In survey after survey, Nordic countries have emerged in the top 5% of the world’s happiest countries. What makes these countries happy? And what lessons can developing countries like India learn from the Nordic experience, despite the many differences (in size and per capita income)?
What the Nordic model does is very simple: the government taxes everybody to ensure that everybody at each point of time in their lives have access to almost free and excellent healthcare services, and that all children and youth have access to comprehensive and quality education inclusive of nutritional services and psychological counseling. Healthcare services include services of hospitals and doctors for curative treatment and delivery and care of babies. These also include tax financed reimbursement for man days lost to companies for providing long parental leaves during the first years of an infants life, a time when she cannot do without nurture, including breastfeeding, from her parents.
What the Nordic countries do is to ensure that life does not become a lottery for newborns; the path that an individual blazes from the time of her birth does not depend on the affluence of her parents. This is a system targeted towards providing equality of opportunity, freedom and a good quality of life for all inhabitants. This is the key to productivity as well as happiness and enables people to nurture and be nurtured by community and family level ties unadulterated by financial dependence, termed an embodiment of Nordic love by leading commentator Anu Partanen. The only entity on which they need to depend crucially is the government, an institution officially entrusted with the task of collecting and disbursing revenues to insure people against uncertainties and underserved randomness in life that could otherwise cripple them.
The lesson
Nordic people do not label their own economic systems as socialist; rather they classify these as modern democratic capitalist systems characterised by equality of opportunity for all, the antithesis of feudalism.
Given that governments in developing countries, including India, have proved to be leaky and inefficient providers of health and education does the Nordic experience provide any lessons for us? One way to generate an equivalent experience is to provide people who do not have adequate means with education, nutrition and health insurance vouchers that entitle them to the services of good quality private deliverers. The resulting significance of the government as a demander would enable it to negotiate both high quality and reasonable prices from providers who would compete with each other.
The alternative to this packet of vouchers is the much touted cash transfer. Cash transfers are subject to leakages: the remittances might be spent on frivolous consumption rather than on education, essential nutrition and health. Yet it is argued by neuroscientists such as Kimberly Noble that cash transfers can generate economic security for parents as well as children, an influence that enhances the cognitive powers of childrens plastic brains directly and through better parenting. One can, however, argue that similar pathways for enhancing cognition and facilitating human capital formation might be activated through the mentioned vouchers which also enhance the purchasing power of the poor.
Recent years have been marked by an explosion in the sophistication of impact assessment techniques. These help to accurately ascertain the exclusive impacts of various policies on socio-economic outcomes. An application of these techniques lies in examining the relative desirability of vouchers and transfers. For example, control groups provided neither vouchers nor transfers can be compared to treatment groups provided either vouchers or transfers, thus helping to isolate and compare the impacts of these alternative policy instruments. Careful research can thus help us to channelise governmental energies appropriately while avoiding the adverse impact of leaky government implementation.
Siddhartha Mitra is Professor of Economics at Jadavpur University.