Global IssuesECONOMY: Neo-liberalism Preys on Nordic Welfare Systems
Nordic welfare state systems, often held up as model in the developed world, are crumbling under the assault of neo-liberal economic policies, say economic experts.
All five of the Nordic countries, Norway, Sweden, Finland, Iceland and Denmark are experiencing rising poverty, long considered eradicated but now causing concern to policy-makers.
'It is true that in the 1970s poverty was more or less eradicated but now we have come back to a situation where 10 - 13 percent of the population is poor and that raises a lot of concerns,’’ Asbjorn Wahl, a trade union advisor, said at a seminar here on ‘Poverty in the Nordic Countries’, organised by the Nordic Institute in Finland (NiFin).
The seminar, late November, brought together economy and poverty researchers from Finland, Norway, Denmark, Sweden and Iceland in a bid to shed light on some of the underlying causes of rising poverty in these countries. They were addressing relative poverty rather than absolute poverty.
'It doesn’t mean that you don’t have food the next day but it means you live differently from the average citizen in not being able to attend social events, and your children cannot take part in anything that costs money. It eventually leads to and is a prime cause of social exclusion,’’ Wahl, who is Coordinator of the Campaign for the Welfare State in Norway told IPS.
Hidden from public view there is apparently a sweeping undercurrent of social exclusion affecting large sections of populations in the Nordic countries.
All of the Nordic have been hit by rising unemployment with the possible exception of Norway which has been spared the worst of the global financial recession with an unemployment rate of less than three per cent.
Sweden’s unemployment rate rose from 6.2 percent in 2007 to 7.3 percent in 2009. Finland’s unemployment similarly rose from a little over 6 percent to 8.2 as of October 2009. Iceland whose economy essentially collapsed in the financial crisis had unemployment rising from 1.6 percent in 2008 to 9.4 per cent in February 2009.
According to Wahl, the poverty rate in Norway is 12 percent if one goes by the European Union’s definition of poverty which means earning less than 60 percent of the median income in the society.
Oil-rich Norway with fewer than five million inhabitants has had a booming economy for the decade preceding the global financial crisis.
'So Norwegian society is getting wealthier while there is increasing poverty', Wahl told IPS.
The situation is similar in Finland. The previously low rate of relative poverty has doubled among adults and tripled among children, said Markus Jäntti professor of economics at the Institute of Social Research at Stockholm University.
'It is a great achievement of the social democratic parties which were responsible for eradicating poverty but are also the very ones who have reintroduced poverty' remarked Jäntti.
In 1995 the rate of poverty among all Finnish children was five percent but by 2007 the corresponding figure was 14 percent, close to three times the figure in 1995, Jäntti told IPS.
Part of the reason for the rise in poverty rate is that the Finnish government in the late 1990s, in an effort to increase work incentives, dramatically reduced the unemployment benefits of those not working.
However, the overall consequences was that it did get a few people to work but the incomes level actually fell and so children whose parents did not secure work were left with lower employment benefits, thus leading to increased poverty among those children, said Jäntti.
'The work incentive programme was essentially driven by neo-liberalism or by right-wing populism but there is little evidence that it produced any increase in work attachment. But since the programme failed to work no one is drawing the obvious conclusion that there is something wrong with our social policy', he said.
The controversial work incentive programme - also known as workfare, and first introduced in the United States which viewed unemployment as stemming from people’s inherent unwillingness to work - has now become the reigning model in most European countries. Critics say it deliberately keeps people under the poverty line and does not address the root causes of unemployment-related poverty.
'The problem of poverty is to be studied first at its sources and secondly in its manifestations', said Wahl, quoting the prominent British economic historian, Richard Tawney, in 1931.
So there should be less of mere campaigning by governments on poverty in the form of ineffectual anti-poverty programmes and more on fighting the underlying unequal power relations in society by broad social mobilisation, Wahl said.
In the immediate post-World War II period, according to Wahl, the well developed Nordic welfare states came into being as a result of social struggles based on popular mobilisation in confrontation with the counter-forces which led to a great part of the economy taken off the market and made subject to democratic control.
Capital was tightly regulated, labour legislation was introduced, there was regulation of investment, credit control and the maintenance of a huge public sector, as well as a fixed exchange rate.
But in the 1970s up to the 1990s all that changed with the emergence of neo-liberalism. There was redistribution of wealth from the public into private hands and from the poor to the rich — characterised by a growing gap between high and low income earners - and a source of discontent among the population.
When the neo-liberal offensive was launched in the 1980s and 1990s the left political parties which were responsible for the welfare reforms also drifted to the right.
All of these Nordic countries are currently under right-wing political parties, except in Norway where the ruling coalition is made of Centre Left parties - the so-called Red-Green coalition.
'The social democratic parties started moving to the right and became soft neo-liberal parties and so they lost the support of the electorate and people began moving back and forth between parties', said Wahl.
This was exacerbated by the emergence of right-wing populist parties who have been clever at supporting all kinds of dissatisfactions and have been successful in channelling these dissatisfactions into making people vote other groups instead of focusing on the economic system.
In Finland, Denmark and Norway, as across many parts of Europe, these right-wing parties have suddenly emerged as formidable electoral forces, even gaining entry into the European Parliament for the first time.
Observers note that the Nordic countries, however, still have a wide range of free public services such as free school lunch - and in the case of Finland also during summer holidays - which has blunted the severity of poverty.
Also children prefer to leave home early as soon as they become young adults thus sacrificing parental financial dependence for individual freedom but which cannot be accounted for in purely monetary terms.
Nevertheless Wahl maintains that 'the only way to fight poverty is to start a new way of mobilisation to change the power relations in society and the current financial crisis has helped a great deal in that aspect because people are becoming convinced that the neo-liberal experiment has failed.''
© Inter Press Service (2009) — All Rights ReservedOriginal source: Inter Press Service