Arctic role models: Should Scotland look north for inspiration?
- 24 November 2013
- From the section Scotland
Stand on the quayside at Aberdeen and you are closer, geographically, to Stavanger in Norway than you are to London. In the centuries when travel was easier by sea than by land, the Norsemen came south to plunder, conquer and settle.
Many of the place-names of Scotland are the legacy of a time Nordic Europe drew the lands bordering the North Sea around it and bound them into one ocean-going community of peoples. Sutherland is so called because it was once one of the southern parts of that community.
Does anything survive of that distant time? Does the North Sea separate us from, or connect us to, our Nordic neighbours?
One of Sweden's most popular tourist attractions is the 17th Century warship Vasa.
Its hull is 70 metres long and decorated with oak carvings of mermaids, wild men and sea monsters - which are designed to celebrate the might of Imperial Sweden and to intimidate its enemies.
It is a visually stunning reminder that Sweden once dominated the northern tier of Europe, drawing many of its Baltic neighbours into its orbit. Both Norway and Finland have, at different periods in their history, been joined to Sweden in a union.
All three of these nations are broadly comparable to Scotland, whose people will take part next year in an independence referendum.
At first glace all of these countries have;
- Small populations spread across large territories
- Long coast lines (the word Norwegian 'fjord' is surely derived from the same root as the Scots 'firth')
- A traditional dependence on maritime activities, including fishing and shipbuilding
- And Norway has an oil industry that has helped turn one of the poorest countries of Europe into one of the richest in the world
They have also evolved a way of living, and of governing, which is the envy of much of Europe.
They're often held up as an example of what Scotland could aspire to become - benign, non-belligerent, socially harmonious and prosperous social democracies.
This reading appeals particularly to the pro-independence left in Scotland.
The Nordic model is "a high wage economy, based on highly productive enterprise," says Robin MacAlpine of the Jimmy Reid Foundation.
He explains: "You use the money that generates through tax, to create extremely strong public services.
"You have this chain - good economy, good jobs, good wages, good taxes, good public services, and high social cohesion."
Finland illustrates well both the strengths and weaknesses of small independent nations on the periphery of Europe.
For decades after WW2, it was almost entirely dependent on trade with the Soviet Union. And it thrived.
In fact it over-reached itself. In the late 1980s it deregulated its banking sector and entered a period that came to be known as the "casino years".
Martti Sanna, an economic adviser to the Finnish government, says: "House prices were going up like never before.
"There was a feeling that we were more or less invincible."
Then the crash came. It provided a signature lesson on the key weakness of many small nations: that their economies are often dangerously dependent on a relatively small number of volatile sectors.
In Finland's case, its dependence of the Soviet Union meant that in 1991 its main export market disappeared almost overnight.
"The world economy was also in turmoil and this resulted in a large banking crisis," says Sanna. "And very suddenly, more or less the whole Finnish economy collapsed."
The economy shrank almost overnight by 10%. The government was forced to make drastic cuts in public spending in what was already a high-tax country. Things got steadily worse.
The Finns did not riot, they did not strike, they did not demand the ring-fencing of health budgets, or insist on spending money they did not have. Unemployment soared.
Banks went bust
Is this a cautionary tale, useful, perhaps, to the Better Together campaign, which argues that Scotland, had it been independent, would have sunk under the weight of the near-collapse of RBS and HBOS?
Yes and no. It took years of pain but Finland recovered. This year it was rated No1 in Europe in a recent global dynamism index. Sweden and Norway came second and third and these were the only three European nations to make it into the top 10 of that league table.
The secret of Finland's successful emergence from economic catastrophe was its independent currency, the Markka.
Sanna says: "We tried to keep it at a fixed rate against other currencies.
"But we had to give it up and let it float. It devalued considerably and this helped exports. We let a couple of major banks go bust and the ones that were left merged. The whole banking sector was completely overhauled."
An independent Scotland, in any similar crisis in the future, would not have this option, because under current plans Scotland is not to have an independent currency.
Sweden, Norway and Denmark have all kept their own currencies. Among the Nordic states, only the Finns, ironically, joined the Euro.
They did so largely for political, rather than economic reasons, and many - given what has happened since - now regret the loss of their currency independence.
But it wasn't only currency independence that brought Finland back from the brink and made it one of the continent's most successful societies. It was a series of factors that illustrate the fleet-of-foot flexibility of small independent states.
