The Nordic Model: Is it Sustainable and Exportable?

Atle Midttun (ed.), Nina Witoszek (ed.), Carlos Joly, Sylvia Karlsson-Vinkhuyzen, Per Ingvar Olsen, Lennart Olsson, Þröstur Olaf Sigurjonssón, Asle Toje, Lars Trägardh and Uffe Østergård

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CARLOS JOLY is a visiting professor infinance at ESC Toulouse, with aparticular interest in climate change andin economic fairness. He is Chair of theScientific Advisory Committee of NatixisAsset Management in Paris.

ASLE TOJE (D.Phil., Cantab) is avisiting fellow at the Norwegian NobelInstitute in Oslo. His research interestsare found at the intersection of securitystudies and development studies.

LENNART OLSSON is professor anddirector of Lund University Centre forSustainability Studies (LUCSUS) inSweden. His research focuses on the politics of climate change, particularly in the context of poverty and foodinsecurity.

UFFE ØSTERGÅRD is professor at theDepartment for Business and Politics,Copenhagen Business School (CBS). Hisresearch mainly concerns comparativestudies of political culture in the European nation states, nationalism and national identity.

THRÖSTUR OLAF SIGURJÓNSSONis an assistant professor at ReykjavíkUniversity School of Business in Iceland.His research interests include issuesregarding corporate governance,privatization, strategic management and corporate restructuring.

ATLE MIDTTUN is professor at theDepartment of Innovation and EconomicOrganisation, Norwegian School ofManagement in Oslo. His researchcontributions and teaching are withinregulation and governance, energy andenvironmental issues, corporate social responsibility, innovation, strategy andeconomic organisation.

SYLVIA KARLSSON-VINKHUYZENis a Research Fellow of the Academyof Finland currently hosted as aVisiting Research Fellow at theGrotius Center for InternationalLegal Studies, Leiden University, theNetherlands. Her current researchfocuses on the legitimacy andeffectiveness of global environmentalgovernance with an empirical focuson climate change and energy in-stitutions.

LARS TRÄGÅRDH is professor of history and civil society studies atErsta Sköndal University College inStockholm, Sweden. His research isfocused on the comparative analysisof political cultures and socialcontracts, particuarly the role ofnationalism and relations betweenstate, civil society and the individual.

PER INGVAR OLSEN is associateprofessor at the Department ofInnovation and Economic Organisation, Norwegian School ofManagement, where he also leads theCenter for Cooperative Studies. His research isin business economics andmanagement with a particular focuson innovation strategies andprocesses, business networks and or-ganizational forms.

NINA WITOSZEK is a research professor at the Centre forDevelopment and the Environment,University of Oslo. Her research in-terests include comparative culturalresearch, nature mythologies,environmental ethics and thehumanist legacy, moral communitiesand the challenge of modernization.

AcknowledgementsWe are grateful to The Research Council of Norway for their imaginative support to this project. We also wish tothank Adam Collingsworth for his editorial assistance and Elin Staurem for her help in putting together thispamphlet.

Atle Midttun og Nina Witoszek, Oslo, January 2011

Contributing Authors

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Table of Contents

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Page1. Introduction: The Nordic Model - How Sustainable or Exportable Is It? 5

Atle Midttun & Nina Witoszek

2. The Nordics and the Myth of the Welfare State 8Carlos Joly & Per Ingvar Olsen

3. The Nordic Model and Ecology: High Rhetoric and Mediocre Practice 11Atle Midttun & Lennart Olsson

4. Civilising Global Capitalism 15Atle Midttun

5. Nordic Humanism vs. Volksgeist 17Nina Witoszek

6. Social Trust and Radical Individualism 19Lars Trägårdh

7. Current Challenges to Nordic Labor Policy: The Danish “Flexicurity Model” 21Uffe Østergård

8. The Nordic Model Abroad 23Sylvia Karlsson-Vinkhuyzen, Atle Midttun & Asle Toje

9. Iceland: the Nordic Model Gone Astray? 27Throstur Olaf Sigurjonsson

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Among the unique features of the Nordic model, is abalance between seemingly contradictory polarities.The model represents a soft, but productive mode ofcapitalism, which is highly dynamic and flexible, but italso has an extensive welfare provision and efficientmarket regulation. It strikes a balance between in-dividualism and collectivism not only in the economic,but also in the civic sphere, where it unites a strongsense of domestic community in welfare provisionwith promotion of universal human rights abroad.Like other countries with small economies, theNordics are highly dependent on open markets toachieve advantages of scale and scope. Yet someobservers hold that the advanced welfare rights entaila need for entry restrictions to prevent erosion of theexisting legacy.For decades, this model has delivered world class GDPper capita in the upper range of Euro-pean perfor-mance, in the conditions of tough internationalcompetition (figures 1 and 2).

Fig 1: GDP per Capita in Euro (PPP) in the Nordiccountries, EU-15 and the Euro-area, 1980-2008

Source: Nordic Council of Ministers (2010), Nordic Statistical Databank

Fig 2: Export share of GDP%

Source: Holberg Fondene (2010), Ukens Holberggraf 3. september 2010

The Nordics have combined economic growth withwider welfare concerns, and have done so in a highlyegalitarian way (figures 3 and 4).

Fig 3 : Human Development Index 2007, top 15 countries

Source: UNDP (2009), Human Development Report 2009

1. The Nordic Model: How Sustainable orExportable Is It?Atle Midttun and Nina Witoszek

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Rank Country HDI-value in 2007*1 Norway 0,9712 Australia 0,9703 Iceland 0,9694 Canada 0,9665 Ireland 0,9656 Netherlands 0,9647 Sweden 0,9638 France 0,9619 Switzerland 0,96010 Japan 0,96011 Luxembourg 0,96012 Finland 0,95913 United States 0,95614 Austria 0,95515 Spain 0,955 *Scale between 0 (no achievement) and 1 (goal reached) indicating how

close countries are to reaching goals for social and economic development.

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Fig 4: Distribution of Wealth (Gini Index)

Source: OECD (2010), OECD Factbook 2010: Economic, Environmentaland Social Statistics

Furthermore, they are generally seen as responsibleand relatively non-corrupt economies which deliveredwelfare without excessively overburdening the state(figures 5 and 6).

Fig 5: Corruption Perception Index 2010, best and worstcountries

Source: Transparency International (2010), Corruption Perception Index2010

Fig 6: Governmental surplus/deficit in 2009 as percentageof GDP

Source: Holberg Fondene (2010), Ukens Holberggraf 3. september 2010

The Nordics are also seen to be virtuous players in theinternational arena. They share more of their wealthwith developing countries than others and practiceextensive corporate social re-sponsibility (fig 7 and 8).

Fig 7: Foreign Aid in % of GDP

Source: OECD (2010), OECD DCD-DAC Aid Statistics for 2009

Fig 8: Average CSR Rating for Enterprises by Country 1

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1) The numbers on the vertical axis are index scores based on companies' CSR reporting, adherence to CSR standards, member-ship in CSR networks/communities, and ranking on SRI indexes. Data found in Midttun, Atle, Kristian Gautesen og MariaGjølberg (2006): “The Political Economy of CSR” The Corporate Governance vol 6 no 4, pp 369-385

Country Gini - coe�cient RankDenmark 0,23 1Sweden 0,23 2Luxembourg 0,26 3Austria 0,27 4Czech Republic 0,27 5Slovak Republic 0,27 5Finland 0,27 7Netherlands 0,27 8Belgium 0,27 9Switzerland 0,28 10Norway 0,28 11Iceland 0,28 12France 0,28 13Hungary 0,29 14Germany 0,30 15OECD average 0,31 …

Rank Country Score* 1 Denmark 9,3 1 New Zealand 9,3 1 Singapore 9,3 4 Finland 9,2 4 Sweden 9,2 6 Canada 8,9 7 Netherlands 8,8 8 Australia 8,7 8 Switzerland 8,7 10 Norway 8,6 11 Iceland 8,5 11 Luxembourg 8,5 13 Hong Kong 8,4 14 Ireland 8 15 Austria 7,9 15 Germany 7,9 172 Uzbekistan 1,6 175 Iraq 1,5 176 Afghanistan 1,4 176 Myanmar 1,4 178 Somalia 1,1 * Scale from 10 (highly clean) to 0 (highly corrupt)

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The stress test of the Nordic Model for the 21stcentury will be how it handles new combinations of is-sues like climate, globalizing markets, migration, andethnic identity. The new questions are related to thefollowing social and economic shifts.

Firstly, the Nordic model has functioned well in the20th century under open trade in commodities. Will itwork under open flow of people and services in the21st? Work solidarity and trust based relations be-tween workers and management, actively supportedby the state, have been hallmarks of the Nordic model.This has strengthened productivity and facilitatedflexible industrial transformation. However, theextensive “labour” rights of the Nordic work forceagainst layoffs and in the event of illness makes itdependent on a will to undertake collective financingwhich may be challenged by increased immigration.

Secondly, with 21st century immigrants increasinglydeveloping diverse and strong cultural-ethnic iden-tities, what happens to the Nordic communities anduniversalistic ideals? Will they turn into segmented,multiethnic, low-solidarity societies or will there be acommon socialization through a buy in of the thirdgeneration? The Nordics have evolved into semisecularsocieties with strong state guaranteed individual rights.They now find themselves challenged by new immi-grants with traditional patriarchal family values and,frequently, theocratic visions of social organization.

Thirdly, high and widely distributed welfareconsumption lies at the heart of the Nordic Model’ssuccess in the 20th century. How can it be reconciledwith the ecological challenges of the 21st? On the onehand the Nordic governments are engaging actively toadvance global collective action. On the other hand,they are strongly pressed to deliver on domesticwelfare expectations.

Fourthly, as small welfare states with open economies,the Nordics have an interest in global fair play underhigh social and environmental standards. How canthey maneuver between hegemons and underdogs intoday’s multipolar globality? Needing hegemons morethan the other way round, the Nordics are forced toplay along, even if a hegemon's policy is toughmilitarism or rough international trade. Humanistic orsocial and ecological concerns in both military con-flicts and international trade can at most be addressedthrough soft legal channels. Furthermore, ecologicaland social upgrading of the global economy may notmix well with developing countries either, as theyoften accuse the Nordics of trade barriers to securetheir workers at home.

Fifthly, the Nordic countries have seen a strongupsurge in “Folkhems-Populism” with demands forconsolidation and restrictive immigration laws. Partieslike Danish People’s Party (Dansk Folkeparti), theSwedish Democrats and the Norwegian Progress Partyhave argued for entry restrictions with ethnocentricovertones. Are the populists challengers or saviors ofthe Nordic Model? Destroyers because their ideologycould be seen to undermine basic Nordic values andprevent creative impulses from abroad; saviors becausethey attempt to protect the Nordic model from over-load and cultural implosion.

The Nordic Model’s sustainability, facing these andother hurdles in the 21st century, will be examined bya group of leading Nordic scholars through the lensesof culture, politics and economics.

