From Start to Finnish: A look at how Nordic Countries are redeveloping the public sector through competition.

In the Economist‘ recent special report titled The Next Supermodel, John Parker (Author) calls for the emulation of the present-day Nordic economic model to alleviate the increasing inefficiencies associated with the public sector, not just in Europe, but worldwide. The Euro-Crisis has done much more harm than good to its members but, surprisingly, Nordic countries have come out of the mess relatively unscathed. Part of their recent well-being can be attributed to luck: Sweden experienced a debt crisis for two decades starting around 1970 but, its economic downturn, in hindsight, did more to help than hurt.  Sweden has since reduced its public spending from 67% of GDP in 1993 to 49% today and has made sweeping reforms to help promote long-term economic stability by, for example, reforming  its pension system which now has switched from a defined-benefit system to a defined-contribution system while also incorporating automatic adjustments for longer life expectancy, bringing pensions inline with lifetime incomes. This is just a sliver of the necessary changes needed by modern governments looking to slim-down.  Recently, in the Nordic countries, private companies have been pushing up standards through competition for state-funded services, like caring for the elderly. By “extending the market into the state” the Nordic countries have seen tremendous gains to productivity in everything from retirement homes to education. In Sweden half of school children chose not to go to their local school and up to 20% of those aged over 16 attended a “free” school, two thirds of which are run by private companies. The deal is even sweeter in Denmark, where the Danes take the educational voucher system a step further by not only allowing parents to take their public money to private schools but also matching parents’ contributions up to a certain limit allowing its citizens to shop for the best services, in turn  promoting quality and diversity among schools.  The Nordic countries are pioneers of the “intelligent state” which seeks to promote innovation. For example, in Denmark, instead of ordering wheelchairs from its usual providers, the state is planning on ordering “mobility solutions” from competing companies and then encouraging the most successful ones to export their product to Denmark. What this does, in turn, is bridge the gap between the winners and the losers. At one point in 2000 Nokia accounted for 4% of Finland’s GDP. This model became far too risky and what Finland has done since then is to diversify its approach to developing technology. It has since created an innovation and technology agency, Tekes, with an annual budget off 600 Billion Euros whose task is to help early stage startups off the ground.  In 2010 a group of students at Aalto University, outside of Helsinki, organised a “summer of startups” which eventually turned into a major business accelerator, helping young entrepreneurs with anything from working space to study trips in silicon Valley. The result has been a cascade of young Finnish companies creating products for niche markets. Zen Robotics automates recycling. Valkee makes a product that lifts seasonal depressive moods by shooting bright light into the ear canal. The eventual demise of Nokia no longer poses as great of a threat as it once did and its near collapse has opened the door for other companies with new job openings.  It would seem that these Nordic countries offer their citizens more for less, a combination that is rarely achieved in the real world. I think that part of their ability to do this arises from their ability to create easily navigable networks with higher connectivity rates among all the nodes (Sweden has one of the best Job-matching systems in the world)  thus allowing a young entrepreneur with a good idea to link up with an angel investor, or send a child to a school through bridges which help to foster traits and characteristics among its citizens which do more to contribute to society, through technological advancement or whatever the sort, than to deplete it through overextending inefficient benefits.


Some statistics from printed edition