SURVEY: THE NORDIC COUNTRIES

Happy family?

Jan 21st 1999
From The Economist print edition

The five Nordic countries remain defiantly different from the rest of Europe—and from each other. Xan Smiley explains

IS THERE a Nordic block, complete with a Nordic economic model and a special kind of Nordic welfare? Nordic collective security? Nordic values, Nordic sex, Nordic gloom? Undeniably the Nordic countries—the Scandinavian trio of Sweden, Denmark and Norway, plus Finland on the eastern flank and Iceland far north-west in the Atlantic—have a great many things in common. And undeniably the lure of the European Union has been drawing all the Nordics, even stand-offish Norway and Iceland, into an ever tighter embrace of rules and regulations that are bound to have an economically unifying effect. In a generation or so, perhaps, the Nordic five will come more closely together in one big European family. But, this survey will argue, for the next few years they are as likely to stay apart, as they have done since the end of the cold war. Each of them has been following its own particular path. Nordic solidarity? For the moment, forget it.

That may seem surprising. After all, the five have a lot in common. Start with their entwined history. For the best part of four centuries, the Danes controlled Norway, as well as, for more than a century, a large chunk of southern Sweden. In 1814, having allied themselves with Napoleon, the Danes lost Norway to the Swedes, who held on to it until 1905. For long stretches the Swedes also owned Finland, most recently until 1809, after which it came under the sway of Russia until 1918. The Icelanders started out as Norwegian seafarers who, more than a millennium ago, found their own patch of freedom by heading rebelliously west. But for many centuries they too came under the Danish crown, winning independence only in 1944. So, at one time or another, every Nordic country has been joined with, or under the thumb of, another.

It helps, too, that their languages are close enough for Norwegian, Swedish and Danish to be mutually intelligible, though people from the Scandinavian trio cannot quite decipher Icelandic. Finnish has different roots (shared with Estonian and Hungarian), but 6% of Finns are ethnic Swedes, and their country is officially bilingual. Moreover, virtually all Nordics who went to school after the second world war speak excellent English. Its use in international business, computers and now the Internet, along with pop music, television soaps, CNN and undubbed Hollywood films, ensure that it is constantly practised. One way or another, the Nordics can easily communicate with each other.

Then there is religion—and Martin Luther, whose reforming creed swept across the entire Nordic zone in the 16th century, leaving a powerful cultural and ethical imprint. These days, few Nordics are devout believers; under 5% attend church regularly, a smaller proportion than anywhere else in the culturally Christian world. Lutheran priests often seem like just another lot of social workers. But the moral legacy of Luther remains strong. Nordics tend to be suspicious of Catholicism, which may heighten their scepticism towards what they see as the Catholic-driven European Union.

Instead, the Nordics believe in nature, greenery and the gods of reason, science and material well-being. They adore their countries’ great expanses of forest and lake, the fjords, mountains and lonely islands, and the pristine emptiness of the Arctic. Most urban Nordics keep their family connections with villages at the back of beyond. This helps to explain the lingering strength of political parties rooted in communities of small farmers and fishermen, even though these days no more than 3% of Nordic people make their living that way.

Lutheranism may also be responsible for a swathe of shared Nordic traits which casual Anglo-Saxons and carefree Latins alike find admirable but sometimes disconcerting. Nordics tend to be modest, punctual, honest, hard-working and high-minded. They do not, on the whole, like ostentation. Rich people generally dress, eat and travel in the same style as the prosperous middle classes. To be ten minutes late for a meeting is considered unprofessional, even rude. Honesty, both in personal and public life, is particularly valued. Financial peccadillos that would be shrugged off in many parts of Europe are fiercely frowned upon up north.

Overdoing it

There is a downside to such an enviable set of values. Public discourse can seem ploddingly priggish, and schemes to help the poor, both at home and abroad, can sometimes look smug and goody-goody (only the mainland Nordics and the Dutch meet the UN-urged figure of 0.7% of national income spent on development aid). Keeping an eye on the neighbours can degenerate into nosiness, sometimes under the guise of “transparency” and “the citizens’ right to know”. In most Nordic countries, for instance, everybody’s tax returns can be held up to public scrutiny.

A darker, more dangerous side to Nordic nannying was revealed two years ago when the Swedish government admitted that some 4,500 mental patients had been forced to undergo lobotomies under officially encouraged eugenics programmes, starting in the 1920s and continuing until the 1970s. Over the same period, some 60,000 Swedish women were forcibly sterilised, sometimes for reasons such as “unmistakable gypsy features”. All four main Nordic countries owned up to similar selective breeding programmes. Experiments with radiation on mentally retarded Norwegians went on until 1994.

