Monday, April 13, 2015

About The Nordic Model

A welfare state is the concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens. It is based on the principles of equality of opportunity, equitable distribution of wealth, and public responsibility of those unable to avail themselves of the minimal provisions for a good life. The term may cover a variety of forms of economic and social organization. 
Modern welfare states include countries such as Iceland, Sweden, Norway, Denmark and Finland which employ a system known as the Nordic Model. 
~ John McCormick's 'Comparative Politics in Transition'.

For both work research and personal interest, the desk has been piled high with case studies and journals about the political, economic, social systems of the four main Nordic countries- Denmark, Finland, Norway and Sweden. These topics and comparisons were intensely debated during university and the years as an office-bound minion. The readings scrutinized every aspect of the Nordic model- from the tax structures and delivery of public services to labor market developments, provision of medical and welfare benefits to its citizens.

Okay, to preface, this post isn't an academic dissertation or a politcal comment. This isn't a skeleton for any presentation papers. Certainly not going to cite references or posit arguments on a personal blog. Form your own.

I was happy to plough through a number of readings online, on the Kindle, then borrowed the rest from the library. They're lengthy and some writers can be tedious. But they help to clarify preconceived notions, review the policies of the welfare state since the early twentieth century, and provide articulate and different viewpoints to help me build a substantial opinion.

There's the backdrop of 'The Global Competitiveness Report 2014-2015' by World Economic Forum. There're Mary Hilson's 2008 'The Nordic Model: Scandinavia since 1945', Lejf Moos' 2013 'Transnational Influences on Values and Practices in Nordic Educational Leadership: Is there a Nordic Model?'T.K. Derry's 2000 'A History of Scandinavia: Norway, Sweden, Denmark, Finland and Iceland', et cetera.

Made an effort to read this one published in 2014 by the Nordic Council of Ministers (Norden)- 'The Nordic model - challenged but capable of reform'. Scandinavia has significantly shifted to the right since their tax-and-spend policies of the 80s and 90s. Almost Thatcherism-like. Their modern welfare state system is rooted in the early twentieth century. Nordic countries have largely avoided Europe's debt woes (clearly not mentioning Iceland and Finland here) and America's inequality and huge healthcare issues. However, it calls to question if their public spending that forms a huge portion of the GDP is sustainable. Scandinavia is battling issues of immigration, integration, increased burden on the systems, and wealth inequality. Norden identified challenges in five areas: 

1. Productivity growth 2. Human capital accumulation 3. The tax system 4. The sustainability of public finances 5. Employment

The million-dollar question for the next fifty years of Singapore's development, I suppose, is how do we sustain economic growth and stability, while strengthening the social safety nets without compromising efficiency and global competitiveness, or levy phenomenal taxes. And of course, this is open to debate among residents and citizens of Singapore. How do we want to do this? Where do we want to end up? I'm curious; there's a chance I'll be still be alive in 50 years, perhaps senile and bedridden, desperately requiring state welfare.

At the Annual Dinner of the Economic Society of Singapore in 2012, Prime Minister Lee Hsien Loong said in his speech,

We face a fundamental choice as a society – do we want low taxes and targeted welfare benefits; or high taxes on all and comprehensive welfare? Singapore has chosen the first; the Scandinavians the second. The Scandinavian model works for them, because the Scandinavians are very different societies from Singapore, and developed Europe is a very different region from emerging Asia. The Scandinavians are rich in natural resources, with a large and affluent continent as their hinterland and major market. They live in a peaceful and stable continent, and can safely spend much less on defence. They have very long histories as homogeneous societies, whose members are willing to pay high taxes in exchange for high social protections for all. I do not believe that Singaporeans would be willing to pay the taxes that Scandinavians pay, or that our economy could be competitive at such heavy tax rates. 
Of course without being as generous as the Scandinavians, we could still increase our social spending and raise our taxes moderately as part of a new social compact. Within limits, that is indeed what we need to do in the longer term, with an ageing population and growing health care needs. But the limits are tighter than many people realise. For decades we have gradually reduced our income tax rates, and partially made up with indirect taxes like the GST, in order to stay competitive with other Asian economies like Hong Kong. This has helped to foster growth, and increase the resources available to strengthen our social compact. Raising taxes will do the opposite, long before they reach Scandinavian levels. 
[link to above Paragraphs 33 and 34 in the PM's speech in 2012]

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