The Secret Story of Nordic Prosperity
The story they don’t want to tell you about how Nordic countries got prosperous.
Here is the sugar coated version they do want to tell you: In the early 1900s free wheeling capitalism unleashed the creative spirits of free enterprise and made the Nordic economies blossom. It was all good, until at some point in the 1970s reckless socialists took over, wasted all the money and tanked the economy. It sucked but the sane pro-market people got back in charge, deregulated and got everything running smoothly again.
Or at least that is what free market think tanks such as the Heritage Foundation, Cato Institute and Ludwig von Mises Institute would like you to think.
This mythology about the Nordic countries is mirrored in the standard description of the Nordic model presented to English speakers at sites such as Investopedia:
The Nordic model is the combination of social welfare and economic systems adopted by Nordic countries. It combines features of capitalism, such as a market economy and economic efficiency, with social benefits, such as state pensions and income distribution.
It is not an entirely incorrect description, although as all other descriptions you can dig up at respectable site, the world “socialism” has been chemically erased. Oh such a nasty little word. We don’t want it there. It ruins the pretty capitalism picture the boys at the Cato Institute and Heritage Foundation have drawn.
No, Capitalism Did Not Make America the Richest Country
America has built a mythology arounds its economic success as being built on hard work, rugged individualism and free wheeling capitalism.
Instead it has been replaced with a more innocent, less provocative “social benefits.” They want you to think that Nordic countries are really just the same as the US. They just have a bit higher taxes and a couple of more welfare services. A bit of free health care and some dollops of free college. Nothing much.
They completely fail to mention one of the most socialist inspired aspects of Norway: Corporate democracy. After all workers participating in how corporations are run is everything socialism is about. And they are desperate to make sure you never get the idea that socialism plays any role in Norwegian society.
Corporate Democracy in Norway
A common misconception I have to fight online when discussing the Nordic societal model is the idea that Norway is simply yet another capitalist country with free healthcare and college. What I will discuss here is one the central themes on socialism: Democratization of the economy.
This U-turn is somewhat ironic given that all the way back to the 1930s American conservatives spoke in alarming terms about the horrors of Swedish socialism. Of the attempt to characterize the Swedish system as totally socialist utterly backfired when Sweden failed to fail, and instead along with the other Nordic countries became model countries, other nations would want to follow.
Ouch!
This has put American conservatives in a bind. They cannot decide whether the Nordic model is a totalitarian socialist nightmare or actually capitalist.
Not the Soviet Union, But Not America Either
It is true that private enterprise has always played a significant role in the Nordic model and still does. However erasing the role of the state as well as socialism would be to tell only half the story.
Characterizing the Nordic countries until the mid 1980s as capitalist countries akin to the USA would be highly misleading.
The stock exchange played almost no role in many Nordic countries in the postwar years. Companies received funding primarily through banks and these were either directly controlled by the government or on a tight leash.
Many Nordic countries ran the equivalent of Soviet Five-year plans, where government bureaucrats planned in detail what industrial sector to expand and grow. In Norway e.g. government used a macro economic simulation called MODIS to model the economy and plan accordingly. They regulated what corporations got loans and how much. Credit was strictly controlled and rationed. Not just credit but also saving.
Like many communist regimes including China today, people were basically forced to save a lot of money. Nordic countries would ration consumer goods, so even though you might have money to spend, you couldn’t. This forced people to save in the bank.
This was a classic approach for the planned economies of the East Block, Soviet Union and partially China today. One of the selling points for planned economics vs free wheeling capitalism was that you could control the savings and investment rate. The basic idea is that an economy grows through investment.
But what do you do if people are mainly spending their money on consumer goods rather than saving? In this case industry cannot be easily expanded. Nordic countries wanted rapid industrialization especially of capital intensive heavy industry. How do you get capital to do that?
Say you want to build lots of power plants and steel mills? By artificially limiting access to consumer goods and rationing credit to other industries, you make a lot more capital available to heavy industry. Government set the interest rate of the central bank very low to make loans cheap. This is also a reason why credit had to be rationed otherwise everybody would have started borrowing excessively. Just like China today, you could not simply move your money to another country to get higher interest. Capital controls were in place.
