a unique example, nevertheless possibly incapable to deal with serious transnational issues, such as migration flows. “Nordic politicians who wish to draw voters away from the anti-immigration right can learn much from the Danish election. The major issue isn’t simply a dissatisfaction with immigration policies, but also the need to formulate a new welfare-state contract. Instead of slowly eroding working norms, voters want a new model that strengthens them. They’ve had enough of the traditional welfare model”.


Detractors of the Nordic Model have been sustaining that the functioning of such welfare system is only possible due to the extremely high level of development of the Scandinavian Peninsula. However, Razi Iqbala and Padma Todia have argued otherwise. “The Nordic model has shown in the past that it can work itself out of problems efficiently and effectively. In the 2008 recession, it was expected that the Nordic countries would badly falter due to their welfare state consumption, but what ensued was actually the opposite. Though the Nordic countries were not immune to the economic downturn, they weathered the recession pretty well and bounced back more quickly than any other European country (…). This shows an ability of the model to tackle problems and come up with solutions on its own”.

Yet, on February 2013, in the midst of the economic crisis, The Economist wrote: “Sweden, Denmark, Norway and Finland—are doing rather well. If you had to be reborn anywhere in the world as a person with average talents and income, you would want to be a Viking. The Nordics cluster at the top of league tables of everything from economic competitiveness to social health to happiness. They have avoided both southern Europe’s economic sclerosis and America’s extreme inequality. Development theorists have taken to calling successful modernisation “getting to Denmark”.


The Nordic Model still persists and further continues to revolve at the core of contemporary debates, moving beyond the traditional Left/Right dichotomy, to explore and discuss the functioning of welfare mechanisms, regarding their sustainability and, eventually, their exportability. Within such contested setting, the Nordic Model gloriously celebrates its 50th birthday.