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Since the days of Reagan in the US, Thatcher in theUK, and Aznar in Spain, there has been a largelysuccessful ideological campaign of propaganda tocharacterize the welfare state as wasteful andinefficient, penalizing good hard-working people withexcessive taxes in order to subsidize an increasingmass of unemployed that would rather live on statelargesse than work for a living. Growing publicexpenditures and rising ratios of government debt toGDP have led the bond markets to loose confidence inthe debt servicing capacity of a number of Eurozonecountries. This would seem to support the conclusionthat the days of the welfare state are doomed; not onlydoomed, but themselves guilty of this predicament as aconsequence of the welfare state's own internalcontradictions. Conventional wisdom has it that thecure is austerity: drastic cuts in distributive paymentsfor public health, education, infrastructure renewal,unemployment insurance and non-carbon energy sub-sidies. In this context, the curious anomaly of theNordics poses a riddle. How can countries likeSweden, Norway, Denmark and Finland prosper eventhough they have high levels of taxation and publicexpenditures? Why do they have the highest overallemployment rates among the OECD countries, despitestate largesse, and how can they manage to compete inglobal markets in spite of well-paid workforces? Somebelieve it must have something to do with the Protes-tant work ethic or cultural, ethnic and religioushomogeneity. Others even say luck, or perhaps the factthey are small countries. They are wrong.

We contend that the Nordics are successful becausethey are not welfare states, not in the distorted sensethe “welfare state” has come to be identified with. TheNordics are what we prefer to describe as highlyefficient, rational and democratic Human ResourceStates (HRS for short). A modern HRS seeks fullemployment through dynamic adaptation of industryand service sectors rather than protectionism. It avoidsclass conflict with appropriate work-life (“arbeidsliv”2) constitutional arrangements. And it encouragesdemocratic governance that prevents extremes ofincome inequality. Natural resource management isbased on the idea that natural resources are publicgoods whose private exploitation must be properlycompensated. In short, the architecture of the HRS is

meant to manage human, capital and natural resourcesfor the benefit of all of its people rather than for theprimary benefit of financial or corporate elites. Thesegoals are achieved through a particularly artfulengineering of industrial and political relationships,expressed through governance mechanisms and in-stitutions that have been deliberately implemented forthese purposes. We therefore claim, as well, that theparticularities of the Nordics can to a significantextent be applied elsewhere, as an alternative model tothe neoliberal framework that is making its comebackthrough the bond market. Neoliberal economics andthe ideology of market self-regulation, or even noregulation at all, is at the root of the troubles in whichthe US is now mired; and is very much at the root ofthe disasters that have hit Ireland, Iceland, Portugal,Spain, and Greece. Globalization ensures that the UScrisis propagates like an epidemic to its tradingpartners and to those countries too reliant on financialcenter funding. Even so, real-time revisionism in theUS Congress would have it that this is, once again,due to “big government.” As distinct from that, theNordics are living proof there is an alternative toPredatory Capitalism.

Nordic capitalist societies are not only more fair andegalitarian in their distribution of income, wealth andpower, and therefore better approximations to theGood Society; they are, we claim, better able to avoidthe self-destructive tendencies inherent in the kind ofcapitalism practiced and promoted by the US preciselybecause they are structured to be fair and have strongpreventive mechanisms against the formation of po-litical and economic oligarchies. Democracy must havethe capacity to prevent those with control overmaterial, financial and media resources from alsocontrolling the political institutions of the state; other-wise democracy becomes electoral formalism and failsto serve in the interests of its people. In the Nordiccountries, a decent life for all is the cardinal structuralvalue, rather than letting a few get very rich, and in-stitutions are structured accordingly. A collaborativeframework of institutions, rules, and cultural moresreinforce each other in this collectively shared purpose.The question is whether in a globalized capitalisteconomy this system can survive. Until now theNordics have been succeeding economically and other-

2. The Nordics and the Myth of the Welfare StateCarlos Joly and Per Ingvar Olsen

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2) ”Arbeidsliv” is literally translated as ”work-life” but this is poor English and does not quite capture its connotations, whichinclude not just the work itself, but also the transversal and hierarchical relationships involved, the workplace environment, andthe rights and obligations of employers and employees.

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wise. We claim this system needs to be defended andprotected; that it has, inherently, the capacity tosurvive and endure; and that it can serve as a modelfor others. What are its essential, and exportable, ele-ments?

The success of the Nordic Model is predicated on thefollowing social constructs:

1.The work-life constitutions, given legal form in “TheGeneral Agreement” (“Hovedavtale”), promulgatedinto law in Denmark in 1899, in Norway in 1935and in Sweden in 1937. These constitutional systemscame in place as a response to severe labor marketand class conflicts that paralyzed their economies inthe early 1900s. Conflicts of labor and capital havesince then been mediated in an ordered way througha collective bargaining system supported by theState, and enacted through State institutions like theArbitrator (Meklingsman), The Labor Court(Arbeidsretten) and The Work Environment Law(Arbeidsmiljøloven). Labor has the right to strike,but within certain rules and under certainconditions. Capital has the right to seek to maximizeprofit, but within boundaries and regulations thatensure decent wages, employment, work-lifedemocracy, and environmental obligations. It works.A century of mostly successful Nordic experienceproves it is not a pie in the sky experiment. Laboragrees to improve productivity, to close out-modedfactories and lay off workers in exchange for retrain-ing, job placement, fair compensation and work-lifedemocracy. They talk and talk, give and take, andagree. Strikes are the last resort and rare. (Comparethis to France, where strikes are frequent and oftenused as the first step in negotiations.) Industrialrenewal takes place, companies compete wellinternationally despite paying collectively negotiatedwages, and employment rates are high. This ishuman resource management on a national scalewithin legally established rules and in an economywhere business decisions in private companies or inpublicprivate companies are generally taken withlittle direct government interference. This keepsinequality largely in check, maintains relativelystable differences among different wage groups, as-sures low unemployment, and allows for satisfactorycorporate profits. Aside from a means of earning aliving, work is seen as a source of identity, self res-pect and achievement. Despite strong state-providedsocial benefits, people overwhelmingly prefer towork and do not “live off the state.”

2.The tax system. Taxation of businesses and in-dividuals is less than commonly believed abroad,and has important productivity enhancing attributes.

a. Business profits and capital gains are taxed at aflat 28-30% in the Nordic countries. In the US thetax rate is 35%. Firms whose profit dynamics dueto globalization become nonviable unless sub-sidized (i.e., taxed at less than 28%) are not sub-sidized but rather allowed to emigrate. The Nordiccountries generally want only businesses that can

pay good wages in the country itself, can pricetheir products competitively on internationalmarkets, require no subsidies, and will pay 28%tax on satisfactory profits. This promotes a dy-namic and technologically up to date businesssector. A company is expected to pay decentsalaries, provide a proper return on capital bygenerating satisfactory profits, and pay their 28%tax. The only exception is agriculture (particularlyin Norway), which is subsidized to keep thecountryside populated and the “kulturlandskap”in good form.

b. Natural Resource Tax. The Nordics impose a“harvesting tax” on natural resources. Resourceslike rivers, oil, forests, fisheries, minerals areconsidered property of the nation; thus privateentities exploiting these resources pay the 28% taxon normal profits up to a certain level and overthat level pay a resource harvesting tax. (This isthe diametrical opposite of the oil depletionallowance or subsidy that oil companies in the USget for exploiting its oil!)

c. Individual taxes are on paper comparable to manyother countries. The difference is that people paytheir taxes. There are few loopholes and no cultureof cheating. In Norway, for instance, themaximum marginal tax rate on salaries is 41%;28% (net deductibles) goes to local governmentand up to 13% on above average income to theState. Social security is paid by employees 7.8%and by employers up to max 14.1%. Thus, themax marginal tax to employees is 49%. But underNOK 400,000 of salary (€50,000), only the localgovernment tax is applied, or 28% (netdeductibles) plus social security at 7.8%, totalingbetween 7.8% and 35.8% depending on theincome to deductibles ratio. Importantly, stockoptions are penalized and not widely in use, theintent being to channel compensation throughfixed salary and salary cash bonuses. The result isthat the tax system is broadly based, everybodypays, and no segment of the population overpaysthus thinking that they have a bigger right to abigger say in running the country. This form ofeconomic democracy strengthens politicaldemocracy, as the state is funded by the broad andemployed middle class which is used to exercisingits claims upon government for the provision ofeducational, health, and pension benefits in return.All income groups receive statesupplied health,educational, disability and pension benefitsequally.

d. The moderate capital gains tax reflects the factthat capital is more moveable than individuals.Also taxation of the poor is more limited andflexible than for instance in the US and the UK,where those on welfare are generally taxed 100%through public support cutbacks when marginalemployment increases. In the Nordic countriespublic support and marginal or unstable

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employment overlap – causing a lower marginaltax rate effect. Hence the Nordics have relativelylower taxes at the two ends of the income scale, todeal with global competition as well as overallhuman resource management challenges. Theyhave very broad tax bases to permit for overallmoderate income taxes also to the middle class.The broad tax base includes substantial taxationof consumption, environmental pollution, traffic,alcohol, cigarettes etc. Through these taxes, im-ported goods are also included as a substantialpart of the tax base.

3.Government's Role is Unquestioned. In the Nordiccountries, the government is expected to regulatemarkets, to assure protection of the common goodand of national interests, and to exercise nationalcontrol of strategic sectors and companies, whileleaving the management of public sectorowned orco-owned firms to professional managementinsulated from politics. A variety of strategies are ap-plied from state ownership and co-ownership toregulatory structures to ensure that government co-ownership is complemented by a local industrialaristocracy (Wallenbergs, etc.) who protect theirown and the national interest through the control-ling mechanism of non-listed voting shares. In-dividual autonomy is strong in the Nordics and hasnot been compromised or suppressed by a strongstate, 3 although novel and intrusive “big brother”forms of internet and electronic surveillance maycome to hamper autonomy through encroachmentson privacy.

4.Housing, Lending, and Patrimony. The source ofpatrimony for most is home ownership rather thanownership of shares. This is structured to coherewith and support the existing alignment of interestsaround the collective bargaining process: employeesand workers rely on their salaries rather than stockmarket placements for their current and retirementincome and thus react purely as wage earners inprotecting the interests of work vs. capital.

5.Locally-owned banking and insurance. Banking,corporate finance and stock trading are largely inthe hands of local or trans-Scandinavian companiesrather than British, US, German, Japanese orSpanish financial institutions. Local capital is thus along term partner with local business. This kind ofcapital sovereignty is seen as essential for thesurvival of the Nordic Human Resource State. Whenbanks overextended themselves by lending tobusinesses and individuals in the 1980s, a suddenrise in interest rates resulted in a severe recessionand huge loan losses. Instead of bailing out thebanks, the Norwegian State nationalized them, firedthe boards and management, recapitalized them, andmanaged them back to health, then floating themagain on the stock exchange while keeping negativecontrol of certain strategic banks. The Swedish and

the Finnish states followed slightly different, but stilleffective strategies.