The specifics of how this played out varied considerably between different Nordic countries. So let me cover some of the countries more in detail.
Norway — Power Socialism
In Norway we have the term “Power Socialism,” referring to the preoccupation of the Norwegian Social Democratic party with building massive amount of hydro-electric power stations. Today it is a bit of a derogatory word, referring to a time when Norwegian Socialists only cared about building factories and power stations and paid little attention to things like the environment and nature.
However this began even before Socialists gained power. However even before Socialists began completely dominating Norwegian politics in the 1930s and onwards, the government played a significant role. Already in 1891 they built a hydro-electric power-plant in the town of Hammerfest, owned by the municipality.
At first politicians had waited for the Norwegian private sector to begin building hydro-electric power stations. But this never materialized. The private sector thought it was too risky and capital intensive. Norway was a relatively poor country in the late 1800s and early 1900s and did not have a large capitalist class which could easily fund large projects like a power-plant.
Secondly, there was no companies actually demanding this power. You would be building a power plant and hoping somebody would buy the power afterwards.
The belief in the Norwegian government was that hydro-electric power was key to industrializing Norway and making it prosperous. Norway had no coal of its own and had to import coal from Great Britain, limiting the ability to industrialize. Norwegian industry was incapable of competing with Britain and workers salaries in Norway was too high relative to the UK.
Industry like textile mills had sprung up along rivers in major cities like Oslo, where a waterwheel could power a factory directly. However this was very different from utilizing a massive waterfall to generate vast amounts of power.
Instead the ideology followed by the Norwegian state, was perhaps best articulated by Social Democratic prime minister Einar Gerhardsen:
Don’t ask what we will use the power for, we must simply build it, and the industry will follow.
And indeed industry followed. Cheap electric power and large quantities which Norway could offer, allowed a number of industries impossible to run effectively elsewhere. Norway developed a method for creating fertilizer using electric power. This became the foundation for Norsk Hydro, which was long the largest company in Norway. Fertilizer is naturally something with a huge global market. No other country had cheap enough power to utilize this method apart from Norway.
The cheap hydro-power cause an electrochemical industry to develop in Norway where electric arc-furnaces was used by smelters producing metals like Aluminum, Zinc and various Silicon based alloys and other chemicals.
Norwegian Parallels With China
American media like to write extensively about how unfair China is. Requiring joint-ventures for anyone wanting to access the Chinese markets. Strict capital controls. The list goes on.
But how many know that Norway have a long history of operating in a very similar fashion. Norway used this strategy to industrialize successfully just like China.
The logic works much like in China. When China opened up they knew they were far behind technologically and had to find ways to catch up. Joint-ventures in exchange for market access for Western companies was one approach.
Likewise Norway knew when it began industrializing that it was short on cash and know-how. At first the Norwegian state tried to buy up water-falls in Norway to secure this valuable resource on Norwegian hands. This is what happened in Sweden but the Swedish state was a lot richer and could afford it.
The state could not keep up. A 1906 report to the Norwegian parliament showed that 77% of all hydroelectric power is in foreign hands. In fact most industry was in foreign hands. This mirrored the early phase of Chinese industrialization where foreigners also controlled most of the factories. An experience communist China wanted to avoid repeating.
Norway worried its ability to prosper from hydro-electric power would slip out of their hands. This lead to what we call the 1906 panic laws, where it was required that all board members on any industrial enterprise establishing itself to utilize Norwegian water-falls had to have Norwegian board members. This was the beginning of a series of laws passed which essentially nationalized Norwegian water-falls.
This approach would mirror the approach Norway would follow decades later in the 1970s when oil was struck in the North Sea. A law passed in 1909 e.g. establishes what Norwegians call “Hjemfallsretten,” which means any company which obtains a license to build an operate a hydro-electric power plant, would have to give the whole thing back to the Norwegian state after the end of the license period.
A similar approach was used in the North Sea in 70s and 80s. Foreign companies drilling for oil would typically have to partner with the Norwegian state owned oil company Statoil. Foreign companies would do the drilling and take charge building out the field, while teaching Statoil how everything was done. The license would stipulate a time period after which Statoil would take over the majority of the operations.
