Introduction

In December of 2006, a group of 25 students and professors from the Stanford Graduate School of Business will travel to Scandinavia to learn about Scandinavia’s unique blend of vibrant capitalism, income redistribution and welfare provisions through discussions with politicians, opinion makers, labor market participants, NGO officials, leaders of traditional industries, entrepreneurs, investors, and cultural personalities.

The Scandinavian Model

The Scandinavian Model presents a unique blend of vibrant capitalism, equitable income distribution and generous welfare services. Access to high quality basic services within health care, child care, education and social services is universal, and virtually all workers are unionized.

For the international business community, Scandinavia is home to some of the world’s most successful companies and offers access to a highly skilled workforce. For the global political community, Scandinavia offers a ‘third way’ – an alternative to Anglo-Saxon capitalism and Socialism. In policy debates around the world, there is a perceived trade-off between economic growth and such progressive policies, and Scandinavia offers a potential solution.

Is this often praised model sustainable?

Our learning objective

Our objective will be to understand the opportunities, challenges and trade-offs faced by as wide a range of stakeholders in the Scandinavian Model as possible and specifically how they think Scandinavia should respond to the challenges it faces.

Specifically the objectives of the study-trip are to understand:

• the perspective of policy-makers across the political spectrum on the Scandinavian Model;
• the functioning of a labor market with extremely high unionization rates and pervasive collective bargaining;
• the symbiosis between large, traditional, industrial companies and the local governments;
• the challenges and opportunities afforded by the system for more entrepreneurial, rapidly growing companies;
• the dynamics of operating a family company locally;
• the key issues confronting private equity and venture capital investors in Scandinavia; and
• the drivers of Scandinavia’s relative success in creative industries such as music, design and fashion.

Dimensions of success

Scandinavia’s success in ‘progressive’ dimensions is demonstrated by:

• consistent top rankings on the UN’s Human Development Index . In 2005, Norway was ranked #1, Iceland #2, Sweden #6, and Denmark #14 (the US was ranked #10);
• the most equitable distributions of income globally. In 2005, Denmark (#1), Sweden (#3), Norway (#6) and Finland (#10), all ranked in the top ten globally as measured by the Gini Coefficient (United States ranked #96).

Scandinavia’s success on more conventional measures is demonstrated by:

• strong rankings in GDP per capita as measured using figures adjusted for Purchasing Power Parity (Norway #3, Denmark #8, Finland #22, Sweden #25);
• continued successful performance of large companies in traditional and new sectors;
• all ranked in the top-five as IT-nations in the world (Sweden #1, Norway #2, Finland #3, Denmark #5) .
• strong performance as an area for investment for public and private market investors.

Challenges and issues

Nonetheless, the Scandinavian System has detractors at home and abroad and faces many challenges going forward, including:

• competing effectively with growing low-cost economies like China and India;
• preserving viable economic incentives despite generous welfare provisions;
• sustaining a revenue base for the welfare state in the face of intensified international competition;
• adjusting to an ageing population;
• integrating immigrants;
• interacting effectively and in keeping with the population’s preferences with international institutions like the EU, NATO and the UN.

High personal taxes have driven many of Sweden’s most successful entrepreneurs and most promising professionals out of the country to lower tax jurisdictions. Substantial social charges and labor market inflexibilities have excluded a large portion of the population from the workforce (in particular first and second generation immigrants) and accelerated the move of corporate activities to alternative locations. Generous welfare provisions have created destructive cycles of dependence for large segments of the population and destroyed the incentive for them to seek independent economic outcomes.