Why Nordic countries top the happiness league

Wednesday, Mar 22, 2017, 06:49 AM | Source: Pursuit

Shirley Jackson

It is no secret that the Nordic countries are a little bit different. When I was in Copenhagen recently I went in search of a hair cut, but found the barber shop down the road was closed. Unperturbed, I pulled out my smartphone to find another hairdresser nearby. This shop too was closed. I began to call all barbershops, hairdressers and beauty schools in the area, only to be met with friendly Danish voicemail messages.

Slightly confused, I returned to my friend’s apartment where I shared with him my experience. He laughed, telling me the hairdressers were on strike. When I asked him what Danish people did when more essential services or businesses went out on such industry-wide strikes, he simply told me “we wait for them, just like they wait for us”.

As a researcher of both the Nordic region and trade unions, this firsthand experience of Nordic attitudes towards work, life and their economy was both thrilling and confusing. However, it must be serving them very well. It turns out that the Nordic countries are the happiest in the world. At least, according to the recently released World Happiness Report (WHR).

Ranking of Happiness
1. Norway (7.537)
2. Denmark (7.522)
3. Iceland (7.504)
4. Switzerland (7.494).
5. Finland (7.469)
6. Netherlands (7.377)
7. Canada (7.316)
8. New Zealand (7.314)
9. Australia (7.284)
10. Sweden (7.284)
Source: World Happiness Report 2017

First released in 2012, the WHR combines a mixture of quantitative and qualitative measures to give an overall ranking of ‘Happiness’. These include the experience of care, freedom, generosity, honesty, health outcomes, income equality and good governance. The WHR considers trust in government, GDP per capita, freedom from corruption, the sense of having someone to count on and incidence of mental health to all be of equal importance.

No coincidence

The fact that 4 out of the top 5 happiest countries are Nordic countries stands out to even the most casual reader. This is no accident or coincidence. The Nordic countries value equality and have invested (both politically and economically) in building more equal societies. They also retain the highest levels of union membership by a significant margin, and have some of the strongest collective bargaining systems in the world. The Nordic countries lead the world in trust in government, gender equity and freedom from corruption.

When we look at the Gini coefficient (a measure of income inequality from 0 to 100, where 0 is perfect equality) the Nordic countries average 27.26 compared to Australia’s 34.9. Indeed, by comparison Australia consistently underperforms the Nordic region, not only in happiness and income equality, but in trust, corruption, and economic competitiveness.

These impressive scores didn’t happen overnight. In most of the Nordic countries, between the 1940s and the 1990s the region as a whole experienced a democratic dominance of left-wing governments, particularly the Swedish social democratic Party (SAP), which governed Sweden from 1936-1976 – an impressive 40-year run. The post-war hegemony of social democratic parties saw the establishment of the ‘Nordic Model’ or the Nordic variety of capitalism.

A demonstration outside Norway’s Parliament building. Nordic countries rate highly when it comes to public trust in democracy and government. Picture: Tore Bustad/Flickr

This regional political and economic project is built around a mixed market economy, or the idea that both government and the private companies have a role in coordinating the economy. This means that the Nordic countries have very low barriers to trade, and indeed four of the five Nordic countries are ranked in the top 12 most competitive economies in the world by the World Economic Forum (WEF). All score highly not only on overall competitiveness, but also on subindexes of efficiency and innovation.

These small, highly competitive Northern European nations provide the most comprehensive welfare system in the world, complimented by free education and universal healthcare. From birth to death, Nordic citizens have access to quality, government funded services irrespective of income.

However, the real strength of the Nordic Model has been its flexibility. There is no single policy platform for the five countries. Unemployment insurance, pension systems, tax burdens, child care and aged care assistance are designed, structured and implemented in wildly different ways. Sweden has the largest share of private sector care providers, Denmark has the highest level of taxation, unemployment insurance is mandatory in Norway, while it is voluntary elsewhere in the Nordic region. What unites them are the underlying values of egalitarianism, inclusion and care.

Some dismiss the small Northern European nations’ consistent standing in these quality of life measures as ‘Nordic exceptionalism’ – the idea that somehow Nordic people are just naturally more egalitarian. Yet, there is no “egalitarian gene”, and no proof that you can “breed” fairness.

Another common criticism is that any wealthy country with decent healthcare and the rule of law will experience similar results. This is true to a certain extent within the confines of the WHR. Australia, New Zealand and Canada all make it into the top 10 happiest countries. But this doesn’t explain why the Nordic countries still consistently come out ahead of these other countries. What does further distinguish the Nordic countries however is the higher levels equality and trust in their societies. And while Australia and Sweden rank equal at ninth, it is worth noting that Sweden has gone furthest down the path towards liberalism and has seen the greatest drop in ranking.

Australia Reconstructed?

There are also claims that the globalised market requires all market economies to converge on the most efficient model. The Economist argues that the Nordic countries have ‘simply reached the limits of big government’. However, the Nordic countries maintain high wages, high taxation and highly regulated business environments. Yet, there has been no capital flight, no destruction of the middle class and no ‘bracket creep’. Trust in governmental, democratic and legislative institutions is amongst the highest in the world. Nordic people trust their countries to take care of them, and governments make sure they deliver. This makes them happy to pay their taxes, which are amongst the highest in the OECD.

The real question is could Australia be more like these ‘happiness superpowers’? It seems that we very nearly were. In 1986, the Australian Council of Trade Unions (ACTU) funded a study tour of what was then known as Western Europe for some of the trade union movements most influential and powerful leaders, in order to formulate their policy agenda for the upcoming elections. They were fascinated by the Nordic region and a sizeable portion of their research focused on trying to understand the way that Nordic market economies function, and how could these lessons be applied back home.

The result was Australia Reconstructed in 1987. The 200 page document covers a range of topics including wages, prices and incomes; trade and industry policy; labour market and training policy; and trade union strategy. Much of the document focuses on specific policy platforms encountered within the Nordic region, and how they could work with traditional Australian values like the fair go, strong unionism and the concept of the “Workingman’s Paradise”. The Swedes even had a very similar term for their model – Folkhemmet or “The People’s Home”.

At a time when Australia is facing widespread inequality, suggestions of corruption and an increasing sense of insecurity amongst young people, now might be the time to start learning from these happiness superpowers and revisit Australia Reconstructed.

Banner Image: Vigeland Sculpture Park, Norway/Pexels

University of Melbourne Researchers