This was a tough pill to swallow for many foreign oil companies. E.g. American Mobil helped develop the enormous Statfjord field, which turned out to be hugely profitable. They had to train Statoil on operating the field however and after 10 years, Statoil would take over. Mobil fought hard to stop Statoil from taking over as agreed up on in the license agreement.
Developing Domestic High Tech Industry
The Norwegian government took an active role in building out power stations. Already in the 1920s the Norwegian state was the largest owner of hydropower in Europe, and Norway had the highest consumption of electric power per capita.
The Norwegian government utilized their control of the power stations in the 1920s in similar fashion as they would use their control of Statoil in the 70s and 80s to build up a domestic high tech engineering companies.
Norway passed laws which required Norwegian companies to supply power stations, just like they would later do for supplies to oil platforms. Foreign companies such as General Electric and Siemens has hoped they would get the orders for turbines to the hydro-electric power stations.
The Norwegian state established Polytechnic schools and a waterpower laboratory for testing water turbines. They would hold bidding rounds for turbines with foreign companies and evaluate turbines in their laboratory. However they would run these in multiple rounds by giving feedback to Norwegian engineering companies how their designs were below foreign standard. Eventually Norwegian companies would device design outcompeting the foreign ones. Thus there was a partnership between the state and private companies to make sure Norwegian companies succeeded.
Through this process Norwegian companies soon became world leaders in turbine construction, making the most efficient turbines of any nation already in the 1920s.
This processes got repeated in the 70s. Foreign companies would get tax deductions for R&D spending in Norwegian universities and with Norwegian companies which caused a large influx in research and development of offshore oil technology. Norwegian companies eventually became world leaders in offshore oil technology. In fact the largest export from Norway today after crude oil is in fact all sorts of equipment, instruments and services related to offshore oil drilling and production. The software company Roxar, I worked at myself for may years was an outcome of this process. It was one of the first companies to create 3D visualization of seismic data and structural models of the subsurface.
To summarize. The Norwegian state has played a central role in industrializing Norway. They did not do it alone but worked as partners with private enterprise, making the large heavy investments the private industry itself would not dare do, and taking the long term perspective, while securing valuable resources on Norwegian hands.
Finland — Cartels and Soviet Five-Year Plans
Orthodox free market economic thinking says cartels and planned economics are bad. Yet Finland kind of did both.
The industrialization of Finland was highly unusual in many aspects. E.g. in the postwar years, Finland was in many ways part of the whole Soviet planned economy. The Soviets made 5 year plans which detailed what each factory should produce and deliver to each other over the next 5 years. It was not based on market prices, supply and demand.
A large chunk of the Finnish industry was part of this arrangement. Finland supplied a variety of machines and industrial goods to the Soviet Union and got a number of raw materials back such as oil. In fact Finland got so much oil back from this setup that they realized they could build an export industry around it. Thus the Neste company was founded by the Finnish state. It did oil refining and produced various chemical products, which they could export to other European countries.
But Finland was not part of the East Block countries. It was part of the Western sphere. So how on Earth did Finland become part of a Soviet planned economy? No other Western nation trade with the Soviets this way. They may have made various products for any market which the Soviets purchased in a normal way.
However Finland was actually building machinery and equipment according to Soviet standard and specifications and delivers were coordinated with the Five-year plans.
Did it work? Judge for yourself by looking at a comparison of Nordic countries and Anglo-Saxon countries on GDP growth per capita below. I excluded Norway because it dwarfs the other countries too much.
You can see that Finland goes like a rocket. However you can also see that depending on the Soviet market was a disaster when the Soviet Union collapsed in the 90s. Finland had the largest economic collapse of any Western nations since the depression in the 30s. GDP dropped 11% and unemployment initially at 4% ballooned to 18.5%. We can see from the graph how the United States, Canada and UK was not very affected by the Soviet collapse while Finland cratered. The Swedish downturn was more about a banking crisis than the Soviet Union.
But this is only one part of the Finnish story.
Resources Nationalization and Industrial Cartels
Finland took a similar approach to their natural resources as Norway. In the 1910s the Finnish Parliament passed laws prohibiting foreign enterprises from purchasing or owning land, forests, hydropower resources or mineral ore deposits.
