“The new welfare state provides us with a fantastic springboard to the global economy,” says Eli Moen, a researcher at the BI Norwegian School of Management in Oslo.

Many economists have been surprised at how well Norway, Sweden, Finland and Denmark have fared in the face of increasing global competition. After all, high taxes, high public spending, flat organisation structures, strong trade unions and high wage levels are hardly the standard formula for strong economic performance in influential circles in London and Washington. But as globalisation has gathered momentum and the pace of change has accelerated in trade and industry worldwide, the Nordic countries have not only managed to keep pace with the rest of the world but to be in front. They can point to rapid economic development over the last 10-15 years, a development that, where Norway is concerned, is far from being explained by the country’s large oil revenues alone. Against all odds, small Nordic companies have held their own in the international premier league, and the Nordic countries come out on top of several economic rankings, including level of innovation or international competitiveness (see Figure 1).

The Translearn research programme brought together researchers from a number of Nordic business schools and universities to study the Nordic welfare states and their recent economic achievements. They believe the Nordic countries have given such a good account of themselves in the international economy because of, and not despite, the welfare state.

This is not, however, down to the traditional Nordic model (see text box). The researchers believe the welfare state has changed to such an extent that we can now talk about a completely new, more flexible and offensive model. They call the modern welfare state “the enabling welfare state”.

The sequence of major crises that hit the Nordic countries through the 80s and 90s played a key role. Rather than simply expanding existing measures, the state has become more demand-oriented, offering tailored services that help individuals and businesses adapt to changing economic times.

This means that the state is sharing the risks inherent in testing experimental business models, something that is essential in conquering the global economy.

An asset

Professor Peer Hull Kristensen of Copenhagen Business School points out that the traditional welfare state has typically provided a safety net for people who lose their jobs as a result of market forces.
    “This is the defensive method. Now, however, we are seeing the welfare state consistently taking an active and offensive approach, giving people a genuine opportunity to be part of a global business community. The welfare state is enabling people to live in the experimental economy. Instead of being a cost, it is an asset,” he says.

Researchers discovered that Nordic employees are surprisingly mobile, and that they are happy to travel to client meetings all over the world. In other countries only the elite would have the means and the opportunity to do this. Ordinary salaries in the Nordic region allow people to combine family life with jobs of this nature, because the welfare state has developed an infrastructure for families to facilitate this.
    “No one believed it was possible, yet small businesses and subsidiaries in such peripheral countries as ours have managed to adapt themselves to international upheavals, captured market shares and become global leaders,” says Moen.
    “The welfare state is the rock on which flexible and experimental organisations are built. What counts in international competition is innovativeness and adaptability: employees must always be prepared for new work situations, new work tasks and constantly changing roles,” she says.

The researchers also point out that work in the Nordic countries seems to be organised in very different ways from most other countries. All have moved towards the “learning” form of work organisation and, more than anywhere else in Europe, people in the Nordic countries are both learning new things and applying their own ideas at work (see figure 2). This “learning” form of work organisation is characterised by “over-representation of the variables autonomy and task complexity, learning and problem solving to the extent of the variable measuring individual responsibility for quality management.” And the variables reflecting monotony, repetitiveness and work rate constraints are underrepresented.

This suggests the Nordic countries have enabled businesses and employees to develop a system of work organisation that is highly compatible with globalisation and the new experimentalist economy.

Perhaps the most surprising finding, the researchers argue, is that in all the Nordic countries, the starting point for a firm or organisation may be the product, but they then move this product very close to the customers. They then solve more and more complex problems for and in cooperation with existing customers, or by starting to work for increasingly sophisticated and demanding customers.

In most cases, Nordic firms seem ready to accept the risks involved in following customer developments, and their internal flexibility makes it possible to reorganise roles and routines as customer relations change. This creates a dense network comprising other firms and suppliers, enabling them to be the spider in a web combining a set of suppliers with a set of customers, the researchers say.

Flexicurity

The Nordic countries have found different ways of adapting to new challenges. In Denmark, the labour market policy introduced by the Social Democrat prime minister Poul Nyrup Rasmussen in the 90s has been dubbed “flexicurity”, refering to the combination of flexibility and security. Employers have a high degree of flexibility in that it is fairly easy to hire and fire employees. On the other hand, an active labour market policy, high unemployment benefits and support for further training ensures that employees also enjoy a reasonably high level of income and job security. The idea is that employers will be more willing to take on more staff, and employees will become more mobile and more willing to take jobs that are risky and more future-oriented.

In Finland and Sweden it is first and foremost the commitment to research and education that has helped the business community to adapt to the global economy. Sweden is characterised by close interaction between the business community and educational and research institutions. Finland has gone even further, establishing a research and technology council headed by the prime minister that has taken the commitment to a new level, making  the commitment to research and education even more focused and all-embracing than in Sweden. Nokia is an example of a company that has benefited from the welfare state’s contribution.

High-tech in Norway

In Norway, the Kongsberg companies stand out as an example of firms that have succeeded in becoming world leaders in their fields.

The state-owned Kongsberg Weapon Factory was split into a number of high-tech companies in 1987, a move that narrowly avoided a colossal business failure.

The subsea division was taken over by the US company FMC Technologies, renamed Kongsberg Offshore (later Kongsberg Subsea Systems) and went on to become a world leader in subsea systems for the oil and gas industry. Since 2000, the Norwegian branch of the company has played a key role in the growth of the global group. Oil & Gas Technologies, and particularly the subsea division from Kongsberg, have become the key growth drivers for the multinational company as a whole. Fortune magazine has four times named FMC the US’s most respected and innovative supplier of equipment and services to the oil industry, ahead of well-known, long-established companies such as Schlumberger and Smith International.

The key to this success, argues Moen, was the adoption by FMC of the subsea division‘s experimental approach to business.
    “Prior to the acquisition, FMC was run as a traditional industrial company. The fact that even peripheral businesses or subsidiaries can play a strategic role in global contexts shows that ownership is not of critical importance to a firm’s business development. The globalised economy is in constant flux. Opportunities for development lie in employee competence and organisational flexibility,” says Moen.

She believes Norway lags behind the other Nordic countries when it comes to business development policy, further training and research. But she notes that firms such as the Kongsberg offshoots compensate for this by working closely with demanding customers and other business partners worldwide.
    “What is fundamentally new here is that we have gained a number of extremely innovative, knowledge-intensive, high-tech companies that have become world leaders in their fields. These are businesses that are managed on the basis of completely different logic from raw material-based industry, and it is astonishing how well they are doing after changing course,” says Moen.

Wanting frontrunners

Although the researchers pay homage to the new welfare state, much can still be improved.
    “It’s vital to stay on the ball in terms of what is needed,” says Hull Kristensen. “Discussions in the Nordic countries tend to look at how to achieve savings and make the public sector a more efficient supplier of specific goods. But if the state is to help elevate the population to be frontrunners in innovative networks globally, we need an offensive public sector that is always one step ahead and constantly evolving. Rather than discussing how to cut costs by opening up to competition and offering standard solutions, we should discuss how the public sector can improve by combining different services that elevate individuals.”

The researchers point out too that the obvious solutions are not always the best ones. Finland has invested heavily in research and development, and the Finnish innovation system has been widely praised. But discussion is now under way in Finland as to whether their innovation system could be a hindrance.
    “It makes Finland more focused on its own institutions, at the expense of participating in the many other innovative environments around the world,” says Hull Kristensen.

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Sveinung Engeland (sveinung@mandagmorgen.no)