What the world can learn about equality from the Nordic model

This article is republished from The Conversation under a Creative Commons licence

Geoffrey M Hodgson, University of Hertfordshire

Rising inequality is one of the biggest social and economic issues of our time. It is linked to poorer economic growth and fosters social discontent and unrest. So, given that the five Nordic countries – Denmark, Finland, Iceland, Norway and Sweden – are some of the world’s most equal on a number of measures, it makes sense to look to them for lessons in how to build a more equal society.

The Nordic countries are all social-democratic countries with mixed economies. They are not socialist in the classical sense – they are driven by financial markets rather than by central plans, although the state does play a strategic role in the economy. They have systems of law that protect personal and corporate property and help to enforce contracts. They are democracies with checks, balances and countervailing powers.

Nordic countries show that major egalitarian reforms and substantial welfare states are possible within prosperous capitalist countries that are highly engaged in global markets. But their success undermines the view that the most ideal capitalist economy is one where markets are unrestrained. They also suggest that humane and equal outcomes are possible within capitalism, while full-blooded socialism has always, in practice, led to disaster.

The Nordic countries are among the most equal in terms of distribution of income. Using the Gini coefficient measure of income inequality (where 1 represents complete inequality and 0 represents complete equality) OECD data gives the US a score of 0.39 and the UK a slightly more equal score of 0.35 – both above the OECD average of 0.31. The five Nordic countries, meanwhile, ranged from 0.25 (Iceland – the most equal) to 0.28 (Sweden).

The relative standing of the Nordic countries in terms of their distributions of wealth is not so egalitarian, however. Data show that Sweden has higher wealth inequality than France, Germany, Japan and the UK, but lower wealth inequality than the US. Norway is more equal, with wealth inequality exceeding Japan but lower than France, Germany, UK and US.

Nonetheless, the Nordic countries score very highly in terms of major welfare and development indicators. Norway and Denmark rank first and fifth in the United Nations Human Development Index. Denmark, Finland, Norway and Sweden have been among the six least corrupt countries in the world, according to the corruption perceptions index produced by Transparency International. By the same measure, the UK ranks tenth, Iceland 14th and the US 18th.

The four largest Nordic countries have taken up the top four positions in global indices of press freedom. Iceland, Norway and Finland took the top three positions in a global index of gender equality, with Sweden in fifth place, Denmark in 14th place and the US in 49th.

Suicide rates in Denmark and Norway are lower than the world average. In Denmark, Iceland and Norway the suicide rates are lower than in the US, France and Japan. The suicide rate in Sweden is about the same as in the US, but in Finland it is higher. Norway was ranked as the happiest country in the world in 2017, followed immediately by Denmark and Iceland. By the same happiness index, Finland ranks sixth, Sweden tenth and the US 15th.

In terms of economic output (GDP) per capita, Norway is 3% above the US, while Iceland, Denmark, Sweden and Finland are respectively 11%, 14%, 14% and 25% below the US. This is a mixed, but still impressive, performance. Every Nordic country’s per capita GDP is higher than the UK, France and Japan.

Special conditions?

Clearly, the Nordic countries have achieved very high levels of welfare and wellbeing, alongside levels of economic output that compare well with other highly developed countries. They result from relatively high levels of social solidarity and taxation, alongside a political and economic system that preserves enterprise, economic autonomy and aspiration.

Yet the Nordic countries are small and more ethnically and culturally homogeneous than most developed countries. These special conditions have facilitated high levels of nationwide trust and cooperation – and consequently a willingness to pay higher-than-average levels of tax.

As a result, Nordic policies and institutions cannot be easily exported to other countries. Large developed countries, such as the US, UK, France and Germany, are more diverse in terms of cultures and ethnicities. Exporting the Nordic model would create major challenges of assimilation, integration, trust-enhancement, consensus-building and institution-formation. Nonetheless, it is still important to learn from it and to experiment.

Despite a prevailing global ideology in favour of markets, privatisation and macro-economic austerity, there is considerable enduring variety among capitalist countries. Furthermore some countries continue to perform much better than others on indicators of welfare and economic equality. We can learn from the Nordic mixed economies with their strong welfare provision that does not diminish the role of business. They show a way forward that is different from both statist socialism and unrestrained markets.The Conversation

My Italian Career

Originally published in

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With its precarious economy, high corporate tax and cumbersome bureaucracy, Italy isn’t usually top of the list for foreign business investment. But one company is seeing a golden opportunity amid all the obstacles.