6.The overall incentive features of the collaborativestructure. The fundamental collaboration betweenlabor, employers and the state represents a structurewith strong incentives to optimize the capacities ofand the use of human resources in the economy as anational whole. The willingness to compensate thoseleft outside the labor market is directly related to thewillingness and ability to pursue an effective policyaimed at minimizing the number of people onwelfare and improve the productive capabilities ofthe marginal labor force. Hence, free education,support for child care, care for the elderly,preventive health care systems, preventive crimepolicies etc. are there to support these capabilities –not just to help people survive. In particular, this hasresulted in very high female employment ratescompared to other countries.

The Future: Are the Nordics Vulnerable? What could undermine the Nordic way? What couldpervert it into a more predatory form of capitalism?Two sources of vulnerability concern us: first, if thelabor unions were to be sub-stantially underminedthrough loss of membership and loss of influence atthe collective bargaining tables. Or if the right wingparties are able to gain sufficient power by playing tochauvinistic fears of foreigners and to popular dissatis-faction (not altogether unjustified) with bureaucraticincompetence, so as to dismantle or weaken thecollective bargaining process based on solidarity.Private sector financed political advertising or rightwing media could promote such changes. Second, ifthe increasing wealth of households and their increas-ing exposure to stock markets tips the balance of inter-ests more in the direction of share owning rather thanwell paid employment. In other words, if greedencroaches upon solidarity and undermines traditionalNordic communitarian values.

In short, just as the Nordic way is the rational anddeliberate result of resolving a deep class conflict inthe early 20th century, the conflict between labor andcapital, in the 21st century it faces the challenge tomaintain this balance in the face of ideological andfinancial forces that would have a much larger shareof value creation allocated to profits rather than towages and taxes. This would lead to a dominant shareof the gains going to the owners and the interme-diaries of capital, as is the case in the US, the UK andelsewhere. Such a move would undermine the work-life constitutions of the Nordic countries that representthe economic corner-stone of their success. Our view isthat the Nordic Model is resilient and strong enoughto survive that challenge. Thus, it can present itself asa model for adoption and adaptation in developingcountries. It shows that predatory capitalism is not theonly option. The Nordics prove that capitalismfocused on welfare through job creation works.

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3) Lars Tragårdh, ”Social Trust and Radical Individualism”

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The Nordics are generally seen as front-runners inecological modernization 4: They have been active pro-moters of conventions and capacity-buildinginternationally around environmental and climate is-sues; they have been among the pioneers ofenvironmental policy-making; and they have beenearly movers in setting up new environmental policyadministrations. However, Nordic ecological practice is lagging behind.While ecological modernization has been pursuedfairly forcefully when it comes to the work ofenvironment and local pollution, the Nordics havebeen far less successful in diminishing their ecologicalfootprint on the globe. Topping global welfareindexes, they also rank as significant consumers of theworld's scarce resources.

Pioneers of Environmental Policy-MakingThe Nordic countries have been fairly active inconvening international environmental initiatives,usually in close collaboration with the United Nationsor other multilateral organizations. Just to mention afew of the most important ones:

The Swedish hosted 1972 UN Conference on theHuman Environment, in Stockholm, was an earlyattempt to set environmental issues on theinternational agenda, and was later followed up bymassive international engagement.

The 1972 Oslo Convention on dumping waste at sea,which later merged with the 1974 Paris convention onland-based sources of marine pollution was anotherearly Nordic initiative to promote internationalenvironmental policy. The Oslo and Paris conventions

later merged into the OSPAR Commission, which es-tablished the legislative instrument regulatinginternational cooperation.The 1985 Helsinki Protocol on the reduction ofsulphur emissions represented a Nordic initiated firststep to deal with long range, transboundary airpollution. It was followed up by another Nordic ini-tiative, the 1994 Oslo Protocol on Further Reductionof Sulphur Emissions. Both conventions were successfulin achieving their goals.

In classical Nordic participatory style, the1998 AarhusConvention on Access to Environmental Informationand Public Participation in Environmental Decision-Making, introduced a directdemocratic element intoenvironmental policy.

The 1990s also saw Norwegianled, policy-orientedinternational conferences on bio-diversity inTrondheim both in 1993 and 1999. Both conferenceswere held in close cooperation with UN agencies.

Another major Nordic initiative was the 2001 Stock-holm Convention on Persistent Organic Pollutants, aglobal treaty to protect human health and theenvironment from chemicals that remain intact in theenvironment for long periods.

Through these and numerous other initiatives, theNordics have signaled willingness to championenvironmental sustainability on the internationalagenda.Nordic policy makers have also championed earlyenvironmental policies.

3. The Nordic Model and Ecology: HighRhetoric and Mediocre Practice Atle Midttun and Lennart Olsson

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4) Michael Skou Andersen & Duncan Liefferinck (eds) (1997) European Environemental Policy: the Pioneers. Manchester Uni-versity Press, Manchester, New York, Joas, M. and A-S. Hermanson, Finland, in Christiansen, P.M. (ed.) 1996, Governing the Environment - Politics, Policy andOrganization in the Nordic Countries, Nordic Council of Minis-ters - Research Nord 1996:5, Copenhagen

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The Norwegian Prime Minister Gro Harlem Brundt-land's chairing of the report on sustainabledevelopment, Our Common Future in 1987, set thestage for including environmental policy with corewelfare state values. The publication of Our CommonFuture and the work of the World Commission onEnvironment and Development laid the groundworkfor merging the development and environmentalagendas and linking them to fair distribution and po-litical democracy.

In 1996 the Swedish Prime minister Göran Perssonannounced Sweden’s ambition to accomplish thegreening of the welfare state. Sustainability wasincorporated into the longstanding “People’s Home”concept of consensus politics aimed at reducingeconomic disparities, redistributing wealth andcarrying out welfare reforms. This initiative integratedenvironmental policy into the core of “the NordicModel.”

Six years later, In 2002 Denmark adopted a nationalsustainable development strategy to be presented toParliament every four years and followed up throughsectoral plans and a set of indicators. Denmark’s high-profile sustainability policy has recently culminatedwith its 2009 hosting of conference of parties of theUnited Nations Framework Convention on ClimateChange (UNFCCC).

The Finnish government also promotes sustainabledevelopment as part of its diplomacy, including in itsrelations with the East, with Nordic countries, and aspart of the European Union. Together with the otherNordic countries it is taking initiatives to integrateenvironmental concerns with trade policy so that bothfields have equal status in international law.

The Nordic countries have also followed up theirstrong environmental policy engagement by establis-hing the following early environmental administ-rations:

In 1971, the Danish Ministry of Pollution Abatementmarked the beginning of the Nordic foundation ofministries with an environmental focus. The ministrywas later changed to the Ministry of Environment in1973, after the passing of a series of environmentallyrelated laws. A strong environmental focus in Danishenergy policy later led to a merger between theMinistry of Energy and the Ministry of Environmentin 1994, reflecting the pioneering role of Denmark inwind energy under its dynamic minister Svend Auken.In 2005, the energy sector was detached again and theministry reverted to the old name.

Norway was also quick to establish a Ministry ofEnvironment in 1972, and has, through one of its

most profiled ministers, Gro Harlem Brundtland, wholater became Prime Minister, established a profile asand international spokesman for environmental policy.The Ministry followed the Committee for Resources(Ressursutvalget) that was appointed in 1968 becauseof concern with the use of natural resources andpollution.

Swedish environmental policy gained momentum inthe aftermath of the nuclear referendum. The strongrelation between energy and environmental policy ledto the creation in 1987 of a joint ministry: theMinistry of Enviroment and Energy. The Ministry hassince gone through several transformationsonly torevert to a pure Ministry of Environment a couple ofyears later.

The Finnish Ministry of Environment was establishedin 1983 in spite of strong opposition from theMinistry of Trade, the Ministry of Industry and theMinistry of Agriculture and Forestry. In 1995, theEnvironmental Administration was established to takecare of important cross cutting issues between thesethree ministries.

Nordic Environmental PracticeEven a crude analysis of environmental performance,however, indicates that there is some distance betweenthe professed principles and actual practice. TakingCO2 emissions and the climate challenge as a point ofdeparture, a simple compilation of CO2 emissions percapita shows extensive variation among the Nordiccountries. With 5.4 tons per year Sweden ranksamong the better European countries, while Finland,with 12.1 tons per year Ranks among the worst.

Fig 1: Carbon dioxide emissions [tons] per capita (2007)

Calculated by the US Department of Energy's Carbon Dioxide Infor-mation Analysis Center (CDIAC), mostly based on data collected from

country agencies by the United Nations Statistics Division

The concern over our impacts on global ecosystemsresulted in the development of measures such as

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Ecological Footprint (EF) and Biocapacity. The EFmerges, into one number, the global consumption ofgoods with the capacity of the planet to regenerate thegoods consumed as well as absorbing the waste fromthe consumption 5. When looking closer at the Nordiccountries (figure 2)it is obvious that they have amongthe largest ecological footprints in the world andclearly larger than the average footprint of the EU.Particularly Denmark stands out with a percapita fo-otprint even larger than the USA. The figure alsoindicates the sources of the ecological footprint, wherefossil energy is a major source for all industrialcountries, but also agriculture (particularly forDenmark) and fishing (particularly for Norway) havesizable footprints.

Figure 2. Ecological footprints of the Nordic countries withsome other countries for comparison. The red line at 5.1indicates the average footprint for the EU.

Source of data: Ecological Footprints Network.

A more detailed accounting of environmental pres-sures can be gained from a coupled multiregionalinput-output (MRIO) economic model. Such aconsumption based accounting is able to show the

export and import of greenhouse gas emissions. Herewe are using data from the study by Davis & Caldeira6

in order to illustrate the full picture of CO2 emissionsfrom the Nordic countries.

According to the official UN reporting on emissions ofgreenhouse gases, Sweden stands out as an affluentcountry with a significantly lower carbon footprintthan other comparable countries, for example theother Nordic countries or the Netherlands. But whenalso considering the trade related emissions, thepicture changes. Sweden has a very large carbon fo-

otprint through import of goods and services fromother countries.

Figure 3 Greenhouse gas emissions includingimports/exports

The biggest challenge for the Nordic countries in thedecades to come will be to wean themselves off fossilfuel. Norway, as a leading producer of oil and gas, willnot be the only Nordic country to have greatdifficulties in meeting the global demand of mitigationof climate change.

The German Advisory Council on Global Change(WBGU) has developed one of the most detailedblueprints for a global climate change mitigation re-

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5) The EF is not without criticism. One critique is the inconsistency of the different components of the EF, where the use of land andoceans cannot by definition exceed the real area but the carbon footprint can. There is of course a risk that the real impact on theworld’s croplands and forests is underestimated. Another critique is that the EF does not give any room for savings of natural capitalthat can be used for future increase of such resources (Stigliz, Sen et al. 2010).

