Is the Nordic welfare state sustainable?

The Danish Liberal Party, the party of Prime Minister Lars Løkke Rasmussen, has pledged a “zero growth” policy in the public sector until 2020 – in effect a policy of further cutbacks on the welfare state. Danish Minister of Finance, Claus Hjort Frederiksen, is also intent on cutting back public spending. “It is time to tighten the reins”, he said during a governmental economical review on December 13.

Welfare states throughout the world are facing a continuous onslaught by liberal, conservative and social democrat governments alike, especially after the so-called financial crises of 2008. This is also the case for the Nordic welfare states, including Denmark, often seen as successful examples of Keynesian economics, although they are still comparatively well endowed.

In 2001, Denmark had the highest welfare expenditure in Western Europe and in 2010 three Nordic countries, Norway, Denmark and Finland, topped the Legatum Prosperity Index. But even though Danish public expenditure had tripled between 1950 and 1988, Denmark has cut expenditure on welfare as a percentage of Gross National Income along with other Western countries since the mid-to-late nineties (though not in terms of actual spending, although this also seems to be levelling off or falling), and is apparently to cut it even further.

This is probably due to a change in the perception of the role of the welfare state. The Danish welfare system is to a much larger degree than a decade or two ago seen as a tool for business competitiveness than a means in itself. To this end it has become individualised, with Danish citizens now to a much larger extent seen as consumers of welfare, and private insurance is on the rise. Many to the left of the social democrats lament the dismantling of the welfare state, maybe because they have given up on “real” socialism after the fall of the Soviet Union and have ended up supporting a slightly radicalised version of the bureaucratic, “forced solidarity” and mixed economy of the Keynesian social democratic welfare state. Maybe they on balance prefer the universally applicable welfare that the Nordic countries offer to the insurance-based welfare of e.g. Britain, Germany and the USA.

The question is, however, whether the Nordic welfare states are sustainable in the long term. According to Dr. Lucien van der Walt, a lecturer at the Sociology department of the University of Witwatersrand, “… the circumstances that led, briefly, to the Nordic Keynsian welfare state no longer exist anywhere on earth”. He claims that the “unique historical conjuncture” in which they arose was due to the ruling classes having to introduce welfare reforms to fend of the prospect of revolutionary socialism; the huge post-war capitalist boom and simultaneous lack of unemployment; and the equally huge increase in workers’ productivity.  These circumstances are obviously not possible to recreate for the Nordic countries, and even less so for less wealthy countries – especially given the present financial crisis.

If this is the case, the question, therefore, is not whether or not any given country wishes to continue or introduce a Nordic welfare model, but what they want instead of it. In broad terms they have but two options: a neoliberal system whose proponents have long argued against welfare systems such as that of the Nordic countries, or a non-authoritarian, non-statist, socialist alternative. The main problem with the former is twofold: that it creates extreme global and inter-societal inequality and poverty, and that its greed and growth-based ideology is ecologically unsustainable. The main problem with the latter, at least in a Danish and Western context, is that it can only come about through a consciousness and mass action that is difficult to sell in an age of mass-consumption and consumerism.

What proponents of an alternative to neoliberalism might take heart from, however, is both that such a consciousness of the usefulness of mass action seems to have improved post-Seattle, and that many of the important improvements in Western society, such as improved work-hours, child labour laws, and gay and women’s rights, have come about in response to mass action and street demonstrations.

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