Paul Howard and his wife Lisa were living in Nice, in the south of France, when they sought a challenge in a “market that’s never been beaten”.

Paul, who at that time was country manager of a large offshore consultancy firm, wanted to put down roots in a country that they both would love.

They didn’t need to look far. Just forty minutes from the border, Italy was reeling from the effects of its longest post-war recession and the trail of destruction left by former prime minister Silvio Berlusconi.

The couple was also hearing news of thousands of companies going bust each month: 2013 alone saw the closure of 111,000 firms, while in the same year unemployment edged up towards 13 percent.

But that didn’t stop them from taking the plunge, and so last summer they ventured to Rome to set up a branch of the financial consultancy firm, Blacktower Financial Management International (BFMI).

The company offers advice in financial planning, on everything from pensions and long-term tax efficient savings to complex inheritance tax issues and portfolio management, to both foreigners and Italian investors, as well as to people who may have spent time working in the UK and left a dormant pension there.

“A number of companies that were previously in Italy found it very hard to do business, but we saw a gap in the market: there was little professional financial advice being offered, and my years of experience should prove to be invaluable in such a market, ” Paul tells The Local.

“And so we approached Blacktower, which is based in Gibraltar, and obtained the Financial Services Commission (FSC) licence to operate in Italy, in order to be able to take up the roles of regional manager and office administrator for them.”

He adds: “One of the advantages of  holding such a high regulatory position is that if a client is unhappy with the service we offer, they have a financial ombudsman to turn to, although this is not a common event when dealing with BFMI.”

One of the incentives for them setting up in Rome was the large international workforce employed by the United Nations, which is said to be between 6-7,000.

“Milan was our original choice and we spent a weekend there looking at properties, but we didn’t find the people so helpful or friendly,” Paul says.

“We also wanted to live somewhere that had a similar climate to Nice, and so told Blacktower we preferred Rome  as our base. However, once Rome is more established, we’ll be opening an office in Milan and then Umbria.”

The timing was also right: many foreigners in the capital had fallen victim to poor financial advice in the past and were also concerned about their financial situation amid Italy’s economic and political instability.

“The best time for us in any country is when there is turmoil,” Paul adds.

“Take the financial crisis, which exposed all the wrongdoing by banks: people lost trust in institutions that were deemed to be solid. Being independent consultants and having the security of the Blacktower name behind us gave people a good deal of comfort.”

Paul explains that having the ability to offer clients what is right for them through an open market policy is key to giving advice in Italy.

“As consultants, we don’t have products and being independent means we can pick and choose from a whole host of companies, not just one or two that a tied agent may be able to offer.”

Paul and Lisa have managed to build up a steady stream of clients since arriving in Rome, mainly through personal recommendations.

They’ve also managed to conquer people’s fear of rogue financial advisors.

“There were so many unprofessional financial advisors working in Rome who left a trail of destruction for the industry, and so we had to win peoples’ confidence; we had to get them to trust us, and that’s still an ongoing process,” he says.

One way of achieving that trust was by reaching out to their competitors, Paul explains.

“We went to some events with competitors, and let them know that we wanted to work alongside them rather than against them, to help the industry,” he says.

“The market is big enough here for us all to have a successful business.”

Apart from their financial experience in France, which also covered Monaco, Paul has also operated in Spain and Germany.

But Rome is their final destiny, he says.

“We have come here to set up a permanent base that will ensure that our goal to retire in Italy can be achieved.”

Lisa also comes with years of experience in the offshore financial market as an office administrator and has supported Paul and his teams for the past six years.

Needless to say, Italy has been the most challenging when it comes to setting up a business.

Paul says that while the country is open to foreign business, he doesn’t think it is “necessarily ready for it”, and points especially to the corporate tax rate, which at 31.4 percent is one of the highest in Europe.

“Sometimes the lack of English language skills among Italians can also be a stumbling block,” he added.

“But in general, people in Italy are probably the most courteous and welcoming people we’ve dealt with compared to those in other countries.”

Challenges aside, Paul believes that Italy will be “the most successful part of our career”, especially with the changes afoot under Italy’s new government.

“There seems to be quite a lot of confidence in Matteo Renzi [the Italian Prime Minister] and they seem to be addressing the issue of tax evasion and are getting better at weeding out non-payers; that brings some confidence.”

High tax and bureaucracy are also outweighed by the Italian lifestyle, he adds.

“We’re living among beautiful architecture, then there’s the good weather and the quality of life…you’d expect there to be a trade-off in return for that.”

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