The Nordic Economic Model
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Case Code: ECON026 Case Length: 19 Pages Period: 1950 - 2007 Pub Date: 2008 Teaching Note: Not Available |
Price: Rs.300 Organization : - Industry : - Countries : Norway, Denmark, Finland, Iceland, and Sweden Themes: - |
Abstract Case Intro 1 Case Intro 2 Excerpts
"The top rankings of Switzerland and the Nordic countries show that good institutions and competent macroeconomic management, coupled with world-class educational attainment and a focus on technology and innovation, are a successful strategy for boosting competitiveness in an increasingly complex global economy."
- Augusto Lopez-Claros, Chief Economist and Director,Global Competitiveness Network, in 2006
"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."
- Jeffrey D. Sachs, Director, The Earth Institute, Columbia University, and Special Advisor to UN Secretary-General
Introduction
The September 2007 issue of Reader's Digest, a general interest magazine, ranked 141 countries on the basis of quality of life. The Nordic countries topped the list, with Finland taking the first place followed by Iceland, Norway, and Sweden. Denmark was placed tenth. The ranking was based on statistics derived from the Human Development Index and the Environmental Sustainability Index. The Nordic countries had consistently figured at the top of such lists during the previous decade. Economists credited these countries' economic model for their success as measured by important social and economic indicators such as per capita GDP, employment levels, etc.
The Nordic economic model was characterized by high taxes, a large public sector, and moderate market regulation. These countries were welfare states, with healthcare, education, and other social services provided free for all citizens. Negating the commonly held belief that high tax rates curtailed growth, the Nordic countries showed growth despite high taxes mainly because they were able to achieve efficiency and bring about innovation in the public sector. Besides, with the Nordic economies being only slightly less liberal than Anglo-Saxon economies such as the UK and Ireland, foreign investment was high in these countries. Also, these economies had benefited from the absence of corruption and red tape.
However, there were challenges. With globalization, immigration, and aging populations, there was increasing pressure on the welfare model. The Nordic countries had responded by introducing reforms in pension and healthcare in the early 2000s. As of 2007, though the Nordic economies were among the best performers globally, reforms to sustain growth and support government expenditure were still being conceptualized and implemented.
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