Martin Wolf FT column on good and bad forms of European capitalism ("Europeans can look to each other"):
The “Nordic model” (Denmark, Finland, Sweden, plus the Netherlands) has the highest public spending on social protection and universal welfare provision. Labour markets are relatively unregulated but there are “active” labour market policies, while strong unions deliver a high degree of wage equality.
The “Anglo-Saxon” model (Ireland and the UK) provides quite generous social assistance of last resort, with cash transfers going mainly to people of working age. Unions are weak and the labour market relatively unregulated. The “Rhineland model” (Austria, Belgium, France, Germany and Luxembourg) relies on social insurance for those out of work, as well as for provision of pensions. Employment protection is stronger than in the Nordic countries. Unions are also powerful or enjoy legal support for extension of the results of collective bargaining. Finally, the “Mediterranean” model (Greece, Italy, Portugal and Spain) concentrates public spending on old-age pensions. Heavy regulation protects (and lowers) employment, while generous support for early retirement seeks to reduce the number of job-seekers. ...How well then do these different approaches work in terms of two fundamental European objectives: high levels of employment and elimination of relative poverty? On the former goal, both the Nordic and Anglo-Saxon models perform well and the Rhineland and Mediterranean models relatively poorly. On the latter objective, the Rhineland and Nordic models do well and the Mediterranean and Anglo-Saxon models poorly (see chart). Prof Sapir argues, intriguingly, that the main reason for the underperformance of the Anglo-Saxon model on poverty alleviation is not the lack of fiscal redistribution but poor educational standards at the bottom. The Nordic model is good for both employment and poverty alleviation and the Mediterranean model bad. Meanwhile, the Anglo-Saxon model is good on employment and bad on poverty alleviation, while the Rhineland model is the reverse. As Prof Sapir puts it, the Anglo-Saxon and Nordic models are efficient (at least for the labour market), while the Rhineland and Nordic models are equitable. He adds that the inefficient models may also be unsustainable. One indication of this is that the Rhineland and Mediterranean countries have higher ratios of public debt to GDPgross domestic product, at 73 per cent and 81 per cent, respectively, against 36 per cent in the Anglo-Saxon group and 49 per cent among the Nordics. http://www.ft.com/cms/s/53b84494-2484-11da-a5d0-00000e2511c8,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F1%2F53b84494-2484-11da-a5d0-00000e2511c8.html&_i_referer=http%3A%2F%2Findustrialrelations.typepad.com%2Funionsfirmsmarkets%2Fglobalization%2Findex.html
Jeff Sachs column in Scientific American in praise of the Scandinavian model ("The Social Welfare State, beyond Ideology"):
One of the great challenges of sustainable development is to combine society's desires for economic prosperity and social security. For decades economists and politicians have debated how to reconcile the undoubted power of markets with the reassuring protections of social insurance.
...Most of the debate in the U.S. is clouded by vested interests and by ideology. Yet there is by now a rich empirical rec-ord to judge these issues scientifically. The evidence may be found by comparing a group of relatively free-market economies that have low to moderate rates of taxation and social outlays with a group of social-welfare states that have high rates of taxation and social outlays. Not coincidentally, the low-tax, high-income countries are mostly English-speaking ones that share a direct historical lineage with 19th-century Britain and its theories of economic laissez-faire. These countries include Australia, Canada, Ireland, New Zealand, the U.K. and the U.S. The high-tax, high-income states are the Nordic social democracies, notably Denmark, Finland, Norway and Sweden, which have been governed by left-of-center social democratic parties for much or all of the post–World War II era. They combine a healthy respect for market forces with a strong commitment to antipoverty programs. Budgetary outlays for social purposes average around 27 percent of gross domestic product (GDP) in the Nordic countries and just 17 percent of GDP in the English-speaking countries.
On average, the Nordic countries outperform the Anglo-Saxon ones on most measures of economic performance. Poverty rates are much lower there, and national income per working-age population is on average higher. Unemployment rates are roughly the same in both groups, just slightly higher in the Nordic countries. The budget situation is stronger in the Nordic group, with larger surpluses as a share of GDP.