The government setup tariffs and tax reductions to protect domestic industry which was encouraged to form cartels. The Finish forrest industry was the first to form cartels after government recommendations. They would agree on prices and standards. In addition they would cooperate to establish broad networks of sales branches in Europe, Americas and Asia.
With cartels Finland avoided that domestic industry destroyed each others profitability and instead could sell at maximum price abroad. In many ways you can think of this as number of smaller companies merging into a large one. Why do companies buy each other out? To get economies of scale and reduce competition. Cartels gave much the same benefits without changing ownership.
The Finnish Tiger
What was the effect of these policies which would be unorthodox in free market think tanks today? Finland in the interwar period was an economic miracle. It was one of the fastest growing economies with annual growth in industrial output of 12%. This rapid modernization is what helped Finland withstand the Soviet Union when it invaded during the Winter War in WWII.
Finnish State Owned Enterprises
Finland during its industrialization had many of the same problems as Norway. As a relatively poor country in Western European terms it had a small capitalist class which lacked the funds to raise found the major exporting industries Finland wanted.
Why did both Norway and Finland both care so much about boosting export industries? Because like most developing countries, both had a desperate need for foreign currency. Both Norway and Finland was too small and underdeveloped to produce everything needed themselves. A lot of goods had to be imported. To import goods you need foreign currency like dollars, pound and francs. Without exports you cannot get these currencies.
Thus Finland like Norway used the state actively to found large capital intensive industries geared at export. Before privatization in recent years, state owned companies stood for 23 to 30% of Finnish exports. In the economy as a whole state owned enterprises added up to 22% of industrial value.
That is quite high. In the US e.g. it was in similar period around 1%.
Examples of Finnish state owned or founded corporations:
Valmet — producer of machines and automation systems. Especially for the paper industry. The largest provider of machines for the paper industry.
Neste — Petrochemical industry, such a refining oil and producing different chemicals.
Televa — State-owned telecommunications company founded in 1945. Evolved from Radio laboratory established by Finnish Ministry of Defense. Was an important part in the transformation of Nokia into a high-tech cellphone company.
How Finland Proved the Nordic Model
A common way to dismiss the Nordic model is to point to countries like Norway with lots of oil, fish, hydropower and relatively calm political situation for most of its modern history.
Finland had none of these benefits. In almost every possible era Finland had a major disadvantage. Finland is farther north than other Nordic countries, meaning all their agriculture operate under quite difficult conditions where large amounts of crops would get lost due to frost.
That famous Nordic homogeneity? Finland had from the onset deep divisions which caused a bloody civil war in 1918 shortly after its founding. Divisions were not over after the war, just kept in check.
The Soviet invasion of Finland was disastrous. No other country would come to the aid of Finland or help them militarily. Despite their dislike of Nazi Germany, they had no other choice but to ally with them to survive the Soviet onslaught.
Not only did this drain Finnish resources to fight against such an overwhelming force, but it also put Finland on the loosing side of WWII. Which has a large number of unfortunate consequences for Finland:
They got lumped in with the losing Axis powers at the end of the war and forced to give the most industrialized part of Finland to the Soviet Union. As if Germany had to give Ruhr to the French.
Fighting the Soviet onslaught for such a tiny nation severely drained their resources. Finland bought lots of military equipment from Germany on credit. After WWII they owed Germany lots of money.
Finland had to pay heavy war reparations to the Soviet Union.
Unlike the rest of the West, Finland got denied Marshall help for reconstruction, although they were in dire need. Why? The Soviet Union as part of the peace settlement dictated a lot of Finnish foreign policy. They did not want US influence in Finland.
In a country of only a couple of million people, 400 000 civilians got displaced by the Soviet annexation. The Finnish government had to force the rest of the population to share their cramped homes with these refugees.
Thus at the end of WWII, Finland needed to rebuilt their country, but had basically run out of foreign currency to import what they needed. What little they had left was being eaten away by food imports. Nor could they get Marshal help. The Soviet Union was not going to give them anything. They owed lots of money everywhere, and they had a huge refugee population to manage, and dealing with the fact that a lot of their industrial base was lost to Russia. And Finland had already been among the poorer Nordic nations.
