• What Can be Learned from the Nordic Model?

  • By Asbjørn Wahl | 25 May 09
  • The Nordic Model, or the welfare state, which developed in a very specific historic context. It can therefore not be assessed independently from its social and historical origin and the power relations which made it possible.  

    If we really want to come to grips with the potential, the actual development and the perspective of the welfare state, a deeper and more thorough analysis and understanding of this particular model is crucial.

    The Political Economy of the Welfare State

    Some level of social services (health, education, social protection, etc.) will inevitably arise in all countries as their economy develops, since the economy itself requires much in terms of the reproduction of labour, qualifications, public transport, and so forth. The organisational form, quality and level of these services, however, will reflect the real power relations in the concrete societies as well as the international configuration.
    In the last resort, therefore, democratically managed, universally accessible public service, as opposed to profit-driven private- service markets, is a question of structural power – of economic, social and political power relations in society.
    However, the welfare state as we know it was not only a product of power relations in general, but the result of a very specific historic development in the 20th century, including the Russian revolution (see below). Contrary to being the result of social dialogue and tripartite cooperation, as many in the labour movement would have it, the welfare state was the result of a long period of bitter social struggle and class confrontations.
    Ever since capitalism became the dominant mode of production in our societies, it has developed and proceeded from boom to bust and from bust to boom. The relatively unregulated laissez-faire capitalism of the 19th and first half of the 20th century reflected extreme exploitation of workers in general, and caused extraordinary misery during its bust periods. The response of the working class became to organise and fight – at the workplaces as well as at the political level. Through this offensive the labour movement gradually achieved better wages, better working conditions as well as high-quality social-welfare provisions.
    In particular, the international economic depression of the 1930s led to increased popular pressure for political interventions in the markets. Mass unemployment, increased misery, fascism and war produced massive demands for peace, social security, full employment and political control of the economy. Thus, when the leaders of the victorious nations met at the Bretton Woods conference towards the end of World War II, the message from their workers and citizens back home was clear: The unregulated crisis-stricken capitalism had to come to an end. Under the then existing balance of power, it was the Keynesian model of regulated capitalism that won hegemony, and thus the social and economic foundation for the welfare state was created.
    In this regard, it is important to note that labour’s strength resulted not only in better trade-union rights and regulated labour markets. Much more important was the general taming of market forces. The power of capital was reduced in favour of politically elected bodies. Competition was dampened through political interventions in the market. Capital control was introduced and financial capital became strictly regulated. Through strong expansion of the public sector and the welfare state, a large part of the economy was taken out of the market altogether and subjected to political decisions. In short, public welfare is a question of power! 

