David Brooks, writing in the New York Times, envies the higher degree of social trust he observes among the Nordic people. It is a precious resource when facing an epidemic. It would also be valuable when facing disasters accompanying the climate crisis.
The willingness of individuals to prioritize the protection of the community as a whole depends largely on social trust, and we’re far enough into this pandemic now to see that countries are showing varying levels of it. In Scandinavia, the grocery stores are not experiencing great rushes of people to stock up on food and toilet paper. Meanwhile, in New Jersey, we see not only panic buying but also angry shouting matches between city-dwellers rushing to their seashore summer houses and local dwellers trying to protect their hospitals.
People trust a system that reliably supports security, solidarity and individual freedom to make major life choices. They learn that trust — or don’t — through how well the system comes through for them.
The contrast between Nordics and Americans these days reveals their contrasting systems.
It’s trust, along with self-interest, that made it possible in Denmark for political parties quickly to unite despite their differences to “bet the farm” — the integrity of their fiscal future — on a gigantic “freeze” of the economy. This revolutionary measure keeps workers on their employers’ payrolls even though the epidemic keeps them away from their jobs.
The New York Times editorial board on March 25 praised the Danish approach as far superior to the American $2 trillion dollar package passed last week. The Times’ explanatory article a few days later emphasizes over and over ways that the ongoing Danish political economy is different from — and better than — that of the United States.
Pandemic as a rehearsal for facing climate disasters to come
The coronavirus is a run-through for the mega-disasters that will come if we continue carbon pollution. Subsidizing oil companies is like continuing a profit-driven health system — both ensure that the needless deaths that didn’t make the headlines last year will multiply when a crisis hits.
The Climate Change Performance Index, for example, in its 2020 report rates the Nordics in the top fifth of nations, while the United States is at the very bottom. This is why learning about different systems’ ability to generate social trust is essential.
It’s not an accident that Denmark, which re-designed an approach to globalization, also innovated when facing the coronavirus pandemic by “freezing the economy.”
A century ago the Nordics’ political economy, which was free market capitalism, did not earn people’s trust and therefore didn’t get it. True, those countries were small and homogeneous, but the common people’s trust in their system was in the toilet, as surveys find that our trust is today. Enough Nordic people rose up against their establishments to shift the power and create a different, trustworthy system.
Fareed Zakaria, however, doesn’t believe they have a different system. In his Washington Post column “Bernie Sanders’s Scandinavian Fantasy” he observes, correctly, that the Nordics have some characteristics that are found in free market capitalism. His article then focuses on individual aspects of the Nordic model rather than looking at the system as a whole. That prevents him from seeing that the Nordics like to design their systems to prevent problems that, in the United States, we’ve tried to come up with specific remedies to correct.
The minimum wage is one such remedy. Classic capitalism doesn’t include a minimum wage because it interferes with the free market. The labor movement, rebelling against workers’ poverty, demanded the minimum wage. Our economic elite accepted it — late and grudgingly — and is still fighting against those calling for a standard of $15 per hour.
The Nordic countries don’t have a legislated minimum wage. Aha, cries Zakaria. They must be free market economies!
He doesn’t even try to explain how it can be that in Copenhagen, McDonald’s hamburger flippers earn $20 per hour. This is characteristic of his article: By focusing on individual features, Zakaria misses the system. As the old saying goes, he “can’t see the forest for the trees.”
We can understand the Danish hamburger flipper and the high wages of all workers if we stand back and look at the Scandinavian forest. We notice the very high density of union membership there, and also the Nordic model’s commitment to full employment. In that kind of system, if McDonald’s wants to sell hamburgers in Copenhagen, they’ll have to pay to get the workers.
The Nordics love design that enhances good living through incentives. That happens at many points in their system, which is why they get high marks in the business world for relative “freedom from regulation.” You don’t need to over-regulate, bogging down the system in bureaucracy, if you have an overall design that incentivizes good behavior.
It especially helps if people’s movements have already won so many battles with the economic elite that they’ve won a democratic system. Matt Bruenig, who also responded to Zakaria’s column, helps us to see the forest, writing, “In Finland, it is the business lobby that pleads for the creation of a minimum wage and the unions that repeatedly slam the idea as a right-wing ploy meant to undermine the wages of workers. The lack of minimum wage is not because of market liberalism. It’s because the labor institutions in the country are so far left that the minimum wage is seen as conservative by comparison.”
While many capitalist enterprises are alive and well in Finland, they also have a widespread co-operative movement. In fact, there are more member-owners of co-ops than there are Finns!
