Other Capitalisms

arton472In the field of sustainable development with social inclusion, which is the rallying cry of Sur Norte and Opinión Sur, it is important to learn from successful experiences at other latitudes. These experiences, however, cannot simply be imported like an automobile. The first step in taking advantage of lessons from abroad is cutting through the rhetoric associated with particular “models” and looking at the mid- and long-term results of public investment. The second step is examining the social base and political/institutional consensus that surround these state policies. A trip to other lands

I have spent four summers crossing the seas of Scandinavia in my sailboat. First came the North Sea, which I traced along the coasts and fjords of Norway, reaching the Arctic Circle and beyond. Then, I had the boat transported to Finland, where it had been built 35 years before. There it underwent a meticulous restoration. Once repairs were completed, I was able to traverse the Gulf of Bothnia (the northern arm of the Baltic Sea) from Finland to Sweden, before finally returning to Finland via the labyrinthine archipelago formed by the Aland Islands. It was a tremendous challenge and a magnificent experience. And not only in the nautical sense. I was able to visit uncharted islands, small fishing villages and incredible cities. I even reached the legendary Ultima Thule. I also learned to read and decipher a few phrases in Swedish and Norwegian. I was, however, hopeless when it came to Finnish – a Finno-Ugric language whose origins, like those of the Basque language, are unknown. Luckily, nearly everyone today speaks English.

My passion for the sea, importantly, did not curb my intellectual curiosity. In Norway, I grew interested in a topic of strategic significance: How can a country profit from its oil reserves without also corrupting its customs and institutions? I visited oil wells and platforms and interviewed common citizens, oil workers and business executives in Oslo, Stavanger and Bergen and along the length of a coast that extends to extreme northern latitudes. In Sweden, I had to anchor in the summer city of Oregrund while waiting for a seasonal storm to clear. To pass the time, I traveled by bus to the ancient university city of Uppsala, where I visited libraries, the tomb of Swedenborg and the Linnaeus gardens. There, I became interested in how Sweden, in the 1990s, emerged relatively unscathed from a financial crisis similar to the one that stunned the world in 2008 and 2009, albeit on a smaller scale. In Finland, in turn, I asked myself (and anyone whom I was able to interview) how a small, sparsely populated country with strong agricultural roots was able to leap to the vanguard of the postindustrial world and compete globally with high-tech products. I was unable to visit jolly Denmark, but I will be sure to do so soon: According to the polls, it has the happiest population on the planet. Apparently the Danes are highly productive and free thinking and move between jobs without the slightest trepidation. My ultimate goal is to assemble a collective vision of the Nordic countries. At this stage in my voyage, I can already anticipate a few conclusions, enumerated below with the help of some unconventional titles.

The value of the concrete.

Ideologies obfuscate because they present mere abstractions as real things. These abstractions, in turn, become idols for the tribe, adored and abhorred and, in general, feared. They generate closed and antagonistic camps. In the heat of the battle, these camps abandon good sense and come to prefer fervor and delirium over everyday realities. All of the “-isms” that bombard us in public discourse or in social chatter simplify the world, distort it, stylize it in antagonistic capsules that divide people and end up becoming rallying cries for struggles as ferocious as they are futile. The last century was a graveyard of “-isms”: fascism, communism, Nazism, liberalism, etc. Almost all perished, but the 21st century has given rise to another round of “-isms”: neoliberalism, 21st-century socialism, fundamentalism, terrorism, etc. The contents and the packaging changes; the function remains the same.

The only effective way to overcome these illusions is not conflict in the streets or on the fields but deconstruction. By deconstruction, I mean the patient work of dismantling these scarecrows, which in ideological discourse we call “models.” In Latin America, some politicians denounce the insidious “models” imposed on the continent by the dominant countries. Others defend their own political or economic “models.” Truth be told, these “models” are rarely more than pretentious guises, used to cover up their own modest leadership style.

The first step in effective deconstruction is to bring these “models” face to face with the complexity of reality. For instance, we must recognize – as has English historian Eric Hobsbawm – that “socialism failed and capitalism is bankrupt.” And then we need to ask ourselves, “What next?” Out of the rubble of the “-isms,” we can glean many things: valuable lessons about what works and is worthwhile and cautionary tales about what doesn’t work or shouldn’t be attempted. Emulate, invent, adapt and avoid: These verbs have replaced – at least, in many regions – the ardent verbs of other eras, join, struggle, resist, triumph and die. The heroism of the 21st century is quiet and persistent – the work of those who seek to protect the environment, reduce suffering, eradicate sickness, bring about reconciliation and – in short – find concrete solutions. In the light of these patient labors, the furious, garish heroism of bygone eras – the “conquer or die” mentality – seems little more than a mask hiding sordid interests and base appetites. It produces much more suffering that it purports to eliminate.

