Northern lights
The Nordic countries are reinventing their model of capitalism, says Adrian Wooldridge

The Economist special report sees the Nordic countries as role model and a source of inspiration for politicians and reformers by offering a blue print of “how to reform the public sector, making the state far more efficient and responsive”. The Economist states: “The Nordics cluster at the top of league tables of everything from economic competitiveness to social health to happiness. They have avoided both southern Europe’s economic sclerosis and America’s extreme inequality. Development theorists have taken to calling successful modernisation “getting to Denmark”.”

Sweden has reduced public spending as a proportion of GDP from 67% in 1993 to 49% today. It could soon have a smaller state than Britain. It has also cut the top marginal tax rate by 27 percentage points since 1983, to 57%, and scrapped a mare’s nest of taxes on property, gifts, wealth and inheritance. This year it is cutting the corporate-tax rate from 26.3% to 22%.

Most daringly, it has introduced a universal system of school vouchers and invited private schools to compete with public ones. Private companies also vie with each other to provide state-funded health services and care for the elderly.

The other Nordic countries have been moving in the same direction, if more slowly. Denmark has one of the most liberal labour markets in Europe. It also allows parents to send children to private schools at public expense and make up the difference in cost with their own money. Finland is harnessing the skills of venture capitalists and angel investors to promote innovation and entrepreneurship.

This is not to say that the Nordics are shredding their old model. They continue to pride themselves on the generosity of their welfare states. About 30% of their labour force works in the public sector, twice the average in the Organisation for Economic Development and Co-operation, a rich-country think-tank. They continue to believe in combining open economies with public investment in human capital. But the new Nordic model begins with the individual rather than the state.

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The next supermodel

Politicians from both right and left could learn from the Nordic countries

Welfare: More for less

Immigrants: The ins and the outs

Business: Global niche players

Entrepreneurs: If in doubt, innovate

Creativity: Cultural revolution