Nordic Socialism Is Realer Than You Think

This post was originally intended for the launch of the People’s Policy Project website. But as that is running behind schedule, I figure I will post it here.

When policy commentators talk about the Nordic economies, they tend to focus on their comprehensive welfare states. And for good reason. Denmark, Finland, Norway, and Sweden are home to some of the most generous welfare systems in the world. Each has an efficient single-payer health care system, free college, long parental leave, heavily subsidized child care, and many other social benefits too numerous to list here.

As marvelous as the Nordic welfare states are, the outsized attention they receive can sometimes lead commentators to the wrong conclusions about the peculiarities of Nordic economies. Jonathan Chait thinks the Nordic economies feature an “amped-up version of … neoliberalism” while an oddly large number of conservative and libertarian writers claim the Nordics are quasi-libertarian.

The common thread to these mistaken conclusions, aside from the desire to deny that there are leftist success stories in the world, is the apparent belief that the only extraordinary part of Nordic economies are the welfare states. Except for their generous social benefits, everything else is properly capitalist and even more capitalist than the United States. Or so the argument goes.

Labor Market
But this is not true. In addition to their large welfare states and high tax levels, Nordic economies are also home to large public sectors, strong job protections, and labor markets governed by centralized union contracts.

Around 1 in 3 workers in Denmark and Norway are employed by the government.

Protections against termination by employers are much stronger in the Nordic countries.

Centrally-bargained union contracts establish the work rules and pay scales for the vast majority of Nordic workers.

These labor market characteristics are hardly neoliberal or quasi-libertarian, at least if we stick to typical definitions of those terms. The neoliberal tendency, as exemplified most recently by France’s Emmanuel Macron, is to cut public sector jobs, reduce job protections, and push for local rather than centralized labor agreements. For the US labor market to become more like the Nordics, it would have to move in the opposite direction on all of those fronts.

State Ownership
Even more interesting than Nordic labor market institutions is Nordic state ownership. Collective ownership over capital is the hallmark of that old-school socialism that is supposed to have been entirely discredited. And yet, such public ownership figures prominently in present-day Norway and Finland and has had a role in the other two Nordic countries as well, especially in Sweden where the government embarked upon a now-defunct plan to socialize the whole of Swedish industry into wage-earner funds just a few decades ago.

The governments of Norway and Finland own financial assets equal to 330 percent and 130 percent of each country’s respective GDP. In the US, the same figure is just 26 percent.

Much of this money is tied up in diversified wealth funds, which some would object to as not counting as real state ownership. I disagree with the claim that wealth funds are not really state ownership, but the observation that Nordic countries feature high levels of state ownership does not turn upon this quibble.

State-owned enterprises (SOEs), defined as commercial enterprises in which the state has a controlling stake or large minority stake, are also far more prevalent in the Nordic countries. In 2012, the value of Norwegian SOEs was equal to 87.9 percent of the country’s GDP. For Finland, that figure was 52.3 percent. In the US, it was not even 1 percent.

Some of these SOEs are businesses often run by states: a postal service, a public broadcasting channel, an Alcohol retail monopoly. But others are just normal businesses typically associated with the private sector.

In Finland, where I know the situation the best, there are 64 state-owned enterprises, including one called Solidium that operates as a holding company for the government’s minority stake in 13 of the companies.

The Finnish state-owned enterprises include an airliner called Finnair; a wine and spirits maker called Altia; a marketing communications company called Nordic Morning; a large construction and engineering company called VR; and an $8.8 billion oil company called Neste.

In Norway, the state manages direct ownership of 70 companies. The businesses include the real estate company Entra; the country’s largest financial services group DNB; the 30,000-employee mobile telecommunications company Telenor; and the famous state-owned oil company Statoil.

Finland and Norway have their special reasons for the level of state ownership they engage in. Finnish government publications discuss the country’s late development and status as a peripheral country when justifying their relatively heavy public involvement in industry. That is, Finland does not want to expose the entirety of its marginal, late-developing, open economy to the potential ravages of international capital flows.

In Norway, the discovery of oil in the North Sea was the impetus for the creation of its enormous social wealth fund. The fund currently owns around $950 billion of assets throughout the world, including more than $325 billion of assets inside the US. In a video on the Norwegian central bank’s website, the fund is described as follows: “It is the people’s money, owned by everyone, divided equally and for generations to come.”

No one would argue that the Nordic countries are full-blown socialist countries, whatever that might mean. But it is also folly to pretend the only thing they have proven is that high taxes and large welfare states can work. Even on the narrow understanding of socialism as public ownership of enterprise, the Nordic countries are far more socialistic than most commentators seem to realize. American socialists who draw inspiration from their successes do so rightly.

  • Matt

    Neste gas stations and the attached restaurants and stores are operated by private franchisees. Your pic says Neste K which means that the store is operated by the K Group which is a retailing conglomerate.

  • Rob

    The Finnish government owns 50.1% of Neste. And, as the article stated, some SEOs operate as if they were private sector businesses.

