Nordic countries have not only largely overcome economic problems but have also weathered the storm of the global economic crisis much better than many of their European neighbours. East African economies can, therefore, pick lessons from the economic model that has seen these Scandinavian countries succeed. Although this model followed by Sweden, Norway, Finland, and Denmark has long been conflict-ridden in some quarters, some people are exalting it while others are just trying to forget everything about it.
About three weeks ago, hundreds of delegates from East Africa and the Nordic region were in Kampala for the first Nordic-East Africa Trade Summit & Expo organised by the Nordic Business Association in Uganda. The two-day event saw business leaders from Uganda, Kenya, Tanzania and Rwanda, and their counterparts from Denmark, Sweden, Norway, Finland and Iceland deliberate on business issues of mutual interest.
In a pre-event meet with Daily Monitor, the communications advisor to the Nordics in Uganda, Shamilla Kara, said: “The summit will bring together businesspeople and entrepreneurs from both sides to discuss business opportunities and to build contacts for trade and investment. These will be days of great interaction, compelling content and business networking.” Ms Kara’s words pose the question of what these small European nations would teach the seemingly big East African countries, including the gigantic Tanzania. But she had insisted that the expo was a great opportunity for East Africa, especially Uganda.
But what is this model? The Nordic model (also called Nordic capitalism or Nordic social democracy) refers to economic and social policies. This includes a combination of free market capitalism with a comprehensive welfare state and collective bargaining at the national level. Their model makes one think about Uganda where President Museveni is constantly scolded by his competitors for having a big government. They all seem to agree that such a government is a burden to a poor country and not welfare-driven at all. But his praise singers say the size of the Cabinet is acceptable; with over 30 ministers and close to 50 ministers of state, one wonders what acceptable really means.
Tanzania’s more than 30 and Kenya’s approximately 25 ministers are all too many compared to Sweden’s 24, Norway’s 18, Denmark’s 17 and Finland’s 14! But this is not all. With 112 districts, Uganda pays salaries to 224 Resident District Commissioners (RDCs) and their deputies put together; and a horde of presidential advisors! President Museveni has about 100 men and women who are collectively paid hundreds of millions of Shillings from the national coffers every month to give him advice. The big cabinet means Uganda can export the required number of ministers to all the Nordic countries, and President Museveni still remains with enough of them to run our country.
Because of exorbitant tax rates and a bossy state, the Nordics became increasingly uncompetitive during the 1970s. It got worse in the 1980s with public spending reaching 70 per cent of Gross Domestic Product (GDP) in Sweden. Here, socialism had been unsympathetic. What makes the Nordics tick? Trust the Nordics. They did not put this catastrophe to waste. They brought about pragmatic reforms. Subsidies and taxes were cut, and public services restructured significantly. Currently, Nordic economies perform well not because they have huge governments, but by cutting public spending, especially in Sweden and Denmark.
The Nordics also rank highly in global competitiveness indices in terms of trade freedom, openness, competition and anti-monopoly policies. How does Uganda perform in all this? The Nordics are also nations where sincerity, market flexibility and collective risk-sharing are in harmony; with long traditions of good governance emphasising consensus and compromise. The Nordics also display a capitalist approach in many areas of public spending, something Uganda can emulate.
Most courageously, Sweden introduced a universal system of school vouchers and invited private schools to compete with public ones; and Denmark allows parents to send children to private schools at public expense and make up the difference in cost with their own money; practices that cannot be equated to our own Universal Primary Education (UPE) or Universal Secondary Education. In business, private companies compete with each other to provide state-funded health services and care for the elderly. The small land mass of the Nordics should be a great lesson to East Africa that geographically small states can operate impressive welfare systems in ways bigger countries like Tanzania cannot.
The greatest lesson to learn from the Nordics is not socio-political but the ability to put words into action. Governments are popular not because they are busy rewarding loyal cadres but because they work. For example, a Swede pays their taxes more willingly than a Ugandan because they get quality free healthcare and more decent schools than our own UPE schools. Uganda should learn that she can constitute good market mechanisms into the economy without necessarily giving people millions of hoes to brag about. And she should be willing to stem corruption. The Nordic model, which has given impressive results, requires exceptional supervision, something which can be transferred to our own East African Community.
The Scandinavian economies have small homogenous populations with a collective economic strength of about 27 million inhabitants (2014 figures). This can be a good market to explore by East African businesses. Given her homogeneity in nature, Rwanda can fit here. However, Uganda is a big bet because of her many tribes. The homogenous population enables the Nordics to get away with a great deal they could not otherwise get away with. What works for Sweden, therefore, won’t fully work for Uganda, Kenya or Tanzania where common goals are much harder to come by because of a diverse population.
All the Nordic economies consistently rank very high in doing business because of character since they know it matters a lot. But they also respect openness in all transactions. Their laws are made in such a way that governments are obligated to operate openly; for instance, Sweden gives everyone access to official records. But may be the model is not perfect. These economies have not been without challenges. Iceland was hit by a strange economic crunch; Finland’s politics became ugly; and Norway suffered an unprecedented terror attack since World War two. But these trials just cemented the Nordics’ welfare.
In Oslo, thousands of people took to the streets carrying roses for democracy while in Iceland; politicians preached social fairness in the wake of the economic breakdown. The theme in the run-up to Danish elections was economy and unemployment not personal attacks that normally choke political campaigns in East Africa. The Nordics seem to have reached the future first; and are now struggling with hitches that other countries will have to deal with, such as what to do when you have unfriendly taxes and how to lead society when almost all women work. They are coming up with impressive solutions already.
The model Economically, the Nordic countries have much in common. They are all small, open economies in which foreign trade has great economic significance. They have also rapidly evolved from poor, agrarian countries into modern industrialised economies that are among the most competitive in the world. The “Nordic model” is therefore of interest to both individuals and policy-makers in other countries. They wonder how these small countries, with large public sectors, including welfare services, and high taxation, have performed so well economically.
Source: All Africa

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of TradeMark Africa.