Thursday, March 11, 2010

Vox EU: The Nordic Model in the Global Crisis

Several economics professors and advisors write on Vox EU about the Nordic model, which includes a comprehensive social safety net not tied to the fortunes of any particular company, a different and more cooperative labor model than the US, and significant government spending during the fiscal crisis. They argue that the Nordic model was a significant asset and enabled the region to recover far faster than the US. In addition, it enabled the Nordic countries to avoid bailing out unsustainable industries merely to preserve jobs.

There are two differences that the US cannot easily replicate. First, the US's public finance situation is more precarious; many Nordic countries had significant reserves built up. This is not an easy challenge for the US to address. Second, the Nordic countries made significant investments in education. The resulting high-skilled workforce finds it much easier to retrain and seek different employment. The US can and should increase its investments in education. Because many legal immigrants to the US have fewer skills and limited English proficiency, the US will have an additional challenge in ensuring that these immigrants are not left behind.

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