February 2nd 2013

S P E C I AL R E P OR T
T HE NORDI C COUNT RI E S
Northern
lights
Nordics.indd 1 15/01/2013 15:13
1
THIRTY YEARS AGO Maigaiel Thalchei luined Biilain inlo lhe voilds
leading cenlie ol lhinking lhe unlhinkahle. Today lhal dislinclion has
passed lo Sveden. The slieels ol Slockholm aie avash vilh lhe hlood ol
sacied covs. The lhinklanks aie hiimlul ol nev ideas. The eislvhile
champion ol lhe lhiid vay is nov puisuing a lai moie inleiesling
hiand ol polilics.
Sveden has ieduced puhlic spending as a piopoilion ol GDP liom
6) in I,,{ lo (, loday. Il could soon have a smallei slale lhan Biilain. Il
has also cul lhe lop maiginal lax iale hy z) peicenlage poinls since I,8{, lo
), and sciapped a maies nesl ol laxes on piopeily, gills, veallh and in
heiilance. This yeai il is culling lhe coipoialelax iale liom z6.{ lo zz.
Sveden has also donned
lhe golden sliailjackel ol hscal oi
lhodoxy vilh ils pledge lo pio
duce a hscal suiplus ovei lhe eco
nomic cycle. Ils puhlic dehl lell
liom )o ol GDP in I,,{ lo {) in
zoIo, and ils hudgel moved liom
an II dehcil lo a suiplus ol o.{
ovei lhe same peiiod. This al
loved a counliy vilh a small,
open economy lo iecovei quickly
liom lhe hnancial sloim ol
zoo)o8. Sveden has also pul ils
pension syslem on a sound loun
dalion, ieplacing a dehnedhene
hl syslem vilh a dehnedconlii
hulion one and making aulo
malic adjuslmenls loi longei lile
expeclancy.
Mosl daiingly, il has inlio
duced a univeisal syslem ol
school voucheis and inviled piiv
ale schools lo compele vilh puhlic ones. Piivale companies also vie vilh
each olhei lo piovide slalelunded heallh seivices and caie loi lhe eldei
ly. Andeis Aslund, a Svedish economisl vho lives in Ameiica, hopes
lhal Sveden is pioneeiing a nev conseivalive model, Biian Palmei, an
Ameiican anlhiopologisl vho lives in Sveden, voiiies lhal il is luining
inlo lhe Uniled Slales ol Svedeameiica.
Theie can he no douhl lhal Svedens quiel ievolulion has hioughl
ahoul a diamalic change in ils economic peiloimance. The lvo decades
liom I,)o veie a peiiod ol decline. lhe counliy vas demoled liom heing
lhe voilds louilhiichesl in I,)o lo I(lhiichesl in I,,{, vhen lhe aveiage
Svede vas pooiei lhan lhe aveiage Biilon oi Ilalian. The lvo decades
liom I,,o veie a peiiod ol iecoveiy. GDPgiovlh helveen I,,{ and zoIo
aveiaged z.) a yeai and pioduclivily z.I a yeai, compaied vilh I.,
and I iespeclively loi lhe main I EUcounliies.
Ioi mosl ol lhe zolh cenluiy Sveden piided ilsell on oeiing vhal
Maiquis Childs called, in his I,{6 hook ol lhal lille, a Middle Vay he
lveen capilalism and socialism. Glohal companies such as Volvo and Ei
icsson geneialed veallh vhile enlighlened huieaucials huill lhe Folk-
hemmet oi Peoples Home. As lhe decades iolled hy, lhe middle vay
veeied lell. The goveinmenl kepl gioving. puhlic spending as a shaie ol
GDP neaily douhled liom I,6o lo I,8o and peaked al 6) in I,,{. Taxes
kepl iising. The Social Democials (vho iuled Sveden loi (( uninleiiupl
Northern lights
The Nordic countries are reinventing their model of capitalism,
says Adrian Wooldridge
A C K N O WL E D G ME N T S
CONTENTS
In addition to the people mentioned
in the text, the author would like to
express his thanks for their help
with this special report to: Matti
Alahuhta, Andreas Alsen, Jorn Bang
Andersen, Ulf Berg, Ewa Bjorling,
Pontus Braunerhjelm, Maria Levin
Erixon, Saeid Esmaelzadeh, Magnus
Gulbrandsen, Jonas Gustavsson,
Mauro Gozzo, Jouko Hayrinen,
Magnus Henrekson, Cecilia Her-
mannson, Kari Herlevi, Anders
Homann, Per-Ola Karlsson, Hannu
Kosonen, Stefan Larsson, Erling
Roed Larsen, Bengt-Ake Ljuden,
Jacob Mchangama, Peter Olesen,
Mrikka Paananen, Petri Peltonen,
Magnus Runnbeck, Ola Pettersson,
Parsi Sahlberg, Peter Santesson,
Oystein Sjolie, Karin Svanborg-
Sjovall, Alexander Triebnigg, Erik
Ullenhag, Frederik Vernersson, Hans
Vestberg, Pekka Viljakanen and
Jacob Warburg.
A list of sources is at
Economist.com/specialreports
An audio interview with
the author is at
Economist.com/audiovideo/
specialreports
3 Welfare
More for less
5 Immigrants
The ins and the outs
6 Business
Global niche players
8 Entrepreneurs
If in doubt, innovate
9 Creativity
Cultural revolution
11 Norway
The rich cousin
13 Lessons
The secret of their success
SPECIAL REPORT
THE NORDI C COUNTRI ES
The Economist February 2nd 2013 1
2 The Economist February 2nd 2013
THE NORDI C COUNTRI ES
SPECIAL REPORT
2
1
ed yeais liom I,{z lo I,)6 and loi zI oul ol lhe z( yeais liom I,8z
lo zoo6) kepl squeezing husiness. The eia ol neocapilalism is
diaving lo an end, said Olol Palme, lhe pailys leadei, in I,)(. Il
is some kind ol socialism lhal is lhe key lo lhe luluie.
The olhei Noidic counliies have heen moving in lhe same
diieclion, il moie slovly. Denmaik has one ol lhe mosl liheial la
houi maikels in Euiope. Il also allovs paienls lo send childien lo
piivale schools al puhlic expense and make up lhe dieience in
cosl vilh lheii ovn money. Iinland is hainessing lhe skills ol
venluie capilalisls and angel inveslois lo piomole innovalion
and enliepieneuiship. Oiliich Noivay is a pailial exceplion lo
lhis pallein, hul even lheie lhe goveinmenl is piepaiing loi ils
posloil luluie.
This is nol lo say lhal lhe Noidics aie shiedding lheii old
model. They conlinue lo piide lhemselves on lhe geneiosily ol
lheii vellaie slales. Ahoul {o ol lheii lahoui loice voiks in lhe
puhlic secloi, lvice lhe aveiage in lhe Oiganisalion loi Economic
Developmenl and Coopeialion, a iichcounliy lhinklank. They
conlinue lo helieve in comhining open economies vilh puhlic
inveslmenl in human capilal. Bul lhe nev Noidic model hegins
vilh lhe individual ialhei lhan lhe slale. Il hegins vilh hscal ie
sponsihilily ialhei lhan pumppiiming. all loui Noidic counliies
have AAA ialings and dehl loads signihcanlly helov lhe euio
zone aveiage. Il hegins vilh choice and compelilion ialhei lhan
paleinalism and planning. The economiclieedom index ol lhe
Iiasei Inslilule, a Canadian lhinklank, shovs Sveden and Iin
land calching up vilh lhe Uniled Slales (see chail). The lellvaid
luich has heen ieveised. ialhei lhan exlending lhe slale inlo lhe
maikel, lhe Noidics aie exlending lhe maikel inlo lhe slale.
Vhy aie lhe Noidic counliies doing lhis! The ohvious an
svei is lhal lhey have ieached lhe limils ol hig goveinmenl. The
vellaie slale ve have is excellenl in mosl vays, says Gunnai
Vihy Mogensen, a Danish hisloiian. Ve only have lhis lillle pio
hlem. Ve canl aoid il. The economic sloims lhal shook all lhe
Noidic counliies in lhe eaily I,,os piovided a loielasle ol vhal
vould happen il lhey lailed lo gel lheii aaiis in oidei.
Theie aie lvo less ohvious ieasons. The old Noidic model
depended on lhe ahilily ol a cadie ol hig companies lo geneiale
enough money lo suppoil lhe slale, hul lhese companies aie he
ing slimmed hy glohal compelilion. The old model also de
pended on peoples villingness lo accepl diieclion liom ahove,
hul Noidic populalions aie hecoming moie demanding.
Small is powerful
The Noidic counliies have a colleclive populalion ol only
z6m. Iinland is lhe only one ol lhem lhal is a memhei ol holh
lhe Euiopean Union and lhe euio aiea. Sveden is in lhe EU hul
oulside lhe euio and has a lieely oaling cuiiency. Denmaik, loo,
is in lhe EUand oulside lhe euio aiea hul pegs ils cuiiency lo lhe
euio. Noivay has iemained oulside lhe EU.
Bul lheie aie compelling ieasons loi paying allenlion lo
lhese small counliies on lhe edge ol Euiope. The hisl is lhal lhey
have ieached lhe luluie hisl. They aie giappling vilh piohlems
lhal olhei counliies loo vill have lo deal vilh in due couise,
such as vhal lo do vhen you ieach lhe limils ol hig goveinmenl
and hov lo oiganise sociely vhen almosl all vomen voik. And
lhe Noidics aie coming up vilh highly innovalive solulions lhal
iejecl lhe liied oilhodoxies ol lell and iighl.
The second ieason lo pay allenlion is lhal lhe nev Noidic
model is pioving sliikingly successlul. The Noidics dominale in
dices ol compeliliveness as vell as ol vellheing. Theii high
scoies in holh lypes ol league lahle maik a hig change since lhe
I,8os vhen vellaie look piecedence ovei compeliliveness.
The Noidics do pailiculaily vell in lvo aieas vheie com
peliliveness and vellaie can ieinloice each olhei mosl povei
NORWAY
DENMARK
SWEDEN
FINLAND
Greenland
(To Denmark, not
to scale)
Spitsbergen
(To Norway)
GDP, average annual
Population GDP per person growth rate
2012, m 2012, $000 2002-12, %
Denmark 5.6 55.4 0.6
Finland 5.4 45.5 1.6
Norway 5.0 99.3 1.6
Sweden 9.5 54.9 2.2
All figures are estimates
< 1.0 - 8.0
8.0 - 12.5
12.5 - 25.0
25.0 - 100.0
> 100.0
Average population
density per km
2011
200 km
Gross government debt
As % of GDP, 2012 estimate
United States
European Union
Finland
Norway
Denmark
Sweden
0 20 40 60 80 100 120
Sources: IMF; national sources; Nordregio & NLS Finland; Fraser Institute; OECD
Economic-freedom ratings
10=maximum
5
6
7
8
9
1970 75 80 85 90 95 2000 05 10
United States
Sweden
Finland
Norway
Britain
Denmark
The Economist February 2nd 2013 3
SPECIAL REPORT
THE NORDI C COUNTRI ES
2
1
lully. innovalion and social inclusion. BCG, as lhe Boslon Con
sulling Gioup calls ilsell, gives all ol lhem high scoies on ils ein
lensily index, vhich measuies lhe inleinels impacl on husiness
and sociely. Booz & Company, anolhei consullancy, poinls oul
lhal hig companies ollen leslmaikel nev pioducls on Noidic
consumeis hecause ol lheii villingness lo liy nev lhings. The
Noidic counliies led lhe voild in inlioducing lhe mohile nel
voik in lhe I,8os and lhe GSMslandaid in lhe I,,os. Today lhey
aie ahead in lhe liansilion lo holh egoveinmenl and lhe cash
less economy. Iocals hoasl lhal lhey pay lheii laxes hy SMS. This
coiiespondenl gave up changing sleiling inlo local cuiiencies
hecause eveiylhing liom laxi iides lo cups ol coee can he paid
loi hy caid.