    The Social-Pact Policy

    In the last century, the social struggle between labour and capital in many countries resulted in static warfare in which none of the parties were very successful in advancing their positions. The labour movement was not able to capture new power positions, and capital forces were not able to defeat the workers’ organisations. As a result of this, the tradeunion movement gradually developed a sort of peaceful coexistence with capitalist interests.
    In the 1930s this cohabitation started to become institutionalised in some parts of Europe when the trade-union movement struck accords with employers’ organisations, particularly in the Nordic countries, and after WW II in most of Western Europe as well. From a period characterised by harsh confrontations between labour and capital, societies entered a phase of social peace, bi- and tripartite negotiations and consensus policies. It was the balance of power within the framework of this social pact between labour and capital which formed the basis on which the welfare state was developed – and working and living conditions, as well as social provisions, were gradually improved.
    One important factor in the post WW II period was that international capitalism experienced more than 20 years of stable and strong economic growth. This made it easier to share the dividend between labour, capital and the public sector. 
    An important feature of this context was the existence of a competing economic system in the Soviet Union and Eastern Europe. As the British historian Eric Hobsbawm (Hobsbawm 1994) has pointed out, this was instrumental in making Western capitalists accept a compromise. It is also important to note that, before its creation, the welfare state, in the form of regulated capitalism, was never a goal of the labour movement. The stated goal was socialism. It was in fear of socialism – after the Russian Revolution and a reinforcement and radicalisation of the labour movement in Western Europe during WW II – that owners of capital in Western Europe gave in to many of the demands of the labour movement.
    The fact that the welfare state was not the expressed aim of the labour movement, but the result of the specific historic compromise between labour and capital, is also reflected in the mixed character of the welfare state. On the one hand, parts of it represent the seeds of the labour movement’s vision of another and better society (social insurance, child benefits, redistribution, free welfare services, universal rights); on the other hand, parts of the welfare state function more like a repair workshop in the face of, and within, a brutal and inhumane economic system, to compensate for its deficiencies (e.g. unemployment benefits and different pension schemes and benefits linked to work-related disabilities, occupational health problems and labour-market exclusions, etc.).
    We should also not forget that along the way there were ideological and political struggles within the labour movement. The more radical or revolutionary currents wanted to socialise, or democratise the ownership of the means of production, while the more moderate or reformist currents aimed at limiting the power of capital through political regulation and reforms. It was precisely the strength of the more radical currents that made capitalist forces attempt a class compromise in Western Europe.
    In any case, the policy of the social pact, which in reality became the development of the welfare state, resulted in enormous improvements in living and working conditions. In the labour movement this led to the common understanding that a way had been found to a society which brought social progress and a relatively fair distribution of wealth to ordinary people – without having to make all the sacrifices connected with class struggle and social confrontations. Settlements between labour and capital were made in rather orderly and peaceful ways at the national level. The dominant understanding was that society had reached a higher level of civilisation.
    For the trade-union movement the social pact in reality represented acceptance of the capitalist organisation of production, the private ownership of the means of production and the employers’ right to direct the labour process1. In exchange for gains in welfare and working conditions the trade-union confederations guaranteed industrial peace and restraint in wage negotiations. Put simply, the welfare state and the gradually improved living conditions were what the rather peaceful labour movement achieved in exchange for giving up its socialist project. Today we can conclude that it was a short-term achievement in a very specific historical context.
    Now, more than 50 years later, we have to admit that this capitalist strategy has been largely successful. Due to important achievements in welfare, wages and working conditions, the social-pact policy received massive support from the working class, and the more radical and anticapitalist parts of the labour movement were gradually marginalised. The dominant parts of the labour movement also started to understand social progress as an effect of social peace and cooperation with more civilised capital owners. To many of the trade union leaders of the time, social confrontations actually became undesirable features which had adverse effects on workers’ conditions and were therefore to be avoided. Combined with the prevailing notion that free- market capitalism had been defeated, this development led to the depoliticisation and deradicalisation of the labour movement and the bureaucratisation of the trade-union movement. It became the historic role of the social-democratic parties to administer this policy of class compromise.

