What America can learn from Nordic capitalism: New book

Robert Strand, executive director of the Center for Responsible Business and a lecturer at UC Berkeley Haas, has been studying the Nordic countries for more than two decades. He has lived, researched, traveled, and taught there. He has spent time raising his family there. He has cultivated relationships with the leaders of globally prominent companies like Denmark’s LEGO and Sweden’s Ikea. Over all of this time a single question has animated much of his energy: How are Nordic countries doing so many things so well?

His answer has at last come together in the form of a book, Nordic Capitalism, published this spring by Cambridge University Press and available for free online. The book is rich with political, intellectual, and economic histories of the United States and the Nordic countries of Denmark, Finland, Iceland, Norway, and Sweden. At its heart, though, the work documents the way in which the U.S. and the Nordics have put capitalism—that staggering engine of efficiency—to work for different goals.

In the United States, capitalism is often an end in itself, its pursuit equated with liberty and freedom. (Capitalism and Freedom is the title of one of Milton Friedman’s iconic books.) In Nordic countries, capitalism has been harnessed as a tool. “The efficiency of capitalism can instead be a means, something that we steer,” Strand says. “And this is what I explore in the book: the use of capitalism in service of democracy, and ultimately shared prosperity and sustainable development.”

Stop saying “socialism”

The poorest 40% of Swedish citizens possess about one-quarter of the country’s wealth. In the United States, the bottom 40% possess no wealth. Nordic countries have a relatively high tax rate, but through those taxes citizens have access to universal childcare and healthcare, generous parental leave policies, and pensions upon retirement. Corporations, governments, and labor unions in the Nordics do not coexist free of tension, but they ultimately collaborate with the aim of building a future that benefits their countries and their residents.

“A very common perception in the United States when they hear all of this is that Nordic nations are socialist,” Strand says. He is quick to disabuse people of this falsehood: The private sector still owns property and capital; markets still determine prices and quantities of goods. He underlines this fact not only because the label socialism is incorrect, but because it is intentionally weaponized. “It’s a dismissive claim, a way to say we have nothing to learn from Nordic countries,” he says. “It’s used to quell curiosity when curiosity is the best thing we have.”

Strand uses his experience with benchmarking to make the point. He got his start in the corporate world as an industrial engineer at IBM’s largest manufacturing plant, in Rochester, Minnesota. In this role he looked to Toyota, in Japan, to find process improvements, drawing lessons for computer manufacturing from the automobile assembly line. He benchmarked the work of IBM against Toyota, a world leader in efficiency.

Likewise, Strand suggests the U.S. can and should benchmark the health of its society against other countries. “We should focus on how to improve,” he says. Perhaps the United States has something to learn from the fact that Nordic countries consistently beat the U.S. on indices that rank personal, civil, and economic liberties; freedom of the press; democratic strength; and gender equality. Nordic countries claimed the top five spots of the World Economic Forum’s 2020 Global Social Mobility Index while the U.S. ranked 27th. Nordic citizens are regularly considered the happiest in the world.[LC1] 

“If we see strong performance elsewhere we should ask what we can learn from it,” he says. “I think that most of us, when presented with the basic idea that things could be better for us and our children, would say, yeah, I’d like things to be better.”

The proper scale of change

The Nordic countries are admittedly small. Sweden, the most populous, has roughly 10 million residents. Iceland, the smallest, has 400,000. What works in a country of 400,000 likely won’t work in a country of 350 million. Strand notes that this dissimilarity between Nordic countries and the U.S. is, like the term socialism, often used to dismiss their instructive potential. But we should instead properly calibrate our scale of analysis: the United States is, indeed, quite different in size and composition than Nordic countries, but U.S. companies, cities, and states present good analogs.

The company is the most obvious level at which the U.S. could learn, he argues—from small businesses to multinationals. Nordic countries have developed distinct ways of structuring private sector entities — cooperatives and foundation-owned companies, for instance — that allow for two things. First, less focus on quarterly profits. Second, broad and deep stakeholder engagement. These orientations help Nordic companies tackle thorny problems like climate change.

Beyond the private sector, though, Strand says U.S. cities could draw from the Nordic experience. Copenhagen has a population of about 1.5 million people, in line with metro areas like Phoenix, Philadelphia, and San Diego. On an annual basis, Copenhagen routinely has zero pedestrian deaths. In San Diego, the number of annual pedestrian fatalities is in the upper 30s; in Philadelphia, the upper 50s; in Phoenix, nearly 100. Copenhagen’s transit culture and infrastructure could be an interesting study.

Finally, Strand pointed to states, which are responsible for so many of the social functions that affect people day-to-day: education, transportation, the penal system, environmental regulation, and so on. As one example, Strand highlighted the perennial competition among U.S. states to be the most businesses-friendly. Borrowing from the Nordics, what if one state decided to provide universal healthcare, taking that expense, and the expense of benefits departments, off corporate ledgers?

“Louis Brandeis described states as the laboratories of democracy in the United States,” Strand says. “States give us the perfect opportunity to focus on continuous improvement, and the Nordics offer us templates worth learning from.”

A moment of reckoning?

Strand is hopeful that his career to this point—the research, the talks, the teaching—are aligned with a growing push for reform of modern American capitalism. He is particularly inspired by the students that he teaches in his class, “Sustainable Business in the Nordics?” which traveled to Denmark and Sweden over spring break to see Nordic-style capitalism in action. (Typically open to Haas students, this is the first year that the class was also available to students at the Rausser College of Natural Resources, with which Haas offers a joint MBA and master of climate solutions)

“There is so much that came out of our field experience, but one of the inspiring things was seeing how the Danish government, the private sector, and trade unions and employees were all kind of on the same page about the long-erm vision of their country,” says Madison Nicole Spinelli, a master’s student in climate solutions who took the class. “People most fundamentally wanted a livable world for their children, and this came out in all sorts of interesting corporate models, federal incentives, and a focus on employee health.”

Strand has lived and taught in the United States since 2014. Despite a profound love for the Nordics, a Norwegian lineage, and a PhD earned and first job teaching in Copenhagen, he considers himself, firmly, American.

He has been disappointed, of late, in his country, in the widespread erosion of decency. He has found himself frequently angered. But these frustrations are fuel for change.

“I love the United States of America so much that I want us to fulfill our potential,” he says. “With this book, and in my work, I am appealing to the competitive American spirit that has become so comfortable and routine in its denial. We hold on to this identity of being No. 1. We are no longer No. 1 in so many ways, and denial is a terrible strategy for addressing problems. We need hope, purpose, clear direction. We need to commit to making this country and its people better.”

Strand will be giving a book talk from 5-7pm tonight in the Morrison Reading Room, Doe Library.

Read the book:

Nordic Capitalism: Lessons for Realizing Sustainable Capitalism
By Robert Gavin Strand
Cambridge University Press