6) We are grateful to Steven Davis and Ken Caldeira for making the data from their PNAS paper Davis, S. and K. Caldeira (2010)."Consumption-based accounting of CO2 emissions." Proceedings of the National Academy of Sciences 107(12): 5687-5692. available tous.

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gime, the so called budget approach (WBGU 2009) 7.When using this approach to analyze the situation forthe Nordic countries it is clear that reducing CO2 emis-sions is a tall order (Figure 4). Denmark and Finlandhave already emitted more CO2 than is compatiblewith the guard rail and budget approach.

Figure 4. Emission scenarios for the Nordic countriesaccording to the Budget Approach (WBGU 2009)

The diagram shows the total allowable emission foreach country from 1990 to 2050 in order to staywithin a particular guard rail of global temperatureincrease (2ºC) and sea level rise (1 m). Source: WBGU8. Based on this calculation it is evident that the Nordiccountries will have an extraordinary challenge todecarbonize their societies and that there is a need fornew innovative mechanisms for redistribution of thecarbon debt. For example: Finland and Denmark havealready by far exceeded their allowable emissions;Norway and Iceland have both reached their allowabletotal emission while Sweden has about 10 years toreach zero emission.

DiscussionThere are several possible explanations for the Nordicecological dualism, with performance lagging far be-

hind their high profile rhetoric and institutionalization:Being the institutional and rhetorical avant garde inecological issues corresponds nicely with Nordic valuesand plays up to strong green civic movements in theNordic countries. Yet, at the same time, strong domes-tic implementation of the same policies seemingly goesagainst core vested interests in the Nordic economy. With their resource-intensive economies, the Nordiccountries would have a hard time putting their loftyenvironmental ideals into operative practice. Theextreme case is probably Norway, which is the world’ssixth largest oil exporter, but still aspires to play a keyrole in environmental protection. Finland and Swedenalso have large energy-intensive paper and pulp in-dustries, as well as heavy industrial complexes. TheDanish agro-industrial complex, and Denmark’s recentengagement in oil and gas production, also leaveserious ecological footprints.

This ambiguous relationship – between Nordicecological visions and the reality of climate emissionstoday – goes back to core elements of the Nordicmodel. This model was based on the common interestamong labour, industry and the state in productivityand wealth creation. Seriously upsetting basic in-dustrial strategies environmental agendas that are tooradical would disturb the basic social contract and theNordic propensity to seek common so-lutions inconsensual negotiations. The core trade unions, in-dustrial associations and state in-stitutions have, afterall, spent most of the 20th century mobilizing arounda traditional, growth-oriented, technocratic projects.

It is more in line with Nordic pragmatism to seek cost-efficient solutions to ecological problems abroad,where the return on investment for CO2 abatement isfar higher than at home. With the high costs of Nordiceconomies, most solutions would be cheaper abroad.In this way the Nordics – with Norway in the front –may continue to enjoy first class welfare systems andrelatively luxurious consumerist lifestyles.

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7) The budget rail approach is based on scientific principles for determining the magnitude of emission reductions required, the so called guard rail approach, and ethical principles for determining the distribution of the emission cuts globally. According to theguard rail approach of determining the magnitude of emission reductions, the global mean annual temperature should be stabilisedat a level not more than two degrees above the preindustrial level. In order to determine how to share this “pie” of carbon betweenthe world’s peoples and countries we need to follow some principles of ethics. Three principles are often invoked for this kind of discussion on burden sharing: 1. The polluter pays principle2. The Rio-principles agreed by all countries in 19923. The precautionary principle

8) We are grateful to Professor Ottmar Edenhofer and n.n at the Potsdam Institute for Climate Impacts Research (PIK) for sharingtheir data with us.

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Over the last couple of decades, corporate social re-sponsibility (CSR) has risen steadily on the internationalagenda. Large West European and North Americanmultinational companies are now finding it necessary todevelop CSR programs and initiatives to comply with thesocietal expectations voiced by sophisticated interestgroups, often under pressure of media coverage.

Some have argued that the predominantly businessdriven CSR agenda is antithetical to the politically drivenwelfare state tradition. The Nordic response, however,shows otherwise. While solid domestic welfare state ar-rangements are certainly not substituted by CSR, Nordiccompanies as well as Nordic state governments havepragmatically appropriated CSR in areas wheretraditional welfare state policies lack resources or out-reach.

The objective of this section is to explore CSR as a newtool in the Nordic toolbox for “civilizing globalcapitalism.” As small, open economies, the Nordiccountries need international trade. However, they wantthe international markets to be environmentally andsocially “civilized,” and as close to the Nordic model aspossible. Nordic companies, as well as the Nordic statesaspire to stand out as CSR leaders, and challenge otherplayers in the international marketplace to follow suit.Their domestic welfare state background sets them at alevel that enables them to play the CSR game at the topof the premier league.

Nordic companies have engaged disproportionately inglobal CSR initiatives, compared to the size of theireconomies, benefitting from their advanced welfare statebackground (y axis in Figure 1). Firms in Nordicindustry score above Anglo Saxon, Mediterranean andContinental European firms

Figure 1 Level of State Welfare and CSR Engagement inIndustry 9

CSR in the Nordic context is a joint project, promotedby industry and the state alike. Although Nordic welfarestates may favor legislative or negotiated strategies forimproving social and environmental conditions at home,CSR stands out as a viable option when traditionalgovernance cannot be internationally mobilized. Inparallel, Nordic governments have engaged in CSR withadvanced policy agendas alongside well performingnational companies.

The global welfare capitalism approach is most clearlypronounced in Swedish and Norwegian CSR policies:CSR in Swedish public policy is centered around GlobaltAnsvar (Swedish Partnership for Global Responsibility),an initiative created by the Swedish prime ministerGöran Persson in 2002, and placed under the control ofthe Ministry of Foreign Affairs. Globalt Ansvar was es-tablished to “strengthen Swedish companies’ work onhuman rights, labour standards, environmentalprotection, and anti-corruption, based on the principlesof the UN Global Compact and the OECD guidelines.”Under successive liberal governments CSR has activelybeen promoted in trade delegations, and the Trade Di-vision of the Ministry of Foreign Affairs (MFA) explicitlyviews CSR as an instrument in trade policy CSR hasbeen particularly prominent in Swedish trade relationswith China, and in June 2007 the two countries signed a‘Memorandum of Understanding on Corporate SocialResponsibility,’ which is the first of its kind in the world.

The Norwegian CSR approach was also international inscope from an early stage, and focused on human rights.The 1999 Government White paper emphasizes that thelegal responsibility for human rights lies with States, butbecause of their significance, the Norwegian governmentexpects companies to take on duties beyond nationallaws. The MFA’s strong CSR engagement has, in fact,been part of a conscious co-branding of orway andNorwegian industry in which the government isconcerned with the corporate social responsibility ofNorwegian firms as part of the image of Norwayabroad10 . The Norwegian white paper on CSR early in2009 follows on in the global welfare tradition. It wasinitiated by the MFA and clearly maintains the focus onCSR abroad. It indicates that the Norwegian governmentwill support international institution building for socialand environmental responsibility. Norway will, for ins-tance, support general international arrangements likeGlobal Compact, Global Reporting Initiative, ILO andOECD guidelines. As a petroleum state, Norway has also

4 Civilising Global CapitalismAtle Midttun

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9) From: Midttun, Atle, Kristian Gautesen og Maria Gjølberg (2006): “The Political Economy of CSR” The Corporate Governancevol 6 no 4, pp369-385

10) Aftenposten (2007) “UDs ti bud om samfunnsansvar Konferanse for anstendighet”. State secretary Liv Monica Bargem Stubholt(Sp) quoted in Aftenposten Morning 27.03.2007 by Skjævesland, Odd Inge

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engaged forcefully in the Extractive Industries’ Trans-parency Initiative (EITI), a voluntary agreement aim-ing to increase transparency in transactions betweengovernments and companies within the extractive in-dustries11.

In addition, both the Swedish and Norwegian ini-tiatives have also included ethical guidelines for theinvestment of the large petroleum pension fund,derived from the government’s extensive net cash flowfrom petroleum activities (Norwegian Ministry ofFinance 2008). Similar guidelines have also been ap-plied in the management of Swedish pension funds.Both countries have developed an active CSR policyfor state owned firms.

Danish and Finnish CSR policies originated with astronger domestic agendas. Hard pressed byunemployment challenges in the 1990s the DanishCSR agenda, under the leadership of the Ministry ofSocial Affairs, focused on inclusive work life and aNew Partnerships for Social Cohesion. The newmillennium saw a gradual transition from social policyto economic policy priorities and a transfer of CSR tothe Ministry of Economics and Business. This includesa focus on the value creation potentials of CSR, butalso climate responsibility of the private sector.

Competitiveness and valued creation was also at thecore of the Finnish CSR policy in the late 1990s underlarge-scale dismissals, factory relocations to andincreasing sourcing from developing countries.Generally speaking, corporate responsibility seems tohave initially met with quite a lot of skepticism fromgovernment representatives, but an increasing numberof CSR policies and practices have been adopted in re-sponse to CSR’s growing importance in the eyes ofFinnish companies 12 . In 2001, The Finnish Ministryof Trade and Industry set up MONIKA, theCommittee on International Investment andMultinational Enterprises in Finland. MONIKA is ameeting forum without permanent staff that was es-tablished when the OECD required the countriesadhering to the OECD guidelines for multinationalenterprises to establish national contact points for pro-moting the guidelines. In the past years, the focus ofthis committee has shifted increasingly from the pro-motion of the OECD guidelines to the promotion ofCSR in general13 .

Yet both Finland and Denmark have also focused on“civilizing” markets abroad. The Confederation ofFinnish Industries focused on international issues suchas wages and child labour, especially in the context ofdeveloping countries, and hereby strengthened the

international dimension in the Finnish CSR approach.Similarly the Danish “Action Plan for CSR (2008)”emphasizes the responsibilities of the corporate sectorto focus on strategic CSR and engages internationallyto market Denmark through responsible growth aspart of a civilizing business mission.

In his well known thesis on small states and welfare,Katzenstein14 has described the welfare state as a“defensive” buffering mechanism where social policiessoften the impacts of international business cycles andstructural change. CSR policy allows for more “of-fensive” buffering as it imposes social andenvironmental decency on the global playing field.

Globalization with social and environmentaldimensions factored in, resonates well with the Nordicpolitical electorate, and it is clearly the type of globalmarket where Nordic firms are most competitive. Veryoften, when big multinational Nordic companies getcaught for social and environmental misdemeanors,even if it does not violate laws abroad, they getflogged by the domestic media. The Nordicengagement for responsible global capitalism is there-fore not only idealistically driven, but can also be seenas pragmatic, self- interested engagement to shape theglobal arena to Nordic advantage. CSR stands out as anew tool or an alternative vehicle for this policy pro-gram, when attempts to build up Nordic style marketregulation internationally by hard law and traditionalgovernance have blatantly failed.

