The Nordic Way by Swedish Institute

equalit y, individualit y and social trust

The Nordic Way

What’s so Special about the Nordics? In international comparisons of global competitiveness, the Nordic countries are almost always found at or near the top. In one meta-index that is an aggregate of 16 different global indices (competitiveness, quality of life, equality, etc.) the four main Nordic countries top the list.1 What are the reasons? Is there such a thing as a common “Model” particular to the Nordic region and if so, will it last? Is it transferable to other parts of the world? In this brief we provide bits and pieces of some plausible explanations for the relative success of the Nordic societies. We hope these experiences can improve the understanding of our way of doing things and inspire debate and development in other parts of the world. Shared values are also about sharing experiences with others. The fact that Nordic countries show resilience during the recent financial crisis largely seems to be the result of deep crises in the Nordic region in the 1980s and 90s. During these crises, the Nordic countries renewed and modernized their respective economies. Klas Eklund (senior economist at SEB and adjunct professor of economics at Lund University) consequently claims that what we ought to search for is not a crisis-free “Nordic model” but rather a “Nordic experience,” efficient ways to handle deep crises. Social cohesion and political transparency seems to have played a role in making tough reforms possible. The second article by Henrik Berggren (historian, former political editor of Dagens Nyheter) and Lars Trägårdh (historian, professor at Ersta Sköndal University College) addresses precisely this issue. Many people see the Nordic countries as some kind of compromise between socialism and capitalism. According to BerggrenTrägårdh, it is instead the combination of extreme individualism and a strong state that has shaped the fertile ground for an efficient market economy.

Kristina Persson (Executive President of Global Utmaning and Chairman of the Nordic Association) underlines the dimension of inclusion in the previous authors’ arguments. She takes a closer look at the Swedish welfare system and presents policies that focus on productivity, social protection and inclusion. She sorts out the importance of local self-governance and the role of taxes in Sweden and in other Nordic countries. Barbro Hedvall (journalist, special advisor and former editorial writer) describes a region in which women do not have to choose between family and career, in which women have essentially the same political posts as men, and in which they are slowly getting a footing in the corporate power sphere. On paper women have long had the same opportunities as men, and in recent years attitudes in Nordic societies regarding gender roles have begun to genuinely change. Economic performance also benefits from low transaction costs, generally delivered by social trust, adherence to laws and low levels of corruption. According to several well-known studies2 it is the most modern and individualistic countries, most notably the Nordic countries, that are characterized by such broad social trust. We believe—like the five authors— that it is not enough to share values. Values also have to be translated into institutions, rules and legislation. Cultural and social values are not easily transferable across borders, but systems and policies that have proved to work well might still serve as an inspiration for others. Stockholm, February 1, 2012

Annika Rembe

Director-general, Swedish Institute

1 Tällberg Foundation, 2009

Kristina Persson Director, Global Utmaning and The Nordic Association

2 World Values Survey, Eurobarometer, European Social Survey, European Values Survey

Klas Eklund

Nordic Capitalism: Lessons Learned

uring the financial crisis of 2008-09, the four main Nordic countries showed resilience. They suffered during the downturn but rebounded fairly quickly. None of them went through any devastating banking crisis. Although the Danish real estate market took a beating, none of these countries showed dangerous budget deficits, and none of them had current account problems. When the sovereign debt crisis deepened in 2011, Norway breezed along while Sweden, Denmark and Finland fared decently. The turmoil in the euro area hit their export sectors and overall growth slowed. But none was downgraded, and none saw any dangerous rise in interest rate spreads—actually, Sweden’s treasury yields dipped below Germany’s. This resilience has rekindled international interest in what is sometimes called “The Nordic Model.” However, one should be very careful about using such a term. It is difficult to find any kind of common Nordic economic blueprint that is transferable to other countries. Actually, in important respects the Nordic countries follow different economic strategies. This is most visible in

their stance toward the euro. Finland is a member of the European Union (EU) and has adopted the euro. Denmark is an EU member, with an opt-out from the currency union—but still keeps its currency tightly pegged to the euro. Sweden is also an EU member with no opt-out—yet is nonetheless not a member of the euro zone and has a floating currency. Norway, finally, is neither in the EU nor in the euro zone. Four countries, four different strategies—whose differences have great importance in the ongoing euro crisis. Of course there are economic similarities. All four are small, open economies with high per capita incomes. All have a rather large public sector with high taxes, and all have inclusive welfare states. But they have different histories and structures. The richest Nordic country—Norway—largely bases its accumulating wealth on oil and gas revenues. Denmark’s economy is based on transport and agriculture. Sweden is successful in manufacturing, pulp and paper, telecom and design. Finland’s industrial structure is similar to that of Sweden but the manufacturing sector is not as broad. Denmark and Sweden have among the highest tax-to-GDP ratios in the world. Finland has lower taxes.

NORDIC CAPITALISM: LESSONS LEARNED

Strong Nordic Competitiveness Institutions 7

Innovation

Infrastructure

6 5

Business sophistication

Macroeconomic environment

4 3 2

Market size

Health and primary education

Technological readiness

Financial market development

Higher education and training

Goods market efficiency Labor market efficiency

Nordic (FI, DK, SE, NO)

United States

EU 27

When the World Economic Forum compiles its competitiveness index, this is based on a weighting of twelve “pillars,” such as education, infrastructure, market efficiency, etc. In the recent Report, the four main Nordic countries beat the EU in all different pillars. At the same time the Nordics beat the US in nine out of twelve pillars, losing out only in market size (of course), innovations and “labor market efficiency.” The latter definition, however, is debatable since the “flexicurity” of the Nordic economies is another way of organizing the labor market than the Anglo-Saxon way—different, but not necessarily less “efficient.” Source: World Economic Forum Global Competitiveness Report 2010-2011

NORDIC CAPITALISM: LESSONS LEARNED

Learning from Previous Crises More importantly, the Nordic countries have not been free from crises. On the contrary, I would claim that one important reason for their relative success today is the fact that they suffered deep crises in the 1980s and 1990s—and were able to learn from them. All of them used their crises to modernize their economies, reforming rather staid systems and making them more flexible.

As a response, labor market policy became much more flexible. Eventually, the result was low inflation and a gradually improving labor market.

In this sense the Nordic countries are turnaround cases. Within a few decades they have gone from poorly performing to strongly performing economies. But there is no clear common pattern in their crisis strategies. The Danes started their turnaround as far back as the late 1970s while the Norwegians had their crisis in the 1980s and the Swedes and Finns did not suffer theirs until the 1990s—then in a more brutal way.

Norway suffered a prolonged financial and real estate crisis in the late 1980s, after a mismanaged credit boom, which ended in a systemic crisis and the nationalization of major banks. In the early 1990s, government, labor and management made an agreement according to which tight fiscal policy should contribute to stabilizing production and employment, wage policies should aim at competitiveness in the export sector, while monetary policy was initially geared toward a stable exchange rate. During the European currency crisis in 1992, monetary policy makers instead adopted an inflation target and accepted a floating currency.

Denmark used to have the most troubled economy in the Nordic area, suffering from both inflation and high unemployment. It joined the European Union as early as 1973 (far ahead of Finland and Sweden) and decided early on that a fixed currency was necessary to overcome inflation and lack of economic policy credibility. In 1982 the Danish krone was pegged to the D-Mark. A number of tough austerity programs in the 1980s— notably the “potato cure”—made stability possible and the exchange rate credible, but at the same time pushed up unemployment.

In both Finland and Sweden, the 1980s were years of high inflation and weak currencies. Both nations had gone through several devaluation cycles, with ensuing high inflation. Both—like Norway—had problems in controlling the aftermath of credit market deregulation, and both were hit by economic shocks in the early 1990s. Finland suffered from the collapse of trade with the Soviet Union when that country fell apart, and Sweden suffered from high interest rates to protect a fixed exchange rate. The result was banking crises, followed by severe recessions with falling

NORDIC CAPITALISM: LESSONS LEARNED

GDP levels and rapidly rising unemployment. The numbers were astounding. In Sweden, the budget deficit peaked at 12 percent of GDP, and the central bank’s key interest rate peaked at 500 percent. Unemployment quadrupled. In Finland, joblessness reached almost 20 percent. Not until hard currency policies were abandoned in 1992 was it possible to lay the foundations of a turnaround, but a period of tight fiscal policies made the recovery painful.

case via a fixed exchange rate. The sloppy budget practices of yesteryear have been replaced by strict budget rules. In both Sweden and Finland, fiscal tightening amounted to some 7-8 percent of GDP in the mid-90s, mainly through expenditure cuts. In Sweden, the national budget targets today are much tougher than in the euro zone’s Stability pact, requiring the government to show a hefty surplus in good years in order to obtain a small surplus over the economic cycle as a whole, aiming to reduce government debt.

