The Nordic Model - Embracing globalization and sharing risks

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THE NORDIC MODEL:
MYTH OR REALITY?
The Nordic model:
socialist experiment
or bumble bee?
There exists a straw man version of the Nordic model. This is the
perception of the Nordic model as a socialist experiment with
stifling taxes and heavy-handed regulation where paternalistic
bureaucrats decide the fate of citizens from cradle to grave. Presumably
such a model is neither efficient nor desirable on other
grounds. Yet, in this chapter we argue that the Nordic model does
indeed exist, and in the next chapter we demonstrate that it has
performed reasonable well in the past. The model thus seems to
have something in common with the bumble bee, which keeps flying
even though it has been claimed that the laws of aerodynamics
prove this to be impossible. 1 Clearly the straw man version of the
Nordic model needs to be amended.
Small and open economies are heavily dependent on international
developments and need to cope with the process of
globalization. The global division of labour creates the potential
for big gains. However, these gains can be realized only through
a process of structural change, a process with winners and losers.
Increased openness, therefore, gives rise to fear among workers
as well as resistance by trade unions and political decision makers.
It is remarkable that citizens and organizations in the Nordic
countries have, by and large, understood and endorsed the case
for free trade and the open economy. Our hypothesis is that the
key feature of the Nordic model is the beneficial and mutually
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