The Nordics, headed by Sweden and Norway, areobviously on an international mission to promote aNordic style social and environmental update to thecruder Anglo-Saxon market model. However, onepremise for the success of this venture is that there issufficient relevant civic engagement and media pres-sure to drive the CSR dynamics. As long as companieswith a home base in mature Western democracies werethe dominant global players, there would seem to behope. However, with a new multipolar globaleconomy where multinationals with a home base inChina, Russia and other advanced developingcountries play increasingly dominant roles, thepromise of success looks bleaker. Even in the dominantAmerican market, a tea-bagger-Fox-News-drivenpublic arena is hardly conducive to enforcingadvanced social and environmental standards.Following a decade of apparent success, the Nordicsand others spearheading the CSR community seem tobe fighting an uphill battle, at least until democracy,civic freedom, and economic development prevailamong the new global winners.

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11) EITI (2009): EITI homepage:http://eitransparency.org/eiti12) Loikkanen, T., K. Hyytinen & S. Koivusalo (2007), “Yhteiskuntavastuu ja kilpailukyky suomalaisyrityksissä – Nykytila ja

kehitysnäkymät” (Corporate Social Responsibility and Competitiveness in Finnish Corporations – Current State andDevelopment), Espoo: VTT.

13) Finnish Ministry of Employment and the Economy (2009) “Committee on Social and Corporate Responsibility”http://www.tem.fi/?l=en&s=890

14) Katzenstein, P. (1985). Small States in World Markets. Industrial Policy in Europe. New York, Cornell University Press.Katzenstein, P. (2003). "Small States and Small States Revisited." New Political Economy 8(1): 9-30.

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There is a growing number Nordic researchers whoare questioning the epic reputation of their homelands.In a series of studies of Norwegian foreign policy,Terje Tvedt coined the phrase “regime of goodness,”which has as much codified as questioned Norwegianmoral and political ambitions which, in his view are asunjustified as they are megalomaniac. 15

The regime of goodness is a delightfully ironic trope:the concept of “regime” gives a technocratic, control-ling tone to “goodness” – and thus both constructsand deconstructs Norway’s achievements with a cleverturn of phrase. According to Tvedt, the actual regimeof goodness is a virtual state within a state which com-prises over 200 voluntary organizations, over 3,000international aid workers, and a wide range ofresearch institutions and universities – all on a payrollof the state – which both study and legitimizeNorwegian aid politics in developing countries. Theregime of goodness has substantial financial resources,exerts a gentle pressure on the media, and, last but notleast, it is founded on a largely unexamined discourse.This charismatic story tells of a small forest kingdomwhich sells goodness, along with weapons of war, tothe less fortunate – or less “virtuous” – parts of theworld.

Flagging its ethical credentials and asserting its noble,well-oiled “outsiderhood” in Europe, Norway poses aformidable challenge to all suspicious hermeneutists.Admittedly, Tvedt’s reappraisal of national goodness isbased not only on well documented accounts ofderailed or aborted development projects abroad; itpoints to a disquieting immunity to outside criticismdisplayed again and again by the architects of

Norwegian aid and peace politics. But his revelationsof the “dirty deed behind a glorious story” tend toovershadow the glamor of the Norwegian – andNordic – moral and economic experiment at home andabroad. I shall argue that the overall success of theNorth (today best represented by Norway) as a “greatgood place on earth” is not just a function of historicalluck, geopolitics, economic policy, or the structure ofinstitutions. It has deep cultural roots – and it may, forthis very reason, be difficult to export. For, to say thatNorway owes all its achievement to the oil economywould be as simplistic as it would be grossly unfair tothe intelligence, good governance and resourcefulnessof the people who have been the inventors of modernNorway and managers of its national resources. AsDavid Landes puts it, “getting lucky isn’t aboutculture, but staying lucky often is. When a society, orthe controlling parts of a society, is sitting on wealth-making resources, a country can be pretty rich as longas the resources remain. But when the resources areused up and any investments from them exhausted,that country often reverts.”16

In short, while cultural values are not all that matters,they sustain a community’s long lasting visions andvalue systems. They do so by defining the ethos of thecommunity, deciding whether it is inward or outwardlooking, and how generous it is to its poorest membersand outside guests. But first of all, culture imposesmoral constrains on the management of acommunity’s wealth.

My second, corresponding contention is that a unique,self-limiting, sustainable mo-dernity emerged in theNorth in the nineteenth century. Though it was

5. Nordic Humanism vs. VolksgeistNina Witoszek

15) See Terje Tvedt, ”Det nasjonale godhetsregimet: om utviklingshjelp, fredspolitikk og det norske samfunn,” in Ivar Frønes,Lise Kjølsrød (ed) Det norske samfunn. (Oslo: Gyldendal , 2005). Among other Tvedt’s anatomies of the Norwegian regimeof goodness see Den norske samaritan : ritualer, selvbilder og utviklingshjelp. (Oslo: Gyldendal, 2004); Utviklingshjelp, uten-rikspolitikk og makt : den norske modellen, (Oslo: Gyldendal 2009).

16) Francis Fukuyama, “Wealth and Culture. A Conversation with David Landes ,“ in The American Interest,September/October 2008, online version: http://www.the-american-interest.com/article.cfm?piece=464.

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partially a function of the Northern countries’relatively egalitarian social structure, homogenouspopulations, and institutional practices, I believe thatit was first of all the effect of Bildung: the work of cul-tural educators and protagonists who succeeded infinding a middle way between the demands a self-as-sertive, despotic Volk – increasingly aggressive inNapoleonic Europe and later – and the aspirations ofthe autonomous individual. Norbert Elias, and thenhis disciple, Pierre Bourdieu – the anatomists ofcivilizing and decivilizing processes – have emphasizedthe role of habitus, or socialized learning, in the waysociety deals with inside and outside challenges. Bycontrast with most European countries, the modernNordic Bildung has been based mostly on consensus,dialogue, solidarity and restraint, rather than onglorification of violence or vendettas. If we inspect themost prominent national educators in the North –those whose visions and ideas empowered, if not“blackmailed” generations of Norwegians, Danes andSwedes – then we see that all three countries share apantheon of humanist heroes who, unlike in the rest ofEurope, have remained unopposed by the NietzscheanÜbermensch, decadent dandies, fundamentalistfanatics, and passive quietists. The normative centre inDenmark has been shaped significantly by Grundtvigand his tolerant Christianity; in Sweden the ethicalcentre was shaped by progressive liberal thinkers andwriters such as Erik Gustav Geijer, Frederika Bremmerand Selma Lagerløf (and later Dag Hammarskjöld andOlof Palme), who all attempted to transcend the darkpowers of ethnos and embrace the polis. In Norwaythere were two moral giants who kept the decivilizingprocess in check: Bjørnstjerne Bjørnson and FridtjofNansen. Both imagined Norway as a green “holyghost” of Europe, radiating human rights, naturalbeauty and peace to the outside world. Threegenerations of Norwegians read them with red earsand foggy eyes. A procession of national heroes, fromski-clad warriors of the Norwegian Resistance duringWorld War II to humanist adventurers and nationalmentors and adventurers such as Thor Heyerdahl andArne Næss, tried to emulate them and thus re-vitalizetheir ethics. “Bjørnsonism” and “Nansenism” –synonymous with moral traits such as reason, rights,nature, liberty, equality, tolerance, science, and pro-gress – penetrated into the Norwegian mentality,creating what Alexis de Tocqueville meant by moeurs:“habits of the mind and the habits of the heart thatmake up the moral and intellectual state of thepeople.” 17

I conclude the following: 1) By combining – conscio-usly or unconsciously – the in-novative thrust of the“Age of Electricity” with the code of restraint intrinsicin the Christian Enlightenment, the “Nordiceducators” created a unique, Nordic, non-hubristicmodernity. 2) As the icons of the nation, theysucceeded in inscribing “goodness” into the nationalself-image. 3) As humanitarians, Bjørnson and Nansenlaunched precursory ideas of a European Union basedon a vision of a re-moralized politics: Bjørnson’s For-bund til Bevarelse af Ver-densfreden (The Associationfor the Protection of Peace) based in Berlin, was to bepart of the strategy to pacify Germany’s demonicambitions by bringing it closer to the Nordic regionand injecting it with a “peace hormone.” Nansen wasnot just a spiritus movens of the League of Nationswho saved hundreds of thousands from hunger andgenocide; he was a co-creator of the Pan-EuropeanMovement 18 – a precursory of the European Unionwhose aim was the promotion of politics based onhuman rights.

What is much underestimated – and understudied –about these Scandinavian founding fathers is that,although they advanced the national cause, they madeattempts to open the North to the world and,ultimately to make the world itself more hospitable tostrangers. I would call them “cosmo-patriots” whofought against the idolatry of state, nation, and blindallegiance to a party.

My third contention is that the legacy of Northern“cosmopatriotism” is today chal-lenged by the peoplewho, belatedly, embraced a Volksgeist at the beginningof the twenty first century. If the post-Bjørnsonian andpost-Nansenian Norway – as well as post-Grundt-vigian Denmark and post-Geijerian Sweden – want toembody beauty and justice, they aspire to flaunt, oftenin aggressively, their aggrieved, victimized, post-im-perial ethnos. The real challenge the Nordics face inthe 21st century is not just to preserve the dominanthuman-ist legacy on which it is largely based – but toeffectively defend it against the rabid worship-pers ofVolksgeist and tribal glory. It would be deeply ironic ifthe only “humanists” left in the North would turn outto be the populist politicians propagating “FestungNorge” or Festung Danmark” – and not the humanistswho continue the work of the Nordic foundingfathers.

17) Alexis de Tocqueville, Democracy in America (1835); trans. and ed. Harvey C. Mansfield and Delba Winthrop (Chicago:Chicago University Press, 2000), p. 295.

18) Nansen’s role as a leader of the “Pan-European Movement” has been illuminated by Carl Erik Vogt, in a Ph.D. dissertation“Nestekjærlighet og realpolitikk. Fridtjof Nansens humanitære og internasjonale prosjekt 1920–1930” (”Charity and Real-politikk. Friftjof Nansen’s humanitarian project 1920-1930”),(Oslo University 2010).

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Traditionally, observers of Nordic society have put astrong emphasis on social solidarity − an ability tosubordinate individual interest to collective rationality.Often, this stress on solidari-ty has been understood inopposition to the fundamental logic of the market:certain collective goods have been decommodified andeffectively removed from the cold logic of the marketsociety. Indeed, this was a perspective that MarquisChilds made famous as early as the 1930s, when hewrote Sweden: the Middle Way, suggesting thatSweden had found a way to a healthy balance betweenaltruistic socialism and selfish capitalism, to use thecrude binary of that period.

But this is, at best, a half-truth. This emphasis onsocial solidarity hides the strong, not to say extreme,individualism that defines social relations and politicalinstitutions in the Nordic countries. The central axisaround which the Nordic social contract is formed isthe alliance between state and individual, what I call“statist individualism.” The Nordic countries (thoughperhaps especially Sweden) are characterized by bothindividualism and a positive view of the state as anally, especially of weaker and more vulnerable citizens.This is coupled with a negative view of unequal powerrelations between individuals in general and hierar-chical in-stitutions in particular, such as the traditionalpatriarchal family and charity organizations.