Nordic economic performance in the 1970s and 80s was not very successful, to put it mildly. Instead, all four countries suffered deep recessions.

In Norway, revenues from oil and gas now have to be handled according to strict rules in order to keep the government budget more or less balanced. The bulk of revenues is put into a sovereign wealth fund—the Government Pension Fund Global—for future needs and investments. Moreover, a“fiscal policy rule”limits the structural non-oil budget deficit over a full economic cycle to the 4 percent expected real return on the fund.

Since then, these countries have shaped up. The reason, however, is not that taxes have been hiked or benefits have become more generous or any other such actions which many people may associate with a “Nordic model.” On the contrary, economic policy in all four countries, but to a different extent, has been modernized, not least by market reforms.

Policy Makeover The high inflation policy of previous decades has been replaced by national inflation targets in both Sweden and Norway, whose central banks have been pioneers. Denmark and Finland, of course, adhere to the ECB target. In this sense, they all have inflation targets, albeit in the Danish

In all four countries, several markets have been deregulated. Taxes have been cut, as well as benefit levels. In Sweden, the tax ratio (total tax revenue as a share of GDP) has fallen from 56 percent in the late 1980s to 45 percent in 2011. Expenditure has come down even faster, turning a budget deficit into a structural surplus. Both Finland and Sweden—mainly because of the political trauma created by deep recessions— were able to push through comprehensive reform programs. In only a few years in the mid-90s, a

NORDIC CAPITALISM: LESSONS LEARNED

radically new macroeconomic framework was put in place, with independent central banks, strict budget rules, deregulation and lower benefit levels. This framework has given both countries a stable low-inflation environment. In Sweden, a new partly-defined-contribution public pension system replaced the old defined-benefit system. On top of that, Finland and Sweden were well positioned to reap benefits from theâ&#x20AC;&#x153;new economy.â&#x20AC;? They have world class IT and telecom companies, as well as a tradition of good international management. The result has been rapid productivity growth. Denmark has benefited from expanding global trade and increasing demand for agricultural products. Norway, of course, has gained from the ever-growing demand for commodities and energy. Finally, it should be noted that Nordic banks in general did not venture into exotic and dangerous credit derivatives in the run-up to the financial crisis of 2007-08, the main reason being that they were scarred from the banking crises of the early 1990s. So, as a group, the Nordics have fared better than most countries. However, they have not been immune to the strains suffered by other countries during the recent crisis. The Danish real estate market has taken a severe hit, due to its high precrisis valuation, and private debt is still high. In Sweden, some banks lent heavily to the Baltic countries, which suffered a terrible crash in 2009.

Swedish real estate prices soared for a while, but started to fall in 2011. And when countries on the European continent fell into a new recession in 2011 and euro zone growth halted, this hurt the non-oil export sectors of all Nordic countries. But this slowdown in the Nordic area was imported, not created by domestic strains or faulty economic policy. Today, the Nordic countries are all facing new challenges, several of which they share with other advanced economies. Their populations are aging, which means that pension systems and health care are facing future funding problems. They will face new competition from the emerging markets as the latter move up the value chain. And they must all, albeit to different degrees, try to integrate a growing number of immigrants in their labor markets to stave off growing xenophobic and populist discontent.

A Nordic Experience in Crisis Management Those challenges are still ahead. Looking back, the relative Nordic success story during the recent economic downturns is largely due to the crisis management of the 1980s and 1990s. Here, of course, is a lesson to be learned by continental European countries: a swift and resolute reform strategy may yield better results than a wishywashy, drawn-out one.

NORDIC CAPITALISM: LESSONS LEARNED

Trustworthy Public Institutions in the Nordics Global Competetiveness Index 2010–2011 7

6 DK 5

SE FI

1 1

1st pillar: Institutions One of the indices in the World Economic Forum Competitiveness report concerns the transparency and efficiency of public institutions. In the recent report, four out of the six top spots in this “pillar” were clinched by the main Nordic countries. Source: World Economic Forum Global Competitiveness Report 2010-2011

NORDIC CAPITALISM: LESSONS LEARNED

The policy lessons from the Nordic experience show it is possible to regain stability, and for crises-ridden economies to recover. We should, however, be aware that in all countries it took deep crises to trigger the necessary reform programs. But this conclusion, of course, raises a more fundamental issue. What made it possible for the Nordic countries to actually make good use of their respective crises? President Obama’s former Chief of Staff, Rahm Emanuel, famously quipped “Never let a good crisis go to waste.” But many countries do. How come the Nordic countries did not waste theirs? Are there some common elements in the Nordic way of handling crises which are beneficial and could be emulated in other countries? Is there a certain “Nordic experience” from which we might learn? Once again, it is almost impossible to create blueprints for other countries, with different characteristics, in different times. And as seen above, the four countries followed different strategies as regards currency policy, income policy, etc. Nonetheless, there are certain common traits in how these countries answered the challenges. All four have a tradition of consensus-seeking policy solutions—the obvious example here is the Norwegian deal between the government, labor and management.

toward new technology. And they all—more or less—adhere to the view that sick leave and unemployment insurance systems should be shaped in ways which are both generous and growthpromoting. This creates a certain social cohesion, which may have beneficial effects on policy-making and growth. The combination of liberal labor laws (it is comparatively easy to hire and fire) with generous benefit levels and an active labor market policy has been dubbed “flexicurity,” since it aims to combine both flexibility and security. This system, however, does not always function as intended. It has not prevented unemployment from rising over the long-term or during the recent crisis. And it has not been able to fully prevent the creation of a large group of structurally unemployed immigrants, who are now creating rifts in previous homogeneous countries. Nonetheless, it may be an important part of the answer to the questions about the Nordic experience. However, this raises new questions and pushes us to the next analytical level: How come the Nordic countries have adopted this “flexicurity” model, with its strong emphasis on labor and work ethics? Here, the wretched economist must leave the floor to the historians. Precisely this issue is analyzed in the next essay by Lars Trägårdh and Henrik Berggren.

Also, their economies are open and protectionism is out of the question. Labor unions are positive

NORDIC CAPITALISM: LESSONS LEARNED

Henrik Berggren / Lars TrĂ¤gĂĽrdh

Social Trust and Radical Individualism The Paradox at the Heart of Nordic Capitalism

n a broad global perspective, the Nordic region may seem of marginal significance. The combined population of the Nordic countries is only 25 million people, but in qualitative terms there is an argument to be made for the viability of the Nordic strand of capitalism. As Klas Eklund shows in his article, the region has emerged in good shape from the recent financial crisis, with budget surpluses and low levels of public debt. In a longer perspective the four main Nordic countries are characterized by steady growth, long-term political stability, transparent institutions, technological adaptability, flexible labor markets, open economies and high levels of education. All these factors tend to put the Nordic countries at the top of international ranking lists both in terms of economic clout and quality of life. It has also been argued that this makes the Nordic countries better equipped to deal with fundamental challenges concerning sustainability in general and global warming in particular.

How, then, can we explain the relative success of Nordic capitalism in a globalized world? One possibility is that Nordics by nature are unusually cooperative, rational and less prone to succumb to the lure of market egoism than other people. If that is the case, there is not much to be learned from the outsideâ&#x20AC;&#x201D;other than that the world might be a more reasonable but also possibly duller place if it were inhabited solely by Swedes, Danes, Norwegians and Finns. However, if we assume that the citizens of the Nordic countries are on the whole similar to other human beings in their passions, both good and bad, other factors come into play: the social practices, the long-term institutions and historical experiences that underpin Nordic capitalism. This is not to imply that there is a free-floating Nordic model that can be applied to other countries. But it does mean that some aspects of Nordic capitalism might be relevant in addressing the problems of globalization, social fragmentation and the instability of modern finance capitalism.