The Noidics also have a sliong iecoid ol diaving on lhe lal
enls ol lheii enliie populalions, vilh lhe possihle exceplion ol
lheii immigianls. They have lhe voilds highesl iales ol social
mohilily. in a compaiison ol social mohilily in eighl advanced
counliies hy }o Blanden, Paul Giegg and Slephen Machin, ol lhe
Iondon School ol Economics, lhey occupied lhe hisl loui places.
Ameiica and Biilain came lasl. The Noidics also have exceplion
ally high iales ol lemale lahouiloice pailicipalion. in Denmaik
nol lai o as many vomen go oul lo voik ()z) as men (),).
Flies in the ointment
This special iepoil vill examine lhe vay lhe Noidic gov
einmenls aie updaling lheii veision ol capilalism lo deal vilh a
moie dimcull voild. Il vill nole lhal in doing so lhey have un
leashed a huge amounl ol ciealivily and hecome voild leadeis
in ieloim. Noidic enliepieneuis aie leeling lheii oals in a vay
nol seen since lhe eaily zolh cenluiy. Noidic viileis and ailisls-
and indeed Noidic chels and game designeis-aie enjoying a cie
alive ienaissance.
The iepoil vill also add caveals. The gioving diveisily ol
Noidic socielies is geneialing social lensions, mosl hoiiihcally in
Noivay, vheie Andeis Bieivik killed )) people in a iacially moli
valed allack in zoII, hul also on a moie mundane level eveiy day.
Sveden is hnding il pailiculaily haid lo inlegiale ils laige popu
lalion ol ielugees.
The Noidic model is slill a voik in piogiess. The lhiee
loices lhal have ohliged lhe Noidic counliies lo ievamp il-limil
ed iesouices, iampanl glohalisalion and gioving diveisily-aie
galheiing momenlum. The Noidics vill have lo conlinue lo up
giade lheii model, hul lhey vill also have lo hghl lo ielain vhal
makes il dislinclive. Ianl Piilchell and Michael Voolcock, ol lhe
Voild Bank, have coined lhe leim gelling lo Denmaik lo de
sciihe successlul modeinisa
lion. This iepoil vill suggesl
lhal lhe liick is nol jusl lo gel lo
Denmaik, il is lo slay lheie.
The hnal caveal is ahoul
leaining liom lhe Noidic ex
ample, vhich olhei counliies
aie iighlly liying lo do. Biilain,
loi example, is inlioducing
Svedishslyle liee schools.
Bul liansleiiing such lessons
is liaughl vilh piohlems. The
Noidics success depends on
lheii long liadilion ol good
goveinmenl, vhich empha
sises nol only honesly and
lianspaiency hul also consen
sus and compiomise. Ieain
ing liom Denmaik may he as
dimcull as slaying lheie. 7
It can be done
Source: IMF *Estimate

Forecast
Swedens government spending
As % of GDP
1
45
50
55
60
65
70
1990 95 2000 05 10
*
13

IN THE IION AND THE UNICORN, viillen in I,(I,

Geoige Oivell invoked lhe spiiil ol England in a handlul ol
images-solid hieaklasls and gloomy Sundays, smoky lovns
and vindy ioads, gieen helds and ied pillaihoxes. Vhen lhis
coiiespondenl liied lo summon up appiopiiale images loi lhe
spiiil ol lhe Noidic iegion he lound himsell luining lo lhe vel
laie slale. Svedish lalheis enjoying a leisuiely lunch vhile lheii
childien sleep in piams (Svedens paleinily leave is among lhe
mosl geneious in lhe voild), Danish molheis cycling, helmel
less, lhiough lhe eaily moining misl vilh lheii childien in side
cais (Copenhagen has moie lhan {okm ol cycle lanes, and a
lhiid ol lhe populalion cycles lo voik), a Iinnish physics leachei
discussing lhe naluie ol elegance vilh a class ol Iyeaiolds (Iin
land iegulaily comes neai lhe lop ol inleinalional league lahles
loi educalional allainmenl).
The Noidics slill have lhe voilds mosl geneious vellaie
slales, hul a succession ol ciises pul an end lo lhe iegions magi
cal lhinking ahoul vellaie. Denmaik venl inlo lieelall in lhe eai
ly I,8os. Iinland imploded in lhe eaily I,,os vhen lhe collapse
ol communism killed ils mosl ieliahle maikel. Sveden and Noi
vay laced seiious hnancial ciises al ahoul lhe same lime. These
evenls aie slill laiily liesh in peoples memoiies.
Policymakeis iesponded lo lhese neaidealh expeiiences
hy changing lheii hahils, ahove all hy pulling lheii hudgels hack
inlo halance. The Svedes, loi inslance, ieduced lheii nalional
dehl liom 8( ol GDPin I,,6 lo (, in zoII. They also lackled en
lillemenls lo lake accounl ol ageing populalions. In I,,8 Sveden
passed lhe mosl sveeping pension ieloim in any iich counliy,
ieplacing a dehnedhenehl syslem vilh a dehnedconliihulion
one and hiinging pensions moie in line vilh lilelime incomes.
Denmaik has heen slovei lhan Sveden lo clean oul ils
closels. Puhlic spending as a piopoilion ol GDP incieased liom
I lo 8 allei lhe zoo)o8 hnancial ciisis and is nov lhe high
esl in lhe OECD. Bul lhe pace ol ieloim is speeding up. In zoo6
Denmaik incieased lhe slale pension age liom 6 lo 6), lo he
phased in hy zoz(z). In zoIo il halved lhe uppei limil on paying
oul unemploymenl henehl liom loui lo lvo yeais. In zoII il has
lened lhe demise ol an eailyieliiemenl scheme vhich gave
some people lhe oplion lo leave al 6o. In zoIz il announced plans
lo inciease lhe dieienlial helveen vages and henehls.
Welfare capitalism
Even moie sliiking lhan lhe Noidic voilds commilmenl lo
halancing ils hooks is ils enlhusiasm loi expeiimenling vilh
nev ideas. The Svedish slale nov allovs piivale companies lo
compele vilh goveinmenl hodies loi puhlic conliacls. The ma
joiily ol nev heallh clinics and kindeigailens aie heing huill hy
piivale companies, liequenlly using piivale money. The slale
also allovs cilizens lo shop aiound loi lhe hesl seivices and lake
lhe money vilh lhem.
The Svedes have done moie lhan anyone else in lhe voild
lo emhiace Millon Iiiedmans idea ol educalional voucheis-al
loving paienls lo send lheii childien lo vhalevei school lhey
choose and inviling piivale companies oi volunlaiy gioups lo
eslahlish liee schools. Almosl hall lhe counliys schoolchil
Welfare
More for less
Agenerous welfare state that does not cost the earth
4 The Economist February 2nd 2013
THE NORDI C COUNTRI ES
SPECIAL REPORT
2 dien choose nol lo go lo lheii local schools. Moie lhan Io ol slu
denls undei I6 and moie lhan zo ol lhose ovei I6 allend liee
schools, lvolhiids ol vhich aie iun hy piivale companies.
Denmaik has added a uselul lvisl lo lhe vouchei idea. Il
nol only allovs paienls lo lake lheii puhlic lunds lo piivale
schools vilh lhem hul also lo lop lhem up (vilhin limils) vilh
lheii ovn money. This is ciealing a ouiishing maikel, pailicu
laily in Copenhagen, ianging liom academic schools loi liadi
lionalisls via ieligious ones loi Muslims lo expeiimenlal ones loi
ageing hippies. One ol lhe mosl populai enleilainmenls in
Denmaik, says Mi Mogensen, lhe hisloiian, is lo spol lhe lalesl
lellving polilicians lo send lheii childien lo piivale school.
In lhe voikplace Denmaik is a pioneei ol exicuiily. com
panies can sack employees vilh almosl Ameiican ease hul lhe
goveinmenl piovides displaced voikeis vilh geneious henehls
and helps lhem gel nev johs. Mosl employeis like lhe syslem he
cause il liees lhem liom one ol conlinenlal Euiopes higgesl pio
hlems. a dual lahoui maikel divided helveen heavily piolecled
insideis and casualised oulsideis.
Denmaik is also a pioneei ol vhal mighl he called lhe inlel
ligenl slale. The goveinmenl ahandoned ils lal lax vhich vas in
lended lo nudge people inlo leading heallhiei lives hecause lhe
iesulls veie disappoinling. Bul il is also using ils puichasing
povei lo encouiage innovalion. loi example, inslead ol oideiing
vheelchaiis liom lhe same old piovidei il
nov plans lo oidei mohilily solulions
liom compeling companies and lhen en
couiage lhe mosl successlul ones lo ex
poil lheii pioducls. Ve need lo leain
hov lo make husinesses oul ol lhings lhal
ve vanl lo do loi polilical ieasons, says
Iais Andeisen, head ol lhe Economic
Council ol lhe Iahoui Movemenl, a
lhinklank.
Il vould he an exaggeialion lo de
sciihe lhese vellaie ieloims as a liiumph
loi Iiiedmanism. The mosl compiehen
sive sludy ol school ieloim in Sveden
demonsliales lhal choice has had a posi
live eecl. Andeis Bohlmaik and Mikael
Iindahl examined dala loi all Svedish
schoolchildien helveen I,88 and zoo,
and lound lhal incieasing lhe shaie ol
liee schools in a pailiculai disliicl leads
lo hellei peiloimance on a vaiiely ol
measuies, liom school giades lo univeisi
ly allendance. The higgesl gains aie iecoided in lhe iegulai puh
lic schools ialhei lhan in lhe liee schools. Al lhe same lime,
lhough, Svedens ianking in lhe OECDs annual PISA lahles on
educalional achievemenl has declined. The Svedish piess is lull
ol sloiies ahoul lhe misdeeds ol piivale schools and hospilals.
Piivale companies have piomised lo geneiale piohls yeai in,
yeai oul, pailiculaily il lhey aie hacked hy piivaleequily com
panies, hul allei lhe hisl vave ol ialionalisalion il ollen hecomes
moie dimcull lo squeeze savings oul ol schools and hospilals.
The Iinns have one ol lhe voilds mosl successlul educa
lional syslems (as measuied hy lhe PISAlesls) vilhoul so much
as a nod lo Iiiedman. They have dispensed vilh lhe machineiy
ol educalional accounlahilily such as delailed nalional cuiiicu
lums, school inspeclions, highslakes examinalions and school
voucheis. All childien allend compiehensive school liom age
seven lo I6, lheie is no hieak helveen piimaiy and secondaiy
school. Teacheis expeiimenl vilh lols ol dieienl slyles ol leach
ing hul lend lo emphasise ciealivily and gioup leaining. They
make exlensive use ol lesls, hul only lo diagnose sludenls ialhei
lhan lo classily lhem.
Yel lhe Iinns have also dispensed vilh many ol lhe shihho
lelhs ol lhe educalional lell. Al age I6 lhey iigoiously divide chil
dien up helveen academic and vocalional slieams. And lhey do
nol spend a huge amounl on educalion. 6.( ol GDP in zoo,,
compaied vilh ).{ in Ameiica. Iinnish leacheis lalk enviously
ahoul hov much lheii Biilish colleagues aie paid.
Iinlands success depends neilhei on accounlahilily (lhe
iighlving panacea) noi on iesouices (lhe lellving one) hul on
lvo lhings lhal aie ignoied in lhe videi educalional dehale. liusl
and slahilily. The goveinmenl has lound il possihle lo alliacl
highqualily people inlo a ielalively lovpaid piolession piovid
ed lhey aie liealed vilh iespecl. Teacheis aie liee lo design lheii
ovn cuiiiculums and develop lheii ovn lesls. And lhe syslem
has iemained almosl unchanged since lhe eaily I,)os.
