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First published July 12, 2016
When the government raises the unemployment rate, some blame the unemployed themselves for lacking jobs. The psychological dynamic follows accordingly… overwhelmed by discouragement, especially when they are told that it must be their fault that they are “losers.”
In Norway, however, society says something very different… the economic system was built for everyone, (emphasis Lakey’s), and therefore jobs are available, and free training and support are available, and working is important for self-respect and the economic productivity of the country. In short, the government’s policy is full employment.
When I learned that the unemployment rate is actually a choice made by those who lead their economies, I looked more closely at the Norwegian unemployment rates. I’d read that Norway’s long-term average unemployment rate is considered by economists to be “full employment” because it allows for the people who are in the labor market but in transition from one job to another. The average for the period between 1997 and 2013 was 3.44 percent, according to worldfinance.com” (114).
had broken with the classical economists and offered breakthrough thinking that later won him the Nobel Prize in Economics. He argued that the reason classical economists were unable to imagine an economy that included well-being for workers was because they were not holistic enough. He believed that it was possible to design an egalitarian economy that would prevent poverty and be productive at the same time. His theory encouraged an investment in the individual person as a resource for economic growth—a pillar of what came to be called as the Nordic model.
Myrdal urged the new policymakers in the Swedish government to let go of the old, negative understanding of incentives for work held by classical economists—that it was a struggle for existence—and design a positive framework of incentives for economic participation.
On any measure of economic performance the economies of the so called “socialist” Scandinavian countries, (Demark, Iceland, Norway & Sweden), match or outperform those of the hard capitalist countries of the Anglosphere. For example, according to the World Bank the countries rank between 8th (Norway) and 17th (Sweden) by the average income per person adjusted for purchase price parity. (This list is a little polluted with tax dodging economies such as Singapore and Ireland middle eastern oil economies which is why they don’t appear further up the list.) The USA is ranked 10th but average worker in the USA works 1790 hours per year while the average Scandinavian worker works between 1408 hours (Denmark) and 1461 hours (Iceland) according to the OECD. (USA ranks well behind the Scandinavian counties in income per hours worked!)
The difference is much more extreme on measures of equality. The Gini index is what economists use to measure inequality. An index of 0% means all the wealth of a country is perfectly evenly distributed and 100% means all the wealth is in the hands of 1 person. A Gini index of over 40% is an indication of potential for political instability of the type that blights Latin America. (Argentina 42%, Peru 44%, Brazil 51%). The Gini index of the Scandinavian countries ranges from 26% (Iceland) to 28% (Denmark) while that of the USA 41%. (If this continues to increase the USA could be headed for troubled times.) This results in Denmark, Iceland and Norway sharing first place in the UN’s International Happiness Index while USA rank 18th at the bottom of the pack of advanced economies. In addition, these economies seem to be built to last. They outperform the Anglosphere on indicators of innovation and entrepreneurship such the rate of company start-ups and patents registered by capita.
Note: Australia my home country, although part of the Anglosphere is midway between the USA and the Scandinavian countries. It ranks 19th in the GNI(PPP) per capital stage, the average worker works 1695 hrs./yr., has a Gini index of 35% and ranks 10th on happiness index.
However, despite the title, this book is not an economics text. It explores the culture and government policies which generated these remarkable economies. Most current economists base their analysis and predictions on simple equilibrium models to explain the Nordic countries. The author is quite firm in his belief that the Viking culture of equality is core to these economies. The Viking ancestors were small groups of adventurous men, not individuals, who had to depend upon each other in their longboat expeditions. At the same time their wives needed to keep running their farms so that women were a vital and equal partner in the Viking enterprise. The book explores several key points in the modern history that also contributed. For example, in Norway: After a very trouble time during the depression of the 1930s, the rich elite of the country aligned themselves with Quisling’s NAZI supported puppet regime during the 2nd World War. This did not go down well with the majority of the citizens who supported a moderate Labour party that followed Keynesian economic polices after the war. Attacks by the elites on this government did not happen because in the author’s words:
The Labor Party’s vision of nonviolent revolution resulting in a completely socialist society remained in its manifesto until 1949, reminded the owning class that another round of militant capitalist resistance to change might lead to a more radical outcome than what they were already living with.
That Norway shared a border with the communist Soviet Union also contributed to the owner class reluctance to push their luck. Since that accommodation, the benefits of all sections of society working together have become very clear to all.
Another seminal moment was the stand that the people of Iceland took against the crony capitalism that ravaged many countries in the years following the financial crisis of 2008. Here the reward from risky lending was taken by private capitalists (bankers, shareholders & depositors), but the costs were large born by society in general. Despite their undeserved reputation as being Nany-States, the Nordic countries insist that people take responsibility for their own actions. When, the IMF demanded that that Iceland’s government repay the UK and Dutch depositors in failed private Icelandic banks despite these depositors expecting unrealistically high interest payments, the people revolted and demanded a referendum:
“In March 2010, 93% of the participants voted ‘Nei’ – a refusal to repay the lenders. The stock market reacted negatively to the vote.Iceland’s 1% pushed for a second referendum on the question, arguing fiercely that a ‘Ja’ was essential for Iceland’s credibility in the world. Once again, the citizens repudiated the debt.
The move sent shudders through the international financial world. Ordinary Icelanders were refusing to accept responsibility for the frenzied behaviour of their bankers.”
Since then Iceland’s economy has boomed with an unemployment rate down to 3.2% by June 2015.
After explaining how the Nordic countries arrived at their current circumstances, the book examines key aspects of their society. Topics covered include:Focus on treating their citizens as an economic asset with a large investment in education, life-long learning and public health. (The countries have some of the longest average lifespans in the world.)
Focus on Family enterprises and co-operative businesses.
Support for adventurers, entrepreneurs and the equality of woman.
“Flexisecurity” , the revision of the socialist contract between the state and the worker. Instead of guaranteeing workers their existing jobs, the government guarantees workers ongoing support and retraining so they could get new jobs.
Work/Life balance which provide excellent pubic infrastructure such as parks and transport.
High taxes where everyone pays.
Active programs to eliminate poverty and crime.
There is then a section of challenges facing these countries which are the migration of other races in what to date has been a very homogenous population and the effects of climate change.
The book concludes with a Chapter in FAQ format titled “How Relevant is the Nordic Model to the United States”. Here, he expounds the view that US citizens should not depend of the elected elite to reform the US economy as these people have too much invested in the current system. They should instead embark on direct action campaigns such as that which was so successful against the bankers and their crony politicians during Iceland’s recent banking crisis.
All in all this book is a very good read and make a very convincing case that hard capitalist agenda being pushed in the Anglosphere by the 1% is not the only path to economic prosperity. The real challenge is how to transform these economies to the Nordic model.