Against all odds: the Nordic welfare states
Low income disparity, high taxes and generous welfare benefits are the perfect recipe for economic disaster - in theory. But the Nordic welfare states are prospering with exactly that formula. Now, 55 top-notch researchers at the ESOP research centre, one of Norway's eight new Centres of Excellence, will investigate why.
"It's time we studied alternative economic models more closely," states Karl Ove Moene, head of ESOP (Equality, Social Organization, and Performance). "Our theory is that there is more than one approach to achieving strong economic results, not just the market-based model with US-inspired institutions at its core. The Nordic economies substantiate this, so perhaps traditional economic theory needs to be re-evaluated against them."
The online encyclopaedia Wikipedia describes economics professor Karl Ove Moene as ambitious, optimistic, energetic, and an original thinker with cutting commentary. Others might call him an alternative economist or even a radical.
Nordic model back in fashion
In any case, he was surprised when ESOP was chosen as one of Norway's eight new Centres of Excellence, the only one representing the social sciences. Competing with 97 other hopeful applicants, ESOP was granted this status on the merits of its highly qualified research community - and perhaps also because the Nordic welfare model is now in fashion. The entire world wants to know how to create a working system that offers generous cradle-to-grave welfare benefits and low taxes and good economic growth.
China, the EU and the UN are all preoccupied with this conundrum, and ESOP has received many enquiries. "We are constantly on the go, talking to organisations and ministries here at home as well as to foreign politicians and bureaucrats. Countries that have contacted us include South Africa, Brazil, Indonesia and Zimbabwe," says the centre's director.
Advising the developing nations
Promoting the Nordic model abroad is not ESOP's objective, emphasises Moene. Though he personally champions certain causes, the professor points out that the centre as a whole assembles researchers with vastly differing viewpoints on economic matters. Around 15 persons at the University of Oslo's Department of Economics are associated with the centre, as well as another 40 from various other institutions, including some abroad.
"From this pool come reports that can diverge in every direction. The point is that we to keep each other on our toes; that's how we refine our approach to the problems."
ESOP will also study welfare systems other than the Nordic ones, including some in developing countries. Moene is convinced there is much to gain from studying well functioning and dysfunctional systems alike. What are a country's social insurance schemes? What about retirement pensions? Tax systems? Trade unions?
The Nordic model is characterised by a well-organised working life with centralised employer and employee organisations in close contact with government officials. This results in a labour market with little income disparity and politicians who prioritise full employment, explains Moene. In this way, a highly educated workforce becomes cheap, a clear competitive advantage for the Nordic economies.
This kind of knowledge can shed light on the problems most relevant to the developing nations as they struggle toward more effective economic systems, says the professor.
High activity level
ESOP's researchers have great faith in their centre. Its name comes from Æsop of fable fame. "His name can also be spelled with 'E'," says Moene, who is searching the fables to select one as the centre's guiding star.
Once a week the centre organises a scientific seminar, and aspires to hosting at least one larger conference per year. A vital task is recruiting researchers - especially women and most preferably internationally recognised thinkers. Many have already been recruited, but the centre wants to add even more associated researchers.
"We've been awarded NOK 100 million over a ten-year period, if we pass the midway evaluation in five years," explains Moene. "That's a lot of money in the context of Norway - it gives us the chance to gather momentum and attract researchers with top qualifications. We can really get some things done now. Economic theory can expect a serious challenge!"
Objective: To understand the connection between equality, social organisation and economic growth in countries wealthy or poor, and to challenge economic theory on the basis of Nordic experience.
Collaborators: University of Oslo, primarily its Department of Economics, where the centre is located. Also involved are researchers from the Frisch Centre, Norwegian School of Management (BI), Norwegian School of Economics and Business Administration (NHH), University of Bergen, University of Stavanger, and Norwegian University of Science and Technology (NTNU). In addition, a number of associated researchers collaborate from foreign universities such as MIT, UCLA, UC Berkeley, New York University, Yale, Harvard, University of Zimbabwe and more.
Annual funding: NOK 9.5 million from the Research Council of Norway
Number of man-years: 15-20
Contact person: Professor Karl Ove Moene
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