SOCIAL TRUST AND RADICAL INDIVIDUALISM

Individual Autonomy and Social Trust What then, are the most outstanding characteristics of Nordic society that are specifically relevant to the efficiency of its economy? Traditionally, outside observers have put a strong emphasis on social solidarity—an ability to subordinate individual interest to collective rationality. Often, this stress on solidarity has been understood in opposition to the fundamental logic of the market: certain collective goods have been “decommodified” and effectively removed from the cold logic of the market society. Indeed, this was a perspective that Marquis Childs made famous as early as the 1930s, when he wrote Sweden: the Middle Way, suggesting that Sweden had found a way to a healthy balance between altruistic socialism and selfish capitalism, to use the crude binary of that period.

ticularly strong leftist attitudes in terms of equality of classes versus individual freedom, equality of pay versus merit-based differentials or state versus private ownership of industries. As Ole Listhaug has put it: “This could well demonstrate a higher level of individualism and support for market principles than is traditionally attributed to the citizens of Scandinavia.” Indeed, while recent studies underline the link between relative equality and a wellfunctioning economy typical of the Nordic societies, even more significant may be data that show higher rates of social mobility in the Nordic countries compared to, for example, the United States.

A strong emphasis on social solidarity

But this is, at best, a half-truth. This emphasis on social solidarity hides the strong, not to say extreme, individualism that defines social relations and political institutions in the Nordic countries. Indeed, it is precisely the fundamental harmony between the Nordic social contract and the basic principles of the market—that the basic unit of society is the individual and a central purpose of policy should be to maximize individual autonomy and social mobility—that we see as the key to the vitality of Nordic capitalism. In a European perspective, the Nordics do not hold par-

Nordic Individualism While much has been written about the institutionalized aspects of the Nordic welfare state, few have paid much attention to its underlying moral logic. Though the path hasn’t always been straight, one can discern over the course of the twentieth century an overarching ambition in the Nordic countries not to socialize the economy but to liberate the individual citizen from all forms of subordination and dependency within the family and in civil society: the poor from charity, the workers from their employers, wives from their husbands, children from parents—and vice versa when the parents become elderly.

SOCIAL TRUST AND RADICAL INDIVIDUALISM

In practice, the primacy of individual autonomy has been institutionalized through a plethora of laws and policies affecting Nordics in matters minute and mundane as well as large and dramatic. Interdependency within the family has been minimized through individual taxation of spouses; family law reforms have revoked obligations to support elderly parents; more or less universal day care makes it possible for women to work; student loans without means test in relation to the incomes of parents or spouse give young adults a large degree of autonomy; children are given a more independent status through the abolition of corporal punishment and a strong emphasis on children’s rights. All in all this legislation has made the Nordic countries into the least family-dependent and most individualized societies on the face of the earth. To be sure, the family remains a central social institution in the Nordic countries, but it too is infused with the same moral logic stressing autonomy and equality. The ideal family is made up of adults who work and are not financially dependent on the other, and children who are encouraged to be independent as early as possible. Rather than undermining “family values” this could be interpreted as a modernization of the family as a social institution. While accepting the fact that long-term spousal commitment is no longer the norm, the “new Nordic family” takes parenthood seriously, both in a demographic sense (the Nordic countries have higher birth rates than more traditional family cultures in southern Europe)

SOCIAL TRUST AND RADICAL INDIVIDUALISM

Secular-Rational Values

Rational and Self-expression Values Dominate in the Nordic Region 2.0 Japan

1.5

1.0

Bulgaria

Russia

Estonia

Macedonia

-0.5

Hungary

South Asia

-1.0

Italy Croatia

Bangladesh

Pakistan South Africa

-1.5 Jordan Zimbabwe Morocco

-2.0

Austria

Spain Uruguay

Great Britain

English speaking

Portugal Chile

Iceland

New Zeeland Canada Australia

U.S.A

Vietnam

Argentina

Ireland

Dominican Republic Peru Brazil

Ghana Uganda Nigeria Algeria Egypt Tanzania

Africa

Luxembourg

N. Ireland

Turkey Indonesia Phillippines Iran

Netherlands

Belgium

Poland India

Traditional Values

France

Israel

Catholic Europe

Romania

Denmark

Switzerland

Greece Slovakia

Georgia Azerbaijan Armenia

Norway

Finland

Slovenia

unist m m o C Ex- Bosnia

Sweden

West Germany

S. Korea

Montenegro Lithuania Taiwan Latvia Serbia Albania Moldova

East Germany

Protestant Europe

Czech

Belarus

Ukraine

0.5

China

ian c u f on

Latin America

Mexico Venezuela Colombia El Salvador

Puerto Rico

-2.0 -1.5 -1 -0.5 0 0.5 1 1.5 2

Survival Values

Self-expression Values Factor Score

Source: World Values Survey (WVS), fourth wave (1991-2001). See also, Ronald Inglehart and Christian Welzel, Modernization, Cultural Change, and Democracy: The Human Development Sequence. Cambridge: Cambridge University Press, 2005.

SOCIAL TRUST AND RADICAL INDIVIDUALISM

and in terms of the time that parents, married or not, spend with their children. In quantitative terms, data from the World Values Survey (WVS) confirm this picture, indicating that the Nordic countries stand out as a cluster of societies in which people put a strong emphasis on the importance of individual self-realization and personal autonomy. In the language of WVS, the Nordics are characterized by their embrace of “emancipatory self-expression values” on the one hand, and “secular-rational values,” on the other. One effect of this radical individualism is that, relatively speaking, people in the Nordic countries are more willing to accept the market economy both as consumers and producers. Less tied down by legal and moral obligations within the family, yet still protected from extreme risk by a universal safety net, they become more flexible on the labor market, while as individual consumers they have developed far-reaching needs of products and services that previously were satisfied within the traditional family. This market orientation is enforced in a number of ways in the Nordic countries, not least by a social insurance system based on the recipient’s level of earned income on the open labor market, thereby creating an incentive to work while at the same time providing adequate coverage for illness, unemployment and parental leave. Currently, the most famous example is the Danish “flexicurity system.”

To this should be added the historical legacy emphasizing equal access to fundamental goods, not just healthcare and pensions, but also education. This has translated into a long history of investing in individuals and providing access to resources that allow them to maximize their value in the market place. Historically the countries with the highest rates of literacy, Nordic countries have for a long time scored at the very top when it comes to basic education and investment in research. For this reason, rather than speaking of a“welfare state,” which many English speakers associate with social assistance and long term dependency on the state, some scholars now prefer the term “social investment state.”

The Institutional Foundations of Social Trust The image of a strongly individualized market society filled with solitary consumers might seem bleak and materialistic. But although this may be true in some sense, the significant social phenomenon is that Nordic individualism has not led to the anomie, alienation and breakdown of general trust that traditional social theory has associated with the shift from warm Gemeinschaft to cold Gesellschaft. The underlying assumption of these theories is that trust arises in small, closely-knit communities where there is large degree of interdependence. More recent research has shown, however, that it is the most modern and individualistic

SOCIAL TRUST AND RADICAL INDIVIDUALISM

Generalized Trust: An International Comparison DENMARK SWEDEN NETHERLANDS FINLAND UNITED KINGDOM SPAIN IRELAND GERMANY EU15 ESTONIA AUSTRIA LUXEMBOURG EU25 BELGIUM TOTAL HUNGARY SLOVENIA PORTUGAL MALTA ITALY FRANCE BULGARIA CYPRUS (SOUTH) GREECE ROMANIA CZECH REPUBLIC SLOVAKIA NMS10 LATVIA LITHUANIA POLAND 0

Source: the EuroBarometer 62.2 (2004). Data weighted.

countries, most notably the Nordic countries, that are characterized by a broad social trust extended beyond the intimate sphere of family and friends to include other members of society. Again we find that the Nordic countries (and the Netherlands) stand out in studies such as World

% of respondents

Values Survey, European Social Survey, European Values Survey and Eurobarometer. In addition to putting a strong emphasis on individual selfrealization these countries are characterized by a high degree of social trust: well over 50 percent of respondents claim to trust other people, including strangers. This social trust furthermore

SOCIAL TRUST AND RADICAL INDIVIDUALISM

co-varies with a high degree of trust or confidence in common institutions, such as the system of justice, public administration, the institutions of the state, etc. From an economic point of view, social trust and adherence to the rule of law translate into a great systemic advantage, which we fundamentally can describe in economic terms as “low transaction costs.” Here, it should be added, we include not only sheer or direct economic transaction costs related to a lower need to resort to written contracts, legal protections, law-suits, and huge amounts of bureaucratic paperwork, but also social and political transaction costs that constitute indirect burdens and inefficiencies that ultimately translate into added financial costs. One clear example of how a combination of social trust and respect for the rule of law results in lower transaction costs is the Land Survey of Sweden (Lantmäteriet) which has been registering the ownership of property since the 17th century. Because of the exact recording of property boundaries and the general trust in the impartiality of this state agency, the amount of litigation over property rights has been negligible, which both lessens the economic costs for the individual and pre-empts many possibilities of social conflict. Another example is labor market relations in the Nordic countries, which, though not always peaceful, have been characterized by a mutual respect for negotiated contracts among both