The end which was supposed to justify such means was the deep Nordic desire for equality. In no other part of the rich world is this idea so zealously upheld—to the point of sometimes being confused with sameness. Except in Sweden and Denmark, where a thin and now insignificant layer of nobility has survived, there were no great class schisms either before or during the industrial revolution.

The Nordics’ social cohesion has been helped, too, by a striking ethnic homogeneity, compared with other European countries. Except in the biggest cities of Sweden and Denmark, there are few immigrants, yet those few meet with growing hostility from the indigenous population. Especially in Norway and Denmark, race-tinged populism is growing. Likewise, relations with the reindeer-herding Sami (or Lapps), of whom about 65,000 live in the northern reaches of the three northern Nordics, are ambivalent, caught between an acceptance of the Sami’s cultural rights and the desire to make them more “modern”.

Underpinning this general Nordic yen for equality is a commendable openness. Most public documents are genuinely in the public domain. Important people are much less likely to hide behind secretaries and bureaucrats than further south in Europe. Ordinary citizens in Sweden have the right to see the prime minister’s official mail, and often exercise that right.

For another illustration of the Nordic drive for equality, take a look at the relationship between the sexes. The proportion of women in most Nordic parliaments and governments is much higher than anywhere else (see chart 1), except in Iceland—and that country had a female president for 16 years. Across the Nordic zone, women have headed, or are heading, serious political parties, including the former communists and the Greens in Finland and Sweden, and the most right-wing party in Denmark’s parliament. Sweden has followed Denmark’s (much earlier) example in changing the law so that the monarch’s first-born child, regardless of sex, inherits the throne. The present king’s elder daughter, Princess Victoria, not his son, will succeed him.

But the most striking manifestation of the push for equality is the Nordic welfare state. Poverty, although not quite abolished, has been reduced to near-invisibility: nowhere else are the unfortunate and the feckless so generously treated. Nowhere else are public services so extensive, nor do they eat up such a big share of the national cake. Perhaps the most distinctive feature of Nordic welfare is the day-care system for all young children up to primary-school age, which provides good-quality, heavily subsidised nurseries and kindergartens so that mothers can get back to work. A typically Nordic row (if that is not too strong a word for the polite exchange of firmly held views) has been going on in Norway, where a Christian Democratic-led government wants to offer new mothers financial incentives to encourage them to stay at home with their babies. The Labour opposition has been fighting the idea, arguing that it goes against the grain of gender equality.

Inevitably, the price of the Nordics’ generous welfare system has been sky-high taxes. Income-tax rates in the four mainland countries are near the top of the world league, with the highest rate exceeding 60%, and kicking in at quite low income levels. In Denmark, for instance, the 60% band starts at earnings of less than $38,000 a year. Yet in the interest of “social cohesion”, most Nordics seem willing to keep paying up as long as high standards in public services are maintained. It is plain, though, that the number of grumblers is increasing.

The business end

Is there a Nordic way of doing business? Only up to a point. True, the Nordics have always put greater stress on partnership and co-operation between employer (never “boss”) and worker than most other European economies. Across the Nordic sweep, thrifty, hardworking, efficient, well-educated people have created exceptionally successful, export-oriented economies. They have been pre-eminent in paper and pulp, strong in engineering and pharmaceuticals, clever at medicine, good at building ships and cars and weapons and furniture. More recently the Nordics were quick to develop high-tech skills. Computer literacy is much higher than in most other European countries. It is no accident that Europe’s two leading telecoms manufacturing companies, accounting for 45% of all mobile phones in the world, are Swedish and Finnish respectively: Ericsson and Nokia.

Since the oil-price explosion of the 1970s, however, Nordic prosperity has seemed a little more fragile. All the Nordic countries, at various times, have undergone cycles of recession. Several have seen unemployment rates rise above the 10% mark; in the early 1990s, 20% of Finnish workers were out of a job. Today, the real unemployment rate in Sweden, including those on make-work schemes, is around 11%.

All the same, the Nordic economies are still ticking over nicely. All bar Sweden’s have been growing faster than the EU average over the past three years. But over the past 20 years some, most strikingly Sweden’s, have slipped badly in the various league tables ranking countries by income per head.

The golden days, anyway, are over. Whatever the Nordic growth rate, over the past decade the taxman’s share has been rising even faster, eroding disposable incomes. At the same time, governments have been trimming, sometimes even slashing, the welfare state. People are living longer, building up a pensions time-bomb that may explode in two or three decades unless something drastic is done. All the Nordic countries agree that in future they will not be able to go on providing a welfare system as generous as in the past.

Parties across the political spectrum, including even the former communists, have acknowledged, too, that labour markets need loosening up and economies deregulating. All the Nordic countries have endorsed a measure of privatisation. All agree that liberalisation is the way to go—including Norway and Iceland, which have stayed outside the EU but are part of the European Economic Area (EAA), which confers virtually all the trading rights and obligations that go with full EU membership, bar those for farming and fishing. All accept that if welfare is too generous, it may discourage work and foster a culture of dependency among those at the bottom of the heap. And all know in their hearts that their economies must become leaner and fitter to cope with global competition and open markets.