How could Finland work their way out of this mess? There was no oil to discover. Not much hydropower to utilize. No gold or other valuable minerals to dig out. Poor agricultural lands. The only thing Finns really had was their forest and Finnish sisu:
Sisu is a Finnish concept described as stoic determination, tenacity of purpose, grit, bravery, resilience, and hardiness and is held by Finns themselves to express their national character
Finland worked out how to pay reparations to the Soviet Union by producing machines and other industrial goods for the Soviet economy. Except there was a catch: Finland didn’t actual have any industry making that sort of equipment. They mainly had paper mills and forestry.
They had to build that kind of industry from scratch. Only they didn’t have foreign currency to actually buy the machines, tools and raw materials from abroad which they needed to construct these factories. For fellow Norway and Denmark, reconstruction was easier. The Marshall plan gave loans and grants in dollars which made it possible to recipients to import crucial goods.
Finland in contrast had to secure loans through negotiation with a multitude of individual countries. It helped that Finland had a good reputation for repaying their debt.
What followed was a massive push by the Finnish government to raise the industry that would meet Russian demands. Ironically while war reparations destroyed the German Weimar Republic and caused hyper inflation, it actually in some sense helped industrialize Finland. The strong drive to settle the debt with the Soviet Union focused the nation to build this industry. Already in 1952, the Finns had pulled of repaying all their debt to the Soviet Union.
However at this point a whole industrial sector now existed in Finland tuned into the Soviet five-year plan building machines at Soviet specification and standard. It became natural to continue doing this, but as a mutual trade agreement. Finland would continue producing good for the Soviet Union in exchange for resources like oil.
Thus despite all the obstacles to development Finland faced, it managed to industrialize using a mix of market economics and planned economics. The Finnish state played an active role in planning economic development and founding strategic companies.
How Finland Became a Telecoms Powerhouse
The rise of Nokia is a complicated story with many twists and turns and I cannot cover it in detail here. However it is an excellent example of the symbiotic relationship between Finnish private enterprise, the Finnish state and the peculiar relationship Finland had to the Soviet Union.
Many Nordic countries including Norway developed various electronics companies. Best known in Norway is probably Tandberg Radiofabrikk, Tandberg Data, Tandberg and Norsk Data.
However like a number of other European electronics companies these all ran into trouble in the 1990s. So why did Finland take a different turn? One reason was better government institutions for supporting research and development. A more active engagement in building the electronics industry. But there is perhaps another, somewhat unusual reason.
All Nordic countries suffer from the problem of having tiny domestic markets. This makes it hard to build large world beating companies. For telephone networks each country protected their markets. This meant no Nordic country could not really achieve scale. Without scale you could not get the volume needed to become a world beating company with strong product development.
Televa, a state owned enterprise making telecoms equipment developed the DX 200 telephone exchange system. This was one of the first digital systems in the world. This was one of several systems tried out in Finland. The Soviet Union was a big market for Finnish electronics producers. They shoved a preference for DX 200. This lead Finland to make the strategic choice of picking DX 200 as the standard for the Finnish telecoms network.
They realized that by making this choice, instead of operating in a tiny Finnish market, their home turf would include the whole market of the Soviet Union. Finally Finland had the scale they needed to turn Nokia into a big telecoms company.
The Soviet Union which has loomed as a threat over Finland through its whole existence went from being a disadvantage to something the Finns found a way to exploit. DX 200 would later form the backbone for GSM which finally allowed Finnish cell phones to conquer the world in the 1990s.
Sweden — Nordic Powerhouse
Sweden followed a path to industrialization and prosperity which has many parallels to Finland and Norway, but also with major differences. Like other Nordic countries they utilized their natural resources as an initial driver and then quickly moved up the value chain to more sophisticated and profitable products.
Forest industry played a significant role in Sweden just like in Finland and Norway. Sweden had some similarities to Norway in that it had significantly more Hydro-power resources than Finland would would prove valuable in industrialization.
But Sweden has several advantages which Norway and Finland lacked:
It used to be a great power, with its own little empire. Strong enough to beat Russia in numerous battles.
A world class steel and iron industry established very early. All of Europe was importing Swedish steel or iron, since hundreds of years back.