The Nordic countries maintain their dynamism despite high taxation in several ways. Most important, they spend lavishly on research and development and higher education. All of them, but especially Sweden and Finland, have taken to the sweeping revolution in information and communications technology and leveraged it to gain global competitiveness. Sweden now spends nearly 4 percent of GDP on R&D, the highest ratio in the world today. On average, the Nordic nations spend 3 percent of GDP on R&D, compared with around 2 percent in the English-speaking nations.
The Nordic states have also worked to keep social expenditures compatible with an open, competitive, market-based economic system. Tax rates on capital are relatively low. Labor market policies pay low-skilled and otherwise difficult-to-employ individuals to work in the service sector, in key quality-of-life areas such as child care, health, and support for the elderly and disabled.
http://sciam.com/print_version.cfm?articleID=000AF3D5-6DC9-152E-A9F183414B7F0000
List of the "World's Most Competitive Economies":
COUNTRY RANKINGS 2006-2007 1. Switzerland
2. Finland
3. Sweden
4. Denmark
5. Singapore
6. U.S.
7. Japan
8. Germany
9. Netherlands
10. U.K.
11. Hong Kong
12. Norway
13. Taiwan, China
14. Iceland
15. Israel
Source: Global Competitiveness Report, World Economic Forum
("U.S. Loses Top Spot to Switzerland In Global Competitiveness Survey," by Marcus Walker, WSJ, Sept. 26, 2006 - behind a pay wall, email me to send)
Nobel Prize winning economist Joe Stigiltz writing in praise of Scandinavian countries in an article titled "A Progressive Response to Globalization":
Yet Sweden and the other Scandinavian countries have shown that there is an alternative way to cope with globalization. These countries are highly integrated into the global economy; but they are highly successful economies that still provide strong social protections and make high levels of investments in people. They have been successful in part because of these policies, not in spite of them. Full employment and strong safety nets enable individuals to undertake more risk (with the commensurate high rewards) without unduly worrying about the downside of failure. These countries have not abandoned the welfare state but have fine-tuned it to meet globalization's new demands. We should do the same.
http://www.thenation.com/docprint.mhtml?i=20060417&s=forum
Economist comparing social mobility in Europe and the US:
The obvious explanation for greater mobility in the Nordic countries is their tax and welfare systems, which (especially when compared with America's) deliberately try to help the children of the poor to do better than their parents. One might expect social mobility and economic flexibility to go together—in fact, to be two sides of the same coin. But to the extent that redistribution is an explanation, it implies the opposite: that social mobility is a product of high public spending, a bit like the low incidence of poverty or longer life expectancy (on both of which Europe also does better than America).
("Snakes and Ladders," May 26, 2006 - email me to send)
WP story titled "Innovation Gives Finland A Firm Grasp on Its Future":
A relatively backward agricultural country became a high-tech powerhouse with labor productivity as good or better than that in the United States, but also a welfare state as generous as any in Europe. Perhaps the most revealing statistic behind this transformation is Finland's commitment to research and development. The Finns put 3.5 percent of their domestic product into R&D last year, second in the world to Sweden (about 4.3 percent) and far ahead of the United States (about 2.6 percent) or the E.U. as a whole (less than 2 percent). R&D expenditures symbolize the Finnish resolve to preserve a comfortable place in a globalized world for an underpopulated nation with thousands of lakes and billions of trees. Typically, the decision to spend so much on scientific research and the adaptation of its results to commercial purposes was the result of a broad political consensus. Finland steadily increased government spending on R&D throughout the 1990s, when all other spending was either cut or frozen. Three Finnish institutions channel this money. One is a unique body called Tekes, the national technology agency. It supports both basic and applied research, granting about 40 percent of its funds to universities and other research institutions and 60 percent to businesses. This year, according to Veli-Pekka Saarnivaara, the president of Tekes, the organization will give out nearly $540 million, or more than $10,000 for each Finnish citizen. A U.S. agency investing a comparable amount per capita would put $300 billion a year into American R&D. http://www.washingtonpost.com/wp-dyn/content/article/2005/07/13/AR2005071302227_pf.html
