Photographer: Cathrine Ertmann / Bloomberg
Photographer: Cathrine Ertmann / Bloomberg
In the toughest test in the 21st century yet of national state rule, the Nordics stand out.
After nearly a year of pandemic, the region’s social model has been made “the most promising” in pursuing a sustainable path out of the crisis, according to the World Economic Forum. HSBC says sovereignty is the result of generous social security networks and high digitization.
It is already clear that Denmark, Norway, Sweden and Finland have suffered a lesser economic situation in the Covid crisis than euro zone or the UK
Scandinavian stability
The area has contracted the pandemic better than most of its peers
Source: OECD
Though far from perfect – a strategy against Sweden’s lockout and high death rates drew even criticism from King Carl XVI Gustaf, while Denmark’s fight against coronavirus mutation ended in botched mink thinning – the picture is still bigger than economic strength. According to the WEF report in December on Global competitiveness, the Scandinavian region is now best placed to “achieve a productive, sustainable and inclusive economic system.”
Indeed, the pandemic is positively emerging in the Scandinavian model after a period of controversy over merit, The allegation by advisers to US President Donald Trump that the region demonstrates how “socialism lowers living standards” and applies in the same basket as Venezuela.
The small and export-based Vikings have long combined high taxes that have led to public sector spending with economic efficiency and technological innovation.
What Bloomberg economists say …
“Deep public coffins, a tight social security network and greater trust in departments that were able to work from home and sell online have helped the Nordics during the Covid-19 crisis.”
– Johanna Jeansson (economist)
Viking Taxes, among the highest in the world, widely accepted by voters who see them as an essential means of maintaining a sustainable society. That in turn creates a stable tax base that means a Scandinavian state debt levels are among the lowest in the European Union.
Frugal Finance
Low debt provides fiscal space for Scandinavian countries
Source: European Commission Autumn 2020 Economic Forecast
Let these low debt levels fall to the region, which will be constant on top of the global happiness ranking, to enter the crisis with the natural advantage of already being rich and able to spend better.
The Nordics generally rank high on gender equality. The fact that Swedish schools and nurseries remained open may explain why unemployment among women rose less than male unemployment at the height of the pandemic, by comparison. to the EU average, said Johanna Jeansson of Bloomberg Economics. In Norway, the gender gap in labor force participation has narrowed this year, after the government extended time off with pay for caring for young children.
Here’s a closer look at why the Scandinavian region is well-positioned to come out of the crisis with fewer cracks than elsewhere.
Safety net
All Scandinavian countries offer universal welfare support, including generous health care and unemployment support. That translates to less concern about jobs and lost income than elsewhere, paving the way for a resumption of economic activity sooner when restrictions are finally lifted, according to HSBC economist James Pomeroy.
Generous benefits
The Nordics spend nearly a third of their wealth on social spending
Source: OECD (2019)
“It’s a great example of how money has basically been put into people’s pockets to be shown in the pandemic as the best way to keep things going,” he said.
Danes and Swedes were at the top of the European Union with 27 members in assessing their financial situation in July compared to the previous three months, with the Finns in 7th place, according to investigation by the bloc’s Eurofound group.
Frugal four
The region’s experiences of a banking crisis in the 1990s, and a global financial crisis in 2008, have kept the Nordics from taking on public debt. That prudent legacy means that governments now have a role to play in spending more to support economies in the current crisis.
Norway, home to the world’s largest sovereign wealth fund, is in a class of its own when it comes to fiscal freedom. Sweden and Denmark have a debt of about 40% of GDP, and Finland has the highest proportion in the region, at almost 70%. That’s still less than half the tally in Italy, and compared to the EU average of nearly 90%.
Sweden’s strong public finances allow it to implement an extensive fiscal policy combined with structural reforms, the Riksbank said in November, listing investments in human capital and infrastructure as well as “broad” tax reform among the options available.
In Denmark, Central Bank Governor Lars Rohde says that “the starting position, with low public debt and prudent homes and companies, means we can get through better.”
Digitization
When the pandemic forced the world to take social distance measures, remote work and digital schooling, few regions were as prepared as the Nordics. Years of investment in computer technology, connectivity and digital skills teaching are now paying off.
Digital Management
The Nordics are at the top of the EU digital index
Source: DESI 2020 Index (European Commission)
Finland and Sweden reported the smallest EU decline in working hours for the second quarter compared to the last three months of 2019, at less than 5%, according to Eurostat data. Norway, which is not a member of the EU, was at the same level. Denmark took sixth place in the bloc.
“The parts of the world that have suffered the most from pandemic are those that cannot go digital at a turnaround,” Pomeroy told HSBC. “Having a very digital population will set you up very well in terms of productivity.”
– Supported by Nick Rigillo, Morten Buttler, and Zoe Schneeweiss