The second step in effective deconstruction is abandoning abstractions and dedicating ourselves to concrete examples. One good approach is to simply pluralize the idea of the “model.” For instance, think in terms of capitalisms and not “capitalism.” In other words, abandon the singular, universal model in favor of a plurality of regional models, which can, in turn, be broken down into national models. Simpler still: This approach involves setting aside theoretical models and focusing on the distinct experiences that go into building a society, an economy and a country.

Nordic experiences

Just as there is no one “model” of capitalism, there is no single “Nordic model.” Norway, Denmark, Sweden and Finland (we might also include Holland in this list) have many things in common but are also unique in important respects. They are capitalist countries in the broad sense of the term, and they share a noteworthy achievement: Each enjoys an inclusive, market economy that minimizes poverty, efficient state involvement and egalitarian tendencies evident both in spirit and practice. In all of these countries, public spending is high and the network of social protections is broad, as one would expect in a welfare state. But neither this spending nor these measures stop these countries from innovating, producing and competing in global markets. Their labor markets are relatively free but subject to active public policies. Unions are strong but, rather than posing an obstacle to business dynamism, work together with management. In other words, the Northern countries bring together efficiency and equity.

When pundits speak of the “Nordic model,” they often compare it with the Anglo-Saxon experience in the United States, the United Kingdom and Ireland, countries where equity and efficiency have marched along steadily diverging paths. In these places, distrust of the state is deep-seated, and inequality, neglect of the needy and poverty have grown progressively worse. But the level of dynamism, productivity and efficiency is very high. The “neoliberal model” refers to attempts to adopt or impose the Anglo-Saxon experience in very different countries at crucial moments in their historical trajectory. The “Washington consensus” references the moment when the countries of Latin America and other regions, in the throes of economic and social crisis, sought assistance from the U.S., which had assumed the role of the world’s only superpower. The diagnosis that these countries received was not completely flawed, but it would prove nearly fatal. To draw a comparison, neoliberalism was like remedies recommended for certain illnesses before the advent of antibiotics. Syphilis, for example, was “cured” by injecting the patient with a strong dose of malaria.

Other capitalist countries have even less favorable combinations of policies and institutions. For instance, France – a country where I have lived on and off for 18 years – protects, with the collaboration of small but strategic trade unions, the employed at the expense of the jobless (above all, young people and immigrants), who are kept from fully entering society by daunting barriers. It is a country where unionism and “progressive-ism” are buttresses of privilege and not engines of equity. In the cradle of the Mediterranean, countries such as Italy (which I frequent), Spain, Greece and Portugal lavish public spending on pensions and maintain employment levels by sacrificing the laboral flexibility necessary in a modern and competitive world. In sum, these countries pay for equity and social protection with a kind of economic arthritis and a structural deficit in the public ledger.(1)

What exactly are the most notable achievements logged by the Nordic capitalisms? Let’s look at an [aggregate chart->chartsothercapitalism.pdf] before continuing our exploration on a country-by-country basis.

Except for the unemployment rate, the figures are encouraging, although performance in some categories has suffered with the global economic crisis affecting everyone. The Nordic countries show that it is possible, in practice, to overcome one of the greatest challenges of sustainable development: to combine aspirations for greater economic prosperity with a high degree of social protection. For politicians and economists of other latitudes who have long debated how to reconcile market forces with guarantees against insecurity and the anguish of social exclusion, the achievements of the Nordic countries should indeed represent a kind of Holy Grail.

But there is more. In general, Nordic economies perform better than economies in English-speaking countries. Here is the list of the world’s most competitive economies:

Wall Street Journal 2006-2007 Country Rankings

1.Switzerland

2.Finland

3.Sweden

4.Denmark

5.Singapore

6.United States

7.Japan

8.Germany

9.Holland

10.United Kingdom

11.Hong Kong

12.Norway

13.Taiwan

14.Iceland

15.Israel

The Nordic countries sustain a high level of economic dynamism in spite of an elevated tax burden. Social spending there is compatible with an open, competitive, market-based economy. “Capitalism” and “socialism” are not opposing concepts but modules that can be combined in different ways. It is important to ask why, in these countries, public spending does not hinder economic growth? Why haven’t high taxes killed private incentive and the thirst for improvement? Why hasn’t the incorporation of disadvantaged sectors proved a burden for everyone else? The answers to these questions lead to some very valuable insights, above all for the countries of the global South.

