The Nordic Model - Embracing globalization and sharing risks

are not at the top of the league, though Sweden ranks high in terms
of social expenditure relative to GDP (column 3).
A particular feature of Nordic social policies is the high share
of spending on child care and early education (column 4), and the
Nordics are also unique in spending as much as 3–4 per cent of
GDP on families in the form of cash and services. The replacement
rate is high in unemployment insurance (column 5), but it may be
added that eligibility for benefits in the Nordic countries is increasingly
conditional on “effective” availability to the labour market,
that is, workfare elements. Replacement rates in pensions (column
6) are higher in the North than in the Anglo-Saxon countries
but lower than in the South, except for Denmark in some cases.
Also, pensions in the Nordic countries have a low “progressivity
index” (column 7), meaning that benefits are strongly related to
contributions and are therefore actuarially rather fair, again with
exception for Denmark that has a quite generous flat-rate pension
(“folkepensionen”). In sum, public spending in the Nordic countries
is high but a significant part of it is geared towards supporting
a high rate of labour force participation.
Needless to say, it would be easy to point to significant differences
between the Nordic countries. Yet, in an international
comparison it is the similarities that are striking. Comparing the
Nordics with other countries in Europe or elsewhere, one is impressed
by the perception of a specific Nordic “cluster” in a number
of dimensions. It would indeed be easy to multiply the examples
of such similarities by covering in more detail areas such as labour
market institutions, the design of the welfare state, policies with
regard to new technologies and research and development or
environmental policies. 5
However, it is not the number of similarities that is important
but the systemic interrelations between the key institutions
and policies. To recapitulate, the argument of this chapter is that
the Nordics have in recent decades broadened their long-standing
commitment to free trade and modernized their collective
mechanisms for risk sharing under the pressure of and in response
to globalization. Openness to globalization and emphasis on social
security are important not only in themselves but also because they
are interconnected and mutually supportive. Free trade and factor
The Nordic public
sector is big, but net
social spending is not
that much higher than
elsewhere
It would be easy to
multiply examples of
Nordic similarities
42 · The Nordic Model