Wednesday,19 September, 2018
Current issue | Issue 1224, (4 - 10 December 2014)
Wednesday,19 September, 2018
Issue 1224, (4 - 10 December 2014)

Ahram Weekly

The Danish way

A mix of democracy, the free market, social security, the rule of law and trust in the state is the secret of the success of the Nordic countries, writes Niveen Wahish

Al-Ahram Weekly

Abdel-Rahman (not his real name) is a taxi-driver in Copenhagen in Denmark. He has been living there for 20 years. His oldest daughter is studying dentistry, his second child, a son, is finishing high school and wants to go into business administration, and his youngest is still in primary school.

Abdel-Rahman represents the perfect example of a beneficiary of the Nordic welfare state: no matter what you do and what your means are, everyone has equal access to free quality education, health and other social services.

A delegation of Egyptian journalists, researchers and political party representatives that recently visited Denmark and Sweden on a trip organised by the Danish-Egyptian Dialogue Institute (DEDI) saw that for themselves. For them it was a dream come true.

Wael Gamal, an economics journalist and part of the delegation, said that the Nordic model was proof that the government could provide effective and inclusive social services, unlike the situation in Egypt  

Although in Egypt public education and health services are considered to be free, they leave a lot to be desired as far as quality is concerned. Health and education spending in Egypt is three and four per cent of GDP respectivly. In Denmark health and education spending is 11 and 9 per cent respecitvely. But the Nordic model is not something that happened overnight. It was in the making for decades and is constantly being reformed to fit the requirements of the times.

Klaus Petersen, head of the Centre for Welfare State Research at the University of Southern Denmark, said the system had been developing for over 100 years and was the result of a long process. The model is followed throughout the five Nordic countries of Denmark, Sweden, Norway, Finland and Iceland, but each “is an exception of its own,” Petersen said.

 An example of such an exception is Sweden where there are publicly funded private-sector service providers. For example, there are free private-sector schools that the government finances. The idea is to give people the right to choose and not be limited only to public-sector schools, yet to encourage the competition that could lead to a better service.

What has anchored this welfare system, according to Petersen, is a strong state with a strong role being given to municipalities. Services are universal and extend across the population, and there is equality regardless of social class or gender.

The political culture is about negotiation, consensus and trust in the state. The latter comes from the democratic electoral system and its track record in dealing with crises.

The way the labour market is organised also plays a crucial role. According to Jens Hauch, deputy director of Kraka, a liberal-oriented Danish think tank, the Danish labour market favours job creation instead of job protection by focusing on a flexible labour market and generous social security.

Politicians do not interfere in the labour market, which is regulated through collective agreements between unions representing workers and other unions representing employers. “When there is a problem, people know who to talk to,” Petersen said. If there are strikes, these are organised by the unions. Strikes that are not organised in this way are legal, but striking individuals risk fines. Because the unions are strong and help guarantee workers’ rights, almost everyone is a member of them.

Another feature of the Danish labour market is “flexicurity,” where hiring and firing is made flexible by the social support system. Nicolai Kaarsen, an economist with Kraka, explained that it was easy to fire people in Denmark, but that there was also easy access to unemployment insurance and active labour market policies and social services that aimed to help employees find new jobs. The unemployed were helped with benefits and trained and coached to return to the labour market, he said

The flexible labour market was one reason behind the creation of 300,000 jobs annually, and it functions well, said Martin Agerup, CEO of CEPOS, a liberal Danish think tank. He said that the labour market was supply driven, and it was not the case that if you kept older people longer in the job market the young would not find jobs. Instead, he said, a highly educated work force would always be able to find jobs. Unemployment stands at four per cent in Denmark.

The strength of the Nordic welfare state, according to Joakim Palme, a professor of political science at the University of Uppsala in Sweden, lay in its ability to build social capital and inclusion in the long term through investment and education.

While this system may appear to be free, it is paid for by taxpayer’s money through state, regional and municipal taxation. The marginal tax rate in Denmark is as high as 56 per cent. “Social policy is also funded by poor people, which gives a strong feeling that people have a right to claim benefits,” Palme commented.

However, the system does not go unchallenged. Nicolai Kaarsen of Kraka pointed out that the population of the Nordic countries was ageing, with people 70 years of age and above representing 13 per cent of the population in 2014. This figure is projected to go up to 25 per cent by 2049. It costs money to take care of the elderly, and as a result even in the Nordic countries early retirement has been gradually removed and the age of regular retirement gradually raised and could be up to 72 depending on the longevity index.

Other areas are also in need of reform according to liberals, including making Denmark a more investment friendly environment by lowering taxes such as the capital gains tax which currently stands at 24 per cent. They also call for lowering the taxes collected from individuals, arguing that these reduce the incentive to innovate, invest and become entrepreneurial.

Liberal critics of the system also argue that social benefits should not be universal, but rather should only be for the needy. Chris Holst Preuss, deputy chairman of the Danish Liberal Youth Organisation, said that “we want a state that is strong enough to help the weak, but not strong enough to crush the strong.” He said that the state should reduce taxes on workers and help businesses to create jobs.

 “It is too expensive to do business in Denmark,” he said. “Highly skilled labour does not find it attractive to live in Denmark, and there is a tendency for more productive people to leave the country,” Agerup added.

According to Preuss, the way the system is currently managed raises people’s expectations that there will always be someone who will take care of them and that they do not need to depend on themselves.

Another challenge to the system is immigration, whether European or from war-torn countries such as Syria. Agerup said that the Danish system was based on very high labour market participation of both men and women, whereas “immigrants come from a very different culture and may want their wives to stay at home.”

All agreed that what made the system work so well was political supervision. In Demark, the Egyptian group met with a member of the Danish parliamentary ombudsman’s office whose task is to supervise the executive. The ombudsman assesses whether acts of the public administration are lawful, clarifies legal uncertainties, and improves standards of public administration.

The ombudsman’s opinion is not legally binding, but the ombudsman has the backing of parliament since it elects him.

It is such institutions that Gamal believes should be applied in Egypt. “The Egyptian government should be held accountable. Without accountability and free access to information, the system does not work,” he said.  In looking to Denmark for inspiration, Egypt would not need to reinvent the wheel but could benefit from the sum of its experiences.

Egypt’s lack of resources should not be a pretext for not extending the scope of the welfare state, since revisiting government expenditure priorities as well as charging taxes on activities such as real estate speculation and imposing a capital gains tax could deliver the needed resources for the provision of inclusive educational and health services as well as support for vulnerable groups.

Mohamed Farid, member of the political office of the Free Egyptians Party and a member of the group, said that in Egypt the government had proven its inability to offer basic services. “We need someone to offer quality services that are cheap and efficient,” he said, adding that he had been impressed by Sweden’s publically funded private services.

“The role of the government should be limited to regulating and supervising the quality offered with the help of civil society,” Farid said. The government needed to make sure that no monopolies were created, but it should not in itself be in the business of directly providing services. He wanted to see social services provided for the most needy, but also incentives put in place that would help people graduate from social assistance.

The Swedish system made sure that people had a say in where they wanted to receive health treatment, which encouraged competition, thus improving services, he said.

However, Maria Eriksson of the Swedish liberal think tank Timbro said that the key to the introduction of the welfare state in the Nordic countries had been economic growth. “Growth came first,” she said. For Gamal, growth does not necessarily lead to a trickle-down effect to the bulk of the population. Growth based on equitable distribution was more sustainable than growth accompanied with inequalities, he said.

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