SOCIAL TRUST AND RADICAL INDIVIDUALISM

Power Relations in Modern Welfare States State

Sweden

Germany

Family

Individual United States

Dynamics of power in modern welfare states. Graphically illustrated as a “triangle drama” by contrasting the position of state, family and individual in the U.S., Germany, and Sweden. Source: Henrik Berggren och Lars Trägårdh, “Pippi Longstocking: The Autonomous Child and the Moral Logic of the Swedish Welfare State” in Helena Matsson and Sven-Olov Wallenstein (eds.), Swedish Modernism: Architecture, Consumption and the Welfare State. London: Black Dog Publishing, 2010.

employers and unions. It should be noted that for most of the 20th century, political legislation has played a much smaller role in regulating labor market relations than voluntary agreements between strong unions and equally strong employer’s federations, often at the national level.

More recent examples include the radical reformation of the pension system, the handling of the financial and banking crisis and the introduction of a voucher system for preschools and primary and secondary schools, as well as the freedom for citizens and residents to choose among competing

SOCIAL TRUST AND RADICAL INDIVIDUALISM

private as well as public providers of primary healthcare and elderly care, all dating back to the early 1990s. What is remarkable is that these were bold political decisions that carried political risk and challenged many long-held positions in the different parties. Agreement was possible only because of shared fundamental confidence in the political institutions as such, as well as trust in the goodwill of members of parties other than one’s own.

What Are the Historical Roots of the Nordic Social Contract? As we noted, social trust and trust in institutions also co-vary with low levels of corruption. Historically the Nordic region also stands out as a “community of law”; indeed it was a community of law before the individual Nordic states were consolidated. Rule of law was central to the social contract that underpinned the emerging state, and adherence to the law by the King and his administration was crucial to the legitimacy of the state.

of a democratic decision-making process and grounded in common values, will determine how well they work. The more accepted and internalized, the less prominent is the specter of corruption and lawlessness. The central axis around which the Nordic social contract is formed is the alliance between state and individual, what we call “statist individualism.” Here an emphasis on individual autonomy coincides with a positive view of the state as an ally of not only weaker and more vulnerable citizens, but the citizenry at large. This is coupled with a negative view of unequal power relations between individuals in general and hierarchical institutions in particular, such as the traditional patriarchal family and demeaning charitable organizations in civil society. In this regard, the Nordic model differs from both their Anglo-American and continental European counterparts.

Has Sweden found a way to a healthy balance between altruistic socialism and selfish capitalism?

The trust in and reliability of institutions thus depend on the acceptance of the rule of law, but even more important is the extent to which the values implicit in formal law are also internalized and embedded as social norms. Or put differently, the extent to which laws, rules and institutions are viewed as legitimate, as the outcome

Above we try to capture these different dynamics of power in modern welfare states graphically as a “triangle drama” by contrasting the position of state, family and individual in the U.S., Germany, and Sweden. In the Nordic countries, as we have indicated, the state and the individual form the dominant alliance. In the U.S., individual (rights) and family (values) trump the state (always seen as threat to liberty). In Germany, finally, the

SOCIAL TRUST AND RADICAL INDIVIDUALISM

central axis is the one connecting state and family, with a much smaller role of either U.S.-style individual rights or a Nordic emphasis on individual autonomy. This came to the forefront after World War I, when the Nordic countries undertook a joint effort to modernize family legislation in each country that, with some variances, resulted in the most genderequal marriage laws according to the general European standards of that era. These laws determined that man and wife were equal in terms of the marriage contract, though still responsible for different spheres within the domestic arrangement. The egalitarianism of Nordic society is, of course, an often noted feature of social and political life in these societies. This is also true of the prominence of gender equality. It has been noted in comparative research that both equality and gender equality are correlated with a number of other social virtues and collective goods, including social trust, happiness, and economic development. What is less noted, since equality in the academic literature is often linked to social engineering and collectivist politics, is that equality in the Nordic context is inseparable from individualism and the value of autonomy. According to what we have called â&#x20AC;&#x153;a Swedish theory of love,â&#x20AC;?authentic relationships of love and friendship are only possible between individuals who do not depend on each other or stand in unequal power relations. Thus autonomy, equality

SOCIAL TRUST AND RADICAL INDIVIDUALISM

and (statist) individualism are inextricably linked to each other. Whatever political and cultural drawbacks there might be to this commitment to personal autonomy, a strong state and social equality—the usual criticisms are conformity, loneliness and an intrusive bureaucracy—one should note the upside: citizens, who feel empowered, accept the demands of modernity and are willing to make compromises to achieve economic efficiency and rational decision-making.

Is the Nordic Instantiation of Capitalism Sustainable? The imminent death of the Swedish or Nordic model has been announced many times. It dates back to the Cold War disenchantment with Childs more celebratory account of a“middle way,”which resonated better during the era of the Depression and the New Deal. And since then it has been a recurring trope, especially in the U.S. To some extent, the failure of these predictions can be traced to a misunderstanding that has been shared by enthusiasts and critics alike, namely that the Nordic countries were built on a compromise between socialism and capitalism. For critics that meant that given enough time, the costly and unproductive “socialist” elements of the model were bound to overwhelm the productive “capitalist” aspects that had been allowed to remain. However, as we

have argued in this essay, these arguments rest on flawed assumptions that tend to underplay the fundamental coherence and vitality of Nordic capitalism. Of course, this is not to say that these countries are any more immune to recessions and global financial crises than other capitalist countries, or that they have not been set back economically from time by bad policy decisions at the national level. However, on the whole Nordic capitalism has proved remarkably sustainable, certainly according to the measures and data that we have available today. Still, questions can be raised about the future sustainability and relevance of the model. Some argue that the increased ethnic, racial, and religious diversity linked to the influx of refugees constitutes a deep challenge to the social cohesion of Nordic society. The political consequences are already visible in the rise of anti-immigrant parties throughout the Nordic countries. Insofar as immigrants and minorities are perceived as both burdens to the welfare system and as a threat to national culture, questions are also raised as to whether broad support of a tax-based system of social services can be sustained.

On the whole Nordic capitalismhas proved remarkably sustainable

Another pessimistic line of argument centers on the impact of neoliberalism on the Nordic social

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contract. Alarmists point to trends toward increased economic inequality and the introduction of voucher systems and privatization in education, healthcare, and pensions. Such developments, it is argued, will over time undermine the universalism of the classic Nordic welfare state in favor of a more pluralistic system characterized by private, market-based alternatives leading to segregation and a decline in social trust. Against this gloomy account, currently focused on the rise of anti-immigrant political parties in the Nordic countries, it is nonetheless quite possible to counter with a more optimistic scenario. The central argument is at heart very simple and rests on two ideas: (1) that the striving for individual freedom and prosperity (life, liberty, the pursuit of happiness) is a rather universal drive, and (2) that this desire can only be realized in an enabling social, legal and institutional context. From this point of view, the Nordic institutional framework is characterized precisely by its capacity to promote both social trust (confidence in institutions and rule of law), and individual autonomy consistent with the logic of the market society. In this more optimistic account, the combined lure of individual freedom and social security is more likely to “naturalize” immigrants over time than seriously challenge the Nordic culture and its institutional system. If we return to the data on social trust cited above and look at the rate of trust over time, it appears that during the recent decades of increased immigration and diversity,

social trust has not declined—indeed it has risen slightly. Similarly, according to the recurrent so-called “diversity barometer” Swedes are more open to immigration than ever. However, we need to take these data with a grain of salt. Other studies focusing on trust at the local level indicate higher levels of distrust in highly diverse communities, especially those which also experience socioeconomic inequality. And other data from the diversity barometer suggest that acceptance of immigrants depend on a willingness to integrate and accept Swedish norms and values: evidence for tolerance of “deep” difference is lacking. And with respect to the neoliberal challenge—the rhetoric of “free schools,”“free choice” of healthcare producers and the introduction of a private component in the government pension plan package—these systems still remain highly regulated within the confines of the moral logic of equal access to fundamental public goods. Even if these market elements within the public sector raise questions concerning accountability, quality and fair distribution of health, education and other services, they still operate within a system that is very different from a society like the United States where individual wealth as well as community finances often determine access to high quality schools, universities, hospitals, and elderly care. Thus, the combination of cultural and moral forces that underpin the Nordic social contract and the firm institutional framework that promotes this seemingly paradoxical coexistence of

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emancipatory individualism and social security may well prove both a major systemic advantage in a globalized market society and an attractive arrangement from the individual’s point of view. Whether it is strong enough to withstand the polarizing impact of immigration and increased diversity—combined with widening differences in wealth, income and access to education and work—is an empirical question to be continuously revisited.

