Scandinavia is also not Shangri-La

Consider this: In 2005, a prominent and among the largest selling newspapers in a country published 12 controversial editorial cartoons depicting Prophet Muhammad that led to violent protests all over the world. Three years later, a country suffers the biggest banking collapse - relative to the size of an economy -  in modern world's economic history. In May this year, the capital city of a country witnessed racial riots in which more than 20 cars were torched in one night, school classrooms were burned down, and far-right extremists were seen chasing immigrants around a suburb. And more recently, in the second week of July, the European Commission against Racism and Intolerance (ECRI) – a human rights body of the Council of Europe – published its report on a country and said,” risk of racial profiling of visible minorities by the police remains, and the National Discrimination Tribunal does not award compensation to victims of discrimination nor deals with cases of discrimination in employment or immigration matters.” The answer to all the above are Nordic countries [Denmark, Iceland, Sweden, and Finland, in that order] which have been hailed as “best governed” and the “next supermodel” by The Economist in its February 2013 issue.  

Why are the above events important for Singaporeans to take note of? Because ever-since the last general elections, much has been said and debated in Singapore on the rising inequality, insufficient retirement funds (read Central Provident Fund or CPF), low total fertility rate, wage stagnation, and declining social mobility. 

Some like Tommy Koh, chairman of Centre for International Law and Rector, Tembusu College, National University of Singapore, in an article, What Singapore can learn from Europe, published in The Strait Times have highlighted the achievements by Nordic countries in birth rates, equality, heritage and environment. Others, including the Prime Minister Lee Hsien Loong himself, while addressing the Economic Society of Singapore last year, countered the comparison. “There is indeed much we can learn from the Scandinavian societies, such as their pro-family policies and their success in nurturing global companies. But there are basic differences between Singapore and Scandinavia, in our strategic situations and our approaches to growth and equity,” Lee said then. 

Importantly, as noted by the PM, Scandinavians have adopted the model of “high taxes on all and comprehensive welfare” as compared to Singapore's “low taxes and targeted welfare benefits”. This they are able to do because of being rich in natural resources, having a peaceful continent [thus can afford less defence spending] and an effluent market nearby, and above all, their long histories as homogeneous societies, argued Lee. And going by the recent racial clashes witnessed in Sweden, he does have a point.  

Sociologists are now saying that high immigration in the Nordic states, particularly of non-European Muslims is  threatening the very core of welfare state – the principle of redistribution. With labour-force participation among immigrants much lower than the local Nordic population [resulting in high unemployment payout benefits to immigrants], the high-income earners are increasingly less willing to pay high taxes. Politically too, many Nordic anti-immigration political parties, which lost ground after a white supremacist Anders Behring Breivik killed 77 people in Norway in 2011, seem to be rising again. The anti-immigration Sweden Democrats shot to third place in the latest polls held just before the riots and is set to secure even more clout in next year's elections. 

Moreover, while the Nordic nations still remain the most egalitarian in the world, there are some disturbing patterns emerging, which cast a doubt on their widely touted economic model. The Organisation for Economic Co-operation and Development (OECD), a grouping of 34 most industrialised countries from the Americas, Europe and Asia-Pacific region, in its report, Divided We Stand - Why Inequality Keeps Rising, released in 2011 had noted the biggest growth of inequality in the Nordic region of all its members over the last two decades. According to the report, the percentage point change in the Gini coefficient from mid-1990s to late 2000s in Denmark was 3.3, while in Finland it was 3.2. The highest of all the OECD members was recorded in Sweden, at 4.8. 

So while its not clear whether a Nordic lesson will work for Singapore, it's certainly evident that Scandinavia itself is a work in progress and has it's own set of social and economic issues.