  • TheBrett

    Interesting point on the stronger labor protections. Denmark supposedly has “flexicurity” on job arrangements, so I’m not sure what strictness means in this regard (although it’s not that much harder to be more strict than the US – simply having a “just cause” standard for termination is enough).

    The central bargaining might ironically be part of why they’re more favorable to business. It means it transcends the survival of any particular firm, and for a long time it acted as an incentive to increase productivity in places like Sweden (where firms that were highly productive could earn high profits because the centrally bargained wage system caused effective wage suppression).

    As for the SOEs, that doesn’t mean much. If they’re run for profit, and have private sector competition, then operationally they’re no different from private sector firms. And as Matt said above, they may actually be privately owned contractors to the SOE.

  • theothers77

    I would go further on the lack of job security in the US. For the majority of American workers, you don’t need just cause. Just cause mostly applies to public sector employees and/or union members with just cause clauses in their contracts (or state civil service standards) with almost everyone else, maybe roughly 80% of the economy, entirely “at-will.”

    Regardless, I think Matt makes a good point that trying to shoehorn Scandinavia into a generalized “flexicurity” model either as a way to bash “continental” models with higher job security but slightly lower benefits (which free market leaning economists loved from like 1950-1978 or so, until they decided they hate them) or as a direction to reform a neo-liberal model is pretty irrelevant to the American political scene. Here in the states folks have both lower welfare benefits AND less job security than either model so we would be moving in a “socialist” direction in both senses, regardless of the exact nature of alternative means of ownership. The new Labour Party platform includes a robust set of options of alternatives to privately owned Capital from ESOPs to municipal control to nationalizations to housing co-ops.

    The OECD put together a report talking of the desperate need for Finland to move to local bargaining, to increase female work force participation by reducing paid leave, for more “flexible wage” agreements, less regulations in trade, shorter unemployment benefits, etc. — but in the same report you can also find a chart showing that even with their recent unemployment increase, Finland has a 3% HIGHER work force participation rate than the OECD average. And that the gap between male and female participation is only 1%. There is always this need to generate a crisis to try to push for massive changes where international capital has a hard time seizing what it wants.

  • Konrad_Lorenz

    I’m trying to find the percentage of USA workers employed at-will, but not having any success. Anyone have that statistic?

  • Fernando Martin

    Great post, but is there a particular reason for not having mentioned Sweden in your comparisons? Is their model markedly different or the absence is due to other reasons?

  • Chip Daniels

    One of the great handicaps in American political discussion is the binary vision, that our political choices between Capitalism or Socialism.
    It was never true of course, but for us Boomers raised in the shadow of the Cold War, it was the convention.

    Which is why even now when even a timid policy like Obamacare is proposed, we are treated to lurid predictions of the gulag and killing fields.

    I prefer to use the term “socialize” as a verb, rather than the proper noun of Socialism, since it communicates how ala carte state ownership can be.

    Here in Los Angeles, I drink socialized water, use socialized electricity, capitalist natural gas; I sometimes make use of the socialized bicycles the city provides, or capitalist Lyft.

    It startles people to call these things by such politicized names, but it demonstrates how deeply “socialist” our status quo is.

  • nicethugbert

    Goes back at least to the Korean War and Reagan. Beware of “personal responsibility”. Keep in mind that the Clintons were children when Reagan subjected them o this crap.

    https://www.youtube.com/watch?v=_yVzQB9y3GE

  • Tomonthebeach

    Here is another case of US socialism – the US Military healthcare system.

    Retired Navy, I have depended upon military medicine nearly all of my adult life either via military hospitals or the TRICARE system in all of its nuanced forms. Over 47 years, I have rarely waited more than 15 minutes for scheduled appointments. In my late 20s, I was fitted with binaural hearing aids due to combat noise. I got some dental implants and even some cosmetic surgery – free. After retiring, the VA (also socialized medicine) continues to provide me with state of the are hearing aids. I was never offered a choice of physicians (as if I was competent to judge such qualifications in the first place, and for this “right, Americans want to pay twice as much for healthcare as in the EU). I had several major surgeries and I was NOT allowed to choose my surgeon. The Navy nicely reassembled me without complications, and, without free-market competition among surgeons.

    Capitalists might ignorantly assert that I was just lucky, and I would agree. I got better treatment by staying out of the free-market healthcare system gobbling up 20%+ of US GDP.

  • nicethugbert

    Soooooooo……when is Trump going to give The Nordic countries the Venezuela treatment? I’m surprised Maduro doesn’t tell Trump to go fuck himself in Norway.

  • pluviosilla

    You failed to talk about trade, which is freer in nordic countries than the U.S.

  • dynamicinaction

    You gonna roll with “welfare foundation” or not?

  • Ralph Duncan

    This all sounds nice on the surface, but, how much do the citizens pay in income taxes and user taxes such as vehicle and others? You should be reporting that side of the story as well.