Are There Lessons to Be Learned from the Nordic Variety of Capitalism? Obviously many of the salient features of Nordic capitalism are idiosyncratic. They have been created by a combination of contingent factors, ranging from geography and natural resources to religious inclinations and political coincidences. But this is also true of the classical model of market economy that is often been presented as “universal.” Specific British and American experiences of modernization have been generalized into historical truths that have been applied to other cultures, sometimes with great success but also with astounding failures. The point is not that it is wrong in principal to try to emulate other successful cultures (how else is mankind to learn anything?), but rather that we should do so with great deliberation and—most importantly—not assume a priori that only one kind of capitalism is relevant as a source of inspiration.

SOCIAL TRUST AND RADICAL INDIVIDUALISM

However, it is not an easy task to identify and transfer such experience in a form that becomes useful and accessible. To be sure, there are a number of important lessons implicit in the development of Nordic capitalism. The first one is that vague references to “values” and “culture” would not be helpful; what is needed is a down-to-earth analysis of concrete institutions and policies. However, even specific laws, policies and institutions are far from easily translated and transferred to other environments with different traditions and historical experiences. Still, we would like to point to a cluster of institutions and policies that do tend to instrumentalize a set of experiences in the Nordic countries, which have kept the socially destructive aspects of capitalism at bay while still retaining the dynamics of market economy, with an eye to whether they might be applicable in other parts of the world.

quishing the possibility of becoming mothers. In authoritarian and hierarchical societies where the individual desire for autonomy is given insufficient space, political tensions are likely to arise while social trust and confidence in institutions are likely to decrease. In this perspective, promoting policies like gender-equal educational systems, individual taxation, universal day care and anti-patriarchal family laws seems to be a generally good idea, even if obviously in conflict with longstanding traditional norms in some cultures. To suggest that the European Union should expand its mandate in relation to the member states’ national sovereignty may seem controversial, but in a longer perspective it might be necessary to develop a common and more individualized family policy if Europe is to remain economically viable. The interest that Germany has shown in the school, pre-school, and family policy of the Nordic countries—against the backdrop of relatively low levels of female participation in the labor market—is one indication that such thinking is beginning to take hold.

What is needed is a down–to–earth analysis of concrete institutions and policies

1. Nordic capitalism shows that individualism need not lead to social fragmentation, distrust and short-term maximization of material interests. Promoting individual autonomy through policy can, on the contrary, lead to greater social cohesion if it is done in an egalitarian way. Less dependence and weaker patriarchal structures mean that more people feel empowered and satisfied with their lives. This is especially relevant for women, who want to participate in the labor market without relin-

2. Nordic capitalism also demonstrates the systemic advantage of having a positive view of the state, not just as an ally of the weak but as the promoter of ideals of equality and individual autonomy. Awareness of the importance

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of social trust and confidence in the common institutions of the state is, of course, not peculiar to the Nordic countries, nor is the awareness that a positive view of the state cannot be upheld if social and economic divisions grow too large. Indeed, the objectives of keeping unemployment down and having welfare systems that are tied to employment and the work ethic constitute central goals for most European welfare states. However, they are pursued with varying degree of success. In the Nordic countries social trust, confidence in state institutions and relative equality coincide. The big question is, of course, how to promote greater trust in countries that experience low rates of social trust and confidence in common institutions. Perhaps most crucial to the positive feedback cycle that has managed to stabilize the Nordic economies at a productive equilibriumâ&#x20AC;&#x201D; allowing for individual social mobility, economic efficiency and sustained relative equalityâ&#x20AC;&#x201D;is the degree and extent of inclusion of citizens and civil society in the governance process. The Nordic experience suggests that the more this occurs, the more trust and confidence-building will result, and the more likely it is that key values and social facts will remain in harmony. In this vein it is advisable to encourage the development of deliberative processes of governance. Churches, labor unions, charities and other associations in civil society should be supported, consulted and involved through commissions, round tables and other forums of interaction between state and

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society. In the Nordic countries such state/civil society interaction has been institutionalized and made routine in ways that may provide useful Âinspiration. 3. A strong state and individual autonomy are not a threat to civil society, but are instead its prerequisites. Citizens who join together not mainly to protect themselves from arbitrary abuse by vested state or business interests but rather to increase their potential for self-realization and personal independence are more likely to make positive contributions to society as a whole. This allows for a more constructive engagement, at best, or too close an entanglement with the state (the corporatist dilemma), at worst. One example is labor market relations in the Nordic countries, where the unions have generally not had a narrow self-interest-

ed view of their role in society but rather have assumed a macroeconomic responsibility. To achieve this social responsibility, it is necessary that these and other grassroots organizations be supported both through legislation and economic subsidies that encourage the formation of an effective and inclusive civil society network. In the face of reality, the above suggestions might seem like the ultimate expression of a delusional kind of Nordic naĂŻvetĂŠ. But even if there is very little in the Nordic historical experience that is transferable to other cultures, it does bring one important point to the discussion: economic policies that cater both to our desire for individual autonomy and our need of community and security can be remarkably successful.

SOCIAL TRUST AND RADICAL INDIVIDUALISM

Kristina Persson

A Closer Look at Inclusion and the Swedish Welfare System

hat explains the relative success of the Nordic model? The two previous articles have given two different answers. Klas Eklund stresses the fact that the Nordic countries, when struck by serious economic crises in the 1980s and 90s, mounted successful responses and practiced good crisis management. The Berggren–Trägårdh article highlights individualism, supported by a strong state. Both articles acknowledge widespread trust in society as an important factor. I would like to add a fourth factor: inclusion. The Nordic welfare model is not primarily a policy to benefit the poor but a whole array of policies focusing on employment, productivity, social protection and inclusion on the basis of citizenship and solidarity. Thandika Mkandawire, professor of African Development at the London School of Economics, observes that the Nordic countries adopted social

policies at an early stage of industrialization and at much lower levels of per capita income than other countries. According to Mkandawire, the Nordic model shows that social pacts and similar arrangements in a democratic order can produce the political stability required for economic growth. Strong social cohesion and trust are underpinned by a number of policies for inclusion.

The Nordic Welfare Model: More than Public-sector Service Provision Welfare provision in the Nordic countries is universal and based on the core values of equal opportunities, social solidarity and security, health services, education and culture for all. There are, however, interesting differences between the Nordic countries in terms of how the welfare policies are organized. Denmark has gone further than the other countries in involving the

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private sector in welfare services. The Danes are also notable for their “flexicurity”model on the labor market, as well as for their emphasis on assimilation in immigration policy—as opposed to the integration strategy that has characterized Sweden. In Finland, the voluntary sector has played a significant role in providing care for the elderly. In Norway, public-sector provision of welfare services has been more dominant than elsewhere.

All Swedish residents have access to medical services, education is tax-financed and retirement includes a basic pension guaranteed by the state. For those who lose their jobs, unemployment insurance is available and many continuing education and retraining programs are tax-financed. On top of these basic benefits, many workers enjoy other advantages based on their salary, sector or workplace.

The Swedish welfare system has been reformed over time due to new economic conditions

In the following text, I have chosen to explain how the welfare model is built up by using Swedish examples rather than trying to provide a comprehensive Nordic picture. The Swedish welfare system has been reformed over time due to new economic conditions. A number of structural reforms were pursued in the 1990s as part of crisis management, in particular a major reform of the pension system.

Taxes: The Basis for Universal Welfare Sweden is among the countries of the world that spend the highest percentage of gross domestic product (GDP) on social services, according to 2007 statistics from the Organisation for Economic Co-operation and Development (OECD), surpassed only by France. The money goes among other things to entirely tax-financed education and heavily tax-subsidized healthcare.