Conliolling puhlic spending is lhe haidesl joh in polilics.
The Noidics have succeeded hecause ol lheii villingness lo lo
cus on iesulls ialhei lhan on ideologies. Slill, lheie is a limil lo
vhal piagmalism can achieve. The Noidic counliies conlinue lo
suei liom vhal Mill Romney, lhe Repuhlican candidale in
Ameiicas iecenl piesidenlial eleclion, called liickledovn gov
einmenl. They aie iun hy piolessional polilicians vho have no
idea lhal mandaling a yeais maleinily leave means one lhing
loi a goveinmenl depailmenl and anolhei loi a slailup. 7
Fabulous Finns
Source: OECD PISA *Mean PISA score for all countries
Education performance of 15-year-olds, selected countries
Mean score in science
2
450 475 500* 525 550 575
Finland
South Korea
Australia
Germany
United States
Norway
Denmark
Sweden
2000
2009
The Finns
have one of
the worlds
most
successful
educational
systems
without so
much as a
nod to
Friedman
The Economist February 2nd 2013 5
SPECIAL REPORT
THE NORDI C COUNTRI ES
1
IN I,6 SVEDENS Social Democialic Paily emhaiked on
lhe Million Piogiamme, an amhilious plan lo huild a mil
lion nev homes in a counliy ol only ).)m people. These homes
had eveiylhing lhal good democialic cilizens could vanl-all
mod cons, easy access lo puhlic seivices and gieen spaces.
The goveinmenl exceeded ils laigel hy 6,ooo, hul in olhei
iespecls lhe Million Piogiamme venl aviy. Svedish voikeis
quickly shoved vhal lhey lhoughl ol lhe nev homes-many ol
lhem highiise hlocks ol als on lhe edge ol cilies-hy skedad
dling al lhe hisl oppoilunily. In lhe I,8os lhe Million homes
veie hlled hy guesl voikeis liom lhe Balkans and Gieece. Today,
as lhe guesl voikeis skedaddle in luin, lhey aie heing hlled hy
ielugees liom lhe voilds liouhle spols.
Rosengaid vas once one ol lhe piogiammes pioudesl
achievemenls. a highiise developmenl lhal vas close lo lhe cen
lie ol Malm, one ol Svedens indusliial poveihouses, hul sui
iounded hy open space. Today ovei 8o ol ils populalion ol
z(,ooo aie immigianls. The local shops have names such as Bah
ylon and Iehanon. Vomen in hijahs and headscaives cail lheii
shopping lhiough lhe lieezing iain. Men sil in cales diinking
sliong coee and keeping diy. A liuck sells lalalel sandviches.
The Svedish slale does ils hesl lo ieach oul lo lhese immi
gianls. The cily ol Malms ciesl is eveiyvheie. The local lihiaiy
has a language cale and a chess ioom. A spoils complex includes
asvimming pool and a hoxing iing. People in ied jackels maiked
Rosengaid hosls-mosl ol lhem immigianls lhemselves-help
iesidenls negoliale lhe complexilies ol lhe vellaie slale.
Yel lhe ielalionship helveen lhe slale and ils clienls is
sliained. In Sveden having a joh is eveiylhing, says Tohias Bill
sliom, lhe minislei loi immigialion and a loimei MP loi Malm,
hul in Rosengaid only {8 ol lhe iesidenls have one. Angiy
youlhs have laken lo iioling, loiching hicycle sheds and iecy
cling cenlies as vell as cais.
Pei Biinkemo is a loimei jouinalisl vhose lile vas changed
vhen he viole a hook ahoul a Somali hoy vho vas hioughl up
in vailoin Mogadishu. He nov iuns an oiganisalion lhal spe
cialises in helping Somali ielugees liom lhe hasemenl ol a Ro
sengaid hlock ol als. The cenlies valls aie decoialed vilh pic
luies ol highianking visilois and piizes avaided lo Mi
Biinkemo. Bul he is no lan ol goveinmenl policies, poinling oul
lhal polilicians have lillle sense ol hov dimcull il is lo inlegiale
Somalis inlo Svedish sociely. They hail liom nomadic socielies
vheie liusl is ieseived loi lhe clan, lileiacy is iaie and limekeep
ing is iudimenlaiy. Thieequaileis ol Somali childien diop oul
ol school. Ioi Somali immigianls |coming lo Sveden| is like he
ing lianspoiled lo Mais, he says.
The sums that dont add up
Mass immigialion is posing seiious piohlems loi lhe ie
gion. Ioi lhe Noidic counliies lo he ahle lo aoid lheii vellaie
slales lhey need lo have 8o ol lheii adulls in lhe voikloice, hul
lahouiloice pailicipalion among nonEuiopean immigianls is
much lovei lhan lhal. In Sveden only I ol nonEuiopeans
have a joh, compaied vilh ovei 8( ol nalive Svedes. The Noi
dic counliies need lo peisuade lheii cilizens lhal lhey aie gelling
a good ieluin on lheii laxes, hul mass immigialion is ciealing a
class ol people vho aie peimanenlly dependenl on lhe slale.
Toihen Tianaes, ol Denmaiks Rockvool Ioundalion Re
seaich Unil, calculales lhal in lhe midI,,os immigianls in lheii
(os-lhe age gioup lhal geneially conliihules mosl lo lhe puhlic
hudgel-paid only maiginally moie in laxes lhan lhey ieceived
in henehls. In Sveden z6 ol all piisoneis, and o ol piisoneis
seiving moie lhan hve yeais, aie loieigneis. Some (6 ol lhe joh
less aie nonEuiopeans, and (o ol nonEuiopeans aie classihed
as pooi, compaied vilh only Io ol na
live Svedes. Immigianls aie so closely as
socialed vilh lhe Million Piogiamme,
and hence vilh puhlic housing, lhal lhe
Gringo, a Slockholm nevspapei loi im
migianls, calls lhem Miljonsvenskar, oi
Million Svedes.
High immigialion is lhiealening lhe
piinciple ol iedisliihulion lhal is al lhe
heail ol lhe vellaie slale. Income in
equalilies in lhe Noidic counliies aie gen
eially lovei lhan elsevheie (see chail,
nexl page), hul Malz Dahlheig, ol Uppsa
la Univeisily, ieckons lhal immigialion is
making people less villing lo suppoil ie
disliihulion. The decline is pailiculaily
maiked among highincome eaineis. Im
migialion is also causing culluie clashes.
Noidics leivenlly helieve in liheial val
ues, especially sexual equalily and liee
dom ol speech, hul many ol lhe immi
gianls come liom counliies vheie men
and vomen aie segiegaled and ciilicising
lhe piophel Muhammad is a seiious ol
lence. Peacelul Denmaik lound ilsell on
lhe lionlline ol lhe culluie vais vhen
Jyllands-Posten, a nevspapei, puhlished
cailoons making lun ol Muhammad.
Immigrants
The ins and the outs
Immigration and growing inequality are making the
Nordics less homogeneous
Out in the cold
Egalitarians all
Source: OECD *0=perfect equality, 1=perfect inequality
Gini coefficient of income inequality*
Selected countries, late 2000s
0 0.1 0.2 0.3 0.4 0.5
Mexico
Turkey
United States
Britain
Japan
Spain
OECD average
Germany
Finland
Sweden
Norway
Denmark
6 The Economist February 2nd 2013
SPECIAL REPORT
2
1
Immigialion has divided lhe Noidics. The Svedes iegaid
lheii openaimed appioach lo asylumseekeis as an expiession
ol vhal is hesl in lheii culluie. The Danes ievisiled lheii immi
gialion policies in I,,,, spuiied hy lhe iise ol lhe anliimmigianl
Danish Peoples Paily. They lighlened lhe iules loi lamily ieunih
calion, made il moie dimcull loi nevcomeis lo claim henehls
and sel up an inlegialion minisliy. Today Denmaik ieceives
moie nonEuiopean immigianls lhan evei, hul il has iadically ie
duced lhe numhei ol ielugees vhile incieasing lhe numhei ol
people on sludenl and voik visas.
The higgesl hallle is vilhin lhe Noidic mind. Is il moie pio
giessive lo open lhe dooi lo ielugees and iisk oveiexlending lhe
vellaie slale, oi lo close lhe dooi and leave lhem lo languish in
dangei zones! Is il moie enlighlened lo impose seculai values on
devoul Muslims oi lo dilule liheial values in lhe name ol mulli
culluialism! Tiying lo ieconcile lhese conliadiclions can lead lo
sliange iesulls. Alaimed hy iepoils ol lemale genilal mulilalion,
Nyamko Sahuni, a Svedish cahinel minislei, suggesled compul
soiy gynaecological examinalions loi all young giils in Sveden.
Iiheials aie incieasingly on lhe delensive. The numhei ol
immigialionielaled allacks is iising. In zoIo Taimoui Ahdulva
hah alAhdaly hlev himsell up in lhe middle ol a ciovd ol
Chiislmas shoppeis in cenlial Slockholm, iemaikahly, he man
aged lo injuie only a couple ol people. In Sveden median house
hold incomes ol nonEuiopean immigianls aie nov {6 lovei
lhan loi nalivehoin Svedes, vheieas in I,,Ilhey veie only zI
lovei. Bul Denmaiks muchvilihed immigialion ieloims may
he paying o. lhe employmenl gap helveen nalive Danes and
nonVeslein immigianls has declined lo z( peicenlage poinls,
compaied vilh (z in lhe midI,,os.
Sveden is nov alloving in moie skilled voikeis, having
pieviously comhined highly iesliiclive policies loi lhis gioup
vilh lhe voilds mosl geneious policies loi ielugees. Tiade un
ions used lo have a velo ovei vho vas admilled and iepealedly
used il. This may calm lhe immigialion dehale, hul il may equal
ly vell inciease lhe piessuie lo open lhe doois even videi loi
skilled immigianls vhile closing lhem loi ielugees.
Azominule diive liom Rosengaid lo lhe veslein haihoui
lakes lhe visiloi lo lhe Tuining Toiso, a highiise, highspec hlock
lhal lvisls like a lilhe alhlele and commands speclaculai vievs
ovei lhe Oiesund hiidge linking Malm lo Copenhagen. Diieclly
opposile ils enliance is an eslahlishmenl calling ilsell a lacelill
cenlie. Designei houses cluslei aiound ils hase. Gieens supei
maikel sells local oiganic lood and adveilises yoga classes and
lango lessons on lhe heach.
Thiily yeais ago Malm vas lhe capilal ol voikingclass
Sveden, a nononsense cily dominaled hy solid cilizens vho
voiked in lhe Kockums shipyaid and voled loi lhe Social Demo
cialic Paily. Then lhe glohal economy luined againsl il. The ship
yaids conliacled and lhe local lacloiies and lexlile mills closed.
The oncedominanl voiking class shiank lo neaiinvisihilily
and lhe populalion splil helveen piolessionals living in design
ei lolls and ielugees living in Rosengaids highiises. The gianl
Kockums ciane lhal had hecome lhe cilys symhol in I,)( vas
dismanlled and senl lo Soulh Koiea in zooz. In zoo lhe Tuining
Toiso hecame lhe cilys nev landmaik.
The decline ol lhe voiking class and lhe incieasing polai
isalion ol piolessionals and immigianls is heing iepealed acioss
lhe iegion. The Noidic counliies aie slill among lhe voilds mosl
equal, and in one impoilanl iespecl lhey aie hecoming moie so.
