Magazine / Economy / The Nordic Model / Interview | 31/10/2007

How losers become winners

Joakim Palme is a sociologist and director of the Institute for Future Studies in Stockholm. He spoke with Eurotopics about the Scandinavian model of the welfare state and its chances of becoming a model for the whole of Europe.

Mr. Palme, do you and your countrymen know that they live in a blessed place, admired by the rest of Europe, where the economy and welfare state coexist in a miraculous way?

Joakim Palme

Joakim Palme: The Swedish complain a lot about the welfare state. Only when they go abroad do they seem ready to support it. Taxes are high, but there is a willingness to pay them, as long as they are shown to be being spent sensibly. The equilibrium might be challenged if the services were not satisfying the middle. Then they would object. Right now the great majority still support it. In last year's election, when the social democrats lost to a centre right coalition, the coalition's campaign was not built on challenging the social system or massively reducing taxes but on maintaining the Swedish model.

Could this model become the guiding light for the European Union?

We at the institute for Future Studies try to be cautious about making predictions for the future. I am not sure if it is possible to extract lessons for all the European countries from the Scandinavian experience. It is not easy to apply elements of an existing model to a new context. You have to be careful about how the different policy areas are linked and interact. But given the fact the members states of the EU are also facing ageing societies, the demands for a new gender balance and the need to make working life more flexible and quality-oriented suggest that something could be learnt from Scandinavian countries.

Some maintain that your system doesn't exist and if it exists, it only works in the northern countries and can't be transferred.

It's true that part of the economic growth of the last 15 years is due to the recovery from the crisis in the early 90s. But there are some well designed social policies in Scandinavia and there is a potential to export them to other European countries. Some member states are already trying to implement policies of Scandinavian design. Spain comes to mind. But that can not be done in an isolated way without looking at the interactions between different policies. Germany, for example, has implemented Scandinavian-style parental leave legislation. In order to successfully promote a new gender balance, Germany probably has also to implement another element: subsidies to child care centers. The proper combination is vital.

What elements of the Scandinavian model can be exported?

We have been successful in mobilising the female part of the labour force into the market. This has been a result of changes in the incentives structure. For example, the tax system has moved away from joint taxation of spouses to separate taxation which provides women with a much greater incentive to participate in the labour market. Another point is the investment in lifelong education which already started in the 1950s and 1960s. Thirdly we realized it that providing economic incentives and education for women is not enough. If you are serious about balancing the challenges of work and family life, you have to give subsidies to those who provide primary care. The expansion of social services for old people and small children in day care centres is another element common to the Nordic countries.

That doesn't sound cheap. What if the economy falters and the flow of tax revenue dries up?

It's true, successful macro economic policy is very important. Past policy failures in the past in this area have been very problematic. But there is an exaggerated sense of the high taxes in Scandinavia. When you look at social expenditures in other European countries, you will find that many spend as much or even more than the Scandinavian countries. Germany has a net social spending that is at par with Sweden. Denmark is in fact at par with the UK. It is misleading to think the social spending in Scandinavia is so different from that of other European countries. It is just more visible.

What is your secret then?

It has a lot to do with investing in people. Sweden was the first country to promote lifelong learning which is now becoming a standard policy in the EU. Sweden was first to promote active labour market policies, which was a modern way of dealing with free trade and the market fluctuations that are specific to globalisation. As a result of this early and active adaptation process, the Swedish population is much more positive about globalisation than other European nations. If there is something to learn from the Northern example, it has to do with combining social and economic politics and making markets work for people and not the other way around.

Experience has shown that democratic politicians are not very farsighted. They tend to focus on the next election. How come Sweden was already responding to problems like the ageing society in the sixties, while Germany started this discussion only a few years ago?

That's an important point. It shows that the Scandinavian model is not so much about institutions but about process, the way to do things. As early as the thirties the Stockholm School of Economics had a very Keynesian approach to macroeconomic policy making. The strong role of the state in the economic and social spheres was advocated throughout the 20th century. But enlightened politicians are not enough. Another asset of the Nordic model is the high degree of trust that citizens have in policy makers.

Where does that trust come from?

We don't really know. That has still to be researched. Some have claimed that it is part of Scandinavian culture, that the Nordic countries have always been egalitarian and so on. There might be some truth to this but I would not underestimate the political institutions. I think that a significant feature may be the importance of local politics. Taxes are based on the local level, decisions are made there, and with the municipalities being comparatively small, a high proportion of the population is active on the political scene.

But many problems can't be solved at the local level.

Politics are local, Swedish policy not. Another important pillar of the model is the universality of policy systems. If you change something at the national level, it will affect the entire population. There are only three labour unions, which represent eighty percent of the workers. Because of this centralised structure, necessary adjustments have not met too much resistance in the past. In Germany or France, diverse interests often oppose change. It's more difficult to change several different systems than a universal one. We see that in France today. The railway workers are against the changes to their pension system because they suspect that they are the only ones who have to lower their claims. Fragmented societies often lack the political trust necessary to achieve change. As we saw in the crisis of the early 1990s, it was possible to change the benefit system in Sweden without triggering mass protests and having various interest groups block the changes. In Germany, the same measures prove difficult because of the various interest groups.

Sweden is Europe's model student. Is there any other country that you admire?

Yes, the Finnish and their education system. They are much better in helping pupils who don't perform so well and in lifting the average level of education.

And outside Scandinavia?

One could look at Ireland. It has been a careful spender in many social areas, but they invested heavily in education, and this was a very important fact for their takeoff. But there is much lacking in the social sector. Their poverty rates are very high.

It seems that fast growing countries can't prevent the gap between rich and poor from widening.

The Austrian economist Joseph Schumpeter considered capitalism to be destructive of old and inefficient institutions. In the transformative process which is called globalisation, there are winners and losers. If anything, the message is to take care of the losers and make them winners. But you have to invest in people. I think that the people of Europe doubt whether their governments are willing to take care of potential losers.

Christoph Mayerl

Born in 1976, Christoph Mayerl studied journalism, philosophy and politics in Eichstätt, Bavaria. He works as a free-lance journalist in Berlin.
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