This article discusses the transforming capitalist welfare state and its education system, and focuses especially on the Nordic model of welfare state and education in Finland. It shows how restructuring processes towards the competition state are proceeding on both policy and institutional levels. Nevertheless, the basic structures of the Nordic model or pattern and especially the principles of public education and the comprehensive and local school are left intact. By applying an institutional approach in the analysis, a new path generation and institutional patterns are emerging, but their legitimization and establishment will take a long time. Changes in policy and organization are much faster to occur than those in sociocultural settings. Such success stories as the Danish labour market reform and the rise of the Finnish knowledge-intensive ICT cluster have paved the way for this transformation. There is still a possibility that a welfare state strategy and a competition state strategy will coexist.
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