The Nordic Models: Still Able to Adapt?

After deep crises in the early 1990s, Denmark, Finland, Norway and Sweden adjusted their models and recovered swiftly. They topped rankings of efficiency and equity in the 2000s and also weathered the Great Recession fairly well. Both crises emanated from financial and economic policy-failures, not from the social models. In the 1990s, major changes were made in economic policies and wage coordination. Currency depreciations (except in Denmark) spurred export-driven recoveries enabling swift consolidation of budgets and restoration of domestic demand. Under coalitions led by Social Democrats, the Nordics invested in education and work-friendly arrangements, and preserved their social models. Activation was mainly pursued through conditionality, unemployment fell, and inequalities remained limited. In the booming 2000s, the Centre-Right embraced the Nordic model and came back in office. Challenging union power vested in the Ghent systems, and combining tax reliefs and cautious welfare retrenchment, inequalities increased. In parallel strengthened welfare chauvinist parties conquered influential tipping positions, while growing EU labour immigration, low wage competition, and the Laval Quartet, sparked tension with the EU regime of free movement. Hard hit by the 2008 crisis, the Nordics could – thanks to former adjustments – draw on strong public finances. Still, faced with more volatile international environments, higher unemployment and inequality, older and more heterogeneous populations, and changing dynamics of political coalescing, uncertainty about the future Nordic path of export-reliant adjustment has definitely grown.