Considering how important globalization is in today’s economic world, Zakaria’s complete misunderstanding of the Nordics is mind-boggling. It is caused, once again, by his fascination with individual trees and an inability to see the forest.
He’s right that globalization has left most nations engaged in a “race to the bottom,” in which jobs are moved from one country to another to exploit workers and the environment.
The Nordics at first tried to keep jobs at home by subsidizing their corporations to keep factories open. Denmark, pessimistic about that strategy’s viability, made a major change. The government, instead of subsidizing corporate owners, re-directed its resources to the workers.
When a factory closed, Danish workers received from the government a very high percentage of their wages while re-training for other available jobs or going back to school, including their famously free universities. Of course workers retained health care (universal), pension payments (universal) and other supports. They also got a relocation grant if their new job was in another part of the country.
New jobs keep appearing in Nordic countries because they are far more supportive of start-ups than the free market capitalist United States. The title of Inc.’s report on entrepreneurs got it right: “In Norway, Start-ups Say ‘Ja’ to Socialism.”
The result is something called “flexicurity”: continued high employment in high-paying quality jobs, with both start-ups and the workforce keeping pace with technology and global trends.
Zakaria, writing about such a complex and sophisticated re-design of the Nordic model, sees only one thing: corporate investment in Danish factories is freed up to be reinvested. Free capital is the tree he sees, so score one for free market capitalism and zero for “Bernie’s socialism.”
Without Bernie’s socialism, however, there wouldn’t be flexicurity. The Dutch deserve credit for the first draft of the idea, but the more socialist Denmark strengthened it considerably. We learn also from the next series of events: Sweden and Norway quickly picked up on flexicurity. The European Union recommended it without success to its member states. The United States also took a pass, as we’ve seen in the Rust Belt where Donald Trump picked up the electoral votes needed to win in 2016.
Contrary to Zakaria’s conclusion, flexicurity reveals another systemic divide between the Nordics and the countries committed to free enterprise. It results from the Nordic model’s deep commitment to the well-being of workers.
I don’t think it’s an accident that the Denmark that re-designed an approach to globalization also innovated when facing the coronavirus pandemic by “freezing the economy.” Nor that the Nordics are in the vanguard in responding to the climate crisis.
Nordic corporations that free up capital by closing factories sometimes take it to the Global South and invest it there. I don’t believe Zakaria would approve of the response from the socialist-inclined Norwegians: a law requiring Norwegian corporations operating abroad to live up to the same (very high) standards for treatment of workers and environment that they must adhere to at home. The law empowers individual Norwegians to become whistle-blowers.
Still Viking at heart, Norwegians (and other Nordics) love to travel. Imagine you’re a Norwegian tourist visiting Chile, and you learn that there are Norwegian-owned fish farms there. Curious, you visit, and discover that the farms are polluting the water, or underpaying the workers or forgetting about occupational health and safety.
When you return home you visit the government-supported nonprofit that monitors corporate behavior abroad and report what you learned. The agency investigates and — if it finds that you are correct — forces the corporation to make amends and change its behavior.
Holding capital accountable is in line with the thinking of Nobel-winning Swedish economist Gunnar Myrdal, who almost a century ago argued that capitalism’s design had its priorities upside-down. It made the well-being of capital most important and gave labor the job of supporting capital. Myrdal argued that the priority needs instead to be the well-being of workers and farmers who produce the wealth. Capital’s job is to support the common good.
This turning-upside-down of priorities is fundamental to the success of the Nordic model and explains both how different it is from free market capitalism and why it is so much more successful.
Getting there is the hardest part, as it was for the Nordics too
The New York Times recently published an op-ed headlined, “Finland is a Capitalist Paradise.”
Here Finnish journalist Anu Partanen, who wrote the delightful book “The Nordic Theory of Everything,” partners with her American husband Trevor Corson to tell us why they have a much better life in Helsinki than in Brooklyn. Theirs is a glowing account: “What we’ve experienced is an increase in personal freedom.”
What’s problematic about their article is how their description gets in the way of us actually gaining that personal freedom here in the United States.
For starters, their branding is an issue. Who imagines a free market “capitalist paradise” to have a government that owns nearly a third of the nation’s wealth, or has one in three workers employed by the state, or features major state-owned enterprises?
The authors are right to say that many capitalist enterprises are alive and well in Finland, but they ignore the widespread vitality of the cooperative movement: There are more member-owners of co-ops than there are Finns!