Larger population and richer agricultural lands in better climate.
Swedish iron mines made it possible for Sweden to have a sizable military industry making guns and cannons. E.g. in the 1600s Sweden made 30% to 40% of all cannons produced in Europe.
That Sweden had a larger and more active army and a steel industry meant that Sweden developed far more experience in mass production before industrialization. Before actual factories, they had something akin to a factory system where large groups of craftsmen assembled forged and assembled weapons. The towns in Sweden which had this sort of crafts based weapons manufacture and metal working also became the more industrialized towns later during the industrial revolution.
However Sweden also was behind much of Europe in many areas. To compensate the Swedish state financed the The Ironmasters’ Association. This organization would send Swedish engineers and Scientists abroad who would return with detailed reports of best practices abroad which would be shared with Swedish industry to modernize it. This helps explains why Sweden has a number of engineering and science oriented companies which has no good equivalent in Norway and Finland such as:
ABB — Robotics and automation. From merger where the Swedish part was ASEA, which made generators, motors, robots, elevators and even Nuclear power plants.
Alfa Laval — heath exchangers, distillers, valves and pumps for industry.
SKF — Bearing and seal manufacturing. Largest ballbearing maker in the world.
AGA AB — Industrial gas company.
Nobel Industries — Production of explosives and other chemicals.
Ericsson — Telecommunications company.
Despite these differences Sweden did follow a number of paths similar to Norway and Finland. Hydropower played a central role in Sweden just like in Norway. The forestry also played a major role just like in Norway and Finland. Although ironically this was an area where Sweden learned from Norway. Swedish sawmills got modernized by Norwegian companies.
Like Norway, Sweden build Hydropower with heavy state involvement. The Vattenfall state owned enterprise built most of Sweden’s hydro-electric power stations.
The Role of Socialism
What I have written about thus far has been about how the government has played a major role in how Nordic countries industrialized. However this was a fact even before the rise of socialism. So how did socialism affects Nordic society?
It is important to note that Nordic countries followed many socialist ideas long before Socialism was a force politically. Socialism at its heart is about collectivism and doing things together. Norway e.g. has a long tradition for what we call “Dugnad” which means coming together and working for a common good. “Dugnad” is an activity arranged at schools, neighborhoods, sports clubs etc even today. In many ways it is an alternative to the Anglo-Saxon concept of charity.
What is Modern Scandinavian Socialism in 2025?
I wrote an article about Scandinavian socialism back in 2020 on Medium but it is as relevant as ever even in 2025 to clarify the many misconceptions I still see Americans have about Scandinavia. Especially conservative Americans. But the misconception also exists in my native Norway because people tend to conflate having a system of government that is s…
With a charity, you often arrange something to collect money or resources for the poor. It is about helping somebody else. Dugnad in contrast is people helping themselves. It could be things like local farmers getting together to build a barn together. It could be parents at a school getting together to paint the school or build a playground. In the neighborhood it could mean planting flowers or bushes. Trimming hedges etc.
In Norway hydro-electric power was often built in this fashion. The government would participate as well as local government and the townspeople. Government would provide funding and locals would donate their free labour to build the power-plant. Why would they do that? Out of charity? No, because these plants would be setup for the benefit of the whole community. Both in giving everyone electricity and income for the town. The town and its people would own the plant.
The socialist movements such as the cooperative movement has even deeper roots. Even back in medieval times, Danish agricultural lands tended to be jointly owned in cooperatives. In modern Denmark over 100,000 families belong to a wind turbine cooperative. In fact wind turbines are mostly owned by cooperatives (86%).
The cooperative movement really grew in the early 1900s and was strongly linked to the socialist labour movement. Housing cooperatives, building cooperatives, farming cooperatives, fishing cooperatives, insurance cooperatives got started. For instance in Norway all the main companies for processing agricultural products are cooperatives, owned by the farmers themselves. The companies selling machinery used by farmers are also cooperatives. Many people live in apartments created by cooperatives.
Cooperatives played a significant role in industrializing Finland, as wood and paper processing facilities tended to be owned by cooperatives of forrest owners. E.g. Metsä Group is owned by 103 000 members of the cooperative.