In zoIoII aiound 6o ol univeisily giaduales in Iinland and
Sveden veie vomen. Sveden has almosl as many lemale as
male MPs. In Denmaik lhe piime minislei and a iall ol olhei
minisleis aie vomen.
Bul in olhei iespecls money is making lhe Noidics less
equal. As a piopoilion ol lhe economy, Svedens piivaleequily
indusliy is second only lo Biilains in Euiope, and Noivay is
avash vilh oil money. Some ol lhe nev iich aie splashing oul on
Poisches and hig houses, hul mosl pielei lo spend lheii money in
suhllei and less conspicuous vays. Even so, lhey live in a diei
enl voild liom lhe immigianls sluck in Rosengaid. 7
THE NORDI C COUNTRI ES
NOVO NORDISK HAS lhe sheen ol a glohal champion. Ils
coipoiale headquaileis neai Copenhagen is decoialed
vilh lieshly cul oveis and lhoughlpiovoking sculpluies, vilh
lillle hovls ol liuil and nuls dolled heie and lheie. The CEOand
his lellov execulives voik liom a laige openplan omce.
Thal is all as il should he. Novo pioduces hall lhe voilds
medical insulin and liequenlly geneiales shaieholdei ieluins
appioaching {o. The voild maikel loi insulin is gioving lasl.
ahoul {(6m people alieady suei liom diaheles and lhe numhei
vill giov as lhe emeiging voild gels iichei. Novo is vell placed
lo iemain lhe voilds leading insulin pioducei loi yeais lo come.
The Vikings modein descendanls helieve lhey can luin
glohalisalion lo lheii advanlage. They excel al pioducing hoin
glohal companies. Eiicsson, lounded in I8)6, slailed selling
phones in China in lhe I8,os. They also oulpeiloim moie mus
culai compelilois. Toihen Pedeisen, ol lhe Copenhagen Busi
ness School, poinls oul lhal Noidic counliies aie pasl masleis al
adjusling lo iules diclaled hy hig counliies such as Geimany oi
Ameiica. Suiely lhey can cope vilh China and India!
Alas, lhe logic lhal deslioyed hiavnvoik such as ship
huilding and lexlile manulacluiing is nov moving on lo hiain
voik. The hesl Noidic companies aie liansloiming lhemselves
liom expoil machines inlo glohal nelvoiks. Eiicsson, loi exam
Business
Global niche players
Nordic companies have coped well with globalisation,
but need new blood
ple, has ieduced lhe numhei ol voikeis il employs in Sveden
liom {I,ooo in zooI lo I8,ooo loday. Mediumsized companies
aie laking advanlage ol lov pioduclion cosls in lhe Ballic slales
as vell as in China and India. In luin, loieigneis aie invading lhe
Vikings sliongholds. Volvo, Svedens lahled cai company, has
heen svalloved hy a Chinese upslail, Geely. Danisco, a Danish
loodingiedienls company, has heen laken ovei hy Ameiicas
DuPonl. Eiicsson has sold ils handsel division lo Sony. Nokia is a
shadov ol ils loimei sell.
The Noidic counliies have an impiessive numhei ol gloh
ally compelilive companies. Denmaik is a voild leadei in heai
ing aids (Olicon), shipping (Maeisk), loys (Iego), diink (Cails
heig) and vindpovei (vilh moie lhan zoo companies lhal
accounl loi a lhiid ol lhe voilds vindluihine maikel). Novo
Noidisk is al lhe cenlie ol a hiolech cluslei, duhhed Medicon Val
ley, lhal slielches liom Copenhagen lo Malm in neighhouiing
Sveden and has an annual luinovei ol CI{.( hillion.
Sveden hoasls some voildclass manulacluiing compa
nies, pailiculaily in mining equipmenl and machine lools (Sand
vik and Allas Copco), as vell as ielail slais such as IKEA and
H&M. Iinlands Kone is one ol lhe voilds leading lill and escala
loi companies. Nokias piohlems aie heing osel hy lhe iise ol
eleclionicgames makeis such as Rovio, lhe ciealoi ol Angiy
Biids. Noivay is a voild leadei in oil seivices and hsh laiming.
Noidic companies have lhiived in velldehned glohal
niches. Iego dominales lhe maikel loi inleilocking hiicks. Sand
vik is a machinelool supeipovei. Volvo Tiucks pioduces lhe
voilds hesl highqualily loiiies. Nichihcalion piolecls highcosl
companies liom emeigingmaikel compelilois. Nohody vanls
lhe cheapesl machinelool vhen a deleclive one can cause mil
lions ol poundsvoilh ol damage.
They ove lheii success lo loui qualilies. The hisl is lheii
commilmenl lo ielenlless innovalion vhich lhey apply lo even
lhe mosl hasic indusliies. Tiny Denmaik iemains lhe voilds
eighlhhiggesl lood expoilei lhanks lo ils ohsession vilh pio
duclivily. Danish laimeis use implanled chips lo moniloi lheii
covs lo maximise lheii milk yield. KJ Indusliies has developed a
vay ol mechanising lhe caiving up ol caicasses hy piogiam
ming lhe culling machines vilh lhe help ol Xiays.
Noidic companies halance lheii passion loi lhe nev vilh
an ahilily lo lake lhe long viev. Sveden is slill dominaled hy a
handlul ol longeslahlished lamilies such
as lhe Vallenheigs and lhe Bonnieis.
Denmaik has a numhei ol oiganisalions
such as lhe Cailsheig Ioundalion and lhe
Iego Ioundalion, sel up pailly lo look
allei lhe longleim inleiesls ol lheii pai
enl companies.
The lhiid qualily is lheii consensus
hased appioach lo managemenl. They
piide lhemselves on lheii al sliucluies
and democialic vays vhich lhey leel pio
mole liusl and coopeialion. BCG lhinks
lhe iegion has lhe voilds mosl skilled
lovskilled voikeis. Bul lhey halance
coopeialion vilh a louilh qualily-a pas
sion loi ieplacing lahoui vilh machines.
The Copenhagen undeigiound has dis
pensed vilh diiveis and lickelselleis.
Shops gel hy on aulomaled checkouls.
To see lhese loices in aclion, consid
ei lvo companies in dieienl indusliies.
Sandvik slailed making sleel in lhe lale
I,lh cenluiy in lhe small lovn ol Sandvi
ken, lvo houis noilh ol Slockholm. Il is
nov a glohal gianl lhal pioduces eveiylhing liom machine lools
lo sleel iods loi nucleai ieaclois. Sandviks smalllovn iools
have nol pievenled il liom hecoming a glohal leadei in ils coie
husinesses. Expanding ahioad is hov ve save johs al home is a
common ieliain.
Sandvik is ohsessed hy piomoling pioduclivily-holh ils
ovn and ils cuslomeis. A gianl lacloiy lhal pioduces sleel iods
looks as il il is iun hy ghosls. loui people moniloi compulei
scieens in a command cenlie and a lev olheis paliol lhe ooi. A
pioduclivily cenlie is devoled lo pushing loivaid lhe lionlieis ol
lechnology-making lhe voilds laslesl diills, loi example-and
liaining employees lo help cuslomeis. The companys manlia is
ve sell pioduclivily nol pioducls.
Haldoi Topsoe lounded lhe company lhal heais his name
hack in I,(o. Nov aged ,,, and hiighl as a hullon vilh il, he ie
mains chaiiman. His company, meanvhile, has giovn inlo a glo
hal gianl. Mi Topsoe asciihes ils success lo lvo lhings. He lound a
peilecl niche in calalysis. Calalysls acceleiale lols ol chemical
piocesses lhal aie vilal lo a modein economy. They aie also ex
liemely haid lo copy. So demand is gioving and haiiieis lo enliy
aie high. He helieves lhal his company henehls liom heing a lam
ily aaii, vhich allovs il holh lo invesl loi lhe long leim and lo
lake advanlage ol lhe glohal maikel.
Vulnerable giants
Ioi all lheii loilihcalions, lhe hesl Noidic companies aie
neveilheless undei assaull liom lvo poveilul enemies. iich
voild iivals and emeigingvoild upslails. In zooo Nokia domin
aled lhe mohilephone husiness. Scandinavian companies had
pioneeied lhe GSM slandaid loi mohile communicalions and
Nokia vas lhe voilds higgesl pioducei ol handsels. Today il is
hghling loi ils lile. since Slephen Elop look ovei as CEO in zoIo,
lhe company has cul a hllh ol ils voikloice. The voilds mohile
phone leadei vas healen lo lhe discoveiy ol smailphone gold hy
Apple, a Caliloinian company vhose coie compelence vas mak
ing compuleis. Eiicsson decided lo ahandon lhe handsel husi
ness in oidei lo locus on making lelecoms equipmenl, hul il is
nov engaged in a mighly hallle vilh Huavei, a Chinese com
pany lhal did nol exisl in lhe eaily I,8os.
These lvin assaulls have ievealed one ol lhe iegions hig
gesl veaknesses. ils lailuie lo hiing logelhei design and engi
Source: Thomson Reuters *Estimate
Nokias market capitalisation
As % of Finlands GDP
2005 06 07 08 09 10 11 12
*
0
10
20
30
40
50
60
The Economist February 2nd 2013 7
SPECIAL REPORT
THE NORDI C COUNTRI ES
2
1
8 The Economist February 2nd 2013
THE NORDI C COUNTRI ES
SPECIAL REPORT
2
1
IN zoIo A GROUP ol sludenls al Aallo Univeisily, jusl oul
side Helsinki, emhaiked on lhe mosl consliuclive piece ol
sludenl aclivism in lhe hisloiy ol lhe genie. They had heen con
veiled lo lhe povei ol enliepieneuiialism duiing a visil lo lhe
Massachusells Inslilule ol Technology. Vhen lhey gol home
lhey oiganised a summei ol slailups lo spiead lhe void lhal
Iinlands luluie lay vilh nev companies, nol old gianls. The
summei ol slailups luined inlo a season ol innovalion.
The SlailUp Sauna-a husiness acceleialoi lhal is slill iun
hy young enlhusiasls hul nov lunded hy goveinmenl, husiness
and academia-occupies a dilapidaled vaiehouse nexl lo lhe
univeisily. Il oeis a vide iange ol seivices. voiking space,
coaching loi hudding enliepieneuis, sludy liips lo Silicon Valley
and plenly ol nelvoiking oppoilunilies (including in lhe Sau
nas many saunas).
The Saunamasleis have an undeislanding ol enliepie
neuiship in advance ol lheii yeais. They iecognise lhal lheie is
moie lo innovalion lhan high lech. lhe Sauna also has design
and knilling lacloiies. They undeisland lhe impoilance ol hiidg
ing lhe gap helveen engineeiing and design. They iealise lhal
piomoling enliepieneuiship is a mallei ol changing culluie as
much as pioviding money. They look lo Russia and lhe Ballic
slales as vell as lo Boslon and San Iiancisco.
No more Nokias
The sludenl ievolulion vas pail ol a videi ieconsideialion
ol lhe piopei ielalionship helveen goveinmenl and husiness.
This had slailed in zoo8, vhen lhe Iinnish goveinmenl shook
up lhe univeisilies (and ciealed Aallo) in an allempl lo spui inno
valion. Bul il vas speeded up hy Nokias piohlems. Iinland had
hecome dangeiously dependenl on lhis one company. in zooo
Nokia accounled loi ( ol lhe counliys GDP. The goveinmenl
vanled lo make lhe mohilephone gianls decline as painless as
possihle and ensuie lhal Iinland vould nevei again hecome so
dependenl on a single company.
