Is Scandinavia Pro Business?
There is often a debate about whether Scandinavia is socialist or really business friendly. But is there actually a contention?
You are right Michael I don’t talk that much about the business environment in this story. However I do go into a lot more of those details, that you mention in this story: What is Modern Scandinavian Socialism in 2020?
When people talk about business friendliness it has to be properly defined in a Scandinavian context, because otherwise especially pro-capitalist Anglo-Saxons get the completely wrong idea about what Scandinavia or Nordic countries in general are like.
When I follow discussion about business friendly policies in the US e.g. I can say with a straight face, that most of what Americans talk about as being business friendly is not practiced in Scandinavia at all. The way pro-capitalists and conservatives talk about business friendliness, Nordic would not measure up at all. Let me clarify:
- Americans regard things like easy hiring and firing as a crucial part of being business friendly. Apart from Denmark that is generally not the case in Nordic countries. Rules regarding firing employees are way stricter than any Anglo-Saxon is accustomed to.
- Flexibility in work hours. Working overtime, weekends, shifts etc is a big part of what conservatives would regard as business friendliness. Yet overtime work is heavily restricted. Running a factory with shifts 24/7 is expensive as you need very high compensating for irregular hours.
- Worker rights. Anglo-Saxon concepts of being business friendly means companies have a lot of power over what employees can and cannot do. Many American companies have been shocked when setting up operations in Norway only to realize they can no longer perform drug tests on their employees, do criminal background tests, or ban talking about politics or religion. To take a few examples. Nordic employees have far more rights in the workplace than Anglo-Saxon enterprises are accustomed to.
- Long vacations. In America it is often regarded as very business unfriendly if you take much more than a week vacation. How will business operate when employees are away that long!? Well in Nordic countries vacations for 4 weeks or longer are pretty normal. Something Anglo-Saxon businesses view as almost an impossible burden placed on them.
- Powerful unions. In the US unionization rate is about 10% and is widely regarded as something profoundly anti-business. Every American company seems to fight tooth and nail to avoid workers getting unionized. Yet in places like Iceland 90% of employees are unionized. Does that sound business friendly from an Anglo-Saxon perspective? All Nordic countries are heavily unionized and unions have far more power than in Anglo-Saxon countries.
Thus Nordic countries are not business friendly in the way pro-capitalist Anglo-Saxons typically frame being business friendly. Quite the contrary. If you look at ratings on economic freedom and business friendliness, which gives Nordic countries high score. This is really about lack of corruption, effective bureaucracies, quick acting legal systems, and few arbitrary barriers to enter a market. But there is nothing “un-socialist” about this. It is not like socialism somehow requires corruption, massive red tape, ineffective and slow moving government and legal systems that never get anything done.
No, what this really comes down to is about having well working states. Business likes to operate in well working states. But that is not at odds with having a lot of socialist inspired policies.
That is important when giving say advice to African countries, because my impression is that you want to advice them to have “business-friendly” policies in the sense of having limited workers rights, free reign to pollution, union busting, work-till-you-drop practices etc. When in reality the lesson to learn from Scandinavia is the value of getting corruption out of politics. If anything it is about cracking down on business trying to buy favors and get special deals. A lot is also about investing in building a quality government.
From my time living in the US, I see this as a big problem for countries where “business-friendly” is turned into a religion. The attitude towards government becomes so hostile that not proper investment is put into building quality government. A big problem I see in the US is that the approach to government is piecemeal. On prefer patching up stuff over having major regulatory reforms. American health care is perhaps the most stark example of this. The for profit health care system creates such a multitude of problems. Instead of simply make a sweeping reform such as socializing it, or creating a single payer system. Americans have preferred a gradualist approach over decades adding one little peach of legislation to patch up one individual problem after another. The result is perhaps one of the most complex health care legislations in the world.
The Nordic “socialist” approach to health care has produced a significantly simpler regulatory framework. There isn’t tons of laws to patch up numerous corners cases, because the core principles are sound: You give health care to everyone regardless of income.
The Anglo-Saxon neoliberalism which has been pushed on much of the developing world has frequently been spectacular failures. Perhaps they should instead follow the social democratic examples of Nordic countries instead: Build a hybrid model of a strong effective state combined with a vibrant private sector.