WP story titled "In Finland's Footsteps":
Finns have one of the world's most generous systems of state-funded educational, medical and welfare services, from pregnancy to the end of life. They pay nothing for education at any level, including medical school or law school. Their medical care, which contributes to an infant mortality rate that is half of ours and a life expectancy greater than ours, costs relatively little. (Finns devote 7 percent of gross domestic product to health care; we spend 15 percent.) Finnish senior citizens are well cared for. Unemployment benefits are good and last, in one form or another, indefinitely. ...Teaching had always been a high-status profession in Finland, but now it would become even more prestigious. (Today there are 10 applicants for every place in the universities that train teachers.) Teachers would be required to complete master's degrees, six years of preparation that combined education courses with substantive work in subject areas. "Of course I faced much criticism," Aho recalled. "Upper secondary school teachers were very skeptical. Many parents were critical. The cultural elite said this would mean catastrophe for Finnish schools. The right thought the comprehensive schools smacked of socialism." But by the end of the 1980s, the new system was broadly popular. It was strengthened by a reform of higher education that gave Finland numerous new, high-quality universities. A grave economic recession in the early '90s was a key test, Aho said. "It was wonderful to see how strong the consensus was" that even in dire economic straits, Finland had to save this new school system, which had become "so important to the society," he said. Indeed it had. Finland in the '90s became a high-tech powerhouse, led by Nokia, now the world's largest maker of cell phones. Finnish students have become the best in the world, as measured by an internationally administered exam that assesses the educational progress of 15-year-olds in all the industrial countries. http://www.washingtonpost.com/wp-dyn/content/article/2005/08/05/AR2005080502015_pf.html
Guardian story titled "Sweden plans to be world's first oil-free economy":
Sweden is to take the biggest energy step of any advanced western economy by trying to wean itself off oil completely within 15 years - without building a new generation of nuclear power stations.
The attempt by the country of 9 million people to become the world's first practically oil-free economy is being planned by a committee of industrialists, academics, farmers, car makers, civil servants and others, who will report to parliament in several months. The intention, the Swedish government said yesterday, is to replace all fossil fuels with renewables before climate change destroys economies and growing oil scarcity leads to huge new price rises.
"Our dependency on oil should be broken by 2020," said Mona Sahlin, minister of sustainable development.
Sweden has a head start over most countries. In 2003, 26% of all the energy consumed came from renewable sources..
http://www.guardian.co.uk/print/0,,5394081-110373,00.html
Some stats from an excellent essay in the NYRB by Tony Judt comparing Europe to America:
Average number of hours worked per year:
US: 1777
Germany: 1362
France: 1346
Sweden: 1316
Netherlands: 1309
(Source: OECD (2004), OECD in Figures, OECD, Paris)
Number of prisoners per 100,000 people:
US: 685
EU: 87
("Europe vs. America," Tony Judt, Feb. 10, 2005, New York Review of Books)
Ratio of CEO pay to average manufacturing employee:
US: 475:1
Britain: 24:1
France: 15:1
Sweden: 13:1
("Europe vs. America," Tony Judt, Feb. 10, 2005, New York Review of Books)
Productivity per hour worked (United States=100)
Norway: 119.7
Belgium: 109.0
Netherlands: 105.2
France: 104.9
Germany*: 103.9
US: 100
Finland: 89.5
Sweden: 88.0
Britain: 85.3
Canada: 84.0
WSJ titled "For the Danish, A Job Loss Can Be Learning Experience": Most of Western Europe is fighting to hold on to its traditionally strong job protections while in some cases cutting jobless benefits, as the region struggles to compete in a globalized economy. Denmark has gone the other way.
