When policymakers around the world look for ways to transform their societies and their public sectors, they inevitably look to the Nordic countries. It’s easy to see why: almost every global ranking puts the Nordics in their top five, and very rarely outside the top ten. That goes for indices on environmental performance, ease of doing business, education, happiness, life expectancy – pretty much any measure you can think of. In the top ten list of countries making progress towards the UN’s 2030 sustainable development goals, the top three are all Nordics.
The Nordic model essentially creates the highest possible level of welfare for as many of its citizens as possible, and perhaps inevitably, I am a huge advocate. We pay high taxes, but we get a lot in return. If my family or I got sick, we would receive healthcare. My daughters feel safe travelling home late. I can drink our tap water and enjoy a beautiful local environment. That is all invaluable to me.
I have spent 25 years advising government institutions in Denmark and its neighbouring countries, and recently I have been working more and more internationally. I’m constantly struck by how many of Deloitte’s government clients around the world ask: what’s so special about the Nordic model? How does it work? How can we copy parts of it? How can we get there fast?
In this article, I will share some perspectives on the Nordic model, highlight some of its current challenges, and reflect on the extent to which it can be replicated.
The Nordic model
So, what are the Nordic model’s defining characteristics? In general, their welfare states offer free healthcare, free education and a substantial social safety net. That does of course come at a price. Some Nordic counties have a tax rate of close to 60 per cent, public spending is around 50 per cent of GDP and about a third of all employment is in the public sector. However, there are some nuances around Nordic taxation, known as our social contract. Essentially, we receive childcare and education when we are young, pay into the system during our working years, and then receive again when we are older and may need some care.
I sometimes hear the charge that this is socialism. It’s not at all – when Conservative or Liberal governments come into power, they continue to support the fundamental system. In fact, all Nordic countries enjoy open market economies even though the public sector plays an important economic role through investments in healthcare, education and training.
Recent years have seen many private sector CEOs voicing their support for a strong public sector, because they see the self-evident benefits of a well-educated and healthy workforce along with well-functioning infrastructure. It’s also a system that works well alongside private provision such as pension schemes and health insurance.
While the Nordic countries are different, they share some common societal factors that are worth acknowledging. Their populations are small and quite homogenous and there is generally a comparatively high level of trust in government and a high level of social cohesion. However, that does not mean other societies could not copy elements of the Nordic model, adapted to their own societal context.
As a sidenote, I refer to the Nordic model in the singular but there are of course some differences between countries in the region. They differ, for example, on levels of private sector participation in their public sectors. However, their differences are outweighed by the similarities that set them apart from the rest of the world, so I hope readers from the region will understand if I refer to the Nordic model in the singular.
Of course, Nordic societies are not perfect – they face the same challenges as other advanced economies. That includes ageing populations with increasingly complex illnesses that are ramping up demand on our health systems at the same time as eroding our tax base. Pressure on our public finances mean that across the public sector, we need to do more with less – and that means raising productivity. Economically, we need to boost skills to keep pace with our competitors. And we need to continue accelerating our response to climate change.
We also have some issues specific to the region. Nordic countries do not all play their part in welcoming refugees, and research suggests that our refugee populations can fall behind in areas like education, labour market participation and health. And the changing geo-political situation is requiring Nordic states to make increasingly massive investments in defence and security.
Nordic political traditions can make these challenges more difficult than they already are. We are more accustomed to political consensus than ambitious decisions, so while the Nordic model is supported across the political spectrum, change can feel marginal and slow. Significant reforms tend to happen over time as our so-called ‘national compromises’ that rely on cross-party agreements. All of this means that Nordic public sectors run the risk of lagging behind other states who are moving faster to take advantage of new technologies and refresh their approaches to regulation.
Nordic governments – like others around the world – know these are complex challenges that can’t be solved in silos. Nor can they be solved by government alone. To meet today’s challenges, governments have to see themselves as facilitators and convenors, not as monolithic providers. They have to come up with solutions to society’s challenges that are transparent and cost efficient, without an ideological fixation on who is delivering services. Ultimately, the Nordic model cannot be sustained without continuous adjustment so that it keeps pace with a changing world.
Renewal and the way forward
Around the world, COVID-19 reminded us all of why a strong public sector matters. We might already have some of that strength in the Nordics, but we need to enter a period of renewal to secure the long-term support of our citizens and their belief in our model of government. So that we can drive long term sustainability; economically, socially and environmentally. I believe that renewal requires three actions.
First, the Nordic governments need to establish a new culture of reform. They need to embrace innovation, broaden their risk appetites and be willing to experiment in order to shape their own future. Governments that are too rigid and bureaucratic will increasingly find themselves out of step with the world around them.
Second, the Nordic public sectors need to challenge their own role in delivery. They need to explore how the private and third sectors can be engaged in delivering public services so that the state shifts from being the service provider to the service commissioner. There are lessons from around the world on successful partnerships with other sectors that the Nordics can import.
Third, Nordic governments – in fact, governments everywhere – need to invest in digital. Public sectors around the world are doing incredible work by thinking creatively about how digital can improve how they make policy, operate and connect with citizens. The Nordics are incredibly well-placed to lead the world in digital government if they are prepared to make meaningful investments.
All in all, I am positive that the Nordic countries have the models in place that means they can renew and deal with the challenges ahead. They have done it before, over the years and in recent times –financial crisis, the pandemic, energy crisis. However, the challenges we now face requires more structural solutions then needed before.
Exporting the Nordic model
In Denmark in the nineties, there was a lot of discussion about ‘system export’ in which our public sector know-how could be exported to other countries. It didn’t really take off, possibly because it didn’t attract the right levels of investment and wider support. But it’s my view that the Nordic model offers a great deal of insight to policy and decision makers in governments around the world. In some ways, it is laboratory of what an alternate public sector can look like.
Obviously, you cannot buy a “welfare system in a box” as it relies on a large number of components being mutually supportive and mutually dependent as described above. Also, the Nordic model depends on culture, a wide-spread and high level of trust, the power of the state as well as the capabilities of the political system.
So my advice to governments looking to learn from the Nordic models is this:
Look for lessons rather than replication. Public sectors are highly interdependent ecosystems, each with their own nuances and cultures. In some cases, it might be possible to ‘drag and drop’ Nordic approaches into different localities. But in most cases, it is more likely that lessons will need to be applied and models adapted to local contexts.
Nurture a culture of trust. Around the world, public trust in government and other institutions has been falling for some years but in the Nordics, it remains higher than the OECD average. Nordic governments know that public trust is not just a worthy sentiment – it is a license to operate – and building it has real-world benefits. Whatever lessons from the Nordics that a government wants to roll out, it should aim to build trust with the public and with players across the sector along the way.
Think and act long-term. Governments with short electoral cycles typically struggle with long-term reform. But building a modern, Nordic-style welfare state will require a long-term perspective and long-term strategic thinking. It simply won’t happen overnight. For many governments, that kind of long game will mean building coalitions and working across political divides so that reform survives any change in political administration.
Finally, there’s nothing like learning first-hand, so do come to the Nordics to look, learn and share your lessons with us as well.
More to read here: DI_The-Nordic-social-welfare-model.pdf (deloitte.com)
Specializes in the public sector, regulation and deregulation, reforms in the public sector and strategy. Carsten is managing partner for Government & Public Services in NSE (North South Europe). He has more than 20 years of experience as a consultant and advisor for the public sector, where he has led several highly complex analyses and larger transformation programs