Yet in Nordic politics, as in business, consensus is still the watchword. Political systems of pure proportional representation, which require a share of only 4% of the total vote (and only 2% in Denmark) before a party can win seats in parliament, might be expected to produce coalition governments unwilling and/or unable to come up with radical policies. Surprisingly, some such coalitions have forced harsh medicine down reluctant Nordic throats. The three Nordic EU members, for instance, achieved a broad consensus to meet the tough Maastricht criteria for membership of Europe’s single currency, even though two of them decided against applying in the first wave. (Finland did ask, and was thrilled to get in.) Finland and Denmark show that broad-based coalitions and sometimes minority ones can do better at shoving through nasty but necessary reforms than ideologically narrower governments.

Drawing together

The end of the cold war and the dropping of neutrality by some Nordics has further helped pep up Nordic co-operation. So did the entry in 1995 of Finland and Sweden into the EU, alongside Denmark, which had joined along with Britain in 1973. Big companies in the Nordic market are realising that they must consolidate to compete with much bigger German, British and French firms. This has produced a spate of Nordic bank and business mergers in the past two years. Merita of Finland, the country’s biggest bank (and itself the product of a recent merger), has teamed up with Sweden’s Nordbanken. Sweden’s SE-Banken has gobbled up Trygg-Hansa, the country’s second-biggest insurer. Den Danske Bank has embraced a big provincial bank in Sweden’s south and is close to swallowing Fokus, a large Norwegian one. In like vein, Stockholm’s stock exchange has agreed to a joint equities-trading system with its counterpart in Copenhagen, to be called Norex.

A number of big Nordic industrial companies have also merged. In the past year or so, Stora, a vast Swedish forestry concern, has joined up with Enso, a Finnish rival. Nordic arms companies, too, have been seeking to co-operate. Finns, Swedes and Norwegians are planning to produce ammunition together. Finns and Swedes are jointly making gunpowder. A British company, Alvis, has bought Hagglunds, a Swedish one that makes military vehicles. And 35% of Saab Aerospace has been sold to British Aerospace. All four main Nordics have been discussing a joint purchase of helicopters and, Finland excluded, submarines. Such mergers, takeovers or joint procurement plans would have been unthinkable for Finns and Swedes during the cold war.

There has been ado, too, about a Nordic or North European security zone. Next summer, when Finland is due to take the EU president’s chair, there will be much talk about the “northern dimension”. The main idea is to find ways of helping Russia settle down and prosper in the region under a kindly Nordic eye. All the Nordics are especially keen to welcome the Baltic trio into the Nordic family. Finland has turned Estonia, the most successful of the post-Soviet countries, into its own backyard. The Danes have singled out Lithuania as their special Baltic friend, while urging all the Nordic countries to pile into the Baltic area with every sort of economic and military aid.

Denmark sees itself as something of a dynamo for a resurgent Baltic and Nordic zone. It sets much store by the redevelopment of Copenhagen’s Kastrup Airport as a hub for north European aviation. And, in June 2000, a new bridge-cum-tunnel 16km (10 miles) long will link Copenhagen and the Swedish city of Malmo across the Oresund, creating the most vital region in the Nordic area (or so its enthusiasts say). If the economies on both sides are to grow together, Danes and Swedes will have to find ways of harmonising labour, tax and social policies. The Oresund region, its architects claim, could become a laboratory of transnational regional co-operation within the EU.

The Danes are both geographically and psychologically best placed to shift the overall gravity of the Nordic countries. What with the Oresund bridge-tunnel link and the likelihood that, after Finland, Denmark will be the next Nordic to join the single currency, Denmark can be expected gradually to pull towards the centre of the continent—and Sweden and even Norway may feel a consequent tug in the same direction. Denmark is the Nordics’ hub country. The hub is edging south.

Nordic integrationists see European and Nordic fusion proceeding in parallel. The EEA, they say, already binds Norway and Iceland much more tightly into the big European scheme than their governments let on to their wary voters. The stay-outside pair already do the EU’s bidding on almost everything to do with the free flow of trade, capital, labour and services. Moreover, they have had a joint passport and customs regime for more than four decades. Norway and Iceland are being woven into the EU’s Schengen agreement that seeks to dissolve border controls.

All this seems to suggest a Nordic identity that is alive and well. But only up to a point. There are a host of reasons, some of them more powerful now than before, why the Nordics should not be considered a cohesive, let alone uniform, block. These days, for all that they have in common, it is the differences among them that are most compelling.

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