The one area of public spending the government did not cut was research and development. While hospitals and schools were being squeezed, the government increased spending in this field by 25%.
At the same time, an old Finnish company that had built itself up over more than a century decided to take a major gamble. Nokia had started life in the nineteenth century in the wood pulp business. By the late twentieth century it also made electrical cabling and rubber boots - hardly the stuff of the digital future and the knowledge economy.
Erkki Ormala, a former senior executive at Nokia, now an academic, says: "The decision was made to divest all the other businesses and to concentrate on mobile communications.
"The rest is history."
For 20 years, tiny Finland dominated the world's mobile phone market. At the height of its success, Nokia was supplying 40% of the global market.
The sale of Nokia to Microsoft this summer marked the end of the company's dominance. The company has laid off 10,000 workers globally. Unemployment in wealthy little Finland is 8%, higher than Scotland's.
But it has weathered the storm because during the years of Nokia's ascendancy, Finnish investment created scores of smaller, independent hi-tech enterprises selling services to Nokia. The games manufacturer Rovio is one. Their computer game Angrybirds has sold 1.7 billion downloads worldwide.
Is there a lesson here for Scotland? A decade ago, I asked the CEO of a small but highly successful internet security company a simple question - if Finland were still in a union with Sweden, and its tax regime was decided in Stockholm rather than Helsinki, what would the Finnish economy look like?
"Nokia," he said, "would still be making rubber boots". Tax autonomy is vital to the success of the Nordic model.
It is not only the left in Scotland that applauds the Nordic model. Finland, Sweden and Norway all now have right-of-centre governments.
Fraser Nelson, the Scottish editor of the far-from-left-wing London weekly The Spectator, looks to Sweden for inspiration, and wishes David Cameron would have the guts to be as right wing in some of his thinking as the Swedes are.
Sweden is "one of the few countries in the world that is cutting tax and getting growth as a result," he says.
He adds: "In everything, from pension policies to the way you run public services, the Swedes are at the forefront of liberalisation. They're showing that there need not be a tension between free-market ideas and progressive ends."
In Sweden 10% of the public health service is contracted out to private companies. Swedes also pay a fee to visit their GP.
Britta Walgreen is the chief executive of St Goran's hospital on the outskirts of Stockholm.
"We have a contract with the local authority to provide care as part of the public health service," she told me. "We are paid for each patient we treat. But if we improve the service, and we are able to discharge a patient two days early, we are paid the same but our cost comes down."
It is not uncontroversial even in Sweden, because some public money ends up as private profit.
Walgreen, a former anaesthesiologist, told me: "I think the important discussion is not whether the care provider is public or private but what it can deliver.
"Just being publicly owned is no guarantee that the quality is high."
This flexibility, too, is key to the Nordic model's success. Would such a policy fly in Scotland? Would any government here dare to propose reforms that would, in our ideologically binary political culture, look like the privatisation of the health service?
Sweden's welfare model is also little understood here. It is not generous to the unemployed. It is designed to keep people in employment, not to reward them for being out of work. If you are on the dole for more than 12 months your welfare payments fall drastically and you are required to attend seminars and training workshops.
Many take unpaid jobs for work experience. The unemployed are stigmatised in Sweden.
The historian Lars Tragardh told me: "Sweden is in many ways a harsh society. There's not a lot of compassion for loafers, for people who do not work. This is not a generous welfare state. We don't have a lot of welfare queens."
But Sweden spends more on childcare for working parents than it does on its armed forces. Anna Nyborg is a young mother-of-two, and a senior executive at Ericsson in Stockholm.
From the age of 12 months, the county is required by law to provide children with day care. For two children under school age, she pays £200 a month.
She explained: "And this includes food and nappies and everything."
As a result, the Nordic countries have more women in work than almost anywhere else in Europe. It is welfare spending designed to sustain and support wealth creation, rather than to drain from it.
But it is still costly.
Tragardh took me out onto the roof of his university building and in a bracing Nordic wind we looked down onto the rooftops of Stockholm.
He says: "You get 360 degrees up here. There's the royal palace. There's the fairground. But what is Stockholm's tallest building? There it is and it symbolises Sweden's love affair with the state: that is the headquarters of the national tax authority."