According to what I have called a “Swedish theory oflove,” authentic relationships of love and friendshipare only possible between individuals who do notdepend on each other or stand in unequal powerrelations. Thus autonomy, equality and (statist) in-dividualism are in-extricably linked to each other.Whatever political and cultural drawbacks there mightbe to this commitment to personal autonomy, a strongstate and social equality – usual criticisms are confor-mity, loneliness and an intrusive bureaucracy – oneshould note the upside: citizens who feel empowered,

accept the demands of modernity and are willing tomake compromises to achieve economic efficiency andrational decision making.

What Nordic capitalism shows is that individualismneed not lead to social fragmentation, distrust andshort-term maximization of material interests. Pro-moting individual autonomy through policy can, onthe contrary, lead to greater social cohesion if it isdone in egalitarian ways. Less dependence and weakerpatriarchal structures mean that more people feel emp-owered and satisfied with their lives. This is especiallyrelevant for women, who want to participate in thelabor market without relinquishing the possibility ofbecoming mothers. In authoritarian and hierarchicalsocieties where the individual desire for autonomy isgiven insufficient space, political tensions are likely toarise while social trust and confidence in institutionsare likely to decrease. Nordic capitalism also demonstrates the advantage ofhaving a positive view of the state, confidence incommon institution, and a high degree of social trust.Perhaps most crucial is the degree and extent ofinclusion of citizens and civil society in the governanceprocess. The more this occurs, the more trust andconfidence building will result, and the more likely it isthat key values and social facts remain in harmony.

A strong state that promotes individual autonomydoes not constitute a threat to civil society but ratherreinforces its vital role in democratic governance.Citizens who join together not primarily to protectthemselves from arbitrary abuse from vested state orbusiness interests but rather to increase their pos-sibilities of self-realization and personal independenceare more likely to make positive contributions tosociety as a whole. One example is labor marketrelations in the Nordic countries, where the unionsgenerally have not had a narrow trade unionist view oftheir role in society but rather have taken a

6. Social Trust and Radical IndividualismLars Trägårdh

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macroeconomic responsibility.

Is the Nordic model sustainable? Still, questions should be raised about the future sus-tainability and relevance of the model. Some arguethat the increased ethnic, racial, and religious diversitylinked to the influx of immigrants constitutes a deepchallenge to the social cohesion of Nordic society. Thepolitical consequences are already visible in the rise ofanti-immigrant parties throughout the Nordiccountries. Insofar as immigrants and minorities areperceived as both burdens to the welfare system and asa threat to national culture, questions are also raisedas to whether broad support of a tax-based system ofsocial services can be sustained.

Another challenge derives from the impact of neoli-beralism on the Nordic social contract. Alarmistspoint to trends of increased economic inequality andthe introduction of voucher systems and privatizationin education, healthcare, and pensions. Such develop-ments, it is argued, will over time undermine the uni-versalism of the classic Nordic welfare state in favor ofa more pluralistic system characterized by private,market-based alternatives leading to segregation and adecline in social trust.

Nonetheless, it is quite possible to consider a more op-timistic scenario. The central argument is at heart verysimple and rests on two ideas: (1) that the striving forindividual freedom and prosperity (life, liberty, thepursuit of happiness) is a rather universal drive, and(2) that this desire can only be realized in an enablingsocial, legal and institutional context. From this pointof view, the Nordic institutional framework ischaracterized precisely by its capacity to promote bothsocial trust and confidence in institutions and rule oflaw, and individual autonomy consistent with the logicof the market society.

Is the Nordic model transferable? However, it is not an easy task to identify and transfersuch experience in a form that becomes useful and

accessible. Vague references to “values” and “culture,”are not helpful; what is needed is a down-to-earth ana-lysis of concrete institutions and policies. This essaywill end with a discussion of a cluster of institutionspolicies that do tend to instrumentalize a set ofexperiences and values in the Nordic countries, whichhave kept the socially destructive aspects of capitalismat bay while still retaining the dynamics of marketeconomy, with an eye to whether they might be ap-plicable in other parts of the world.

1. Nordic capitalism shows that individualism neednot lead to social fragmentation, distrust and short-term maximization of material interests. In this pers-pective, promoting policies like gender-equaleducational systems, individual taxation, universal daycare and antipatriarchal family laws seems to be agenerally good idea, even if obviously in conflict withlongstanding traditional norms in some cultures. 2. Nordic capitalism also demonstrates the systemicadvantage of social trust and confidence in thecommon institutions of the state. Here I will stress thedevelopment of deliberative processes of governance.Churches, labor unions, charities and other as-sociations in civil society should be supported,consulted, and involved through commissions, roundtables and other forums of interaction between stateand society. In the Nordic countries such interactionbetween the state and civil society interaction has beeninstitutionalized and routinized in ways that mayprovide useful inspiration.3. A strong state and individual autonomy are not athreat to civil society, but are instead its prerequisites.

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Geographically speaking, Denmark is by far thesmallest among the Nordic countries with 44,000square kilometers and 5.5 million inhabitants. In 2008it was the 11th richest country in the world measuredin purchasing power parity. In the World EconomicForum’s 2008 competitiveness index Denmark isranked among the top three countries (but is nowslipping down the ladder as a result of the financialcrisis which hit harder in Denmark than in the otherNordic countries because of the housing bubblecreated by the politics of the centerright governmentsince 2001). The main factors behind this higheconomic performance in a small country withoutmany natural resources apart form fertile agrarianlands are a strong tradition for entrepreneurship andhigh quality products in small and medium businessescombined with a flexible and highly skilled laborforce. The organization of the labor market is oftencalled the flexicurity-model and has attracted muchfavorable attention from the European Commissionand other member countries in the European Union.19

It can be debated whether the flexicurity-model for thelabor market represents a conscious model or is theunplanned outcome of otherwise intended actions overthe last hundred years. The system contains anunwritten social agreement or understanding wherethe trade unions have accepted short notice for layingoff workers in return for an insurance system wherethe lowest paid workers from the first day ofunemployment in up to two years (previously fouryears) are entitled to benefits equal to 90 % of theirformer wage. This has enabled employers to fire butalso to hire at very short notice. The system dates back

to the regulation of the labor market in 1899. But thepresent details are primarily a result of developmentsduring centerright governments 1982-93 under theconservative Prime Minister Poul Schlüter and center-left governments 1993-2001 under the socialdemocratic Prime Minister Poul Nyrup Rasmussen. Asa result an unwritten social agreement has emergedwhere the trade unions have accepted short notice forlaying off workers. This has enabled employers to firebut also to hire at very short notice. As a resultemployment in the private sector rose faster than inalmost any other European country between 1994 to2008 (and now seems to be recovering fast after thefinancial crisis of 2008). Furthermore the rate ofunemployment among young, unskilled workers is notonly low compared to southern and central Europe,but also compared with Sweden and Norway.

There is a maximum limit to the benefits with theeffect that skilled metal workers (and other well paidemployees such as academics) receive around 60 % oftheir previous wages. Benefits in cases of illness andmaternity leave are at the same level and may last upto one year. Entitlement to unemployment benefitsrequires 12 months of membership in anunemployment insurance fund (run by the tradeunions).

A precondition for the generous benefits is the socalledactive labor market policy. As the main inventor of thepolicy of flexicurity, former minister of finance andforeign affairs, Mogens Lykketoft, writes in thepamphlet 20 that his intention in the early 1990s whenunemployment reached 12% was ”to make all

7. Current Challenges to Nordic Labor Policy:The Danish “Flexicurity Model” Uffe Østergård

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19) “Denmark: A Big Small State – The Peasant Roots of Danish Modernity”, in John L. Camp-bell, John A. Hall, and Ove K.Pedersen (eds.), National Identity and the Varieties of Capita-lism. The Danish Experience, Montreal: McGill-Queen’s UniversityPress 2006, 51-98

20) Mogens Lykketoft, The Danish Model – a European success story, Cph.: Economic Council of the Labour Movement 2010

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unemployed people a good offer they could not turndown” (p.13). This offer contained an offer to up-grade the qualifications of all unemployed througheducation and training. “Something for something” asthe motto of the labor movement traditionally runs inDenmark.

The whole system is mainly financed through theincome taxes and value added taxes (all in all 49.5%of the GDP as compared to 40.8% in Germany and45.% in France; the VAT is 25% with almost noexemptions). The employees pay a small part throughmembership fees whereas the employers do notcontribute to the financing of the unemploymentinsurance system. Furthermore the corporate tax of25% is relatively low.

The preconditions for this system – which traditionallyis called universal although in reality it is only uni-versal for the national citizens – are a relatively closedlabor market and a competitive economy. In reality theuniversal system should be called national as thenation state and its labor market function together asone big insurance fund. Membership of the nationalinsurance scheme is restricted to citizens andpermanent residents. The beginnings of this systemdate back to 1891 when old age pensions for men andwomen were introduced regardless of how long theyhad worked. That is one of the main reasons for therestrictive immigration policy which is currentlysupported by more than 80% of the political spectrumand will probably be upheld even after a change ofgovernment in 2011 to a left-left coalition of the SocialDemocrats and the People Socialists with support fromthe Social Liberals (Radikale Venstre). This policy isoften presented as racist or anti-foreigner in theinternational media. It is true that part of the rhetoricof Danish People’s Party (Dansk Folkeparti) maysound that way. But the rhetoric rather reflects apopulist tradition of outspoken free speech in thepublic realm than real racism implying hatred of allforeigners. Most sociologists interpret the restrictivepolicy and the attitudes of the majority of theinhabitants as rational protection of the economic

system in general and the labor system in particular. Ifyou work you eat. But this quid pro quo was for atime undermined by generous social benefits doled outaccording to need rather than previous contributionsas formulated in the wellintended social law of 1975which marked the peak of the postwar welfare state.Thus the restrictions on immigration in particular ofunskilled immigrants from the Middle East throughmarriages. New laws of December 2010 haveintroduced a whole series of restrictions on marriagesaccording to age, education, linguistic and other skills.These laws are heavily debated but the very idea of es-tablishing criteria for immigration has now beenaccepted by most of the political parties apart from themost liberal and left wing.

The Danish system thus struggles with squaring theequation of either closed coffers and open borders orclosed borders and open coffers. A successful solutionhas not yet been found. But Denmark continues toface these challenges for a small open economy in aglobalizing world. The unsolved problem is how toremain economically and culturally open and at thesame time discriminate socially between citizens andnon-citizens. Membership of the EU does not makethis compromise easier as Denmark has accepted thecommon European labor market for all. The debateover the labor market and access to the benefits fromthe welfare state is the rational background for a po-litical discourse which from the outside is often inter-preted as nationalist and even racist. This is unfair asthe dilemmas are real. But it goes a long way inexplaining the differences in political discourse, inparticular between Denmark and Sweden. Whether thesuccess of the party Sverigedemokraterne in the recentelections in Sweden will close the gap between the political rhetorics in the Nordic countries is too earlyto tell.