To support these social services, all levels of government receive their share of tax revenues: the municipality, the county council and the national government. All taxes, including municipal, are collected by the Swedish Tax Agency (Skatteverket). Sweden, however, has neither an inheritance tax nor a wealth tax, and the real estate tax rate has been replaced by a lower municipal fee. Earned income taxes have been reduced since 2007, as well as social insurance contributions for young people.

Tax burden as percentage of GDP in 2008: Denmark:

48.2%

Sweden:

46.3%

Finland:

43.1%

Norway: 42.6% OECD average:

A CLOSER LOOK AT INCLUSION AND THE SWEDISH WELFARE SYSTEM

34.8%

Local Self-government Swedish municipalities, county councils and regions are responsible for providing a significant proportion of all public services. The right of local self-government, including the right to levy taxes, is stipulated in the Constitution. Taxes are levied as a percentage of income, and the municipalities and county councils set their own tax rates. The average local tax rate is 30 percent. Swedenâ&#x20AC;&#x2122;s local and regional governments have a great deal of freedom to organize their activities. Their responsibilities are regulated partly in the Local Government Act and partly in laws and ordinances covering specific areas. The scope of local and regional self-government is also affected by decisions made by the European Union. In order to ensure fairness, a system has been introduced with the aim of redistributing the revenues of the municipalities and county councils according to regional needs. This equalization system is managed on state level. In addition there are state grants which may be either general, i.e. per inhabitant, or targeted. Privately run activities that are tax-financed must offer services to inhabitants on the same conditions as those which apply to public services. People pay the same for a service whether it is provided by the public sector or a private company. In some fields, such as refuse collection, public transport and dental care, it has long been

A CLOSER LOOK AT INCLUSION AND THE SWEDISH WELFARE SYSTEM

common for municipalities and county councils to procure services externally. A 1992 reform allowed private companies to run tax-financed schools, and recently the same system has been extended to preschools and care facilities.

Children and Parenthood In 1979, Sweden became the first country to criminalize beating or spanking children. To protect the rights of children and look after their interests, the Swedish Government has also appointed an ombudsman for children, obliged to enforce the 1989 United Nations Convention on the Rights of the Child in Swedish society. Parents get to share a total of 480 days of paid leave per child, which must be claimed before the child turns eight. In reality, the bulk of parental leave is taken by mothers. Fathers now claim about 20 percent of all parental leave, but the figure is increasing. Each parent has 60 days of leave reserved specifically for him or her, which means that these cannot be transferred to the other parent.

at least nine years in Sweden. Sweden and Finland are the only countries in the world that serve free school lunches to all students. Children are offered a place in a preschool class from the year they turn six until they start compulsory schooling at seven. Preschool is followed by three years each of elementary school, middle school and junior high school. They then have a choice of staying on for senior high school (gymnasium), which is non-compulsory and also free of charge. Virtually all students who finish compulsory school start senior high school. The number of independent schools in Sweden is growing. Independent schools must be approved by the Schools Inspectorate and follow the national curricula and syllabuses. Nine percent of compulsory school students and 20 percent of senior high school students attend independent schools in Sweden. The largest proportion of municipal budgets, 45 percent, is spent on education. About 70 percent of education, and of municipal operations as a whole, is financed by municipal taxes.

Education The Swedish Education Act states that all children and young people are to have equal access to education regardless of gender, place of residence or socioeconomic factors. There are no school fees and everyone has to attend school for

Municipalities also provide nursery schools for children from age one until school starts. Parents pay 8 percent of the cost. In the fall of 2008, 85 percent of all children between the ages of one and five were registered in preschool or family day

A CLOSER LOOK AT INCLUSION AND THE SWEDISH WELFARE SYSTEM

care homes. The percentage has been increasing for many years, especially among one-year-olds. Higher education in Sweden is financed largely by tax revenue. In 2011, however, tuition fees were introduced for students from outside the EU/EEA and Switzerland with the motivation that Swedish higher education should compete in terms of quality, not just by providing free education. To enable students who cannot pay the tuition fees to study in Sweden, the Government has allocated resources for new scholarship programs. The Government provides 80 percent of funding for Sweden’s universities and university colleges. A further 7 percent comes from other public sources and the remaining 12-13 percent from private sources and financial revenue. All Swedish students who study at a university or university college are entitled to financial assistance, which consists of a grant component and a loan. Repayment of the loan is income-dependent, with the loan to be repaid by the student’s 60th birthday.

start a health center that is reimbursed with public funds. In 2005, the county councils and central government agreed to introduce a healthcare guarantee. Anyone who needs care must be treated by a doctor within seven days. After referral, specialist care is supposed to be provided within 90 days. If the time limit expires, patients are offered care elsewhere. Patient fees for primary care vary between SEK 100 (USD 14) and 200 depending on the county council. After a patient has paid a total of SEK 900 during one year, medical consultations within 12 months of the first consultation are free of charge. There is a similar ceiling for prescription medication, so nobody pays more than SEK 1,800 over a 12-month period.

An important feature was to give disabled people the right to personal assistance free of charge

Healthcare The Swedish healthcare system is tax-funded and largely decentralized. All care providers that meet county council requirements are entitled to

The general social insurance system includes sickness benefits. Employers are responsible for providing sick pay for the first 14 days of an employee’s illness. For longer illnesses, the social insurance system grants a maximum of 364 days of benefits at 80 percent of the employee’s income. Longer benefit periods may be granted for severe illnesses. General social welfare programs in Sweden extend to everyone, but there are also special programs to address the needs of people with disabilities. The Act concerning Support and Service for Persons

A CLOSER LOOK AT INCLUSION AND THE SWEDISH WELFARE SYSTEM

with Certain Functional Impairments (LSS) was adopted in the 1990s by the Swedish Parliament. An important feature of this wide-ranging reform program was to give disabled people the right to personal assistance free of charge. In addition to general social benefits, municipalities are responsible for providing social assistance in the form of financial support. This is intended as a last-resort safety net for people with temporary financial problems, and it is disbursed after an individual assessment. Social assistance includes income support based on a national standard and also covers other common expenses needed to ensure a reasonable standard of living.

The Labor Market Swedenâ&#x20AC;&#x2122;s long tradition of government labor market policies has resulted in a wide variety of employee benefits, including at least five weeks of paid vacation, well over a year of parental leave and employer pension contributions. Collective bargaining has played a central role for achieving these benefits, along with a well-established culture of cooperation between employers, employees and unions. Nearly 70 percent of Swedish workers belong to a trade union. For their millions of members, trade unions provide special insurance policies, coaching and representation for contract negotiations as well as legal support.

A CLOSER LOOK AT INCLUSION AND THE SWEDISH WELFARE SYSTEM

Wages are regulated primarily in collective agreements. Trade unions and employer organizations negotiate collective agreements which regulate working conditions such as wages, working hours, sick pay, etc. There is no government intervention in the wage negotiations or in the enforcement of collective agreements, although in the final phase of negotiations—if the two sides reach an impasse—a public mediator may be called in to help achieve an agreement. Since 2006 the Government has taken measures to enhance the incentives to work. Earned income taxes have been reduced. Employers’ social insurance contributions have been lowered for young people as well as for groups who are returning to the labor market after a long absence. The unemployment benefit system has also been tightened. All these reforms have been important factors in Swedish crisis management during the recession that began late in 2008.

The Elderly Of Sweden’s 9.3 million inhabitants, 18 percent have passed the retirement age of 65. This number is projected to rise to 23 percent by 2030. Sweden has the largest proportion of people aged 80 or over among the EU member states, totaling 5.3 percent of the population. Since more and more citizens in this age group are in good health, their care requirements have declined since the 1980s. Most elderly care is funded by municipal

A CLOSER LOOK AT INCLUSION AND THE SWEDISH WELFARE SYSTEM

taxes and government grants. In 2008, the total cost of elderly care in Sweden was SEK 91.8 billion. Only 4 percent of the financing came from patient charges. The bulk of all elderly care is provided by the municipalities. Everybody is allowed to choose whether they want their home assistance or special housing to be managed by public or private operators. Older people who continue to live at home can obtain various kinds of support to make life easier. Disabled or severely ill people can obtain assistance around the clock, which means they can remain at home throughout their lives. The elderly and disabled also qualify for transportation services in taxis or specially adapted vehicles.

for the elderly provides a last safety net to ensure a decent standard of living. A total of 18.5 percent of your wages and other taxable benefits goes into your public pension account each year. You can also choose when you would like to retire, with some people retiring as early as 55 years of age. But the income-based pension and premium pension can only be drawn from the age of 61. In 2009, the average effective age of retirement in Sweden was 66 years of age for men, compared to the OECD average of 65, and 64 years of age for women, compared to the OECD average of 63.

