Abstract
In order to stimulate economic growth and strengthen European integration, the EU must show greater respect for national sovereignty, reform the welfare state and invest in technology. The Nordic countries have set an example that could work for the rest of the EU.
Introduction
The current debt crisis–-this too shall pass. European integration is a long-term project. If we are to build a sustainable union, we must discuss the underlying structures and ideologies. Speaking from a Nordic perspective, I want to discuss three challenges facing European integration after the euro crisis: nationalism, the welfare state and technology. Politics play a very different role in each of them. The Nordic countries–-both EU members and non-members–-have, through mutual cooperation, been able to combine healthy nationalism with deep integration. One of the causes of the debt crisis was a misunderstanding of the welfare state: governments were spending more than they earned. This is why it is necessary to study the birth of the Nordic welfare model more closely. But the most important point is that there can be no welfare state without economic competitiveness. And this cannot be achieved without new technology, based on science and top-quality education, as well as investment in research and development.
Respect for national identity and sovereignty
My first point is that national identity and sovereignty need to be respected if deeper integration is to be achieved. If small nations–-and larger ones too–-feel that their identity is threatened by the integration process, they will choose to protect their identity and sovereignty, whatever the rational and economic arguments may be for deepening international cooperation. In Nordic history you will find many conflicts and wars between countries. Over the past century, however, these hostilities have given way to a deeply integrated region where a balance has been found between each country's need to protect its own sovereignty and the concomitant need to respect the sovereignty of others. Perhaps there are lessons to be learned that would be applicable to the wider European context.
At the present time, there are two different ways of thinking about the future. One option is to look to the past and attempt to restore the pre-crisis situation. The alternative is to accept the fact that the world has changed, adjust to the new reality and then create something new. It is easy to recommend the latter option, but the temptation to restore the vanished world is usually stronger, for the simple reason that the past is more familiar than the future.
Let us remember the greatest lesson on looking back that European history has to offer. After the First World War, most countries wanted to return to the way of life and standards that had existed before the war; the restoration of the gold standard is a case in point. The victors also wanted to punish and humiliate the losers. After the collapse of major empires, Europe consisted of small nations.
But the structure of European post-war politics could not survive the economic and political storms of the 1920s and 1930s. Germany and the Soviet Union–-once great powers, but now weak and isolated–-yearned to restore their former status and influence. Dictatorships and neo-imperialism took over and crushed smaller states and their democracies. Democracy was not strong enough to survive in most of these smaller states.
After the Second World War, the opposite approach was taken. The winners wanted to integrate the losers into international structures and economies. Entirely new systems of transnational cooperation were created. But democracy was the means of change only in the western half of Germany. The eastern half of Germany and Soviet-occupied Europe were enslaved by brutal neo-imperi-alism and a dictatorship that lasted until the end of the Cold War in 1991.
The hopes and fears of small nations represent one of the key challenges to the future of European integration. The importance of national identity as the cornerstone of the sovereign state has not decreased–-it may even have grown stronger. Along with deepening integration, we are witnessing a growing desire for sovereignty: in the Balkans, in Scotland and perhaps in other countries as well.
Critics of European monetary solidarity appeal to national identity and sovereignty as their chief arguments. Presenting an idealised vision of the past, right-wing populists have painted an unrealistic picture of male dominance, homogenous populations and national decision-making. One must argue with them and demonstrate that ultra-nationalism and the atomisation of Europe only serve our rivals outside Europe's boundaries.
In the future, the deepening of integration must go hand in hand with a healthy respect for national identities and sovereignty. But national identity does not equal protectionism, tax competition, or national subsidies and restrictions.
We must find ways to strengthen, not weaken, the foundations of the EU–-after all, it is the finest example of international cooperation in European history, especially for small nations.
The welfare state–-a wait-and-see policy
My second point is that so far the Nordic model of the welfare state has survived. But the need to make adjustments grows every day as state budget deficits increase. The idea of the welfare state is often referred to as the ‘Scandinavian (or Nordic) model’. Let us have a brief look at its history, its present state and the challenges it must face to survive.
One of the most undervalued facets of political history is ‘Nordic cooperation’. In fact, even when this cooperation began, in the 1950s, the Scandinavian countries, including Finland, joined in an integration process that was far deeper than the one in Western Europe. It represented true integration in most fields of society, including passport union and the labour market.
Security policy is the reason why Nordic integration was not recognised for what it was. During the Cold War, Sweden and Finland were neutral countries and did not want to reveal how closely they were actually working with NATO members. But what is most important is that the essential common values of the Nordic welfare system united and unified the societies in the north. Sweden, and Stockholm in particular, was the central point. The common features were free education and health care, as well as generous social benefits, such as child allowance for all families, regardless of their income. The key ideology behind the system was social equality. Taxation was highly progressive in nature.
The Nordic model originally included a strong element of economic growth. The central idea was to overcome national poverty, which had resulted in mass emigration. The optimistic belief in an ever-broadening circle of democracy accompanied by increasing equality and economic growth was the invention of the Swedish social scientist and politician Gunnar Myrdal.
