The Trimming of the Nordic Welfare State

By Barnes, Hilary | Scandinavian Review, Spring/Summer 1997 | Go to article overview

The Trimming of the Nordic Welfare State


Barnes, Hilary, Scandinavian Review


he daily crop of headlines in the Nordic newspapers makes it clear that the Nordic welfare state is not working as smoothly and uncontroversially as it once was. "Losers smart for the Swedish cure;" "Income gap is widening;" "No confidence in government's pension promises;" picked at random over the new year, say it all. The message was rammed home in Sweden last winter when Therese Rajaniemi, an unemployed mother of four young children, emerged from obscurity to become the leading figure in a series of demonstrations, attended by several thousands, protesting against the failure by Prime Minister Goran Persson's Swedish Social Democratic government to reduce unemployment and at the government's cuts in social welfare compensation. "The capitalists never did this to us" was representative of the sentiments expressed by the demonstrators' placards.

But if the criticism, worry and concern, which are ever-present in the continuing debate throughout the region on the present and future health of the welfare state, were to lead an outsider to believe that the welfare state is about to crumble, this would be quite wrong. What is happening, rather, is that a hedge which has grown somewhat unruly is being trimmed back into shape: No one has any idea of uprooting the hedge itself.

The Nordic countries are all emerging from a period of low-in some cases negative-economic growth in the early 1990s, which left the government sectors with serious financial deficits. These were especially serious in the case of Sweden and Finland, with general government budget deficits which peaked in 1993 at 12.3% of GDP in Sweden and 8.0% in Finland. The deficits had to be attacked by a combination of measures on the revenue and the expenditure side. Almost everyone has felt the pain to some degree, and the least well-off probably more than most. The exercise has often been headlined as "curbing the costs of the welfare state," which is true as far as it goes, but it does not go very far. For, although costs have indeed been curbed, the welfare state remains firmly in place and the ideal uncompromised.

The universal provision of free (or virtually free) education, health, hospital and income security programs, which are the key features of the Nordic welfare states, have not been questioned. Success is visible to anyone who visits Scandinavia. It is measured by the almost complete elimination of real poverty and destitution, high living standards, and populations that are well-educated and top or close to the top of the lists of indicators of good health.

The Nordic countries are strongly permeated by the egalitarian ideal of societies in which, as the 19th century Danish priest, educator, and hymn-writer, N.F.S Grundtvig, expressed it, "few have too little and few too much." The ratio of the incomes of the highest 10% to the lowest 10% of earners in the Nordic countries varies from about 2.1 compared with about 3.7 in the USA, according to estimates published by Denmark's semi-official Economic Advisory Council recently. A substantial redistribution of income through the tax and social security system takes place, much of it over the lifetime of the individual, but some of it between individuals. The costs are high in terms of taxes, against which everyone grumbles, but almost no one revolts (the few who do emigrate).

Scandinavia nevertheless has its share of sceptics, who wonder whether the welfare state in the advanced form that it takes in Scandinavia is sustainable. They have been proved wrong in the past. As government sector outlays have passed 40%, then 50% and in Denmark and Sweden, 60% of GDP, the Cassandras have predicted that economic breakdown is just around the corner. So far, however, breakdown has not happened, even if there have been some set-backs. But the Cassandras are still in business, for there is a new challenge ahead: the cost of the aging of the population in the 21 st century, which will place a serious strain on government finances and send the tax burden soaring to even more exorbitant levels if corrective policies are not adopted. …

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