    The Turning Point – The Neoliberal Offensive

    As the reconstruction and rebuilding of the economy after WW II came to an end, the post-war Keynesian economic model encountered ever more difficulties. Stagnation, inflation and profit crises became prevalent. Spurred on by these international economic crises, market forces went on the offensive and ushered in the current era of neoliberalism. Social-pact policies thus reached their point of maximum development in the 1970s. After that point, capitalist forces changed strategy in order to restore profitability, withdrawing gradually from the social pact and introducing more confrontational policies against labour.
    Most of the complex system of regulations, which was used to tame market forces and thus create preconditions for the development of the welfare state, has simply been dismantled. This deregulation policy has led to the development of a wild speculative economy, in which more than 90 % of international economic transactions are speculative, mainly currency speculation, and to an unprecedented redistribution of wealth from public to private, from labour to capital and from the poor to the rich. Public as well as private poverty is growing alongside ever greater and more visible private wealth among the elite. The redistribution model of the welfare state has, in other words, been turned upside down. 
    An important part of capital’s strategy has been the restructuring of capitalist production at the global level. Global production chains, lean production, outsourcing, offshoring and relocation of assembly lines as well as of supportive services are central features of this development. Workers and social models are being played off against each other as a result of this ever more unbridled freedom of movement of capital, goods and services. New Public Management has introduced private-sector models in the public sector. Market freedom and the ability to compete in increasingly deregulated international markets have been the guiding principles behind the present policies. As a result, competition is increasing in the labour market, and a rapid growth of precarious work is undermining trade-union and workers rights. A widespread brutalisation of work2 is one of the more serious adverse effects of this development.
    This capitalist offensive did not meet much resistance. The labour movement was not well prepared for the new economic and social situation. The trade unions found it difficult to act under the changed economic and social conditions as their policies and activities were mainly suited to their experience in a period of economic prosperity. In addition, the process of depoliticisation and deradicalisation which had taken place during the social-pact era made it easier for owners of capital to try to solve the crisis by attacking working conditions, trade-union and workers’ rights, public services and social rights and provisions. 
    Through informal and unaccountable power structures like the G8, institutions like the International Monetary Fund (IMF), the World Bank and the World Trade Organisation (WTO), regional institutions like the European Union (EU) and the North American Free Trade Agreement (NAFTA) and other bilateral and regional trade agreements, neoliberal policies are being pushed through and institutionalised on an international level. In short, an immense shift in the balance of power between labour and capital has taken place, and this time in favour of capital. The big multinational companies have been in the forefront of this development – with their newly achieved freedom from democratic regulation and control.
    The fact that the power base of the welfare state is eroding, does not, of course, mean that there is the risk of a return to a pre- elfare-state condition, in which social spending constituted a considerably smaller part of GDP than it does today (Lindert 2004: 11ff.). Society has developed far beyond that stage, and the current economy is completely dependent on a number of social and public services. It is therefore not only the size of the public sector that is decisive in this regard, but also, and even more importantly, the power relations within it.
    The undermining and weakening of the welfare state will first and foremost be reflected in the organisational forms, the stratification, the quality and the level of the social services – through privatisation, increased use of competitive tendering, increased poverty and inequality, more and higher user fees, the transition from universal services to means testing, through the increased commodification of labour (Esping-Andersen 1990:35 ff.), and so forth. Due to bolstered market forces, many people will also experience reduced access to decent housing, deteriorating working conditions and health services.
    Accordingly, we can conclude that the weakening and deconstruction of the welfare state is still proceeding, but the potential of the new power relations are not exhausted. Institutional sluggishness, the existence of universal suffrage and democratic institutions, although weakened, and sporadic social resistance, slow down the process of deconstruction.  Whether or not this development will be allowed to continue will therefore depend on the scope and strength of the social resistance which is mobilised in defence of the achievements won through the welfare state – and subsequently for more offensive social and political goals. 

    The Shift from Consensus to Confrontation

    The trade-union movement was taken by surprise by this development. The shift from consensus to confrontation on the part of capital was incomprehensible within the labour movement’s consensus-oriented social-pact ideology. The breakdown of the historic compromise therefore also led to a political and ideological crisis in the social-democratic parties and in most of the labour movement. With a depoliticised and passive membership, and an increasingly self-recruiting leadership which was moving into the elite of society, social-democratic parties rapidly adapted to the dominant neoliberal agenda, although in the form of softer alternatives than the original right-wing version. 
    In this context, globalisation, instead of being understood as the concrete form of the current neoliberal offensive, became interpreted as a necessary phase of development of the new world economy. “Globalisation has come to stay” has been the mantra of dominant parts of the labour movement, and larger parts of the trade-union movement in developed countries have therefore also come out in favour of a narrowly focused policy of strengthening the international competitiveness of their own companies (business unionism). Increased flexibility, including in its new, dressed up version flexicurity, which means the weakening of working conditions and labour regulations, has been embraced in the name of increased competitiveness. Competitiveness, in turn, is being construed as the one and only way to secure jobs.
    Deregulation and economic liberalisation in general have also been widely accepted, provided they are accompanied by labour standards (or social clauses). Thus, a focus on real power relations and limitation of market forces through enforceable regulations have been replaced by a sort of legal formalism – both at the national level, within the European Union and in international institutions like the WTO and the World Bank. An entire academic industry focusing on corporate social responsibility (CSR), in the form of voluntary ethical standards, has emerged in this vacuum created by the crumbling power of trade unions and social movements – and with an army of well financed and well intentioned NGOs and research groups to throw this ideological smokescreen over the immense shift in power relations in favour of capitalist interests occurring in the real world.
    These policies do not aim at fighting the liberalisation of the economy itself, but are directed against the negative effects of liberalisation on workers. However, liberalisation without negative effects on workers does not exist. It is the liberalisation process which is the problem. If trade unions and social movements want to reduce the negative effects of liberalisation, they will therefore have to fight liberalisation itself, since liberalisation means deregulation and privatisation, which is precisely how the ongoing, enormous shift in the balance of power in society is being carried out.

