Authors: George Lakey
One measure of inequality is wealth. On the international charts, Denmark, Sweden, and Norway do not do as well on wealth equality as they do on income, although even on the wealth measure they do better than the United States. New Credit Suisse became curious about why the Nordics are not superstars in the wealth-equality ratings and conducted a study. The researchers concluded that the very fact that individuals’ future is so secure in the Nordic countries reduces the incentive for working- and middle-class people to save. Owning-class people do invest because they cannot spend all their income, and their investments pile up in the form of wealth and assets.
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The difference in typical saving behavior between the different classes
means that the Nordic spectrum of wealth is much wider than the Nordic spectrum of income. As we’ll see in the chapter on taxes, the Norwegians acknowledge wealth inequality by having a wealth tax.
What matters most for people’s everyday life is income. Among thirty-two OECD countries, the ten most equal countries include Denmark, Norway, Iceland, and Sweden. The United States and the UK are among the five most unequal, along with Turkey and Mexico.
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Henry Ford famously announced that he paid his workers high wages (compared to those at other automobile firms) because he wanted them to be able to afford to buy his cars. The genius industrialist anticipated the modern economic reality in which a nation’s productivity is partly driven by consumer demand.
The social-democratic Nordics are surprisingly in agreement with arch-capitalist Ford. Together they’ve been the outliers, because they challenged the prevailing assumption made by Soviet and capitalist leaders alike: underpay your workers and farmers to force capital accumulation to finance economic development.
Norway was on a front line of the U.S.-Soviet struggle. It was a member of NATO, but also had an active Communist Party and a common border with the Soviets. Norwegians could hear clearly the economic arguments of both sides.
Both the Soviets and the capitalists needed a maxim to justify maintaining their high levels of poverty, reassuring their 99 percent that the sacrifice would someday be rewarded by shared abundance. The Soviet version was, “Communist rule will one day shower you with goods and services.” According to the U.S. version, “A rising tide lifts all boats.”
Both promises turned out to be profoundly untrue. In economic
development terms, the Nordic model has proven far more practical than either the Soviet’s command economy or the free market. The workers’ parties that led the Nordics had a belief in equality that correctly distrusted a huge income gap. They also shared the economic shrewdness that Ford expressed. They distributed income to those who would use it for needed goods and services rather than allowing it to be skimmed off the top by owners who would do God only knows what with it.
The way that Norwegians designed their globalized economy was to create a national mechanism for setting wages. Both labor and employers have national federations that look after the interests of their constituents. They meet periodically to negotiate wages. Their first step is to pay attention to Norway’s export industries and ask what the global wage situation is for those workers. Then they negotiate Norwegian wages that make sense in light of the global market.
Wages for other workers are then decided in that context, assuming—as do most Norwegians—that high wages, high taxes, and abundant services create a productive and prosperous economy. The typical starting wage for a Norwegian graduate of the country’s upper high school, which is roughly the equivalent of a U.S. two-year community college, is $45,000.
In that way, Norway’s economic “boat” is balanced for successful use in the turbulent global seas and the more peaceful domestic lakes, an economic feature that reminds me of those early Viking ships that were designed to serve well in both shallow rivers and deep water.
Highly productive, unionized workers create more wealth. Workers are more likely to be productive if they are in jobs that are right for them. Family-support policies and quality vocational education
matter, as does support for retraining and career change. Universal, single-payer health care prevents workers from being locked into jobs that bore them in order to keep employer-paid benefits. Productivity and equality-promoting services join to produce individual freedom in the labor market.
In the United States, the business news on television and the daily newspaper focuses on the excitement of corporate deal-making, the volatility of the stock market, and, occasionally, a union’s threat to strike. Rarely attracting media attention is the international network of cooperatives, which, in total, do business equal to the seventh-largest economy in the world.
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Cooperatives have played a significant role in building the Viking economic model. Cooperatives have been growing internationally in recent years. For example,
The Economist
reports that since the 2008 financial crisis, European cooperative banks have been increasing their market share. Germany’s
Bundesbank
(Central Bank) investigated the trend and found out why: co-op banks are financially more stable and less likely to fail than shareholder-owned institutions.
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Exceptions do exist. Even though a co-op’s board of directors—who are customer-members—is elected by the other customer-members, a board can fail to do due diligence and can allow
management to go off the rails. In Germany, the cooperative bank DZ lost one billion euros in 2008 because it had made high-risk investments.
Nevertheless, a recent scholarly study of the 2008 crash showed that overall, co-ops were more resilient than shareholder-owned banks, since they aren’t driven by a need to make profits for investors and huge bonuses for managers.
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In Iceland, co-ops played a pivotal role in economic development for the first half of the twentieth century and then went into decline. Now they are growing again. In Denmark, Norway, and Sweden, cooperatives remained a dynamic part of economic life. A Danish financial services and insurance co-op,
Beierholm
, made the 2013 list of twenty-five “best large workplaces in Europe.”
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The Oslo-based KLP Insurance is eighty-first in the top 300 co-ops in the world, with revenues of $3.9 billion.
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The Swedish co-op
Folksam
represents the overall growth trend. The 106-year-old insurance co-op grew by aggressively marketing to immigrants to Sweden, who make up one-fifth of the population. Folksam set up a multilingual call center over a decade ago that now handles calls in seventeen languages, including Somali, Farsi, Arabic, and Kurdish. Folksam claims the lion’s share of the insurance market in immigrant communities.