Learning without copying

If we combine the characteristics of the Nordic countries into a single “model,” we end up with little more than a Utopian vision, impossible to achieve in the South. We cannot simply “import” this model as one would a Volvo. On the other hand, if we break the model into discrete pieces, we can take away useful lessons adaptable to our setting, particularly in terms of the goals of certain public policies.

First, it is not public spending that should frighten us, and reducing spending at any cost (the order of the day in Washington, not too long ago) is the wrong approach. The key lies in where the spending is applied. There is purely redistributive spending, deficit spending and inflationary spending. In general, these are all bad and sooner or later contribute to social hardship. But there is also non-inflationary spending (although this may come in the form of deficit spending) that brings economic and social returns in the mid- and long-term. We should therefore learn to see it as a good investment. Here the Nordic lesson is very clear: Both in times of boom and bust, countries like Finland have maintained a high and consistent level of public spending on health and education and of public investment in infrastructure. Medical coverage embraces the entire population. Education is public and free at all levels, from kindergarten to professional studies, with a particular emphasis on the expansion of technical institutes. Comparing this strategy to strategies in other countries, including some European Union members, is telling (though it may appear a bit unfair). Let me offer my own experience as an example. Several years ago, I spent a month in the city of Lucca, in Italy, and another month in the city of Kokkola, in Finland. Both have exactly the same population: 32,000 people. In the lovely Lucca there are 300 Catholic churches and several monasteries, two nursery schools, a high school and a music school. After much struggle, my colleagues and I were able to establish an institute for advanced studies in technical and social sciences, which to this day is viewed with distrust. In the more austere city of Kokkola, there are only two Lutheran churches, several primary schools and five technical schools. These schools produce highly qualified graduates who work in small- and medium-sized high-tech businesses in the region (shipyards, boat motors, computers, steel rollers and paper mills). In this city, a Protestant ethic and a business spirit predominate; in the Tuscan city, a Catholic ethic and humanist spirit predominate. In the end, Finnish public spending stimulates economic development, promotes equality and accelerates social mobility. There is no significant poverty and life expectancy surpasses that in the U.S.

Let’s move from Finland to South America. Here, it is important to point out that Argentina has not slipped even further in world economic rankings precisely because its population enjoys a level of education and training superior to its neighbors: 150 years after the fact, Argentine President Sarmiento’s educational policies and public investments continue to benefit everyone!

Another Finnish virtue with strategic value should be highlighted: the country’s unyielding commitment to scientific research and the development of new, high-tech products. The Finns dedicate 3.5 percent of their domestic product to R&D. The Swedes dedicate no less than 4.3 percent of their GDP. The Nordic people understand that in order to maintain a comfortable place in a globalized world it is not enough to simply look inward. It is necessary to compete globally with high-quality, value-added products. An important and growing part of the spending of the Finnish government is dedicated to financing research and its commercial applications. Funds are channeled through a public agency, Tekes, that supports both pure and applied research both in universities (40 percent) and in private businesses (60 percent). Last year, Tekes spent $540 million this way – some $10,000 for every Finnish citizen. If the U.S. did the same, they would end up spending $300 billion dollars on R&D.

I have just enumerated a few of the achievements that I have seen with my own eyes. The list is much longer, and includes great accomplishments in education and healthcare (the Finns spend 7 percent of their GDP on healthcare services, which are excellent and widely available, while the U.S. spends 17 percent of their GDP on far inferior services).

All of these accomplishments share key element that is neither technical nor economic but rather social, political and geopolitical. All of the Nordic countries have small, culturally homogeneous populations (although this is changing with immigration, which is in turn linked to the aging of the population), that have achieved a broad consensus on public and state policies. They also occupy a geopolitical position that has left them on the sidelines of the great global conflicts. Ultimately, these are the variables that we in the global South must consider before we try to glean any benefits from the “Nordic model.”

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(1) It is estimated that by 2010 public debt in Italy will climb to 116 percent of GDP, four times greater than the limit set by the European Union. Tax evasion grows worse and worse, employment levels are low and pensions absorb 30 percent of all public spending. Considering that both Italy and Finland (which is in the Antipodes) form part of the same European Union, the EU seems a bit like a stove with several burners but only one control. For this simple reason, the future of the Euro is problematic, and it will not be capable of replacing the dollar as a reserve currency.

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