    The Brutalisation of Work

    One important effect of the new balance of power is an extensive brutalisation of work. An increasing number of workers are being excluded from the labour market and declared unable to work. We are witnessing an all-time high in sick leave, as well as an increase in occupational injuries and accidents. A growing number of workers are experiencing increased stress and so-called chronic fatigue syndrome at the workplace. In many industries and sectors, workers are experiencing degradation of work, with less control over the work process. In short, there are many signs that something dramatic is about to happen to our labour market and to our whole relationship to work.
    Many people in recent years have thus experienced an intensification of work pressure, a frequent undermining of labour laws and agreements which are daily ignored at the workplace and an increase in insecurity and uncertainty. A rapidly growing number of workers are being excluded from the labour market altogether. In Norway, almost 15 % of the total population between the ages of 16 and 67 – 67 being the normal retirement age – are now in early retirement or receiving disability benefits or some kind of rehabilitation. The figure has doubled over the last 20 years. At the same time, trade-union and labour rights are being weakened and undermined. There is no doubt, then, that serious brutalisation of work is occurring.
    This represents a major break with the golden years of the welfare economy. In that era, we, at least in the industrialised world, experienced a gradual improvement of working conditions over many years – a development which included dampened competition, shorter and better regulated working hours, longer annual leave, better job security, the introduction and improvement of sick pay, a reduction in work intensity, less stress, the closing or transformation of many hazardous workplaces, and the development of better legislation regulating the work environment.  This developed alongside a high level of employment, improved trade-union rights, increasing co-determination in the workplace and in the companies, etc.
    This does not mean that we had an ideal work environment – far from it. Many problems and challenges still remained. What it means is that we had a positive development. Working conditions and environments were gradually improving. This is no longer the general trend. The shift in direction is formidable – workers’ human dignity is under severe attack.
    In particular, new management methods, new work processes, new organisational structures and increased competition within the markets have had immense effects on working conditions and workers’ health. Workers are being excluded at an earlier stage than before. Due to increased competition, more rapid restructuring of companies and public undertakings and changing working relations, less control over the work process and more precarious work, the demand on workers is becoming more and more intolerable. At the same time research and experience confirm that measures taken by politicians and public authorities to stop and reduce this exclusion from the labour market have failed all over Europe, as demonstrated by the European Foundation for the Improvement of Living and Working Conditions.
    If one does not analyse – or denies the existence of – the power structures and the driving forces which lay behind the ongoing brutalisation of work, one will never be able to fight it. 
    The increasing gap between rich and poor in society is adding to these adverse effects on peoples’ health and well-being. Vicente Navarro concludes that the growing inequalities we are witnessing in the world today are having a very negative impact on the health and quality of life of populations. He demonstrates that it is the inequality itself – that is, the distance among social groups and individuals and the lack of social cohesion that this distance creates – which is the problem (Navarro 2004, p. 26.) In other words, as neoliberal policies increase the poverty gap, and as increased inequalities lead to health problems, we can conclude that neoliberal globalisation is a health hazard.
    The social-pact ideology is incapable either of explaining or developing counter-strategies to oppose this development. Under the welfare economy there were direct connections between economic growth and better living and working conditions. These connections no longer exist – the economy is growing but this leads to setbacks rather than to progress. The entire concept of the welfare state is breaking down.
    The welfare state, and particularly the Nordic model, represented enormous social progress for the great majority. What then went wrong? Why is something that, despite its weaknesses, can be characterised as one of the most successful social models in human history now being attacked and undermined? To summarise the most important reasons:
    First, the social pact was not a stable situation. It was a compromise in a concrete and very specific historic situation, and the main economic and social characteristics of the capitalist system were still intact. Second, something which could have been considered an important shortterm tactical compromise from the point of view of the labour movement became the long-term, strategic aim. Rather than being seen as a step towards a more fundamental social emancipation, the class compromise, and its natural offspring, the welfare state, gradually became the end of history. Thirdly, and linked to the previous point, the ideology of the social pact proved false. Democratic control of the economy was never fully achieved, crisis-free capitalism was not created, and the class struggle was not over. Fourth, the labour movement was taken by surprise by the neoliberal offensive. Rather than mobilising socially to defend the achievements won through the welfare state and moving the social struggle forward, a large part of the leaders of the trade-union and the labour movement were pushed to the defensive, clinged to the socialpeace and social- ialogue model, negotiated concessions and themselves adopted a surprisingly large part of neoliberal ideology.

