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Getting to Norway

I am in Oslo, attending an Evolution Institute-organized workshop led by my EI colleagues Jerry Lieberman and David Sloan Wilson. We are in Norway because this country is well known for a very high quality of life. In fact, during the last decade Norway has reliably occupied the number 1 position in the United Nations list of countries ranked by their Human Development Index, HDI (in 8 years out of 10, if you want to be precise).

The HDI combines economic and biological measures of quality of life (GDP per capita and life expectancy) with educational attainment. It’s not perfect, but it’s much better than ranking countries by their GDP per capita. The latter measure is a poor indicator even of the economic aspect of well-being. For example, while GDP per capita has been growing in the US over the last several decades, real wages have actually been stagnating (and even declining), as I have discussed in a previous blog. The reason is that all the gains of economic growth have been going to the top earners, reflected in the growing inequality of incomes.

In Norway, on the other hand, inequality has increased very slightly and remains at a very low level, so the gains of economic growth have been distributed to essentially all Norwegians. This can be seen in the following chart from the presentation of one workshop participant, Dag Hessen:

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Other indicators of well-being have aligned with economic measures. For example, the proportion of Norwegians reporting that they are ‘very satisfied’ or ‘quite satisfied’ has increased from 50% to 70% between 1999 and 2011 (also from Dag’s presentation):

Dag_Hessen_2

The Norwegians are also quite happy about the government. Remarkably, the proportion who want to lower their taxes decreased from 50% in 1999 to 20% in 2011 (the blue curve):

Dag_Hessen_3

(from the presentation of Dag Hessen)

At the same time, the proportion who think that cheating on taxes is unacceptable grew (see the yellow broken line).

Nobody says that Norway is perfect in all respects, but the ‘Norwegian model’ (on which more below) has certainly generated that proverbial “rising tide that lifts all boats.” Proponents of free markets like to use Nordic countries, such as Norway, as examples of how socialism kills economic growth. But the reality is quite the opposite, especially if you use indicators of well-being other than GDP per capita, which is a good practice, I would argue.

Not all Americans are ignorant of the Nordic achievement. The conservative thinker Francis Fukuyama, for example, uses Denmark as an example of a country that does things right. The title of this blog is, of course, a shameless rip-off of the meme Fukuyama launched, “Getting to Denmark.”

So what is the famed ‘Norwegian Model’? The answer came from two participants of the workshop, Kalle Moene and Lars Gule. At the core lies three-way cooperation between the workers, the employers, and the state.  As an aside, this tri-partite division corresponds perfectly to the representation of the society in the structural-demographic theory as a commoner-elite-the state system.

Each group has its own formal organization through which they negotiate socially optimal outcomes. The state, of course, has the government. The workers are organized in Trade Unions. And the employers have their own organization, Confederation of Norwegian Enterprise (abbreviated in Norwegian as NHO).

This system was instituted shortly after World War II and continues operating to these days. It involves routine consultations between the three organizations, which pre-empts strikes. It resulted in the establishment of the welfare state and a controlled, highly regulated capitalism. It also led to wage compression. Not only the differential between the salaries of workers and management is kept within strict bounds, worker wages from different industries are kept essentially the same, even when industries may differ wildly in labor productivity. This is a very interesting aspect of the Norwegian model, to which I will return in a future blog.

So how do we get to Norway? Do we want to get to Norway? (I, for one, am not comfortable with all aspects of its model). Can anybody get to Norway? (Clearly, history and culture matter – a lot!)

These kinds of questions were one of the major themes of discussion at the workshop. The second one was whether even Norway can continue being ‘Norway,’ that is, stick to its own model in the long run. There is no guarantee of that. We know many examples of countries that did very well for a while, and then got derailed. I still remember how back in the 1980s Japan seemed to be an invincible economic juggernaut. For those too young to remember, just watch “Rising Sun” or, better, read Michael Crichton’s book on which the movie was based.

Ironically, just when Crighton was finishing the novel, the Japanese bubble market was collapsing, a crisis that resulted in the ‘lost decade’ of the 1990s, from which Japan never (or, at least, so far) fully recovered.

So history shows that past success is no guarantee that the future will be as bright, and the Norwegians are right to worry about preserving their model of economic and social development.

17 Comments

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17 Comments

  1. Also, they have stockfish, and pinikjott. Don’t miss those while you’re there.

    • Peter Turchin says:

      Too late – I am leaving tomorrow morning. But there were a couple of memorable gastronomic experiences this trip.

  2. wagnerel says:

    Interesting blog. My hunch is that many Americans, and most certainly those of a more conservative bent, don’t give a darn about how high the average person’s quality of life and overall satisfaction is in Norway because:

    1. They’re engaged in a sort of lottery mentality, where they honestly believe they’re talented, smart, lucky and hard working enough to make it into the top 1%, or at least top 10%, of Americans who are living like kings. Statistics suggest, though, that very few people actually rise above the economic circumstances of their birth here. But it’s not something most Americans want to believe. Or if they do, they also believe that they’re different.

    2. A sort of holdover from the puritan value that too much happiness and security leads to sloth and complacency. I don’t think there’s any truth to this. In fact, I believe that some research suggests that people are more willing to take risks and are more able to be engaged in their communities and pay it forward to the next generation etc. when they’re reasonably secure and not afraid of losing their job, their health insurance or their home. But the idea that fear is the best motivator seems to be a strongly entrenched idea in US culture.

    • Peter Turchin says:

      Thanks for these comments. I think there is much truth in both points you make. However, or in addition, opinion surveys show that a great majority of Americans support a more equitable distribution of income and wealth. Furthermore, they drastically underestimate the degree of inequality that obtains in the States.