Regardless of when you retire, however, the total amount of your pension remains the same

Pension System The Swedish pension system consists of three parts—a national pension, an (employer- financed) occupational pension and private pension savings. People contribute to their national pension, which is income-based, for every year they work. There is also a small portion of the national pension called the guaranteed pension. This is for people who have had very little or no income at all in their life. Should the guaranteed pension still not be enough, maintenance support

Regardless of when you retire, however, the total amount of your pension remains the same. Hence, if you choose to go into early retirement, your monthly payments will be reduced accordingly. It is also possible to keep working and thereby increase your pension. Gender equality—which Barbro Hedvall will take a closer look at in the following section—is another important aspect of the Swedish welfare system.

A CLOSER LOOK AT INCLUSION AND THE SWEDISH WELFARE SYSTEM

Barbro Hedvall

Nordic Gender Equality

n the Nordic region, we like to think of ourselves as world leaders in gender equality. It is not difficult to make a case for this, given that women have such a high employment rate, educational level and political representation. The equality is beneficial to society in a number of ways, not least when it comes to the Nordic standard of living.

Between 75 and 80 percent of women aged 20-64 are employed, which means they are not far behind men. And while average wage discrepancies persist, they are on the decline. Women also make the most of educational opportunities. Statistics from Swedenâ&#x20AC;&#x2122;s higher education institutions show that well over 60 percent of graduates are women; men dominate only in the technical programs. In Nordic political assemblies, too, women are well represented. For almost two decades, they have held 40 percent or more of the available seats; women also hold top political posts. Nordic women do not have to choose between career

and family: in Iceland the fertility rate is 2.1 children per woman; in the other Nordic countries that number varies between 1.8 and 1.9. Those are the basic facts. It is in these key areas that opinion-building efforts have been focused in the past. They still are. But while the Nordic countries may have progressed further than most, women and men in the region are still not on the same footing. Much remains to be done, not least in respect of pay gaps, unequal career opportunities, and the under-representation of women in executive posts. Ultimately, this is a question of human rightsâ&#x20AC;&#x201D;one that has a tremendous impact on a countryâ&#x20AC;&#x2122;s social, democratic and economic situation.

Visible Patterns Nordic gender equality is immediately apparent to the visitor. It can be seen out on the streets, where both women and men hurry to and from work and

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go shopping. It can be seen in the many prams being wheeled around by men, not just women. Family schedules at the weekend are like a jigsaw puzzle where both parents are expected to contribute; whether shopping, cleaning or driving their children to their various activities. A daughter who chooses to play soccer is not unusual in any way, nor is a mother who takes her to the game and cheers her on. Kids’ recreational activities are something that the parents share alike. This shared existence of the sexes begins early in life. Daycare centers and preschools are mixed as a matter of course, and this is the case throughout the school years. As early as preschool, teachers employ gender education techniques by actively combating stereotypes and roles, by freeing children from the expectations and demands that society has traditionally imposed on boys and girls respectively. The aim is to ensure that children have the same opportunities in life, regardless of gender.

Young people today may not have much difficulty understanding one another but they are definitely more open and demand respect from one another; the days when girls “accepted things” and boys “helped themselves” are a thing of the past. The advertising industry, too, reflects modern Nordic lifestyles. Successful ad agencies like to play around with outdated gender roles, turning them around or satirizing them in some way. Anyone trying to sell a car with the aid of scantily clad ladies nowadays would quickly be out of work. In general, people are sensitive to stereotyped gender or parental roles, due to a long-running critical debate that has frequently targeted advertising and the media.

Today, journalism is one of the professions with the best gender balance

At university, young women and men live and study together. Nevertheless, issues relating to sexuality, unwanted approaches and abuse are identified as significant problems. This may be surprising, given the fact that the Nordic countries have long been known for their emancipated lifestyles.

Women’s organizations have counted both the number of images of each gender and of references to each group in newspapers, in news bulletins and in radio and TV broadcasts. This has not led to any kind of absolute statistical balance but it has enhanced sensitivity to the single-sex perspective. The aim is to get out of the rut and deliberately highlight women who have something to say about the topic being discussed. Gender distribution in editorial offices is also under scrutiny. Today, journalism is one of the professions with the best gender balance; women are as likely as men to be political reporters or to focus on hard news. As in other companies, however, men predominate at

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the top, although a few women hold or have held prestigious executive posts.

Looking Back Women hold a strong place in Nordic society. In principle, men and women are on the same footing both in family and professional life. This Nordic model is based on the individual and on individual opportunity. It is inclusive, it brings women and men together and accords them the same status; it does not separate them. How did this situation come about? The Nordic countries’ small populations have been a factor, in that each individual’s work input has been needed. The popular movements that emerged in the 19th century also played their part; here, it was natural for women and men to stand side by side. The women’s movement was a part of this powerful Nordic grassroots tradition, which came to be radicalized in the 1970s. In Denmark, the Red Stockings3 were active, in Sweden the gender role debate flared up, and in Norway politically interested women put together lists of women candidates and seized local council seats. At the heart of this new women’s movement was the “baby boom” generation born in the 1940s, the first to have full access to education. They were versed in theory and sought to change people’s attitudes and lifestyles, quickly influencing both media and political parties. 3 The Red Stockings were a radical feminist organization with socialist links.

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Today, their ideas concerning shared parenthood and an equal work life are generally accepted. The pressure brought to bear has led to policy decisions, legislation and political governance. In the Nordic countries, policymaking bodies from central government to local councils now have gender equality plans and, ideally, funds for their implementation. The feminist debate has been taken over by a younger generation. In recent times, moreover, the success stories of the Nordic societies have attracted the attention of those who regard gender equality as vital to progress and development.

generations; they often follow in their mother’s or father’s footsteps, and—not least—are influenced by the mood of the times, whether commercial or ideological. As a result, working life remains segregated in some fields. Women are to be found in the caring and teaching professions to a far greater extent than men. And men tend to target the manufacturing, financial or construction sectors. Some, however, make unconventional career choices, and you can find women construction engineers and men preschool teachers.

Career choices and professional life are of crucial importance to people in our countries

Financial Aspects The legal obstacles that previously excluded women from certain professions (the police, military, priesthood and judiciary) have long since been removed. Nor is there anything to prevent young men from training in what used to be female-oriented professions such as midwifery and nursing. This gives individuals the freedom to choose. It is however true that no one is absolutely free, except in theory. Women and men in the Nordic countries are affected by the attitudes of previous

But even women with equivalent training and the same work tasks as men do not enjoy the same pay; at present the pay gap is less than 10 percent. If we consider the differing jobs of women and men, the gap widens to around 15 percent; a greater number of men choose professions that enable them to earn more money than women and to acquire greater status. Career choices and professional life are of crucial importance to people in our countries—to an extent that may surprise others. A person’s identity is closely linked to his or her work. And this applies equally to women and men. Today, hardly anyone would presume to introduce a woman simply as someone’s “wife.”

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This is in fact the principal feature of our Nordic model: each and every one of us, women and men alike, are responsible for our own subsistence. Nordic legislation has reflected this perception since the 1970s. Taxation is individual, i.e. neither the family nor the household is a tax unit. Retirement pensions and sickness insurance are both linked to the individual. Couples are required to provide for their children, not for each other. At the root of this change is an explicit idea of adult maturity and individual responsibility. There is also a freedom dimension. People are to live together of their own free will and to be linked together as free individuals by their feelings for each other, not by financial expedience or dependence. There is a direct historical link here to those who first claimed the right of girls to an education and the right of women to pursue their own careers. Women’s work contributes a vast amount to the national economy. The increase in living standards witnessed in the Nordic countries in the late 20th century would have been impossible without women in the labor market. Finland, and a short while later, Sweden, were at the forefront. In Finland’s case it was about rebuilding a country ravaged by war, while Sweden was keen to take advantage of a prolonged economic boom. The extensive development of the public sector that distinguishes the Nordic countries is ultimately dependent on policy decisions, but is also linked to women’s participation in working life.