    The Need to go Beyond Keynesianism

    The most important lesson to learn from the history of the welfare state, from today’s vantage point, is that it did not go far enough in establishing democratic control of the economy. One of the most successful effects of the welfare state was income redistribution. However, it the state was still dominated by the basic relations of capitalist production. The strong concentration of the ownership of capital, of the means of production, thus formed a solid power basis from which an attack on the relatively equal distribution of goods and services in welfare societies could be launched. This is exactly what we are witnessing today, in the form of the ongoing global neoliberal offensive.
    A new social model will therefore have to go beyond the Keynesian welfare state. Emancipatory social policies will presuppose a more fundamental shift in the balance of power. To achieve it, one has to understand and focus more sharply on power – and ownership. It is not a question of good intentions, good will or a high moral level (or of “corporate social responsibility”, as some call it), but of power relations, of the balance of power between labour and capital, between market forces and civil society.
    In the long run, in order to fight for another social model in the interest of the great majority of people, we will thus have to confront the economic, political and social interests which are behind the attacks on public services and the welfare state. Power structures and power relations will have to be changed. Structural reforms such as a currency exchange tax, capital control, increased taxation of multinational companies, local control of natural resources, and progressively increased democratic control of the economy should therefore be the entry point and direction of our future struggles.

    The Immediate Tasks

    The following are among the most important, immediate tasks which the labour movement faces:

    a Defending the achievements which were won through the welfare state.
    This is our first line of defence. It is a defensive struggle, and we have to realise that we are in a defensive situation. This means fighting privatisation, deregulation and attacks on our social-security provisions, opposing the undermining of the universal social systems which have been built in many countries and preventing them from being replaced by means testing and other humiliating needs tests. It also includes fighting for a financing model based on a progressive tax on the haves rather than on individual user fees for the have-nots.

    b Confronting the institutionalisation of neoliberalism at the international level.
    An important part of neoliberal strategy is the attempt to institutionalise its policies at the transnational level. In this way, the interests behind these market-oriented solutions are able to avoid and overrule democratic structures and processes at the local and national levels. Markets are thus being forced open through legislation at the EU level (the Services Directive being one of the most recent), or through agreements within international institutions like the WTO. The General Agreement on Trade in Services (GATS) is, for example, being used not only to give market competition priority over social or environmental regulation, but also to make this  kind of privatisation and deregulation irreversible. Broad international networks of social movements and NGOs have been developed to mobilise against such corporate trade and investment policies. The Our World Is Not For Sale network (OWINFS)3 is the most important of these, and should be supported by all who want to defend the achievements of the welfare state.

    c Democratising and further developing our social services/institutions in a user/producer alliance.
    Although popular support of public services is broad and comprehensive, there is also widespread discontent with many aspects of them, such as limited access, bureaucratic structures, lower-than-expected quality, etc. Under-financing in order to weaken and discredit public services, to then pave the way for future privatisation, is a familiar strategy of neoliberal politicians. It is important not to deny or explain away these deficiencies, but to acknowledge them, to correct them and to formulate a policy to improve their quality, responsiveness to users and accessibility. Democratic and organisational reforms are decisive in this regard and can, if successfully managed, provide stronger barriers to future privatisation and political attacks.4 Developing social and political alliances between the users of the actual public services and those who produce them is of great strategic importance for the more decisive social struggle which must occur. 

