Thomas Jefferson is reported to have said that the government which governs the least is the best, a profound statement that voiced his vision for a democratic polity. Though not to be taken in the literal sense, it perhaps suggested that the government’s role should be limited to ensure the overall wellbeing of its citizens. Seen in the current context, the chief Nordic countries – Sweden, Denmark, Norway, and Finland – seem to embody the healthy functioning of a modern day state.
The Nordic countries earned the moniker of “welfare states”, thanks to the liberal social spending undertaken by their governments over the past decades. Now, the continuing debt crisis in Europe and the political stalemate resulting from the indecisive Italian elections have turned the spotlight back on these economies.
Public spending as a percentage of the GDP has been much higher in Nordic economies, and as such, these countries realized with the debt crisis in the 1990s and again during the financial crisis of 2009, that this cannot be continued indefinitely. Still, as The Economist said in a recent report, these economies serve as glorious examples for their debt-ridden and unemployment-laden European neighbors of how to successfully reform the public sector and make the state a responsive and efficient entity.
From the tax- and-spend days of the 1970s and 1980s, the Nordic economies have systematically reduced government spending over the years with Sweden taking the lead. Though the corporate tax rate has been reduced to 22% and the government’s share of GDP has been brought down over the years, the Nordic countries have devised a unique system where public and private sectors work in tandem to provide the best of services to the general public. A noteworthy example is the way countries such as Denmark and Norway run their public services as they rope in private enterprises to run public hospitals. The education system in Sweden and Denmark also offers new lessons in healthy public-private competition, which ultimately benefits the students and their parents. Denmark allows parents to make use of public funds to educate their wards in privately-run schools by paying the differential.
Nordics can also give other governments a run for their money when it comes to transparency in public services. Not only do they evaluate the performance of schools and hospitals, but the governments too come under intense public scrutiny. Here again, Sweden has set new standards in public governance by making official records accessible to all its citizens. And Nordic politicians live in constant fear of public backlash if they change their mode of transport to anything other than a bicycle.
It is the delft combination of competitive capitalism and an efficient and productive government that has set the Nordic countries apart from rest of the crowd. The role of the Nordic governments is limited to that of a match referee when it comes to dealing with corporate businesses. And countries such as Sweden proved their credentials as free traders on the big question of the government’s role in business. For example, iconic auto maker Saab, which went bankrupt, did not receive even a single Swedish krona in public money, while Volvo, another national champion, was allowed to be taken over by China’s Geely. Still, the region is home to truly global companies such as mobile phone maker Nokia Oyj, Novo Nordisk, the world’s biggest insulin maker, Danish beer manufacturer Carlsberg, toy maker Lego, and Finnish elevator company Kone.
Even as government imposed austerity measures force neighboring protestors onto the streets, the Nordic people seem a happy lot, a rarity in an otherwise discontent Europe. To give Jefferson’s statement a modern spin, perhaps the government that is best is one that works for the common good of its citizens and the economy. The Nordics and prospective investors in the region wouldn’t mind raising a toast to that.
Postcards from Around the World
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