Analysis of the Sustainability of Nordic Welfare Model in Times of Essay

Analysis of the Sustainability of Nordic Welfare Model in Times of Economic Recession - Essay Example The first challenge for Nordic countries is the demographic shift. The population in the entire developed world is greying and Nordic countries are no exception. With the increase in longevity of people and reduced child births, the number of people above the age of 65 is rapidly increasing (Adema, 2001). All Nordic countries provide generous pension facilities to enable the old to live a life of dignity. Thus if the number of dependents increase, it becomes increasingly difficult to finance their pension out of the income of working population. It has been assumed that in the next 3 decades the old age dependency ration will increase from 0.25 to 0.40 in the Nordic countries. The dependency ratios over the next 40 years in three Nordic countries is shown in the graph below – Source: (Kvist & Greve, 2011) Thus it is clear from the above figures that it will be unsustainable for Nordic countries to provide pension to their elderly without significantly deteriorating their finan ces. It is assumed that Denmark will suffer deterioration of finances up to 4% of GDP; it will be 6% of GDP for Norway and up to 4.5% of GDP for Sweden (Kvist & Greve, 2011). Clearly no country can suffer such an impact on its finances. It is often said that the problems of a welfare state can be circumvented by ensuring a high GDP growth. The Nordic countries should focus on increasing their GDP growth rate to mop up extra finances for their welfare schemes. In this section I will discuss the challenges of achieving high GDP growth for Nordic countries in this era of recession and globalisation. The Nordic countries have historically seen higher growth rates as compared to other European economies. However...This essay examines, whether the Nordic welfare model is sustainable in these difficult economic times and the age of globalization. The Nordic welfare model is also called as the Nordic social democracy. The Nordic countries have been strictly pro trade and suspicious of any k ind of protectionism but at the same time they have made policies which ensure a large degree of equality and welfare of the children, unemployed, sick and the old. However, as it is shown in the essay, the Nordic model is increasingly become unsustainable due to pressures of an ageing population, globalization, immigration and the financial crisis which has engulfed the whole world. All Nordic countries provide generous pension facilities to enable the old to live a life of dignity. Thus if the number of dependents increase, it becomes increasingly difficult to finance their pension out of the income of working population. It has been assumed that in the next 3 decades the old age dependency ration will increase from 0.25 to 0.40 in the Nordic countries. It is often said that the problems of a welfare state can be circumvented by ensuring a high GDP growth. The Nordic countries should focus on increasing their GDP growth rate to mop up extra finances for their welfare schemes. In this section I will discuss the challenges of achieving high GDP growth for Nordic countries in this era of recession and globalisation. The problem for these open and free economies has been attracting investment in this climate of recession