The Iinns ciealed an innovalion and lechnology agency,
Tekes, vilh an annual hudgel ol C6oom and a sla ol {6o. They
also eslahlished a venluiecapilal lund, Iinnveia, lo hnd eaily
slage companies and help lhem gel eslahlished. The cenliepiece
ol lheii innovalion syslem is a colleclion ol husiness acceleia
lois, pailly lunded hy lhe goveinmenl and pailly hy piivale en
leipiise, lhal opeiale in eveiy signihcanl aiea ol husiness and
piovide polenlial highgiovlh companies vilh advice and sup
poil liom expeiienced husinesspeople and angel inveslois.
As a iesull, Iinland has hecome much moie maikel and en
liepieneuiliiendly. Il has pioduced an impiessive numhei ol
slailups, including {oo lounded hy loimei Nokia employees.
Miciolask oulsouices omce voik. Zen Roholics specialises in
aulomaling iecycling. Valkee makes a device lhal lills vinliy
daik moods hy shooling hiighl lighl inlo lhe eai canal. The coun
liy has also acquiied lhe paiapheinalia ol a lech cluslei, such as a
celehialoiy hlog (Aiclic Slailup) and a valleyielaled name (Aic
lic Valley). The lashionahle aigumenl nov is lhal Nokias decline
is lhe hesl lhing lhal evei happened lo lhis counliy.
The nev Iinland is pailiculaily pioud ol ils hooming vid
eogames indusliy, including successlul companies such as Ro
vio Enleilainmenl, lhe makei ol Angiy Biids and a leading sup
poilei ol lhe SlailUp Sauna, and Supeicell, lhe makei ol Clash
ol Clans. Supeicells employees aie vhal you vould expecl.
men vilh heaids and ponylails vho lake lime oul liom lheii
compulei scieens lo shov o lheii colleclions ol aclion hguies.
Ilkaa Paananen, Supeicells CEO, poinls oul lhal Iinland
has spenl yeais piepaiing loi ils cuiienl success. Helsinki slailed
lo hosl a leslival loi gameis in lhe eaily I,,os. Today lhe leslival is
so populai lhal lhe oiganiseis have lo ienl lhe cilys higgesl ice
hockey sladium, vilh ioom loi I{,ooo, and slill luin people
avay. Kajak Univeisily oeis couises in video games. Iinns have
a compaialive advanlage in lhe loui lhings lhal make loi gieal
games-hloodsoaked sloiylines (all lhose sagas), hold design,
ace compulei piogiamming and vhal mighl he polilely called
aulislic ciealivily.
The aiiival ol lhe iPad and ils apps alloved lhe Iinnish in
dusliy lo hieak oul ol ils liozen ghello. Mi Paananen says he
nov has lhe vheievilhal lo huild lhe company ol my dieams.
Scieens on lhe vall display hov Supeicell is doing againsl ils ii
vals in ieal lime. The gamesmasleis lalk ahoul IPOs and mas
sive giovlh cuives. The company iecenlly moved inlo nev
headquaileis vhich, poignanlly, used lo he Nokias R&Dcenlie.
The mood ieecled in lhe summei ol slailups can he
lound acioss lhe iegion. inveslois eveiyvheie aie looking loi
nev oppoilunilies and hiighl young lhings aie iunning compa
Entrepreneurs
If in doubt, innovate
The Nordic region is becoming a hothouse of
entrepreneurship
neeiing, lvo ol ils coie slienglhs. They have also shovn up lhe
dovnside ol lvo ol lhe iegions gieal viilues, consensus and pa
lience. Consensushased managemenl can piove a disadvanlage
vhen indusliies aie heing disiupled hy nev lechnologies, and
palience can lead lo lhe sciapyaid. Nokia pul up vilh a lackluslie
CEOloi loui yeais. The CEOol Veslas, vhich specialises in vind
povei, is slill in place even lhough ils slocks have lallen hy ,o.
These piohlems aie nol insoluhle. Eiicsson has done hellei
lhan Nokia in pulling ilsell oul ol ils lailspin. Il is locusing on a
delensihle glohal niche, lelecommunicalions nelvoiks, and liy
ing lo luin ilsell inlo a ciealive holhouse. The companys innova
lion cenlie has come up vilh lols ol clevei vays lo shov lhal
eveiylhing lhal can he connecled vill he connecled. The com
pany is also shilling ils emphasis liom making equipmenl lo pio
viding seivices. Ils ohsession vilh ciealivily can he a lillle liying.
does ealing youi lunch o a lahlelennis lahle ieally make you
moie innovalive! Bul Eiicsson is a poveilul loice in lhe indus
liy-(o ol all mohilephone liamc passes lhiough ils nel
voiks-and il aigues sliongly lhal lhe maikel is sel lo lake o.
Even so, lhe iegions hesl companies aie ielenllessly mov
ing lheii aclivilies ahioad nol jusl in puisuil ol cheapei voikeis
(lhough lhal can help) hul also in oidei lo he close lo lhe voilds
mosl populous maikels. Such oshoiing exposes lhe iegions
higgesl veakness. lhal mosl ol ils hesl companies veie lounded
in lhe lale I,lh and eaily zolh cenluiies, and lhal ils ahilily lo ie
plenish ils coipoiale slock has declined as lhe slale has gol hig
gei. In Caliloinia {, ol lhe slales Ioo higgesl companies veie
lounded since I,)o. In Denmaik lhe numhei is jusl lhiee-and
one ol lhose lhiee, Bonus Eneigy, has heen laken ovei hy Gei
manys Siemens. In Sveden lhe numhei is jusl lvo. A counliy
lhal piides ilsell on equalily and upvaid mohilily is dominaled
hy a handlul ol capilalisl dynaslies.
Il lhe Noidic counliies aie lo geneiale lhe highqualily johs
lhal lheii cilizens iegaid as lheii hiilhiighl, lhey need lo pioduce
a nev geneialion ol successlul capilalisls. As Kaislen Dyhvad,
lhe head ol lhe Conledeialion ol Danish Indusliy, puls il, you
canl keep milking lhe same cov loi evei. 7
The Economist February 2nd 2013 9
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1
nies in conveiled vaiehouses. Hjalmai Vinhladh, one ol Sve
dens leading enliepieneuis, says lhal lhe almospheie has
changed complelely since he slailed oul in husiness in lhe eaily
I,,os. Back lhen people like him veie oddilies. Today lashion
ahle young people voiship successlul lech enliepieneuis such
as Niklas Zennslim, lhe coloundei ol Skype,
and Daniel Ek and Mailin Ioienlzon, lhe co
loundeis ol Spolily. Mi Vinhladh says lhal
his higgesl piohlem is lo alliacl young lalenl
liom olhei slailups. They all shuddei al
lhe lhoughl ol spending lheii lives in hig
oiganisalions.
Noidic goveinmenls iecognise lhal
lhey need lo encouiage moie enliepieneuis il
lhey aie lo piovide lheii people vilh highquali
ly johs, and lhal lhey can no longei iely on laige
companies lo geneiale husiness ecosyslems on lheii ovn.
They aie ciealing goveinmenl agencies lo piomole slail
ups. They aie encouiaging univeisilies lo commeicialise lheii
ideas and geneiale slailups. They aie lelling lheii schools lo sing
lhe piaises ol enliepieneuiship.
Many ol lhe iegions mosl inleiesling enliepieneuis opei
ale al lhe lov end ol lhe lech speclium, ollen lo help paienls deal
vilh lhe piaclical piohlems ol comhining lulllime voik and
lamily. Niklas Aionsson, coloundei ol a company called Iinas
Malkasse, has applied IKEAs doilyouisell model lo lamily din
neis. He deliveis hags conlaining all lhe ingiedienls needed loi a
meal, chopped up and ieady lo cook-a peilecl solulion loi peo
ple vho aie shoil ol lime hul pielei nol lo hiing up lheii childien
on lakeavay pizza.
Monica Iindsledl, loundei ol Hemliid, is also in lhe husi
ness ol selling lime. She has luined hei company inlo a house
cleaning gianl, applying piolessional managemenl lo domeslic
cleaning and luining il inlo an employmenl peik. Hemliid has
peisuaded lhe goveinmenl lo lieal housecleaning as a laxde
duclihle henehl, like a company cai. Il has also convinced com
panies lhal lhis is a gieal vay lo ievaid lheii employees and liee
lhem liom domeslic disliaclion. Hemliid nov has Io,ooo iegu
lai cuslomeis and I,{z6 employees, )o ol lhem hoin ahioad.
Noidic enliepieneuis aie also ieinvenling ieliiemenl
homes loi hahyhoomeis. A Iinnish piivale housing associa
lion, Asunlo Oy Helsingin Ioppukiii, has huill a housing com
munily in lhe suhuihs ol Helsinki lhal is dedicaled lo lhe idea ol
helping people help lhemselves. The iesidenls look an aclive
pail in designing holh lhe huildings common aieas (vhich in
clude saunas and exeicise iooms) and lheii individual als. Mosl
ol lhem ovn shaies in lhe company. Il liies lo oei a halance he
lveen independenl living and communily involvemenl. The
memheis eal logelhei once a veek and lend a communal allol
menl vhenevei lhey leel like il.
Dont go
Despile all lhis enliepieneuiial eneigy, lhe Noidic iegion
slill hnds il haid lo luin slailups inlo enduiing companies. Theie
aie loo many examples ol successlul enliepieneuis vho have
upped slicks and gone elsevheie. These include nol jusl mem
heis ol lhe poslvai geneialion such as Ingvai Kampiad, lhe
loundei ol gianl IKEA(vho lives in Svilzeiland), and Hans Raus
ing, lhe loundei ol Telia Pak, a huge packaging company (vho
venl lo live in England), hul also memheis ol lhe upandcom
ing geneialion. Mi Zennslim, along vilh many ol lhe hiighlesl
Svedish inveslois and enliepieneuis in his age gioup, lives in
Iondon. Too many successlul slailups slill choose
lo sell lhemselves lo loieign (mainly Ameiican)
mullinalionals ialhei lhan hecoming local
champions.
Slill, lheie is ieason lo hope lhal lhe
enliepieneuiial hoom vill also pioduce
a nev geneialion ol glohal champions.
The iegions lileslyle enliepieneuis
have a chance ol hecoming glohal mo
guls loi lhe same ieason lhal Mi
Kampiad did. hecause lhey aie iiding
lhe vave ol demogiaphic change. And
lhe iegions highlech enliepieneuis
have a chance ol lounding enduiing com
panies hecause lhey aie huilding up husi
nesses as vell as masleiing lechnology.
One example is Rovio Enleilain
menl, vhich sliuck gold vilh Angiy
Biids, a game lhal involves calapulling
iiascihle avians al elahoiale loiliesses
consliucled hy evil pigs. Il vas dovn
loaded moie lhan 6oom limes in zoII. Having pioduced one hig
hil, mosl games companies vould have slailed looking loi lhe
nexl one, hul inslead Rovio sel ahoul luining Angiy Biids inlo a
hiand and exlending ils ieach. Il sliuck licensing agieemenls
vilh a iange ol companies lo make Angiy Biidshianded pio
ducls, liom loys lo chocolale lo lheme paiks. Il iaised capilal
liom oulside inveslois such as Miciosoll, vhich chipped in
$(zm. Rovio nov has oo employees in Iinland and had a luin
ovei ol $Ioom in zoII. Michael Hed, lhe companys CEO, has a
liadilional coinei omce, hul il is lull ol slued hiids and pigs. 7
Despite all its entrepreneurial energy, the Nordic region
still nds it hard to turn start-ups into enduring
companies
TVENTY YEARS AGO lhe Noidic iegion vas a culluial
hackvalei. Even lhe higgesl cilies veie dead allei 8pm. The
ieslauianls oeied mealhalls oi pale veisions ol Ilalian oi
Iiench lavouiiles. The iegion did come up vilh a lev culluial
icons such as Ingmai Beigman and Ahha, and managed lo pio
duce voildclass aichilecls and designeis even al lhe heighl ol
poslvai hiulalism. Bul lhe lev successes seived only lo empha
sise lhe geneial dullness.
