The Economist offers an interesting overview of the new Nordic reform model where Sweden leads the way in cutting back on some aspects of the welfare state and re-examining the role competition plays in stirring more dynamic economic activity.
Why are the Nordic countries doing this? The obvious answer is that they have reached the limits of big government. “The welfare state we have is excellent in most ways,” says Gunnar Viby Mogensen, a Danish historian. “We only have this little problem. We can’t afford it.” The economic storms that shook all the Nordic countries in the early 1990s provided a foretaste of what would happen if they failed to get their affairs in order.
There are two less obvious reasons. The old Nordic model depended on the ability of a cadre of big companies to generate enough money to support the state, but these companies are being slimmed by global competition. The old model also depended on people’s willingness to accept direction from above, but Nordic populations are becoming more demanding.
I was especially interested in the dependency link between big companies and big government. If the competitive advantage of being really, really big is diminishing, this sort of selective downsizing of the state may be a trend.