A Scottish Nordic Model?

With a little under a year to go until the 2014 referendum, political debate in Scotland has focused on the referendum question and its two possible outcomes.  Debate has been polarised and partisan.  However, when the question of what Scottish society might look like post-referendum has been posed, the debate has been more forward-looking and free-thinking.

A prominent example of this is the Jimmy Reid Foundation’s vision, the “Common Weal” project.  Here, the left-wing think-tank draws heavily on Nordic thinking with regards to welfare systems, taxation and the wider democratic model.  Indeed, the “Nordic Model” has been frequently cited within the context of the referendum debate as a potential for Scotland to adopt. 

The Nordic Model exists as a Weberian ideal-type, combining the conceptualisation of social democratic themes with practical examples in the form of the Nordic states.  Nevertheless, the clear differences in the development of welfare systems within and between the states indicate that the Nordic model is an overarching framework, an ideal-type which might exist if the perfect conditions permitted it, and that the realities of global political economy and internal macro-economic policy serve to limit the opportunities to realise an ideal-type. 

Historically, the Nordic states generally have three key features which set them apart:  a comprehensive – universal – social security system (though this has been diluted in recent years); institutionalised social rights; and social solidarity. A tripartite bargaining system between employers, employees and the government (with widespread unionisation a key facet of this system) and the political culture of consensus are also widely accepted as features of the model.  Policy-learning between the Nordic states reached its peak during the ‘Golden Age’ of welfare expansion during the 1960s and 1970s.  During the late 1980s and early 1990s, however, economic crises affected all four of the Nordic states, and each sought different solutions to similar problems, causing policy divergence within the Nordic model. 

Denmark introduced limits to unemployment benefits and introduced an ‘active’ time model, which gave citizens a right and an obligation to seek employment.  This heralded the beginning of Denmark’s ‘flexicurity’ model, with flexibility in the labour market (for both employers and employees) combined with security (delivered through generous welfare provisions for the unemployed) and an active labour market policy (ensuring the rights and obligations of the unemployed). 

The Norwegian government aimed to reduce unemployment by introducing similar active labour market and training policies to those in Denmark in a “Solidarity Alternative” agreement with unions which reduced unit costs.  In return, welfare rights, including the retention of a right to 100% compensation in the event of sick leave, were safeguarded.  A strong recovery, based on offshore investments (and, in no small part, oil revenues) saw an economic turnaround in the mid-1990s, and meant that Norway’s welfare system escaped any substantive adjustments in the period.

For Sweden, so long the epitome of the Nordic Model, the economic crisis of the early 1990s played a substantial role in contracting the welfare state.  The 1980s had seen the erosion of the tripartite bargaining system which had helped to maintain relations between employers and unions.  This manifested as a so-called “Third Road” between Keynesian reflation and Thatcherite austerity policies, resulting in a cut to spending as a percentage of GDP and a cut to budgets.  Increased unemployment put pressure on the system and the government reacted by cutting public budgets, tightening benefits, reforming public services and, increasingly, turning to private sector solutions.

While it is the similarities and the policy-learning between the states which make the model, the differences between the states are nonetheless of interest in considering why some states adopted particular policies which others did not.  The conclusion we can draw is that there is no set means of achieving a “Nordic model” of welfare, meaning that if Scotland were to go down the Nordic route, it would be developing a “Scottish Variant” of the Nordic Model, rather than adopting the Nordic Model itself.

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Malcolm Harvey's picture
post by Malcolm Harvey
28th October 2013
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