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IntroductionNordic engagement abroad has been characterizedfrom the beginning by a blend of realism and idealism.Their status as small advanced welfare statespermeates the external relations of the Nordiccountries across foreign policy, trade policy anddevelopment policy. They are well establishedmultilateralists, supportive of the UN andinternational institution building, and fundamentallydefensive in their military policies. In development aidand social and ecological issues, however, they aremore willing to take an offensive lead, in line with po-litical expectations at home.

Replicating Nordic domestic priorities on the globalarena, however, is has been controversial. TheNordics’ quest for social and environmental upgradingof the global economy has led to disagreements withboth the developing and the developed world. Nordicunwillingness to translate common Nordic values andinterests into stronger integrated Nordic institutionalinitiatives, precludes any influence through forcefulrealpolitik.

Since their accession to the EU, common EU position-ing has limited the scope for joint Nordic standpoints,especially in trade policy. Norway now stands outmore clearly with an international profile, while therest remain subsumed under a common EU platform.

The Nordics in the UN: Effective Informality With aTarnished ImageIn line with their smallness, the Nordic countries haveby and large been strong multilateralists andparticularly strong supporters of the United Nationssince its formation. Finland as a latecomer (onlyadmitted to the UN in 1956), and a neutral countrywith a complicated relationship to its eastern neighbor,was to start as a more passive and reluctant actor.Nonetheless, analysis of voting behavior in the

General Assembly of the UN in the 50s and 60sshowed a strong unity in views and mutual solidarity,a Nordic country who disagreed rarely voted againstits neighbors but rather abstained. The Nordicsquickly established a pattern of close collaboration inthe UN system, through frequent, even dailyinteractions when called upon, at various levels. Theysought common views to promote and therebystrengthen their ‘voice’ as small countries, yet did notseek to negotiate or persuade each other to changeviews when opinions differed, as they certainly did.This collaboration included agreed rotations in whoruns for membership in the organizations such as theSecurity Council, common statements and lobbying onissues, and engaging in a joint project on UN reformover a number of years.

When Sweden and Finland joined the EU in 1995, theintensity of the internal EU negotiations took over andleft much less time and political space for the Nordicsto collaborate. Yet the networks have continued andthe a strong sense of solidarity remains among dip-lomats from the neighboring Nordic countries. Insome arenas like the Security Council they can stillmake joint statements (as two other EU members arepermanent members and thereby act in their owncapacity). Information exchange continues and the EUmembers can urge Norway, for example, to push forissues where the EU stance is not in line with Nordicviews. There seems to be little fear that the Lisbontreaty that seeks greater coherence in the externalagenda of the EU would threaten the remaining degreeof collaboration. Rather, the recent expansion of theEU, with frequent block formation and reduced in-fluence for small countries, makes some diplomats seeroom for returning to strengthen the Nordic allianceagain, possibly with the addition of the Baltic stateswhich have been drawn into this collaboration in someways.

8 The Nordic Model AbroadSylvia Karlsson-Vinkhuyzen, Atle Midttun and Asle Toje

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The contribution of the Nordics to the UN has beenone of staunch moral support complemented throughconceptual approaches and ideas, as well as hands oncontributions in the form of human resources andfinances. In issues of peace and conflict, a range ofNordic nationals have played key roles in framing andbuilding the UN approach to peacekeeping (forexample, Hammarskjöld building up this part of theUN and many Nordic soldiers working as UNpeacekeepers). The Nordic countries have also beeninvolved in mediation of concrete conflicts (Ahtisaari,Palme, Eliasson, Bildt), and subsequently promoted ofthe idea of conflict prevention and the importance ofcivilian elements in peace building missions. Humanrights have always been strong on the Nordic agenda,with only minor differences on how they look atcollective rights such as those of indigenous peoples.They especially push for equality, women’s rights andreproductive rights, which reflects their domesticagenda.

In later years the focus on UN reform and ensuringeffectiveness and accountability of the organizationhas increased particularly from the Swedish andDanish side, bringing ideas of good governance (lackof corruption, efficiency in the public sector) fromhome to the international field. The Nordics probablyhave more credibility on these issues than countrieswho are less committed to the idea of the UN itself.The Nordics continue to be some of the largestfinancial supporters to the UN funds and programssuch as UNICEF, UNIFEM (now UN-Women) andUNDP with the concomitant influence.

In the field of environment the Nordics were ‘earlymovers’ for putting this broad issue on the UN agendaand institutionalizing it there. Examples of this includethe Swedish proposal of the UN Conference on theHuman Environment in Stockholm in 1972, theBrundtland commission and its seminal influence onthe discourse of sustainable development, and the roleof the Swedish scientist Bert Bolin in setting up theIntergovernmental Panel on Climate Change. A strongpublic opinion on these issues in several of the Nordiccountries made such initiatives a win-win situation forgovernments.

But the Nordics are known for more than just domes-tic action in international, where they maintain a solidreputation as green stewards, and inherent conflict ofinterests with industrial sectors such as oil in Norwayand forests in Finland are sometimes at odds with thisimage. The extreme failure of the Danish presidency ofthe Copenhagen Climate Summit, despite all their ef-forts to reduce the environmental impact of thesummit itself, together with three of the Nordic statesbecoming blurred with the EU, may have severelydamaged trust towards the Nordics from the Southwhere they have otherwise been considered at least

'‘less bad’ than the other rich countries.

The Moral Vikings 21: Nordic Trade Strategies in theGlobal EconomyThe Nordics can be described as free trading moraliststhat seek to successfully compete in world markets,but also aspire to imbue them with ecological andsocial regulations. In this way Nordic trade policy re-flects the Nordic model at home, and features: 7. Strong free trade advocacy combined with support

for multilateral fair play regulation 8. Support for high work and environmental standards

to accompany free trade9. Engagement to enhance the capabilities of develop-

ing countries to benefit from economic exchange

This triple focus is displayed in the Nordic countries’trade policies where they figure as ardent supporters ofopen markets for both goods and services, and wherethey also engage actively to open up publicprocurement to global competition. Yet they do sowhile supporting environmental standards. TheNordics tend to see environmental conventions withequal importance to free trade rules, possibly withsome reluctance from Denmark that flags moreconcern that such standards are not used as hiddentrade barriers. The Nordics also mix their free tradeengagement with social concern. They do so, in partby backing the International Labour Organization andits demands for decent work conditions across theworld.

The Nordics back up their moral entrepreneurshipwith economic support, as illustrated by their strongfunding for developing countries’ capacity building asin the Doha Development Agenda Trust Fund and theWTO Trade Facilitation Trust Fund. These fundsprovide technical assistance to help low-incomecountries to set their needs and priorities in the WTOtrade facilitation negotiations.

The efforts of Nordic countries to export their domes-tic priorities on a global level have led to controversy.Some of the tensions are:

• A clash between free trade and high environmentaland work standards, as seen in both the WTO’s andthe EU’s systematic opposition to include suchstandards with functional means of enforcement intheir trade arrangements.

• Conflict between high environmental and workstandards and developing countries’ perceived inter-ests in competitive low cost production for theworld market.

• Potential tensions between free trade anddevelopment, in so far as many successful develop-ing countries, such as the Asian Tigers, have chosensemiclosed economy strategies to further growth.

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21) The term “Moral Vikings” was coined by Maria Gjølberg in her forthcomming Phd dissertation at the University of Oslo2011.

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There are some other notable inconsistencies in theNordic free trade approach including Norwegianagricultural subsidies with dumping strategies forproduction surplus and Swedish weapon exports.

Apart from conflicting interests, the Nordics also facethe challenge of exercising moral power without beingready to pursue it in strong economic realpolitik. Theadvanced social and worker standards may be nicewords, but the realities are much cruder, as illustratedin strong reservations by the WTO against the newISO 2600 standard for corporate social responsibilityin its call for social and environmental demands onpublic procurement.

The potential for advancing Nordic values in theemerging multipolar world order is unclear. On theone hand, the shifting economic power relations, giv-ing a stronger voice to the rapidly growing “catchup”economies, may strengthen the Nordic positionrelative to the previously dominant neoliberal Wash-ington consensus. On the other hand, the Nordicdemand for advanced environmental and socialconcerns challenges the growth agenda of catchupeconomies at their present stage of economicdevelopment.

Faced with these difficult tradeoffs, the Nordics clearlyprioritize free trade over ethics in a crunch. Yet crudefree trade and pure commercialism might backfirewith a softer values oriented domestic public opinionat home.

Given the challenges from both neoliberal anddeveloping countries, what are chances for Nordics tohave an impact on global trade? In spite of the abovementioned conflicts there are positive signs. For one,advanced catchup economies, such as Brazil, are wil-ling to join forces with the Nordics and front somelevel of social and environmental upgrading of theeconomy. Brazil and South Africa have recently joinedthe Nordics in international advocacy for decent workstandards in the international economy. The onset ofthe financial crisis has weakened the neoliberal“predatory” capitalism as a role model, and motivatedadvanced economies to look for softer and more re-sponsible alternatives. This might create a window ofopportunity for stronger Nordic influence in globaltrade. The battle to civilize capitalism has conqueredsome of the more peripheral outposts, as in newOECD guidelines for multinational enterprise and anew International Standard Organisation, ISOstandard for CSR. However, the core of global freetrade capitalism, the World Trade Organization, is stilla hardnosed free trade forum, where anyenvironmental or social softening will have to awaitthe new mandates following the completion of thepresent never ending DOHA negotiation rounds.

Foreign and Development Policy: From Cold War Followers to “The Regime of Goodness.” The Nordic blend of foreign policies has been subjectto a great deal of scrutiny, mainly under the banner of

“small state” studies, where the Nordic countries haveenjoyed a privileged position. In the small stateliterature some recurrent traits of relevance to theNordic states as foreign policy actors can be discerned.

1. The strategic behavior of the Nordic states ischaracterized by dependence. A Nordic staterecognizes that it cannot obtain security by relyingsolely on its own capabilities. They cannot affectthe international system alone but with someconcerted effort can have an impact on the way thesystem works. A Nordic state plays a dispensableand non-decisive part in a great power’s array ofpolitical and military resources. Nordic states there-fore tend towards a policy of either strict neutralityor alliance. In an alliance Nordic states tend tofollow the alliance leader closely, lend it whatsupport they can, and avoid antagonizing it. TheNordic states that chose neutrality – i.e., Swedenand Finland – maintained close ties to the UnitedStates and the Soviet Union respectively, avoidingpolicies that could upset one of the hegemons.