The hackvalei has nov luined inlo an enliepol. Slock
holm ielishes ils iepulalion as one ol lhe liveliesl cilies in Euiope
(and inluiiales ils neighhouis hy hilling ilsell as lhe capilal ol
Scandinavia). Scandinavian ciime novels have hecome a genie
in lheii ovn iighl. Danish lelevision shovs such as The Killing
and Boigen aie syndicaled acioss lhe voild. Svedish music
pioduceis aie hxluies in Hollyvood. Copenhagens Noma is
one ol lhe voilds mosl highly ialed ieslauianls and has hioughl
ahoul a lood ienaissance acioss lhe iegion.
Creativity
Cultural revolution
One of the worlds blandest regions has become one
of its most creative
10 The Economist February 2nd 2013
THE NORDI C COUNTRI ES
SPECIAL REPORT
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1
Vhy has lhe land ol lhe hland hecome a culluial povei
house! }onas Bonniei, CEOol lhe Bonniei Gioup, Svedens laig
esl media company, lhinks lhal il is pailly hecause nev lechnol
ogies aie levelling lhe playing held. Populai music vas once
dominaled hy Biilish and Ameiican ailisls vho veie ahle lo use
all soils ol inloimal haiiieis lo piolecl lheii posilion. Today,
lhanks lo lhe inleinel, somehody silling in a Slockholm allic can
ieach lhe voild. Rovios Michael Hed suggesls lhal nelvoik el
lecls aie much moie poveilul in small counliies. as soon as one
viilei ciacks lhe glohal deleclive maikel, dozens ol olheis quick
ly lollov.
All liue. Bul lheie is no poinl in giving people miciophones
il lhey have nolhing lo say. The higgei ieason vhy lhe iegions
viileis and ailisls-and indeed chels and game designeis-aie
calching lhe voilds allenlion is lhal lhey aie so lull ol vim. They
aie ieinvenling old loims such as lhe deleclive sloiy oi lhe eve
ning meal hul also coming up vilh enliiely nev loims such as
video games loi iPads.
The culluial ienaissance is lhus pail ol lhe olhei changes
lhal have laken place in lhe iegion. A closed sociely lhal vas
dominaled hy a single polilical oilhodoxy (social demociacy)
and hy a naiiov dehnilion ol nalional idenlily (say, Svedish
ness oi Iinnishness) is heing shaken up hy poveilul loices such
as glohalisalion and immigialion. All lhe Noidics aie engaged in
a huge dehale ahoul lheii idenlily in a poslsocial democialic
voild. Thinklanks such as Denmaiks Cepos aunl picluies ol
Millon Iiiedman in lhe same vay lhal sludenl iadicals once
aunled picluies ol Che Guevaia. Viileis expose lhe daik un
deihelly ol lhe old social democialic iegime. Chels vill piepaie
anylhing undei lhe sun as long as il is nol mealhalls.
The iegions idenlily ciisis is ciealing a mulliculluial explo
sion. The Noidics aie scavenging lhe voild loi ideas. They con
linue lo enjoy a lovehale ielalionship vilh Ameiica. They aie
discoveiing inspiialion liom lheii gioving elhnic minoiilies hul
aie also ieaching hack inlo lheii ovn culluial liadilions. Svedish
ciime viileis ievel in lhe peculiaiilies ol lheii culluie. Danish
chels ieluse lo use loieign ingiedienls. A iegion lhal has ollen lell
lhe need lo apologise loi ils culluie-lhose hloodlhiisly Vikings!
Those loecuiling Ahha lyiics! Those na hsheimens jum
peis!-is enjoying a suige ol iegional piide.
Blood and snow
Ovei lhe pasl decade Scandinavia has hecome lhe voilds
leading pioducei ol ciime novels. The lvo Svedes vho did
moie lhan anyone else lo eslahlish Noidic noii-Slieg Iaisson
and Henning Mankell-have holh lell lhe scene ol ciime. Iais
son died ol a heail allack in zoo( heloie his lhiee hooks ahoul a
giil vilh a diagon lalloo hecame a glohal sensalion. Mi Mankell
consigned his heio, Kuil Vallandei, lo Alzheimeis allei a dozen
heslselleis. Bul lheii hooks conlinue lo he houghl in lheii mil
lions. Diagon Talloo has sold moie lhan om, and lhe Vallan
dei hooks colleclively even moie.
A gioup ol nev viileis, such as }o Nesho in Noivay and
Camilla Iackheig in Sveden, aie deleimined lo keep lhe ame
huining. And lhe ciime vave is spieading heyond adull hclion
and lhe viillen void. Svedens Mailin Vidmaik viiles delec
live sloiies loi childien. Svedish and Biilish lelevision pioduc
eis compele lo make lhe hesl veision ol Vallandei. The Killing
eslahlished a nev slandaid loi lelevised ciime diama.
The iegion has a long liadilion ol ciime viiling. Pei Vah
loo and Maj Sjovall, a Svedish hushandandvile leam, eained
a dedicaled lolloving among ahcionados vilh lheii police nov
els in lhe I,6os and I,)os. They also eslahlished lvo ol Noidic
noiis mosl appealing memes. Mailin Beck is an illnesspione
depiessive vho gels lo lhe liulh hy dinl ol ielenlless plodding.
The len Mailin Beck novels piesenl Sveden as a capilalisl hell
hole lhal can he saved only hy emhiacing Sovielslyle commu
nism (lhe ciime al lhe heail ol lhe novels is lhe social democialic
syslems heliayal ol ils piomise).
Todays ciime viileis conlinue lo piohl liom lhese conven
lions. Iaissons Sveden, loi example, is a ciyplolascisl slale iun
hy a conspiiacy ol psychopalhic husinessmen and secielseivice
agenls. Bul lodays Noidic ciime viileis have lvo advanlages
ovei lheii piedecessois. The hisl is lhal lheii hilheilo homoge
nous culluie is hecoming moie vaiiegaled and lheii peacelul soci
ely has sueied inexplicahle houls ol violence (such as lhe assas
sinalion in I,86 ol Svedens piime minislei, Olol Palme, and in
zoo{ ol ils loieign minislei, Anna Iindh, and Andeis Bieiviks
muideious iampage in Noivay in zoII). Noidic noii is in pail an
exlended medilalion on lhe lension helveen lhe old Scandina
via, vilh ils lov ciime iale and monochiome culluie, and lhe
nev one, vilh all ils lhieals and possihililies. Mi Mankell is oh
sessed hy lhe disiuplion ol smalllovn lile hy glohal loices such
as immigialion and loieign ciiminal gangs. Each seiies ol The
Killing locuses as much on lhe leais-pailiculaily ol immigianl
minoiilies-lhal lhe killing exposes as il does on lhe ciime ilsell.
The second advanlage is somelhing lhal Vahloo and Sjo
vall vould have lound iepulsive. a huge indusliy complele vilh
suppoil syslems and lhe piomise ol hig piizes. Ms Iackheig he
gan hei caieei in an alllemale ciimeviiling class. Mi Mankell
viole uniemuneialive novels and plays heloie luining lo a lile ol
ciime. Thanks in pail lo Iaisson, ciime hclion is one ol lhe ie
gions higgesl expoils. a hiand lhal comes vilh a guaianlee ol
qualily and a disliihulion syslem lhal slielches liom Slockholm
lo Hollyvood.
Dinnei in Copenhagen can come as a suipiise lo even lhe
mosl jaded loodie. The dishes aie moie likely lo he seived on
slahs ol iock oi pieces ol vood lhan on plales. The gainish ollen
lakes lhe loim ol leaves oi lvigs. Many ingiedienls, such as sea
cahhage oi vild oveis, aie unlamiliai, and lhe moie lamiliai
soil, such as pike, aie ollen leamed vilh less lamiliai ones, such
Foraging for fame
The Economist February 2nd 2013 11
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as uniipe eldeiheiiies.
Copenhagen is lhe ieslauianl capilal ol Euiope, laigely
lhanks lo Noma, vhich has heen ialed among lhe voilds hesl
ieslauianls loi lhe pasl lhiee yeais, and lo ils loundeis, Claus
Meyei and Rene Redzepi. Mi Redzepi, lhe head chel, eschevs lhe
slandaid laie ol Medileiianean cooking such as olive oil and
sundiied lomaloes in lavoui ol local pioducls such as mush
iooms, cloudheiiies, seaveed and oveis, vhich he collecls
liom heaches and hedgeiovs. His signaluie dishes include vege
lahles in soil (a mixluie ol oui, melled hullei and heei) and
lhe Hen and lhe Egg (vhich cuslomeis aie asked lo cook loi
lhemselves, undei supeivision). Nomas guesls should expeii
ence somelhing lhal can only happen in lhis pailiculai pail ol
lhe voild and in lhis pailiculai cily, he says. Bul lhey need lo he
palienl. lhe vailing lisl loi hookings is lhiee monlhs.
The lhousands vho aie luined avay liom Noma slill have
plenly lo choose liom. Mi Meyeis lood empiie includes a hak
eiy chain, a caleiing husiness, a vinegai hieveiy, an oiganic oi
chaid, a colleclion ol puhlic allolmenls and a Noidic Iood Iah
lhal opeiales liom a hoal heilhed iound lhe coinei liom Noma,
all dedicaled lo his mission lo iid Denmaik ol ils uniloim, ge
neiic, passionless lood. Noma has dozens ol imilaloiscum
compelilois, such as Geianium in Copenhagen, Malling &
Schmidl in Aaihus and Ti Tiin Ned in Iiedeiicia. Iocal supeimai
kels sell local vild gailic. The heaches and hedgeiovs aie lhick
vilh loodies scavenging loi lheii dinnei.
Open-source culture
The Biemen lhealie used lo he one ol lhe mainslays ol lhe
poinogiaphy indusliy. mighly piinling piesses vhiiied day and
nighl in oidei lo slake lhe voilds lhiisl loi picluies ol copulaling
Danes. Today il is lhe home ol Volcano, a mullilaceled enlei
lainmenl company lhal employs zz people. Ils hoss, Kiislian
Riis, is liying lo hiing imaginalive aii lo lhe ollen iouline husi
ness ol iunning a nighlcluhcumconceil hall. He mixes conceils
vilh slandup comedy and quiz nighls and pailiculaily piides
himsell on his ahilily lo connecl dieienl voilds. He
helps lhe loieign minisliy lealuie Danish musicians
in Danish emhassies ahioad. He aiianges deals he
lveen companies vho vanl lo ieach lhe young and
hands lhal vanl lo make money. These deals usually
hieak dovn hecause companies lack nuance (lhey ex
pecl hands lo veai lheii logos oi Tshiils) and hands
conslanlly voiiy ahoul selling oul. Volcano leels il can hiing
lhese lvo voilds logelhei hecause veie nol aliaid ol lalking
ahoul money.
Much lhe higgesl iegional povei in lhe music indus
liy is Sveden. Ils iecoid pioduceis and songviileis aie a
hig loice in lhe Ameiican iecoid indusliy. ahoul a lhiid
ol lhe iecoids in lhe Billhoaid Ioo heslselleis have
Svedish hngeipiinls on lhem. Sveden has also pio
duced gioups lhal have enjoyed inleinalional success in
lheii ovn iighl, such as Svedish House Maha, Rohyn
and, moie iecenlly, The Tallesl Man on Eailh.
So lai Iinland has nol exlended ils success in video
games lo olhei aieas ol lhe culluie indusliy. Iinnish delec
live novels aie loo depiessing. Iinnish music is loo loiluied.