Democratic socialists saw many ways of empowering people against the interests of capitalists. Cooperatives was one of many solutions. The other was stronger unions. Nordic trade union membership has been growing strongly since the 1930s, while you can see in Anglo-Saxon countries union membership never reached Nordic levels before beginning a rapid decline.
Why this major difference? Anglo-Saxon countries have generally been run by conservatives or liberal parties. Britain has had some periods of Labour government however. More pro-Labour government in Nordic countries have allowed the development of sectorial collective bargaining for unions as opposed to enterprise bargaining agreements. So what is the difference? With the latter agreements are made with individual companies. With the former agreement are made across whole industries.
This makes a profound difference. Consider this example: McDonalds workers strike to get a higher salary. They increase their salary by say 30%. Except now their burgers become more expensive than Burger King burgers. Customers begin to flock to Burger King. McDonalds loose market share and have to cut back. McDonalds workers are fired.
Read more: When McDonalds Came to Denmark
Now compare outcomes using sectorial collective bargain. In this case salaries for all fast-food workers get agreed upon. This means prices increase for burgers, pizza, tacos etc all over the market. In this case customers cannot switch to another company. Demand will surely drop some, but mostly customers will suck up the price increase. The effects for an individual company such as McDonalds become much less dramatic. Thus sectorial bargaining is far more effective and evening out wages. And one can see this when comparing Nordic countries and Anglo-Saxon countries.
E.g. you can see the GNI numbers for Nordic countries is among the lowest in the world, while the US e.g. has values only comparable to developing countries.
Out of the stronger Nordic unions and democratic socialist parties actually holding power, we saw the development of corporate democracy, which is still not a feature in any Anglo-Saxon country.
Depending on the size of a corporation, employees normally get ⅓ of the board members. However in Denmark it can be up to ⅔ of the board members. In e.g. Norway this often happens a bit indirectly through what is called a corporate assembly. If you look at large Norwegian corporations such as Telenor, you can get an overview of the board and corporate assembly. It will show which members have been elected by shareholders and how has been elected by employees.
Employees also get influence through various committee requires by laws such as the corporate committee. These are to discuss changes to how work is performed, expansion of business, contraction. Basically anything affecting employees.
The nature of corporate democracy is always in development as confederations of unions and employers negotiate national binding agreements which form a sort of constitution for the relation between all employees and workers.
How I Define Socialism and Capitalism
To me, socialism means the democratization of the economy. Allow me to elaborate by giving an example of how elections used to work in Sweden in the 1800s (Swedish Municipal reform 1862):
Appendix
This story covers a lot of different topics. If you are curious about more details or want to know the source of various facts, I have here a list of articles I have written in the past which are basically collections of facts about Nordic countries and social democracy collected from a diverse set of sources, such a Nordic encyclopedias, official historical party programs etc.
Industrial Policy in Postwar Finland — Collection of various sources about Finnish economic and political history with comments.
Nordic Welfare Spending, Cuts and GDP Growth — What was the impact of socialist government on Nordic economic growth. A look at key statistics.
What is Democratic Socialism? — Norwegian contemporary Social Democrat and prime minister, Odvar Nordli’s thoughts on democratic socialism.
Why I am a Democratic Socialist — Former social democratic prime minister of Sweden, Olof Palme, explains why he is a democratic socialist.
What is Modern Scandinavian Socialism in 2020? — An explanation of what is meant by socialism in the Nordic tradition, as opposed to say Russian tradition.
Socialism and Capitalism in Venezuela and Norway — A comparison of the socialist traditions and practices in the two oil countries, Norway and Venezuela. Why are outcomes so radically different?
Inequality and Economic Growth: Europe vs the US — Does more equality hinder economic growth? This is a look at statistics disputing this view.
Notes on Corporate Democracy in Norway — How employee representation and influence is secured in Norway by law and practice.
How Denmark invented Social Democracy — This youtube video by Kraut which goes all the way back to medieval time to explain how Scandinavian social democracy developed with emphasis on Danish history.
Thank you for this interesting history! I am pleased to see the differences between the Dutch and the Nordic economics aren't as big as I thought, even though the Netherlands are not rich in natural resources.