The average adult is a member of two co-ops. Finns, like their Scandinavian neighbors, have employee-owned as well as customer-owned enterprises. They use co-op banks, department stores, hotels, groceries and insurance companies. In a country larger than the United Kingdom, there’s a co-op within two miles of everyone.
Partanen and Corson also leave out the full story of struggle accounting for how Finland became such a happy place. (2020 is Finland’s third year in a row at the top of the international happiness ratings.)
To their credit, the authors — alone among the writers discussed in my previous two articles — reveal what happened in the bad old days when the capitalists were fully in the saddle. As in the other Nordic countries, Finnish people were oppressed, rebelled and were met with violence.
Unlike the people’s movements in other Nordic countries, some Finns turned to violence, and the struggle became civil war. The authors tell what happened in 1918: “After months of fighting, the capitalists and conservatives crushed the socialist uprising. More than 35,000 people lay dead. Traumatized and impoverished, Finns spent decades trying to recover and rebuild.”
The good news is that, despite the victory by the Finnish economic elite, it was unable to prevent a gradual resurgence of the labor unions. By the 1950s, as Tatu Ahponen recently explained in Jacobin, unions organized a nationwide 10-day metalworkers’ strike. They then organized a general strike of half a million workers. Both forced major concessions.
Finland created a publicly-funded (mainly through taxes) health care system that gets good marks in international ratings. Today, for example, the United States allows substantially more of its citizens to die for lack of health care than does Finland, in relation to differences in population size. The numbers on preventable deaths show a grisly comparison between the capitalist, profit-driven approach to health care in the United States and the Nordic model.
The new form of centrist resistance to a manifestly better system is to refuse to name it as different.
The decade from 1966-76 became a “catch-up time” for Finland, with the unions pushing hard and the largest political party — the Social Democrats — able to win more of the elements that other Nordic countries already enjoyed: annual national wage negotiations, universal elementary education, universal day care and the like.
By downplaying the recent decades of struggle between the classes in Finland, the authors present a picture of enlightened capitalists welcoming a win/win in paradise. That could mislead Americans who long for the degree of justice, personal freedom and equality that the Nordics enjoy.
Finns, like us now, needed to struggle. They organized people’s movements that rebuilt the political economy so it reliably comes through for them, and therefore builds social trust.
They are not done. The labor movement’s power now represents 90 percent of the workers. The new Social Democratic prime minister, 34-year-old Sanna Marin, suggested in January a new goal: a flexible six-hour work day and four-day work week. She stimulated a vigorous national debate that caught the eye of Forbes, which noted the stress due to overwork experienced by many Americans.
The debate over models helps us prepare for the pandemic and climate crises
Centrist Democrats want us to believe that the present American political economy deserves our loyalty. They say “yes” to liberal reforms that leave the system intact: equal wages for women, more educational opportunity for people of color, universal pre-school for children and expanded Obamacare.
Never perfect, the Nordic struggle is available to witness. What they learned is ours to use.
At the same time they’ve consistently said “no” to measures that make it easier to organize unions and ending subsidies for fossil fuels — even when they controlled the White House and both houses of Congress. This is because those changes would mess with our economic model’s intention to put profit first. Even in the midst of the pandemic and its exposure of our inadequate, profit-driven health care system, their loyalty to the free market prevails.
The writers critiqued in this series don’t want to call the economy shared by the Scandinavian countries “democratic socialism” or “social democracy,” or even, as academic economists often do, “the Nordic model.”
Their new form of centrist resistance to a manifestly better system is to refuse to name it as different. This way of defending the status quo reminds me of how homophobia manifested itself to me as a young gay man urged to stay in the closet: “We’re happy to accept your contribution, but we don’t want to know who you are.”
As many oppressed peoples have learned, naming something and giving it an identity increases its power. People address reality in a new way. The difference becomes an alternative. Naming suggests that “another world is possible.” The refusal of a name reflects profound resistance.
The U.S. economic elite shows no more inclination to find a win/win than the Nordics’ elites did in their day. Over there, most people who wanted change realized they would simply have to fight, and they knew they were not fighting for just a laundry list of good ideas: It was an alternative system they were aiming for.
Outside Scandinavia, we can allow ourselves to be inspired by knowing the results of their fight so far — results they couldn’t be sure would come about. The economic elite lost its dominance and the people won a historic level of health and security, democracy, economic justice and individual freedom.
Now they innovate to lead the world in meeting pandemics and climate adaptation. Never perfect, their struggle is available to witness. What they learned is ours to use.
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