The model was consensual in nature. It involved close cooperation between the state, local municipalities, trade unions, employers, cooperative movements and, of course, political parties. With its economic and social success, the model became a herald of modernism, new ideas and social avant-gardism. After the Second World War, the Nordic states, and especially neutral Sweden, wanted to present themselves as ‘the third way’ between Eastern Bloc dictatorial socialism and American free-market capitalism.
Today there is no uniform Nordic welfare system. Since the mid-1990s, the EU in Brussels, instead of Stockholm, has been the dominant force when it comes to values and the construction of societies.
Furthermore, while the original model was economically viable, it was distorted over time. Little by little the role of the state grew stronger and more dominant. Then, in the 1980s, deregulation started to redefine the border between state paternalism, and individual choice and responsibility. A second challenge for the model was presented by environmental issues, which could not be easily situated within the context provided by the old social models. The third challenge was globalisation, which involves more open competition both between and within national economies.
The political choice today, however, is still between left and right. The leftist parties continue to believe in centralised and bureaucratic solutions, whereas the non-socialist parties want to give more leeway to individual freedom of choice and competition, even in the area of social services. In the Nordic countries today, the difference between the left and the right is not dramatic. The centre-left has acknowledged that a free market and competition are needed to ensure growth, quality and effectiveness. The centre-right has acknowledged that a strong state is needed to ensure fair markets and social cohesion. The question is all about balance. The Reinfelt centre-right government in Sweden has been especially successful in stimulating growth without dismantling the basic elements of the welfare state.
A good analysis of recent economic events is provided in Nordics in global crisis: Vulnerability and resilience: ‘The essence of the Nordic model is to combine openness to globalization and new technologies with collective mechanisms for risk sharing, including the role of labour market organizations, the safety nets maintained by the public sector, and the high rate of spending on investment in human capital’ (Gylfason et al. 2010, 255).
The biggest challenges facing the Nordic model today are state budget deficits and ageing populations. If the financial shocks stay with us any longer, the need to adjust the basic balances within the model will become pressing. So far a wait-and-see’ policy has prevailed. At the same time, we are witnessing the comeback of Nordic cooperation–-even in the field of security policy. Amidst the financial storm in Europe, centrifugal forces are bringing the Nordic countries together again, and they are finding mutual interests across NATO and eurozone borders.
Unpredictable but rewarding technology
My third point is that governments and politics cannot create new inventions and technology. Most politicians believe that the only way to lasting success is through education, science and technology. The means to encourage advancement, however, are indirect at best. The drivers of change are the inventions created within global companies.
Science is both independent of institutions and unpredictable in its results. Parliaments cannot create competitive economies simply by founding universities. But they can and must establish and finance institutions of higher learning. Governments can also ensure that there is no censorship or other obstacle to the free flow of ideas and to contacts among scientists. Moreover, governments must provide money for the education of scientists, but a significant amount of research also takes place in private companies.
A shining example of this approach can be found in Sweden, a former, and fallen, great military power. In the early 1900s Alfred Nobel made a fortune in explosives, but channelled his wealth into the Nobel prizes. This is typical of how Sweden has been able to combine scientific and commercial success. New greatness was found in the international success of world-class companies such as SKF, Alfa-Laval and Ericsson.
The turning point in Finnish history came in the early 1980s with new investment in technology. Nokia became a world leader in mobile networks and phones. Having the technological edge was the key to success and was based on determined investment in technological universities.
The discovery of the Higgs boson in July 2012 at the European Organization for Nuclear Research (CERN) is an excellent example of a highly significant research breakthrough brought about by government finances. No single country could have built the gigantic laboratory needed for the research. There are a great many other encouraging examples, especially in the fields of the natural sciences and medicine.
The story behind the third industrial revolution, the digitalisation of the world, is one of various kinds of state activity, such as the deregulation of state monopolies and expanded education for information technology engineers. It is also a story of international cooperation between companies and public agencies in the field of standardisation. But the drivers of change are clearly leading companies like Apple, Samsung, Ericsson, Nokia and the other major telecom operators around the world.
The essential feature of the telecom revolution, as in most other fields of technology, is the speed of change: the rule of thumb is that technology becomes 1,000 times more efficient every 10 years. New services, which a short while earlier no one had ever dreamed of, are being developed all the time, and they are immediately available to businesses and individuals alike. In medical research cancer treatment is an example of this rapid and radical advancement.
The only option left for governments is to continue financing a broad spectrum of education and research. The goals should not be set too rigidly given the simple paradox that it is impossible to name something before it has been discovered, and that when it is discovered it is no longer new. We simply do not know where the next drivers of technological and scientific revolution will come from.
Conclusions
Europe could perhaps learn a few lessons from the Nordic experience: how to combine deep integration with respect for national pride and sovereignty, how to reform the welfare state and how to invest in science and technology to create world-class companies. At this juncture in history, we must show more, not less, respect for national identities and sovereignty while building the sustainable structures of the EU. We must be prepared to make considerable readjustments to the welfare state model if real growth does not bring public deficits under control. We must create favourable circumstances for the development of technology and ensure that researchers in science, technology and the humanities have genuine freedom. After all, future competitiveness is only possible through education and technology. You cannot export products and finance a welfare state with ideas alone; you need to sell goods and services in the global markets.
Footnotes