The high productivity and efficiency of businesses organized on the co-op model also shows up in the United States. A study found that worker co-ops had only one-third the chance of failing compared with public companies. This might be related to their extraordinary ability to retain the people in their workforce. A 2013 study found annual turnover averaging 15 percent, compared with industry norms of 40 to 60 percent!
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Starting early in the nineteenth century, Swedes organized co-ops for a variety of purposes. Now we find industrial production, banking and insurance, retail sales, and agriculture. People often band together to build an apartment complex and then share the ownership of it. The co-ops helped move Sweden from mid-nineteenth-century poverty, which pushed people to flee to America, to its present prosperity.
In their early days, co-ops were often organized by activists from the temperance movement, the farmers’ movement, the trade unions, and a dissenting wing of the state Lutheran church. Activist workers who were members of the Social Democratic Party were prominent, although co-ops formally abstained from party politics.
In the 1870s, workers increasingly came together to build homes, investing their savings in their new housing co-ops. The cooperative movement expanded rapidly in the 1930s, when the Social Democrats replaced the Conservatives and began their long tenure in leading the economy.
The housing co-op movement not only provided homes but also created jobs for construction workers. Today, some 860,000 Swedes are members of housing co-ops, holding 18 percent of the country’s housing stock with about 750,000 apartments.
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The co-op ownership model supports a variety of dwelling sizes, from one-family homes to large apartment buildings. The large units usually incorporate co-op-owned space for shopping centers, schools, and day-care centers.
Parent co-ops provide between 10 and 15 percent of childcare
in Sweden. First developed in the 1970s as an alternative to the childcare offered by municipalities, they grew significantly in 1985 when they began to get public funding.
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Swedes in industrial co-ops today produce a variety of goods: automobile tires, paper, earthenware, even plastics. A kind of hybrid is the recent trend toward co-op wind power. For technical reasons these are defined in Swedish law as consumer co-ops, but the cooperative companies in fact produce electricity. From 2009 to 2012, the number of members in wind-power co-ops increased from 19,300 to 25,000.
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The members of all the co-ops, as co-owners, have the right of participation in decisions through a representative, democratic process. The
Folksam
insurance firm’s governance structure is interesting because it was founded by both the co-ops and the trade unions. Its highest decision-making body of 108 delegates are elected half by the co-op movement and half by labor.
Today, groups wanting to start up a new co-op are called “nontraditional entrepreneurs” by the state-supported consulting agency,
Coompanion
. Many of these start-ups are from immigrant groups who see unmet needs among their people. Coompanion’s 100 advisers can often steer them toward start-up funds from the government’s assistance program.
In the meantime, Swedish consumer co-ops have grown to include 1.9 million members.
The Norwegian Co-operative Association was founded in 1906 but remained weak until 1914. The combined membership of local
consumer cooperative societies was a smaller proportion of the population than it was in other countries that got started at about the same time. The 1844 Rochdale principles—which were the international hallmark of viable co-ops—had little impact; Norwegians attracted to the consumer movement had little ideological coherence and failed to agree on an organizational practice.
Not until the Association borrowed from Sweden the idea of setting up a wholesale operation serving their local stores did the movement take hold. Norwegians increased their unity, and in the single decade before 1920 the number of local societies increased tenfold.
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Now a thousand co-op stores together have 1.2 million members, which is about half the number of households in Norway. More than 22,000 people work in the extensive Norwegian network of consumer co-ops. Co-op grocery stores have 24 percent market share of food sales. The network not only provides useful goods and services at competitive prices, but also acts as an interest group advocating on consumer issues nationally.
Norwegians were inspired by the success of the early Swedish housing co-op model, so construction workers in Oslo started a housing co-op of their own with the close collaboration of the city government. It wasn’t until after the Nazi occupation during World War II, however, that large-scale cooperative housing was seriously undertaken.
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Now in Oslo, 40 percent of the housing is owned cooperatively; the portion for the country as a whole is 15 percent. The average housing co-op has apartments for fifty families or individuals. Nationally, the housing co-ops have about 800,000 members—a large number in a population of only five million.
The need for fire insurance spurred in Norway a local fire
insurance cooperative in 1689. There was little building on that, however, until some local start-ups in the nineteenth century finally joined together to create
Gjensidige
, now one of the biggest Norwegian insurance companies with about 966,000 members.
There’s nothing more hardcore in Norway than fishing. Co-ops are significant for getting the fish and shrimp to market. Each of the six co-ops is owned by the fishermen in that particular geographical area.
All told, more than 2 million Norwegians are co-op members, and many individuals are actually members of several co-ops. The government has been backing this continued growth. In 2008, the Storting passed new legislation to encourage more co-ops of all kinds in Norway.
Cooperatives have an impact beyond the economy because they provide visible evidence that
cooperation works
. Culturally, co-ops serve the need in small countries for a defense against the unrelenting message from corporate globalization that only ruthless competition produces results.
Norwegians and Danes were already keeping cattle in the days when Vikings were discovering North America. At that time, the most valuable product was butter, which was used as a kind of currency and means of payment.
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When Norwegian national feeling grew in the eighteenth and nineteeth centuries, urban intellectuals realized that the closest connection the country had to the ancient Vikings was through the farmers, since the Vikings were mostly farmers and the family
farms in remote valleys still had some continuity with old Norse practices.
When in 1959 I first went to Norway, there were still nearly 200,000 farms, but the number now is about a third of that. The national government anticipated this trend and began to build cultural and educational programs to strengthen rural life. Berit and I saw an early sign of the program on my first ski vacation in a remote valley. We skied over to the local grange hall, where we joined local farmers watching a movie brought by a travelling culture worker.