The government allows liberal hiring and firing as in the U.S. And it has imposed limits on the duration of its high unemployment benefits. But it also invests more than any other country, as a percentage of its gross domestic product, in retraining the jobless -- a combination it calls "flexicurity." Its unusual mix of the free market and big government has helped Denmark cut its unemployment rate in half, from about 10% in the early 1990s to U.S.-style levels of under 5% now. The economy has been relatively robust, growing 3.4% last year. Meanwhile, France and Germany are at or above the Danish jobless rate of a decade ago. Even though Danes are among the most easily laid-off workers in Europe, polls show the country's workers are the most secure about their future. The European Commission now holds up Denmark as a model for other countries to try to follow. Politicians from other EU countries have made numerous study trips to Copenhagen. France has cited Denmark as a model for its own more modest labor-law reforms, which in recent days have touched off mass public protests.
Meanwhile, Danes change jobs more frequently than any workers in the developed world except Americans and Australians, says the Organization for Economic Cooperation and Development. But fewer than 10% say they're concerned about job security, compared with nearly 40% in Germany and more than 60% in Spain. Most Danes believe they can always find work in their fluid labor market. In the interim, they get security from a dole that replaces up to nine-tenths of their last wage, the highest level in Europe.
("For the Danish, A Job Loss Can Be Learning Experience," by Marcus Walker, WSJ, March 21, 2006 - behind a pay wall, email me to send)
Foreign aid giving as a percentage of GNP:
Norway: 0.93
Sweden: 0.92
Netherlands: 0.82
Denmark: 0.84
Britain: 0.48
France: 0.47
Ireland: 0.41
Germany: 0.35
Canada: 0.34
Italy: 0.29
Australia: 0.25
US: 0.22
Yale University's 2008 Environmental Performance Index: 1) Switzerland 95.5
2) Norway 93.1
3) Sweden 93.1
4) Finland 91.4
5) Costa Rica 90.5
6) Austria 89.4
7) New Zealand 88.9
8) Latvia 88.8
9) Colombia 88.3
10) France 87.8
11) Iceland 87.6
12) Canada 86.6
13) Germany 86.3
14) UK 86.3
15) Slovenia 86.3
16) Lithuania 86.2
17) Slovakia 86.0
21) Japan 84.5
28) Russia 83.9
34) Brazil 82.7
39) United States 81.0
104) China 65.1
http://epi.yale.edu/CountryScores
United Nations 2007/2008 Human Development Index rankings (rankings for all countries at link):
- Iceland
- Norway
- Australia
- Canada
- Ireland
- Sweden
- Switzerland
- Japan
- Netherlands
- France
- Finland
- United States
- Spain
- Denmark
- Austria
- United Kingdom
- Belgium
- Luxembourg
- New Zealand
- Italy
http://hdr.undp.org/en/statistics/
Human Poverty Index (a subsection of the Human Development Report)
1) Sweden
2) Norway
3) Netherlands
4) Finland
5) Denmark
6) Germany
7) Switzerland
8) Canada
9) Luxembourg
10) Austria
11) France
12) Japan
13) Australia
14) Belgium
15) Spain
16) United Kingdom
17) United States
18) Ireland
19) Italy
20) Iceland
http://en.wikipedia.org/wiki/Human_Poverty_Index
NYT graphic showing comparative infant mortality stats:
Idar Kreutzer, head of the Nordic region’s biggest life assurer, was in New York recently when a senior executive of a large US bank invited him in for a quick chat. It soon extended into a two-hour discussion of the Nordic business model and corporate diversity. “It surprises me, the interest and the curiosity in the Nordic model,” says Mr Kreutzer, chief executive of Norway’s Storebrand.
The model of capitalism practised in Sweden, Norway, Denmark and Finland is seen by some as one of the few winners of the current economic and financial crisis. From its response to a previous banking crisis to its
promotion of women in the boardroom, the Nordic model is piquing interest around the world in the same way as the Japanese style of capitalism did in the 1980s or the Germans’ in the 1960s.
Just as those systems faced challenges after their time in the limelight, so does the Nordic mode