Google – AFP, Soeren Billing (AFP), 21 January 2014
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Stockholm's
old town rooftops are pictured from the Riddarholmen island in
Sweden's
capital, on November 10, 2012 (AFP/File, Jonathan Nackstrand)
|
Copenhagen
— The Nordic model, known for high taxes and its cradle-to-grave welfare
system, is getting a radical makeover as nations find themselves cash-strapped.
During the
post-war period, the Scandinavian economies became famous for a
"softer" version of capitalism that placed more importance on social
equality than other western nations, such as Britain and the United States,
did.
But
globalisation, economic necessity and an ideological shift to the right has led
to a scaling back of the public sector.
 |
Danish
Prime Minister Helle Thorning-
Schmidt arrives for an EU summit, in
Brussels, on
December 20, 2013 (AFP/
File, Lionel Bonaventure)
|
"The
generosity of the system has declined," said Jonas Hinnfors, a professor
of political science at the University of Gothenburg.
"Much
of this already started changing in the 1980s and especially in the
1990s," he added.
In the wake
of a banking crisis in the early nineties, Stockholm scrapped housing
subsidies, reformed the pension system and slashed the healthcare budget.
A
voucher-based system that allows for-profit schools to compete with state
schools was introduced, and has drawn attention from right-wing politicians
elsewhere, including Britain's Conservative Party.
In 2006,
conservative Prime Minister Fredrik Reinfeldt's government accelerated the pace
of reform, tightening the criteria for unemployment benefits and sick pay while
lowering taxes.
Income tax
in Sweden is now lower than in France, Belgium and Denmark, and public spending
as a share of GDP has declined from a record 71.0 percent in 1993 to 53.3
percent last year.
Once the
darling of progressives, Sweden has become a model for free-market-leaning
thinkers including British weekly The Economist, which last year hailed the
scaled-down Nordic model as "the next supermodel."
"They
offer a blueprint of how to reform the public sector, making the state far more
efficient," it wrote.
This month,
the Wall Street Journal praised tax cuts and entitlement reforms in Sweden and
Denmark that "are now discomfiting their big-government admirers
overseas."
Although
polls show strong support among Swedes for the income tax cuts of the past few
years, the leftist opposition looks set to win this year's general election.
The Social
Democrats, in power for much of last century, have been boosted by a string of scandals
in private elderly care homes involving degrading treatment of their residents,
and by plummeting school results in international rankings.
However,
it's unclear how they will finance an improvement of public services, having
already pledged to keep the popular income tax cuts.
If Sweden
is the Nordic country to have gone the furthest in shrinking its welfare state,
Denmark has moved the fastest.
When her
Social Democratic government took power in 2011, there was little to suggest
Prime Minister Helle Thorning-Schmidt would make any dramatic changes to the
country's cherished welfare state -- funded by the world's highest tax burden.
 |
Timber,
transported by railway, seen
at a train station in Niirala, eastern
Finland, on
July 17, 2008 (Lehtikuva/
AFP/File, Roni Rekomaa)
|
After a
centre-right government had raised the retirement age and reduced the
unemployment benefits period from four to two years, "Gucci Helle" --
as she is known among her detractors -- went on to cut corporate taxes to 22
percent from 25 percent.
Other reforms
have included requiring young people on benefits to undertake training, and
withdrawing student aid to those taking too long to finish their studies.
It has left
her deeply unpopular in some quarters. At last year's May Day speeches she was
met by jeers as audience members sprayed her with a water pistol, threw
tomatoes at her, and even flashed their buttocks.
For some of
Thorning-Schmidt's allies -- notably the leftist Red Green Alliance -- the
reforms have been too much to stomach, and in November her minority government
had to seek support from the main opposition parties to pass this year's
budget.
Denmark has
been spurred into action by a persistently sluggish economy since a housing
bubble imploded in 2007, leading to anaemic household spending.
But among
Danes there is also a sense that the welfare state was ballooning out of
control.
In 2011, a
TV report aiming to show what life was like for the poor in Denmark visited the
home of a single mother on benefits, whose disposable income turned out to be
15,728 kroner (2,107 euros, $2,860) per month.
"Poor
Carina", as she was later nicknamed, sparked a national debate on the
level of unemployment benefits, with one pollster crediting her with fuelling a
rise in the number of people who felt benefits were too high.
 |
The
entrance of the headquarters of
Norwegian partially state-owned oil
group
Statoil, pictured in Stavanger,
on January 18, 2013 (Scanpix/AFP/
File, Kent
Skibstad)
|
Helsinki
responded to the crisis by announcing in August a slew of measures to put more
Finns to work.
Under the
controversial plan, the retirement age is to go up, time spent at university
will go down, and incentives to enter the job market will be boosted for the
unemployed and young mothers.
Only Norway
looks unlikely to reform entitlements anytime soon, bolstered by its oil
wealth.
The country
is home to the world's largest sovereign wealth fund. Worth some 5,116 billion
kroner (610 billion euros, $830 billion), each of the country's 5,096,000
inhabitants is -- at least on paper -- a millionaire.
New
centre-right Prime Minister Erna Solberg has pledged to preserve the welfare
state.
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