GOVT ROLE IN AN ECONOMY

Sir,

Scandinavia is a region in northern Europe comprising the three kingdoms Norway, Sweden and Denmark; but sometimes extended to include Finland and Iceland, together with their associated territories. Due to strong cultural and linguistic ties, the same region is sometimes referred to as the ‘Nordic region’.

Scandinavia constantly tops prosperity lists and boasts to be inhabited by the happiest people on earth. Geographically, the region somewhat resembles a mammalian reproductive organ but do not scoff just yet; Scandinavia could be the only slice of heaven on earth. Scandinavian countries seem to have found the ideal economic model in a context where State intervention, tax and labour market policies often lead to sterile political debates, contradictory and inefficient solutions.

Success

The famed success of the Nordic countries has prompted policy makers and academics alike to place the region on some sort of pedestal to which they regularly refer when it comes to reforming governments. The Nordic welfare model is based on three major pillars; ‘state-ness’, universalism and equality.

Pillars

If we were to describe the three pillars briefly, we’d say state-ness refers to the extensive prevalence of the State in welfare arrangements through extensive public services, public employment and taxation-based cash benefit schemes; universalism refers to the social rights extended to the whole population; and equality refers to the small differences in class, income and gender that characterise the Nordic people to this day. Scandinavian countries have developed around a history of family-driven agriculture resulting in nations of small entrepreneurial enterprises directed by citizens facing the same set of challenges and for whom solutions benefitting the one citizen are likely to be of equal benefit to the next.

As a consequence, the Nordics believe in their respective governments’ capability and willingness to provide benefits to be enjoyed by the whole. This belief system is attributed to the high willingness among the Scandinavian populace to pay their taxes. The high tax revenue collected by the State has resulted in public services such as healthcare and education being of such high quality that private enterprise has neither the reason to offer nor the room to improve these services. These countries have developed a true model for the role of government in an economy, in which the State’s job is to invest in human capital.

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