2. Nordic states display variable geometry. In terms ofmilitary capabilities there is no ability to projectpower on a global scale. They are forced by theirlimited resources, their location and their politicalsystems to prioritize strictly. To this end they es-tablish a hierarchy of risks and attempt tointernationalize those considered to be most serious.Nordic state policies are aimed at altering theexternal environment by reducing an unfavorablediscrepancy in strength, broadening the field ofmaneuver and choice, and increasing the totalresources on which they can count in times ofstress. Nordic states are therefore status quo ori-ented. They work within the established orderrather than attempting to change the order itself.

3. Nordic states see themselves as primary be-neficiaries of international institutions and are, ofnecessity, lovers of international law. A Nordic statewill often seek to minimize the costs of conductingforeign policy and increase the weight behind itspolicies by engaging in concerted efforts with otheractors. This is also the case internally where foreignpolicy en-joys, in all but a few cases, cross-partysupport. Traditionally, each country has been toosmall to have more than one foreign policy position.Generally, this leads to a high degree ofparticipation in and support for international or-ganizations, which leads to a tendency to takemoral and normative policy positions. Formal rulesare actively encouraged to curb the great powersand strengthen their own position. Nordic statestend to pursue multilateral solutions tointernational problems, to embrace compromisepositions in international disputes, and to rely onnotions of “good international citizenship” in theirdiplomacy.

4. Nordic states are defensive by nature. They seemore dangers than opportunities in free range

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international politics, which leads them both toshun system-upholding tasks and to display a pen-chant for token participation in such endeavors. Be-cause of the risks of disproportionate loss whenchallenging greater powers they can have onlydefensive ambitions. They have a narrower range ofinterests and less freedom of activity. One might seeNordic states as regional powers in the sense thattheir interest driven policies focus narrowly on theirown and immediately adjacent areas, while greatpowers exert their influence on a global scale. Sub-sequently, Nordic state strategic behavior ischaracterized by a general reluctance to coerce anda tendency to promote multilateral, non-militarysolutions to security challenges.

With a shared base in these four rules of thumb theNordic countries have mirrored each other in terms offocus, agenda and discourse with regards to meansand ends in foreign policy in general.

The Soviet collapse and America's determination topolice the international system have opened the roomfor a new era of Nordic foreign policies. Globalcommitment moved from the periphery to the core ofNordic foreign policy. There are several possiblereasons why the Nordic states used the "window ofopportunity" that the absence of threats made toglobal engagement. Missionary idealism is not a newphenomenon in the region. Directing Protestant mis-sionary zeal and socialist internationalism outward hasmaintained political peace at home for a long time.The Nordic states sees see themselves as anembodiment of universal values. In all Nordiccountries this has been driven by a social democraticdiscourse where the world is seen as analogous to thewelfare state and that redistribution is not only amoral imperative, but also a harbinger of a betterworld.

The Nordic countries see themselves as particularlysuited to solve problems on a global scale by virtue ofinternationalist spirit and willingness to pay. And thereare large amounts put into circulation. In 2009 alonethe Nordic foreign aid budgets of $12.7 billion, more

than the total GDP of many UN members. The Nordicstates have also pioneered a model where thegovernment, civil society organizations and researchinstitutions are mobilized for composite foreign policyinstruments, in particular to the effect that the sharedeffort remains directed by the state. This has lead to a"dualtrack diplomacy" where one track concernstraditional governmental actors and the second comesfrom the NGO sector. In this relationship the NGOshave played a key role. What distinguishes the Nordicmodel from similar aid oriented subsystems in othercountries is that the development sector is dis-proportionally larger in the Nordic states, in the sensethat the number of organizations involved is larger.Norway, a country of some 4.7 million people hassome 120 aid NGOs, 107 of which receivegovernment funding. The Nordic governments givesmore, relatively, through the civil society than is thecase in other states – and they expect less in returnfrom the recipient state.In spite of strong common values, Nordic foreignpolicy cooperation has not realized its potential. Plansfor a Nordic defense union fell apart in 1949 whenNorway, Denmark and Sweden failed to agree. Theauthorities in Oslo and Copenhagen were generallyskeptical of any proposal that could cast doubt on theaffiliation of the alliance to America. In 2009 the trendof deep informal coordination and prickliness towardsformal cooperation was the fate of Norway's attemptto breathe new life into the old idea of a Nordicdefense union – the Nordic states were all positive intheory, but not in practice. Today, the legacy of formalNordic cooperation and integration with passport-freetravel and technical coordination stands out more likea harbinger of European integration.

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Iceland is a prime example of a country that took aseries of bad decisions that led to the total collapse ofits economy in 2008. No other developed countrycollapsed to the extent of Iceland during the FinancialCrisis of 2008. Historically, Iceland belongedculturally, politically and economically to the Nordiccountries, favoring the Nordic model, yet out of theNordic countries, only Iceland experienced a systemiccollapse of its economy. Therefore, the question arises:Which particular decisions led to such catastrophicresults and why was the experience so much worsethan in any of the other Nordic countries?

The Nordic countries all, with the exception ofDenmark, began their deregulation processes atroughly the same point in time, around the beginningof the 1980s. A boom period was immediate inScandinavia, from 1986 to 1990. In Iceland, however,such growth started during the latter part of the1990s. But the explosive growth, which led to thebust, began in earnest 22 after 2003 when the banks’privatization was completed . In Iceland the li-beralization program was led by a right wing govern -ment that came into power and ruled for 18 yearsconsecutively (until it was forced to leave office shortlyafter the collapse in autumn 2008). The businesssector gained strength during this liberalization pro-gram as the supervisory authority and public administ-ration was weakened. The lack of business tradition inIceland and the lack of consideration towards theexplicit and implicit rules that facilitate interactions ina society became evident during the booming years.

Questionable business practices – that, arguably, couldhave been considered corrupt – enabled weak businessethics to thrive. An interaction of these factors playedan important role in the breakdown of the Icelandiceconomy 23.

Iceland’s financial markets had long been plagued byboth political interference and regulations, whichcreated economic difficulties. Inflation went up tonearly 100%, resulting in high negative real interestrates that led to reduced savings. Subsequently, im-portant legislative reforms were implemented and thefinancial sector was opened up to the free flow ofcapital. Interest rates were liberalized and for the firsttime determined by markets. Innovation was bothencouraged and rewarded. Taxes were lowered to thelowest of the Nordic countries.

The privatization of Icelandic banking was somewhatdifferent from the process of privatization in othercountries. While most had privatized with at leastsome foreign ownership, the Icelandic governmentinitially decided to encourage foreign ownership, thenbacked away from that decision. Instead, twoinvestment groups gained a controlling interest in thebanks. These groups of investors had absolutely noprior experience in commercial banking.

Foreign analysts questioned the sustainability of boththe Icelandic financial system and the economy asearly as 2005. In addition, the analysts raised concernsabout the Icelandic banks’ risk management, culture,

9. Iceland, the Nordic Model Gone Astray?Throstur Olaf Sigurjonsson

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22) Sigurjonsson, T. O., and Mixa, M. (2011) Learning from the worst behaved. Iceland‘s financial crisis and Nordic comparison.Thunderbird International Business Review. Vol. 52(2).

23) Vaiman, V., Sigurjonsson, T. O., and Davidsson, P. A. (2011) Weak business culture as an antecedent of economic crisis: The caseof Iceland. Journal of Business Ethics. Vol. 98(2).

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dependence on wholesale financing, and lack of trans-parency in their ownership and holding structures 24.Schwarzkopf and Sigurjonsson (2011) 25 analyzed howa network of “defenders” of the financial stability ofthe Icelandic economy and banks was created almostimmediately after this criticism. The network, const-ructed or activated to defend the notion of financialstability among the banks, made it difficult for thepublic to ascertain whether the banks were actuallystable. Thus, critics to stability had a hard time findingan open forum.

Still the Icelandic people did not complain. Unemploy -ment was low and disposable income seemed to beamong the highest in the Nordic countries. AlthoughIcelanders had to work longer hours than others, theypaid less tax.

Iceland distanced itself from the Nordic Model duringits boom years. Taxes were lowered and welfaresupport such as unemployment benefits, childallowances and sick pay were not at the same level asin the other Nordic countries. Certainly, there areexceptions, as with paid parental leave and paymentsthat provide parents with higher benefits than in mostNordic countries. The boom period delivered higherincome to many but equality in income and assetsshrank. Iceland did in general never go as far as itsneighboring countries in distribution of the nation'swealth through the tax and welfare system.Particularly, the elderly and the disabled were neg-lected during the boom period. Indeed, the elderly be-came so frustrated with their situation that they wereclose to forming a new political party, although that

was never realized 26.

The new “Icelandic Model” veered closer to theAnglo-Saxon one than the Nordic. Evidence of this isthat Iceland adopted a much stronger reduction in be-nefits “connected” to beneficiaries' income.The Anglo-Saxon countries, US, UK, Canada, Australia and NewZealand, established stronger capitalism. The visionwas to foster growth and employment by increasingflexibility within the labor market, and loweringwelfare benefits in order to increase autonomy ofpeople and enterprises (while restricting stateinterference). However, the new Icelandic model keptmany in a poverty trap, which is expensive for asociety in the long run 27.

Historically, Iceland had wanted to relate itself withthe other Nordic countries. That agenda changedduring the boom period. A remark from the IcelandicChamber of Commerce demonstrates this: “The Ice-landic Chamber of Commerce recommends that Ice-land stops comparing it to the other Nordic countries,since we are more advanced than they in most areas”28. The Nordic countries were blamed for having anovergrown welfare system that produced problems inpractice 29. They ignored that, historically, the Nordiccountries had been ranked among the mostcompetitive nations in the world. The IcelandicChamber of Commerce was searching for role modelsin the more capitalistic countries where the corporateand free enterprise culture was prevailing, and wherethe workforce submits 30. It illustrates the neoli-beralism which was put high on the country’s agendaduring the boom period, with welfare placed second.

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24) Jannari, K. (2009). Report on Banking Regulation and Supervision in Iceland: past, present and future. Available at:http://eng.forsaetisraduneyti.is/media/frettir/KaarloJannari__2009.pdf.

25) Schwarzkopf, D., & Sigurjonsson, T.O. (2011). The structure of community networks defending the concept of "financialstability". Working paper, Bentley University and Reykjavik University.

26) Stephensen, Ó. (2006). Norræna módelið yfirgefið?Available at: http://www.norden.org/is/analys-norden/thema/velferd/norraena-velferdarmodelid-yfirgefid.

27) Ólafsdóttir, A.G. (2005). Erfiður samanburður við hin Norðurlöndin. Morgunblaðið. 13.september 2005. Available at:http://www.mbl.is/mm/gagnasafn/grein.html?grein_id=1017678.

28) Icelandic Chamber of Commerce (2006). Viðskiptaþing - Ísland 2015. Available at:http://www.vi.is/files/1612898009%C3%8Dsland%202015%20Vi%C3%B0skipta%C3%BEing%202006.pdf.

29) (ibid.)30) Icelandic Confederation of Labor (2006). Lífskjör á Norðurlöndunum. Available at:

http://www.asi.is/Portaldata/1/Resources/upplysingarit/lifskjor.pdf.

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