The Nordic Economic Model: Successes, Challenges and the Future

Maria Johansson, for GPA -- The Nordic countries of Denmark, Finland, Iceland, Norway and Sweden make up a very small portion of the world. With a total population of 25 million and governments that are known for their socialist attitudes, these countries perform remarkably well economically.

On December 15, the Global Interdependence Center and the Norwegian-American Chamber of Commerce Philadelphia hosted a number of Nordic thought leaders and experts to discuss the existence of a Nordic economic model and what it might entail.

The keynote speaker for the event was Ambassador Terry Miller, director of the Center for International Trade and Economics and the Mark A. Kolokotrones Fellow in Economic Freedom at the Heritage Foundation. Miller and his colleagues at the Heritage Foundation perform research on the amount of economic freedom that the world offers, ranking each country based on its performance in a number of categories.

During this conference at the Federal Reserve Bank, Miller concluded that the Nordic countries are historically successful economies and that while he had not been able to find a de facto economic model, “there must be something here worth looking at.”

Miller pointed to a number of societal characteristics in the Nordic countries that have translated into economic policies and attitudes: honesty, fairness, efficiency, industriousness, trust in government, gender equality and cultural homogeneity. The combination of these specific characteristics, he said, may be one of the reasons why Nordic countries have been so successful in the past.

During the first panel of the day, the audience was given the viewpoint of government officials. Leif Trana, Minister Counsellor for Economic Affairs at the Embassy of Norway, shared an overview of the economy of Norway and what he perceived to be the challenges facing the country.

Historically, Trana said, Norway has had much success with both oil and the advanced technology surrounding its extraction. This advanced technology, he said, is now being exported back to other countries. Trana also pointed out a difference between the Norwegian employee hierarchy and that of many non-Nordic countries: people of all parts of a company have easy access to other departments, allowing for a quicker and smoother line of communication and faster solutions to most problems. Finally, he said that the future of the Nordic countries and their success will “come down to people,” a common theme in many of the presentations.

While the overall image of the Nordic countries was positive, Finnish Ambassador Jukka Pietikäinen delivered a slightly less optimistic report. Finland’s biggest trade partner and source of tourism is Russia. With the tensions between Russia and the West, resulting in financial sanctions placed on Russia, this source of trade and tourism has significantly decreased.

“Everything that has happened between Russia and the West, Finland has felt,” said Pietikäinen. However, by 2018 production is expected to be back to normal levels.

The second panel offered the view of the markets. The Chief Economist of Swedish bank SEB Robert Bergqvist and the Chief Executive Officer of Qlik, a company founded in Sweden that is headquartered in Philadelphia, Lars Björk, offered two somewhat contrasting views of the Nordic economic model.

Björk successfully runs Qlik from Philadelphia in a global fashion but with “a Swedish soul.” He argued that the reason behind the success of Qlik and other Swedish companies can be traced back to a few societal characteristics like those mentioned by Ambassador Miller, as well as the flat employee hierarchy pointed out by Trana.

Bergqvist argued that there was not a Nordic Economic Model, but rather a “Nordic Experience.” This could be traced back to common economic crises in the 1980s and 1990s and the shared solutions to these crises, such as the creation of independent central banks, the use of the Euro and joining the European Union.

While Bergqvist did agree that there has been a “fairly good economic performance from the Nordic countries over the last couple of years,” he suggested that the future challenges would include financing the established welfare state amidst an ageing population, employment and immigration as well as increased competition due to globalization.

In summary, all panelists agreed that the Nordic countries do offer openness, innovation, a deregulated market and modest corporate income taxes. These attitudes, in addition to a unique combination of regional societal characteristics, have had a historically positive influence on the overall economic performance of the Nordic countries. Given their great success, it can be concluded that whatever the model is, it’s working.

Photo courtesy of the Nowegian-American Chamber of Commerce Philadelphia.