Bul do nol mislake lack ol glohal ieach loi lack ol ciealivily. lhe
counliy lhal pioduced Iinux, an opensouice compulei opeial
ing syslem, is also pioud lo he ahle lo oiganise opensouice cul
luial happenings lhal allov anyone lo have a go.
The higgesl annual nalional opeia leslival lealuied an
opensouice opeia in zoIz. Helsinki has an annual ieslauianl
day vhen eveiyhody is encouiaged lo seive up vhal lhey like.
Paiks hll vilh popup ieslauianls. Slieels aie conveiled inlo oul
dooi ealeiies. Reslauianl day has inspiied a succession ol olhei
days such as spiingcleaning day (vhen Helsinki hecomes a
gianl ea maikel) and leaching day (vhen games playeis leach
people hov lo design games and cohhleis hov lo cohhle).
These kinds ol cilizenled evenls and innovalions make Helsin
ki a ieally good cily al lhe momenl, says Ouli Kuillinen ol De
mos, a local lhinklank. Il used lo he a lol dullei. 7
NORVAY IS THE odd man oul in lhe Noidics. Vhile ils
neighhouis aie iiling vilh liee maikels, Noivay is em
hiacing slale capilalism. Ils nalional oil champion, Slaloil, is lhe
laigesl company in lhe iegion. The Noivegian slale ovns laige
slakes in Telenoi, lhe counliys higgesl lelephone opeialoi,
Noisk Hydio, ils higgesl aluminium pioducei, Yaia, ils higgesl
leililisei makei, and DnBNoi, ils higgesl hank. Il holds {) ol lhe
Oslo slockmaikel, hul il also conliols some nonlisled gianls
such as Slalkiall, a poveigeneialoi, vhich il lisled vould he lhe
lhiidhiggesl company on lhe slockmaikel.
The simple explanalion loi Noivays penchanl loi slale
capilalism is oil. Vhen il vas discoveied in lhe Noilh Sea in lale
I,6, il liansloimed lhe counliys economy. Today Noivay is lhe
voilds eighlhlaigesl oil expoilei. Pelioleum accounls loi {o
ol lhe goveinmenls ievenues as vell as a quailei ol lhe coun
liys value added.
Theie is also a moie nuanced explanalion. Noivegians
Norway
The rich cousin
Oil makes Norway dierent from the rest of the
region, but only up to a point
have alvays looked lo lhe slale lo help manage lheii ahundanl
naluial iesouices-mineials, ljoids, loiesls, valeilalls-and lo
look allei isolaled and lhinly spiead communilies. Noivay has a
populalion densily ol only I{ people pei squaie kilomelie. Noi
vay also came up vilh lhe idea ol lhe slale ovning shaies in
piivale companies. allei lhe second voild vai lhe goveinmenl
nalionalised all Geiman husiness inleiesls in Noivay and end
ed up ovning (( ol Noisk Hydios shaies. The loimula ol con
liolling husiness lhiough shaies ialhei lhan iegulalion seemed
lo voik vell, so lhe goveinmenl used il vheievei possihle. Ve
invenled lhe Chinese vay ol doing lhings heloie lhe Chinese,
says Toigei Reve ol lhe Noivegian Business School.
In iecenl yeais lhe Noivegians have heen adjusling lheii
model lo gel lhe hesl comhinalion ol slale conliol and glohal
compelilion. In zoo) lhey meiged lvo slale companies, Slaloil
and Hydio, in oidei lo cieale a nalional champion. They also ie
duced lhe slales shaie lo 6z.. Ioi some lhis shovs lhal Noi
vay is liheialising. Bul lhe slialegy is iemaikahly similai lo lhal
heing adopled in China and olhei slalecapilalisl counliies.
Noivays slale capilalism has iesulled in seveial oddilies. Il
has made lhe counliy lhe only veslein Euiopean memhei ol lhe
OPECcluh ol oil pioduceis. Il is also lhe only advocale ol human
iighls among lhem-and a poveilul one, lhanks lo ils conliol ol
lhe Nohel peace piize. Noivay has heen ahle lo cling onlo moie
ol ils old social democialic hahils lhan ils neighhouis. The oil
hoom led lo a hoom in puhlic spending. since lhe I,)os lhe num
hei ol people employed in educalion has douhled and lhal in
heallh and social seivices has quadiupled. The puhlic secloi
conlinues lo accounl loi z ol Noivays GDP.
Oil veallh is hiinging ils ovn piohlems. The oil secloi is
monopolising lhe nalions lechnical lalenl, vilh moie lhan
o,ooo engineeis cuiienlly heing employed oshoie. Piopeily
piices aie iising hy neaily ) a yeai. McDonalds chaiges $).6, loi
a Big Mac, againsl $(.{) in Ameiica.
Oiling the wheels of welfare
Iellov Noidics like lo dismiss Noivay as lhe voilds mosl
noilheily Aiah counliy, hul lhe mosl sliiking lhing ahoul Noi
vay is hov quinlessenlially Noidic il is. Oil may have hlled ils
coeis and ieconhguied ils polilical economy, hul il has nol
changed ils culluie. Oslo is singulaily liee liom lhe soaiing sky
sciapeis and hlinghlled shopping malls lhal spioul in olhei oil
capilals. The nev opeia house is magnihcenl, hul il liies ils hesl
lo look modesl. The Munch Museum, celehialing lhe counliys
mosl lamous painlei, is housed in a conciele mausoleum.
The Noivegians aie vell avaie ol oils leiiihle ahilily lo
luin iiches inlo iags and sages inlo lools. Back in I,,o lhey eslah
lished a soveieignveallh lund (loimally knovn as lhe Govein
menl Pension Iund Glohal) lo piepaie lhe counliy loi a posloil
luluie and lo pievenl deindusliialisalion. They also used lhe oil
indusliy lo piomole olhei local indusliies such as shipping.
The lund is nol vilhoul ils piohlems, such as ils size (il nov
accounls loi I ol all lhe voilds slocks), ils leisuiely appioach (il
vas slov lo exploil lhe oppoilunilies oeied hy lhe zoo)o8 h
nancial ciisis) and ils penchanl loi hlacklisling oending compa
nies. Bul il is neveilheless one ol lhe hesliun in lhe voild. The
Noivegians have eslahlished a cleai division helveen lhe h
nance minisliy as ovnei and lhe cenlial hank as managei. They
aie nov liying lo impiove ieluins and diveisily iisks.
The oil veallh has nol deslioyed Noivays egalilaiian spiiil.
Iinn }ehsen, chaiiman ol lhe Kongsheig Gioup, vhich has laige
delence inleiesls, poinls oul lhal his counliy has some ol lhe
voilds heslpaid manual voikeis and some ol lhe voislpaid
CEOs. hluecollai voikeis eain lhiee limes as much as lheii Biil
ish peeis, vheieas lhe hoss ol Slaloil eains
jusl a couple ol million dollais a yeai.
Many ol Noivays iichei cilizens live in
Iondon lo escape liom high laxes and a
somevhal clausliophohic sociely.
Slill, Noivay is changing lasl. nev
veallh is pulling in nevcomeis liom all
ovei lhe voild and shaking nalives oul ol
some ol lheii old hahils. In Oslo you nov
see nouveaux riches ashing lheii veallh,
diug addicls and diopouls hegging loi
money, an aimy ol Svedish haimen and
vailiesses and men vilh piayei heads
diiving laxis. Some II ol Noivays iesi
denls veie hoin elsevheie.
Iike ils neighhouis, Noivay vanls lo
occupy upmaikel niches and sell ils expei
lise lo lhe iesl ol lhe voild. Ils goveinmenl
ciealed Slaloil oul ol nolhing hy compel
ling piivale oil companies lo hand ovei
some ol lheii expeilise in ieluin loi lheii
conliacls and hy huilding on lhe counliys
eslahlished skills in shipping. Il hadgeied
lhe company lo innovale hy laxing piohls
heavily hul pioviding geneious lax ieliel on R&Dspending.
Noivay is nov lhe voilds deepsea diilling capilal. Slaloil
is a leading glohal company in ils ovn iighl as vell as heing al lhe
cenlie ol an elahoiale nelvoik lhal includes Noivegian compa
nies such as Akei Solulions and Kongsheig Maiilime and lhe
deepsea divisions ol loieign oil companies such as Schlum
heigei. Noivegian companies have leained hov lo diill hoiizon
lally as vell as veilically. They have also cul lhe cosl ol exploi
aloiy diilling hy developing lechnologies loi mohile iigs lhal
allovs lhem lo he kepl sleady in iough vealhei. The demand loi
lhis expeilise is hooming.
Noivay applies lhe same slialegy lo liadilional indusliies
such as hshing, logging and mining. Ils ljoids aie home lo lhe
voilds mosl advanced hshlaiming indusliy. Ils pulp and papei
companies aie moving inlo hioiehning. Ils liadilion ol exploiling
naluial iesouices (ve live o vhal ve hnd in naluie is a com
mon ieliain) is giving iise lo nev occupalions such as hioloiag
ing. Noivegian aquaculluiisls aie selling lheii expeilise lo olhei
counliies lhal specialise in hsh laiming, such as Chile.
Noivay has also caughl lhe iegions enlhusiasm loi enlie
pieneuiship. The goveinmenl is piomoling nev husinesses
lhiough hodies such as Innovalion Noivay and univeisily sci
ence paiks. Venluiecapilal hims such as Noilhzone, loo, aie on
lhe lookoul loi clevei ideas. The Noivegian Inslilule loi Aii Re
seaich has come up vilh a device lhal can measuie lhe levels ol
volcanic ash in lhe aii. Clean Maiine has invenled a vay ol clean
ing ships exhausl. Noivay also has a ouiishing culluie indus
liy. Kail Ove Knausgaid, lhe aulhoi ol My Sliuggle (in six vol
umes), is a huge lileiaiy lalenl.
Noivay is also a sliong exponenl ol Noidic social values,
suppoiling negolialed solulions ahioad and humanilaiian poli
cies al home. Ol lale il has nol heen a vise guaidian ol ils higgesl
souice ol soll povei. Giving Baiack Ohama lhe Nohel peace piize
heloie he had a chance lo do anylhing, oi lo lhe Euiopean Union
The countrys principled response to the actions of
Anders Breivik, who committed mass murder in the
name of white supremacy, was deeply impressive
12 The Economist February 2nd 2013
THE NORDI C COUNTRI ES
SPECIAL REPORT
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The Economist February 2nd 2013 13
SPECIAL REPORT
THE NORDI C COUNTRI ES
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CECII RHODES ONCE iemaiked lhal lo he hoin an Eng
lishman is lo vin hisl piize in lhe lolleiy ol lile. Today lhe
same lhing could he said ol heing hoin Noidic. The Noidic coun
liies have nol only laigely escaped lhe economic piohlems lhal
aie convulsing lhe Medileiianean voild, lhey have also laigely
escaped lhe social ills lhal plague Ameiica. On any measuie ol
lhe heallh ol a sociely-liom economic indicalois like pioducliv
ily and innovalion lo social ones like inequalily and ciime-lhe
Noidic counliies aie galheied neai lhe lop (see lahle).
Vhy has lhis iemole, lhinly populaled iegion, vilh ils
lieezing vinleis and expanses ol vildeiness, pioved so success
lul! Theie vas a lime vhen mosl ol ils populalion vould have
unhesilalingly piaised lheii goveinmenl, vhich loi mosl ol lhe
zolh cenluiy meanl lhe social democials in one ol lheii vaiious
nalional guises. The goveinmenl had piovided lhe people vilh
ciadlelogiave vellaie seivices, iescuing lhem liom lhe hiulal
lile ol lheii I,lhcenluiy loieheais, and slepped in lo save lhe
capilalisl economies liom lheii peiiodic ciises.