The many working women in the region generate tax revenue that finances public activities which in turn provide jobs for women. At first, politicians debated whether there was any point in women leaving the home in order to perform similar tasks to men in the labor market. That discussion has long since been settled. The rules concerning specialization and restructuring also apply in the case of traditional women’s work. The demands of gender equality are a further factor: work in the home is to be shared between men and women. As the level of education rises, it has become increasingly important to ensure that educational capital—that of both women and men—is turned to account. Once again, the demands of women are consistent with economic benefit.

Family Life The family is the other flashpoint in the gender equality discourse. Here, too, legislation has been adapted to the fundamental concept of free individuals. It is of no great consequence whether children are born in or out of wedlock. Parents have the same responsibility. Public support to children in the form of child allowances, free schooling, study support and the like is linked to the child and no one else—once again, the individual. Where parenthood is concerned, Nordic society has established clear principles: children are entitled to both of their parents. If the parents live

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apart, they are to share responsibility for the child. And in the vast majority of cases, they also manage to do so. As someone once said: “The person with whom you become a parent is someone you will have a lifelong relationship with, whatever other loves you may have.” Shared parenthood, then, is a reality, although not always distinguished by full gender equality. Women take parental leave to a much greater extent than men, both when the children are born and when they fall ill. Women still put the children before their jobs. But for each passing year, more fathers are taking leave to be with their young children, and it is becoming increasingly common for fathers to stay at home from work to care for a sick child. Where responsibility for the home is concerned, the distribution of duties in many families is the traditional one, i.e. the woman looks after the home while the man looks after the house and the car. On the other hand, we are now seeing a growing number of men cooking meals and women taking the car to the repair shop. Things are moving in the right direction. In Sweden, for instance, women’s unpaid daily work in the home was reduced by 14 minutes between 2000 and 2010, while men’s increased by 11 minutes. Even in homes with a decent level of gender equality, certain tasks are perceived as less glamorous than others. Washing clothes and cleaning belong to the former category, house painting and barbecuing to the latter.

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One major challenge is violence between the sexes. This is a focus of attention both in the media and in political debate. In the great majority of cases, the victims are women and the perpetrators men with whom they have or previously had a relationship. Society has responded through women’s emergency shelters and heightened awareness and understanding among police, care workers and social workers. Unfortunately, a greater openness on the subject of violent men and their victims has not led to any marked improvement. Violence against women is a stain on the Nordic gender equality undertaking. Gender-based violence naturally causes suffering in Nordic society, but it also causes economic losses in the form of social and medical costs, legal fees and reduced work capacity. To fight for a more equal society and against violence directed at women (and men) is to fight for both social and economic gains.

ance is more or less even. The same applies to local, elected assemblies. The proportion of women at the highest level is even more striking. Since the mid-1980s, successive Norwegian governments have comprised as many women as men. The same is true of Swedish governments since the mid-1990s. In the other Nordic countries, governments are approaching gender balance. This high level of women’s representation has been achieved without the use of formal quotas, through external pressure, internally-established objectives, and initiatives on the part of individual politicians. Gro Harlem Brundtland, three times the Prime Minister of Norway, was the pioneer. Once a head of government has appointed a gender-balanced cabinet, her or his successor will not want to appear less progressive.

Women are strongly represented in the political arena

Centers of Power The distribution of power in everyday life is one aspect of what power is like at the top, in both the economic and political spheres. Here, too, the Nordic countries have made greater progress than most—although full gender equality is still far off. Women are strongly represented in the political arena. In the Nordic parliaments, the gender bal-

In politics, women have climbed to the very top in all countries with the exception of Sweden. Women either are or have been heads of government in Denmark, Finland, Iceland and Norway. Finland and Iceland have also had women presidents: Tarja Halonen and Vigdís Finnbogadóttir. Whether the situation in Sweden is due to chance, or reflects a covert backlash in society against women’s drive for power, is hard to say. Where the distribution of economic power in the Nordic area is concerned, however, there is no doubt about it: women are clearly being shut out. One or two exceptions cannot shake male power

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hegemony. It rests both on ownershipâ&#x20AC;&#x201D;and active company ownership is usually practiced by menâ&#x20AC;&#x201D; and on career. Those promoted to the post of CEO in a major company are, with very few exceptions, men. As a result, company boards tend to be decidedly male-dominated. In this power sphere, too, Norway has taken a lead. The law passed there a few years ago requiring the boards of listed companies to introduce gender quotas has yielded good results. Faced ultimately with the threat of liquidation, companies listed on the stock exchange have filled their quota of 40 percent women on their boards. The Norwegian example has been copied by Iceland and has influenced the discourse in other countries. In Sweden, Denmark and Finland, the politicians are more hesitant and hope that the power of example will do the trick. In Sweden, only 22 percent of the board members and 2.7 percent of CEOs of listed companies are women. The issue of board representation is mainly symbolic since company boards are a bastion of male power. The same was once true, however, of the regionâ&#x20AC;&#x2122;s political assemblies.

The major companies may be privately owned but they also have owners of both genders, they have employees of both genders and they operate in a society comprising both women and men. There is good reason why in reaching decisions they should have as broad a range of experience as possible available to them and also employees able to consider many different aspects. Consequently, political bodies are entitled to have a say in how their executive boards are put together. This is how the argument goes, and it is one that many find reasonable without wishing to introduce legislation. A further aspect of the Nordic model is a strong belief in opinion-building and voluntary participation: establish objectives, provide concrete figures and trust that constant pressure from public opinion will have the desired effect. By applying this method, parties have managed to make more women candidates available for election, governments have been able to appoint more women as heads of public authorities, and numerous organizations have boosted the proportion of women at the top.

Parties have managed to make more women candidates available for election

In parliaments and local councils, it is a matter of exercising popular rule; it is there that we as citizens are able to influence matters. And our influence should not be limited by money or gender.

In both Norway and Sweden, the giant trade union confederations have been led by women. The Swedish employer organization has also appointed a woman at the helm. The fact that these

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organizations have become less influential may not be a coincidence. Women researchers have frequently noted that when women enter the corridors of power, that power tends to disappear elsewhere. This is what happened within such previous high-profile institutions as the church and the national defense when they opened up to women following a tough and prolonged debate. Power is difficult to encapsulate and describe once we no longer confine ourselves to formal posts.

Denmark Finland Iceland Norway Sweden

Occupation rate, ages 15-64

71.1

66.9 76.2

73.3 70.3 58.2

Occupation rate, ages 25-65

72.5 81.8

75.6 76.5 62.5

1.80

1.80 2.14

1.95 1.90 1.56

Fertility rate Percent women in parliament Percentage of women of total higher education graduates

These can be counted and we can be pleased that their gender distribution is steadily improving. A different kind of challenge is the one we encounter when formal power is to be translated into actual decision-making and the exercise of influence. Consequently, women as well as men must ensure that they understand the rules of the game and make use of their personal experience. Here, men have been at an advantage for generations. In the Nordic area, however, women are steadily catching up.

40 -

42 43 -

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39 45 24 62

© 2012 Swedish Institute Graphic design: FWD Reklambyrå AB © Photos Cover: Anders Helgesson / Pixgallery, p. 4 Henrik Trygg / Johnér, p. 12 Johan Willner / Johnér, p. 15 Lena Paterson / Matton, p. 19 Tommy Andesson / Bildarkivet, p. 22 Heléne Grynfarb / Bildarkivet, p. 25,29,30 Melker Dahlstand / imagebank.sweden.se, p. 27 Johan Willner / Johnér, p. 33 Ulf Lundin / imagebank.sweden.se, p. 34 Adam Haglund / Maskot bildbyrå, p. 37 Hans Berggren / Johnér, p. 39 Helena Wahlman / imagebank.sweden.se, p. 40 Cecilia Larsson / imagebank.sweden.se, p. 43 Katja Kircher / Matton, p. 44 Maskot bildbyrå, p. 47 Ulf Huett Nilsson / imagebank.sweden.se Printed by: Åtta.45, Solna, Sweden ISBN: 978-91-86995-13-3

“In international comparisons of global competitiveness, the Nordic countries are almost always found at or near the top. What are the reasons? Is there such a thing as a common “Model” particular to the Nordic region and if so, will it last? Is it transferable to other parts of the world? In this brief we provide bits and pieces of some plausible explanations for the relative success of the Nordic societies. We hope these experiences can improve the understanding of our way of doing things and inspire debate and development in other parts of the world. Shared values are also about sharing experiences with others.”

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