  3. O.Voron says:

    I am very curious to learn about the sustainability of the Norwegian model. Considering massive immigration to Norway of people culturally very different from locals. I am not so sure that such a small country is able to succefully absorb and assimilate all of them. But if they don’t, they can kiss good-bye to their current model.

    Every model is built on the societal consensus, I believe, and there will be no more. Remember riots in Sweden? No riots in Norway so far. They got Breivik instead. And a landslide victory of a right wing party in their latest presidential elections a month ago, which now is in ruling coalition with the ultra right (by Norwegian standards, at least) anti-immigration party where the said Breivik used to be a member. Isn’t it a sign that Norwegians became worried about the sustainability of their cherished model?

    I wonder how your Norwegian colleagues interpret these developments.

    Looking forward to your future blogs,

    O.V.

  4. wagnerel says:

    “However, or in addition, opinion surveys show that a great majority of Americans support a more equitable distribution of income and wealth. Furthermore, they drastically underestimate the degree of inequality that obtains in the States.”

    This is true too. Which makes the voting behavior of most Americans (the ones who vote, at least) all the more baffling. I wonder if the low voter turnout in primary elections in particular is part of the reason. I don’t know what people can do to get Americans to pay more attention to the statistics that show how unequal wealth is becoming in this country. The Occupy movement tried to address this, but it lost momentum, possibly because its message was too scattered. There still seems to be a general “squeamishness” many feel with regards to higher taxes for wealthier individuals, and increased regulation being possible fixes for some of these ills. In fact, many Americans of a more moderate to liberal bent feel a general squeamishness about following or getting involved in politics at all.

    Anyway, thanks for your blogs, as they are interesting and thought provoking.

  5. John Lillburne says:

    Norway has thrived on a bubble of oil and gas. That solves the difficulty of competing with other countries and insulates them from the effects of chinese and other competition. so the country suffers from one part of the commodity curse which is strong currencies and weakened work ethic, but to its credit avoids the other side of the commodity curse which is inequality, corruption and continual elite conflict (ie nigeria). probably the correct choice but makes the norwegian model impossible to duplicate.

    The spirit level, a book claims that all things go better with lower inequality, but the results are based on the outliers of scandanavian culture. when the scanadanavian countries are excluded, then the results disapear. The question then becomes what genetic and/or deep cultural factors lead to the scandanavian cultural uniqueness.

    • O.Voron says:

      John Lillburne, you are absolutely right about oil and gas. As I remember, they comprise a quarter of their GDP – or more.

      However, it is not the case with Sweden and Denmark (no oil, no gas to talk about) although all three of them have rather similar models and enjoy similar success.

      It is their shared Scandinavian culture, I believe. The question is can _culture_ be duplicated? I have my doubts

    • Peter Turchin says:

      I was waiting for someone to bring up oil! However, as O.Voron rightly notes, Sweden and Denmark do not have oil. Furthermore, as was discussed in our workshop, Norway had become quite wealthy by the 1970s, before there were any significant amounts of oil extracted. And the comparison with Nigeria is quite appropriate.

  6. John Kemp says:

    So how did Norway actually get to be Norway? The current social compact may have taken shape after WWII, but surely a critical chain of social evolutionary events came before that – reaching back, at a minimum, to the adoption of the constitution in 1814. As Peter and other contributors have noted previously, we need new and better models of history to help us understand how the Scandinavian social compacts have evolved.

    Thanks again to SEF for another excellent discussion!

    • OhFinland says:

      I’d start from around the Middle Ages. What was characteristic of pretty much every Nordic country, especially Norway, Sweden and Finland, was the complete absence of the serfdom institution and the relatively high degree of independence enjoyed by farmers in general. The contrast is stark compared to Eastern Europe, in particular.

    • OhFinland says:

      The Nordics have had it pretty easy since then, too. Isolated from the European wars, almost uninterrupted peace time since the early 17th century (with the occasional Russian shocks absorbed by the Finnish provinces) and a small culturally, religiously and ethnically homogenous, mostly rural population all give you a pretty good head start into the industrial age.

  7. Shannon says:

    I know that people often argue that cultural differences that make the US too different from Scandinavia make it difficult for it to adopt such a model, but perhaps the other New World “Anglo” settler countries — Australia, Canada (which seemed to top the HDI in the ’90s), and New Zealand might be a fair comparison.

    These Anglo countries presumably share more in common with the US than with Scandinavia, and they seem to be able to come up with a more socialized system than the US (but less still than Scandinavia or other parts of western Europe), so probably differences between the US and Norway can’t only be something about Scandinavian culture.

    Then again, the US is still unique compared to the other Anglo countries themselves by having a founding event based on a revolutionary break from British rule, so that probably plays a role too.

    • john kemp says:

      Shannon,
      I think these are excellent points. They are exactly the sort of questions that should be tested as new models are developed to account for the evolution of modern societies.

  8. Shannon says:

    For what it’s worth, Occupy Wall street was said to be started/initiated by Canadians 🙂

  9. Is Norway (and other Scandinavian countries) really so special?
    Yes, it is, in terms of equality of the income distribution.
    However, what about the distribution of wealth? Let’s take a look.
    Norway – 0.633 (Gini of wealth distribution) nothing special, Sweden – 0.742 close to US – 0.8 and Denmark – 0.808, one of the most unequal wealth distribution in the world!
    In this light, the Fukuyama’s meme “Getting to Denmark” sounds like a cruel irony. This means that the rich should get richer, but they have to pay for this by increasing a financial help to so-called “straggling middle class”.

  10. Mathew says:

    Norway has no net debt, unemployment is barely visible at around 3 per cent, oil investments are still rising and the government runs budget surpluses worth more than 10 per cent of GDP, giving it firepower to potentially counter any slowdown.
    Meanwhile no country is perfect..