Scandinavians pay the highest taxes in the world. In Sweden, if you're only reasonably well-off, you surrender close to two-thirds of your income to the tax man. It is a condition that Swedes have reconciled themselves to over the years.
It is the egalitarianism of Nordic society that appeals to many in Scotland. Where does it come from? Can Scandinavia's social harmony be taken off the peg and made to fit a non-Nordic society?
The Nordic world has been, historically, much more classless than Britain. They have a tradition of land ownership that is radically different to anything that Scotland has experienced.
In the eighteenth century Swedish peasants owned the land they worked. They had title deeds - property rights. That put them in a different relationship with the power of the crown than their counterparts in Scotland where, as the journalist Lesley Riddoch points out in her book Blossom, a thousand people still own 60% of the privately-owned and, and where only in recent years has the number of people owning their own homes passed the 50% mark.
But the Nordic country that is arguably most similar to Scotland is Norway. If you'd sailed into Oslo 30 years ago, you'd have passed shipyards and marine workshops on the waterfront.
They were, by then, already in terminal decline. There was a lot of public pressure on the government to use the country's new oil wealth to rescue the industry and save jobs. It didn't happen. Norway, ruthlessly, let its declining old industries die.
For Norway understood very early that its oil wealth, if mismanaged, would be a curse rather than a blessing. Windfall resources like that can have the effect of so inflating a nation's currency, that every other sector of the productive economy becomes uncompetitive and collapses.
Norway's political parties entered into a self-denying pact. They agreed not to spend a penny of the oil revenues in Norway itself. So they save it all instead, investing in companies overseas.
Its oil fund is now worth £400bn. What's more 96% of the interest on that fund is reinvested in it. The Norwegians allow themselves to spend only 4% of the interest each year - and none of the capital. But even that is enough to pay for 10% of the annual public budget.
It is a quiet Nordic rebuke to the rest of us. Britain's oil wealth - of course much smaller as a proportion of GDP - has been used as part of the overall tax take.
And an independent Scotland, initially at least, would need to spend its oil revenues to meet existing commitments. The Scottish government argues that it could, in time, start an oil fund. But the Norwegians have a 40-year start on us, and much, perhaps most, of the wealth that was there has now gone.
Norway declared independence from Sweden in 1905. There was tension between the two nations and even the threat of war. But there were negotiations at the end of which the Swedish King renounced his claim to the Norwegian throne, in effect dissolving what had been a United Kingdom.
Echoes of that tension remain. The Norwegian journalist Marie Simenson worked for a time as her newspaper's correspondent in London, and reported from Scotland during the 1997 referendum campaign.
She told me: "Norwegians used to have an inferiority complex about the Swedes.
"The Swedes were the big brother of the Nordic countries. They ruled over Norway till 1905. It's still there especially among older people - the Swedes seem more posh, more sophisticated, and we are still like farmers and fishermen and so forth.
"I saw these same traits in the Scottish view of England. The Scots are like the Norwegians - they are outgoing and so on, but if you push their buttons, they're a bit touchy. It's the same with the Swedes. In sport, it is the most important thing to beat the Swedes."
The warship Vasa sank, just 120m from the shore, on its maiden voyage in 1638. It keeled over under the weight of its own grandiose, unsustainable ambition.
Twenty years ago, the received wisdom in Europe was that the Nordic economic model had had its day - the public sector was too big, the state, like the Vasa, top heavy.
Norway's former foreign minister, Jonas Store, told me: "We were told that we were doomed in the new global economy.
"But we've seen over these last years that the Nordic countries come out on top when it comes to innovation, creating new businesses, and flexibility.
"We have higher employment, sounder public finances, safe and solid public welfare, because we have unions that take collective responsibility and strike responsible deals. We have a high level of social capital, as well as financial capital."
Could an independent Scotland emulate the model? And if it could, why couldn't a strongly devolved Scotland within the UK do the same?
For what, in the Nordic context, does "sovereignty" mean? And, given the extraordinary degree of interdependence and co-operation that exists between them and the rest of Europe, in what sense is any of these countries (in the parlance of the Scottish constitutional debate) "going it alone"?
It's not for me to answer the questions.
But as an old foreign correspondent returning to my own country at a time of historic decision-making, I wonder this - shouldn't we at least try to see the choice we face next year in its broader European context?
- Watch Allan Little's Nordic documentary: "Our Friends in the North" on BBC Two Scotland at 22:30 on Monday.