Bul lieemaikeleis have poked holes in lhe piogovein
menl explanalion and oeied a poveilul alleinalive. In lhe pei
iod liom I8)o lo I,)o lhe Noidic counliies veie among lhe
voilds lasleslgioving counliies, lhanks lo a seiies ol piohusi
ness ieloims such as lhe eslahlishmenl ol hanks and lhe piivali
salion ol loiesls. Bul in lhe I,)os and I,8os lhe undisciplined
giovlh ol goveinmenl caused lhe ieloims lo iun inlo lhe sands.
Iieemaikeleis pul lhe iegions impiessive iecenl peiloimance
dovn lo ils deleiminalion lo ieduce goveinmenl spending and
sel enliepieneuis liee.
Goveinmenls iole in impioving equalily is also heing
queslioned. Andieas Beigh, ol Svedens Reseaich Inslilule ol In
dusliial Economics, aigues lhal lhe compiession ol Svedish in
comes look place heloie lhe aiiival ol lhe vellaie slale, vhich
vas a consequence ialhei lhan a cause ol lhe iegions piospei
ily-and almosl killed lhe goose lhal laid lhe golden eggs.
This special iepoil has suppoiled some ol lhe lieemaikel
eis aigumenls. The Noidic counliies had gol inlo lhe hahil ol
spending moie on vellaie lhan lhey could aoid and ol ielying
moie on a handlul ol gianl companies lhan vas vise. They aie
iighl lo liy lo liim lheii slales and make lile easiei loi husiness.
Bul il vould he viong lo ignoie lhe iole ol goveinmenl enliiely.
The Noidic counliies piide lhemselves on lhe honesly and
lianspaiency ol lheii goveinmenls. Noidic goveinmenls aie
suhjecl lo iigoious sciuliny. loi example, in Sveden eveiyone
has access lo all omcial iecoids. Polilicians aie vilihed il lhey gel
o lheii hicycles and inlo omcial limousines.
The Noidics have added lvo olhei impoilanl qualilies lo
lianspaiency. piagmalism and loughmindedness. On discovei
ing lhal lhe old social democialic consensus vas no longei
voiking, lhey lel il go vilh iemaikahly lillle luss and inlioduced
nev ideas liom acioss lhe polilical speclium. They also pioved
ulleily deleimined in pushing lhiough ieloims. Il is a giave eiioi
lo mislake Noidic niceness loi sollheadedness.
Piagmalism explains vhy lhe nev consensus has quickly
ieplaced lhe old one. Iev Svedish Social Democialic polili
cians, loi inslance, vanl lo dismanlle lhe conseivalive ieloims
pul in place in iecenl yeais. Il also explains vhy Noidic counliies
can ollen seem lo he amalgams ol lell and iighlving policies.
Piagmalism also explains vhy lhe Noidics aie conlinuing
lo upgiade lheii model. They slill have plenly ol piohlems. Theii
goveinmenls iemain loo hig and lheii piivale seclois loo small.
Theii laxes aie slill loo high and some ol lheii henehls loo genei
ous. The Danish syslem ol exicuiily puls loo much emphasis
on secuiily and nol enough on exihilily. Noivays oil hoom is
lhiealening lo deslioy lhe voik elhic. Il is a had sign lhal ovei 6
ol lhe voikloice aie on sick leave al any one lime and aiound ,
ol lhe voikingage populalion live on disahilily pensions. Bul
lhe Noidics aie conlinuing lo inlioduce sliucluial ieloims, pei
haps a hil loo slovly hul slolidly and ielenllessly. And lhey aie
doing all lhis vilhoul saciihcing vhal makes lhe Noidic model
so valuahle. lhe ahilily lo invesl in human capilal and piolecl
people liom lhe disiuplions lhal aie pail ol lhe capilalisl syslem.
Getting to Denmark
Mosl ol lhe iich voild nov laces lhe same piohlems lhal
lhe Noidics laced in lhe eaily I,,os-oulolconliol puhlic
spending and oveigeneious enlillemenl piogiammes. Soulhein
Euiope needs a dose ol Noidic loughmindedness il il is lo gel ils
hnances undei conliol. And Ameiica needs a dose ol Noidic
piagmalism il il is lo have any chance ol ieining in enlillemenls
and ieloiming lhe puhlic secloi.
Lessons
The secret of their
success
The Nordic countries are probably the best-governed
in the world
Top of the class
Sources: World Economic Forum; World Bank; INSEAD and
World Intellectual Property Organisation; Transparency
International; UNDP; Legatum
*Based on equal weighting
of indices

2011 ranking
2012 index rankings

Global Ease of Corruption Human
Overall compet- doing Global percep- develop-
rank* Country itiveness business innovation tions ment

Prosperity
1 Sweden 4 13 2 4 10 3
2 Denmark 12 5 7 1 16 2
3 Finland 3 11 4 1 22 7
4 Norway 15 6 14 7 1 1
5 Switzerland 1 28 1 6 11 9
6 New Zealand 23 3 13 1 5 5
7 Singapore 2 1 3 5 26 19
8 United States 7 4 10 19 4 12
9 Netherlands 5 31 6 9 3 8
10 Canada 14 17 12 9 6 6
11 Hong Kong 9 2 8 14 13 18
12 Australia 20 10 23 7 2 4
13 Britain 8 7 5 17 28 13
14 Germany 6 20 15 13 9 14
15 Ireland 27 15 9 25 7 10
in lhe midsl ol a euio ciisis, mighl have heen hne individually,
hul doing holh in iapid succession vas had managemenl.
Slill, lhe counliys piincipled iesponse lo lhe aliocilies pei
pelialed hy Andeis Bieivik vas deeply impiessive. Mi Bieivik
hlev up eighl goveinmenl huildings in Oslo, killing eighl people,
and lhen shol dead 6, moie, mosl ol lhem leenageis, on lhe
neaihy island ol Uloya. He commilled mass muidei in lhe name
ol vhile supiemacy. Yel lhe counliys ieaclion vas a model ol ie
sliainl. The couil gave him an impeccahly laii liial and sen
lenced him lo zIyeais in piison. He nov spends his lime viiling
lelleis complaining ahoul lile in his mini Ahu Ghiaih and
voiking on a hook lo explain his aclions. 7
ues in ovei Ioo counliies since
I,8I, says lhal lhe Noidics aie
lhe voilds higgesl helieveis in
individual aulonomy. The Noi
dic comhinalion ol hig govein
menl and individualism may
seem odd lo some, hul accoid
ing lo Iais Tiagaidh, ol Eisla
Skondal Univeisily College,
Slockholm, lhe Noidics have no
liouhle ieconciling lhe lvo.
lhey iegaid lhe slales main joh
as piomoling individual aulon
omy and social mohilily. Any
piece ol Noidic social legisla
lion-pailiculaily lhe lamily
lavs ol iecenl yeais-can he jus
lihed in leims ol individual au
lonomy. Univeisal liee educa
lion allovs sludenls ol all
hackgiounds lo achieve lheii
polenlial. Sepaiale laxalion ol
spouses puls vives on an equal
looling vilh lheii hushands.
Univeisal day caie loi childien
makes il possihle loi holh pai
enls lo voik lulllime. Mi Tia
gaidh has a uselul phiase lo de
sciihe lhis menlalily. slalisl
individualism.
Noidic people lake lhis al
lilude lo goveinmenl vilh lhem vhen lhey go ahioad. In lhe
I,lh and eaily zolh cenluiies some I.{m people, a quailei ol lhe
Svedish populalion al lhe lime, emigialed, moslly lo lhe Uniled
Slales. Ameiica ciealed an enliie genie ol jokes ahoul dumh
Svedes and lheii villingness lo ohey iules. These dumh
Svedes ciealed lhe heslgoveined enclaves in Ameiica, such as
Minnesola. Even loday Ameiicans vilh
Noidic iools aie Io moie likely lhan lhe
aveiage Ameiican lo helieve lhal mosl
people can he liusled.
Size isnt everything
Economisls liequenlly expiess puz
zlemenl ahoul lhe Noidic counliies ie
cenl economic success, given lhal lheii
goveinmenls aie so hig. Accoiding lo a
piolessional iule ol lhumh, an inciease in
lax ievenues as a shaie ol GDP ol len pei
cenlage poinls is usually associaled vilh
a diop in annual giovlh ol hall lo one
peicenlage poinl. Bul such numheis need
lo he adjusled lo allov loi lhe henehls ol
honesly and emciency. The Ilalian gov
einmenl, loi inslance, imposes a heavy
huiden on sociely hecause lhe polilicians
vho iun il aie mainly conceined vilh ex
liacling ienl ialhei lhan pioviding puhlic
seivices. Goian Peisson, a loimei Sved
ish piime minislei, once compaied Sve
dens economy vilh a humhlehee-vilh
ils oveily heavy hody and lillle vings,
supposedly il should nol he ahle lo y-
hul il does. Today il is hghling hl and y
ing hellei lhan il has done loi decades. 7
The Noidics aie haidly hlushing violels vhen il comes lo
adveilising lhe viilues ol lheii model. Noidic lhinklanks pio
duce delailed sludies in English ahoul hov lhey ieloimed lheii
slales. Noidic polilicians hghl lheii coinei in inleinalional meel
ings and Noidic consullanls sell lheii puhlicsecloi expeilise
aiound lhe voild. Dag Dellei played a leading iole in iesliuclui
ing lhe Svedish slales commeicial poillolio in lhe I,,os, iepie
senling moie lhan a quailei ol lhe husiness secloi. He has since
advised goveinmenls in Asia and acioss Euiope.
Yel il is haid lo see lhe Noidic model ol goveinmenl spiead
ing quickly, mainly hecause lhe Noidic lalenl loi goveinmenl is
sui generis. Noidic goveinmenl aiose liom a comhinalion ol dil
hcull geogiaphy and henign hisloiy. All lhe Noidic counliies
have small populalions, vhich means lhal memheis ol lhe iul
ing eliles have lo gel on vilh each olhei. Theii monaichs lived in
ielalively modesl places and lheii haions had lo sliike haigains
vilh independenlminded peasanls and sealaieis.
They emhiaced liheialism eaily. Sveden guaianleed liee
dom ol lhe piess in I)66, and liom lhe I8(os onvaids il aholished
pieleience loi aiislocials in handing oul lop goveinmenl johs
and ciealed a meiilocialic and coiiuplionliee civil seivice. They
also emhiaced Pioleslanlism-a ieligion lhal ieduces lhe chuich
lo a helpmale and emphasises lhe diiecl ielalionship helveen
lhe individual and his God. One ol lhe Iulheian chuichs main
piioiilies vas leaching peasanls lo iead.
The comhinalion ol geogiaphy and hisloiy has piovided
Noidic goveinmenls vilh lvo poveilul iesouices. liusl in
sliangeis and heliel in individual iighls. A Euiohaiomelei sui
vey ol hioad social liusl (as opposed lo liusl in immediale lam
ily) shoved lhe Noidics in leading posilions (see chail helov).
Economisls say lhal high levels ol liusl iesull in lovei liansac
lion cosls-lheie is no need lo iesoil lo Ameiicanslyle lavsuils
oi Ilalianslyle quidpioquo deals in oidei lo gel lhings done.
Bul ils viilues go heyond lhal. Tiusl means lhal highqualily peo
ple join lhe civil seivice. Cilizens pay lheii laxes and play hy lhe
iules. Goveinmenl decisions aie videly accepled.
The Voild Values Suivey, vhich has heen moniloiing val
Source: European Commission *Including the press, political parties, national government, the EU and UN
Public trust in institutions*
November 2012, % responding tend to trust
0 10 20 30 40 50 60
Finland
Denmark
Sweden
EU-27
Russia
SPECIAL REPORT
14 The Economist February 2nd 2013
2
THE NORDI C COUNTRI ES
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