This post is a summary of three articles published at http://www.economist.com/, on the same date, February, 2nd 2013. The first one with the title above, The second with the title of, " Northern lights." And the third, with the title of, " The secret of their success."
Small countries are often in the vanguard when it comes to reforming government. In the 1980s Britain was out in the lead, thanks to privatisation. Now the Nordic countries are likely to assume a similar role. That is partly because the four main Nordics- Sweden, Norway, Denmark and Finland - are doing rather well. The Nordics are at the top of everything from economic competitiveness to social health to happiness. To politicians around the world, they offer a blueprint of how to reform the public sector, making the state far more efficient and responsive. In the 1970s and 1980s the Sweden`s public spending reached 67% of GDP in 1993. But it did not work: Sweden fell from being the fourth richest country in the world in 1970 to the 14th in 1993. Since then the Nordics have changed course. Government`s share of GDP in Sweden, which has dropped by around 18%. Sweden has reformed its pension system. Its budget deficit is 0.3% of GDP. On public services have been similarly pragmatic. So long as public services work, they do not mind who provides them. Denmark and Norway allow private firms to run public hospitals. All western politicians claim to promote transparency. The Nordics can do so with more justification than most. The performance of all schools and hospitals is measured. Government are forced to operate in the light of day. The home of Skype is also a leader in e-government. The new Nordic model is not perfect. Public spending as a proportion of GDP in these countries is still higher. Their level of taxation still encourage entrepreneurs to move abroad. The pressures that have forced their government to cut spending, such as growing global competition, will force more change. When Angela Merkel worries that the European Union has 7% of the world`s population but half of its social spending, the Nordics are part of the answer. They also show that EU countries can be genuine economic successes. The main lesson to learn is not ideological but practical. The state is popular not because is big but because it works. But you need to be willing to root out corruption and vested interests. And you must be ready to forage for good ideas across the political spectrum.
Sweden has reduced public spending as a proportion of GDP from 67% in 1993 to 49% today. Its public debt fell from 70% of GDP in 1993 to 37% in 2010, and its budget moved from an 11% deficit to a surplus of 0.3% over the same period. Sweden has introduced a universal system of schools vouchers and invited private schools to compete with public ones. Private companies also vie with each other to provide state-funded health services and care for the elderly. The two decades from 1990 were a period of recovery: GDP growth between 1993 and 2010 averaged 2.7% a year and productivity 2.1%. The other Nordics have been moving in the same direction, Denmark has one of the most liberal labour markets in Europe. It also allows parents to send children to private schools at public expense and make up the difference in cost with their own money. The new Nordic model begin with the individual rather than the state. It begins with fiscal responsibility: all four Nordic countries have AAA ratings and debt loads significantly below the euro-zone average. There are compelling reasons for paying attention to these countries on the edge of Europe. The first is that they have reached the future first. They are grappling with problems that other countries too will have to deal, such as what to do when you reach the limits of big government. And the Nordics are coming up with innovative solutions that reject the tired orthodoxies of left and right. The second reason is that the new model is proving strikingly successful. The Nordics dominate indices of competitiveness as well as of well-being. It mark a big change since 1980s when welfare took precedence over competitiveness.
Why has this remote region, with its freezing winters and expanses of wilderness, proved so successful? In the period from 1870 to 1970 the Nordics countries were among the world`s fastest growing countries, thanks to a series of pro-business reforms. But in the 1970s and 1980s the undisciplined growth of government caused the reforms to run into the sands. The Nordics countries had got into the habit of spending more on welfare than they could afford and relying more on a handful of giant companies than was wise. They pride themselves on the honesty and transparency. Nordics governments are subject to rigorous scrutiny: for example, in Sweden everyone has access to all official records. They also have added two other important qualities to transparency: pragmatism and tough-mindedness. On discovering that the old social democratic consensus was no longer working, they let it go with remarkably little fuss and introduced new ideas from across the political spectrum. Pragmatism also explain why they are continuing to upgrade their model. And they are doing all this without sacrificing what makes the Nordic model so valuable: the ability to invest in human capital and protect people from the disruptions that are part of the capitalist system. Most of the rich world now faces the same problems that the Nordics faced in the early 1990s, out of control public spending. Yet it is hard to see the Nordic model of government spreading quickly, mainly because the Nordic talent for government is sui generis. Nordic government arose from a combination of difficult geography and benign history. Sweden guaranteed freedom of the press in 1766, and from the 1840s onwards it abolished preference for aristocrats in handing out top government jobs and created a meritocratic and corruption free civil service. A survey of social trust ( as opposed to trust in immediate family ) showed the Nordics in leading positions. Economists say that high levels of trust result in lower transaction costs. But its virtue go beyond that. Citizens pay their taxes and play by the rules. The world values survey, which has been monitoring values in over 100 countries since 1981, says that the Nordics are the world`s biggest believers in individual autonomy. They regard as the main job of state as promoting individual autonomy and social mobility. Universal free education allows students of all backgrounds to achieve their potential. Universal day care for children makes it possible for both parents to work full-time. Economists frequently express puzzlement about the Nordic recent economic success, given that their government are still so big. But it need to be adjusted to allow for the benefits of honesty and efficiency. Sweden´s economy today is flying better than it has done for decades.