    While all these immediate struggles are important in their own right, they must nevertheless be developed in a way which strengthens our longer-term, strategic aims. Our concrete demands and struggles should therefore:
    l contribute to shifting the balance of power from capital to labour, from market forces to civil society;
    l be linked to the experiences, the problems and the interests of the social groups in question, since this is a precondition for effective mobilisation;
    l contribute to building the broad social alliances which are necessary to win social power.

    A significant shift in the balance of power can only be achieved through a broad interest-based mobilisation of trade unions, social movements and other popular organisations and NGOs, which is strong enough to confront corporate interests and put them on the defensive. Continually larger areas of our societies have become victims of the current neoliberal offensive, and it is exactly these affected social groups which will have to be united in new, untraditional alliances.  
    In particular, it is important to develop the alliance between the trade-union movement and the new global-justice and solidarity movement which has developed over the last few years. Even though its grasp of class relations is rather poor, this movement has been decisive in revitalising popular resistance and has – with its dynamic, its insistence on independence and democratic control from below, its radicalism and its militancy – raised hopes and inspired people. Some of their features could also help revitalise many old-fashioned and bureaucratic trade unions. If the relationship is managed constructively and correctly, these two movements could reinforce each other and take the struggle to a higher level.
    International cooperation between, and coordination of, these alliances and movements are important, but in order to coordinate across borders, there have to be strong and active social movements at the local and national level in the first place. There is no such thing as an abstract global struggle against neoliberalism. Social struggles are being globalised as and when local and national movements realise the need for cooperation across borders in order to advance their positions against internationally operating and well coordinated counter-forces. Even though a global perspective and international coordination is necessary, the primary task is therefore to organise the struggle and to build the necessary social alliances locally.
    In Norway, over the last few years, the so-called Campaign for the Welfare State5 has been quite successful in mounting an opposition. The alliance includes trade unions in the private as well as the public sector, women’s organisations, student organisations, a retired people’s association, a small peasants’ organisation, organisations of users of welfare services, etc. It is not yet a real popular movement, but this broad alliance represents the political, social and organisational infrastructure which is necessary if the aim is to stop the policy of liberalisation, deregulation and privatisation – and make another world possible.

    In Conclusion

    The welfare state is not only a sum of social institutions and public budgets. It was made possible by concrete power relations permeating all social domains It’s features were:
    l a policy for full employment,
    l regulated markets and dampened competition,
    l increased influence of employees and trade unions at the workplace,
    l redistribution of wealth and eradication of poverty,
    l universal services as opposed to means testing.
    The shift in the balance of power between labour and capital over the last 25 years has had an impact on all these features (increased unemployment, exclusion, poverty, health problems and so on), and the welfare state is in danger of withering away along with its power base.
    The most important lessons to be learned from the Nordic model are (1) that fierce social struggles and the enormous shift in the balance of power between labour and capital were required to achieve the social progress represented by the welfare state, but also (2) how fragile the model is, and how unstable and vulnerable the power base of the welfare state has proven to be. 
    Based on the experience of the last 25 years, the perspective must now be that of going beyond the welfare state – to a socially and democratically organised society where peoples’ needs and the environmental limits become our guiding principles. The main aim of the labour movement in the north as well as in the south today must therefore be to limit the power of capital and to make the economy subject to democratic control. This will not be achieved through social dialogue and tripartite cooperation, but through class struggle and social confrontations.  History tells us that power never steps down. It has to be brought down. 

    1 This was, of course, only seldom, partly and indirectly expressed by leaders of the labour movement. Socialist rhetoric was regularly used, especially during the first years of class cooperation, although more in the trade unions than in the Labour Party, since socialist feeling was still strong at the grassroot level.

    2 The author of this article introduced the notion brutalisation of work in Norway some years ago. The notion is now in common use in public debate.

    3 See www.ourworldisnotforsale.org 

    4 The Norwegian Union of Municipal and General Employees has developed the so-called Model Municipality Project which has proven quite successful in this regard. It is an alternative to privatisation and marketisation, a bottom-up project based on the knowledge and experience of the workers involved. Further information can be found here: www.fagforbundet.no/Modules/ B_Publish/ShowPage_WYSIWYG.asp?PageID=107

    5 Seewww.velferdsstaten.no


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    Asbjørn Wahl
    , Adviser, Norwegian Union of Municipal and General Employees