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East Asians Eye Scandinavian Welfare Model

By Dipankar De Sarkar, IPS
11 March 1999

COPENHAGEN, Mar 11 (IPS) - A group of South East Asian ministers, business leaders and policymakers headed home Thursday after an international meeting left them pondering whether their devastated economies should be steered toward calmer, Scandinavian methods.

They had reason to be in a quandary: whereas the Scandinavians emphasise the role of the state, South East Asian countries traditionally put stress on the market.

It was impossible to participate in any discussion on international economic issues in Copenhagen without at least one reference to the 'Danish model of government.'

Along with the Swedish and the Norwegian, the Danish system forms part of what is known as the 'Scandinavian Welfare Model' - a term used to describe the path taken by these three countries in organising and financing their social security, health and education systems.

The problem for Asian delegates at the 'Asian Europe Conference on States and Markets' held here this week were the differences, rather than the similarities, that mark the countries of Scandinavia and Asia.

These include the fact that most Scandinavian countries are composed of small, tightly-knit and more or less homogenous populations.

By contrast, Indonesia is the fourth most populous country in the world and most countries in the South East Asian region are home to large groups of linguistic, ethnic and religious minorities - a mix that leads to frequent sectarian violence.

The Scandinavian model acts within a controlled capitalist market, whereas South East Asia - except very recently for Malaysia - has given up many controls.

And democracy forms the political bedrock of the welfare model in Scandinavia, whereas dictatorships, rather than democracy, has been the preferred model in South East Asia, with banking laws shrouded in secrecy.

Despite these differences, Danish Prime Minister Poul Nyrup Rasmussen was clear there were lessons to learn from the Scandinavian experience.

The Scandinavian welfare model "has been evolving without damaging our social security...and Europe has been protected from the international financial crisis because it protects itself," he said.

In Denmark, "the state takes the responsibility of taking care of those who cannot take care of themselves."

"For me, a very important litmus test for the value of an economic system is the situation of the weakest member sof the community, be it individuals, families, social classes or nations," Danish Minister for Development Cooperation Poul Nielson said.

"The Asian financial crises in a dramatic way has demonstrated the fragility of social progress associated with global capitalism at least in the short term," Nilson added. He pointed out that 20 million people in the region had fallen below the poverty line in just the last 12 to 16 months.

"Inequality has also deepened in the economically advanced countries during the last decade, with very few exceptions, notably in small countries like Denmark with long welfare society traditions," he said.

If the South East Asians were listening, it wasn't immediately evident. South Korea's Minister of State for Trade, Han Duck Soo, declared that East Asia was laying stronger emphasis on the "market-principled approach" - unlike the West where government activism is favoured.

"The Asian Crisis and the ensuing debate on the applicability of the 'East Asian Model' has forced us to reevaluate - painfully - our past experience with state-led economic development," Han said.

"A consensus is emerging on the need for reducing the ties between the government and the market and making the market freer. Therefore, it seems inevitable to find more efforts in seeking market-based solutions, even with regard to the issues of social protection and welfare," he added.

Subsequent remarks by the South Korean minister, however, made clear that when he referred to his country's "painful experience" with state-led economic development, he meant "bad governance."

Han spoke of his government's failure to increase transparency, which led to corruption, misplace intervention in the management of banks and its inability to check some large business conglomerates from expanding into "too many different sectors without development core competence."

Freeing up the market forces, he indicated, could well mean an end to the former situation, where the responsibility for social protection was borne by business, which offering guaranteed lifetime employment, housing and education.

"The new direction marks a paradign shift and finally puts an end to the so-called 'Korean Model' of industrialisation," Han said.

Paradoxically, the way in which South Korea plans to introduce market principles in "all possible segments of the society" could see the South East Asian country emulating some of the key aspects of the 'Danish Model.'

Han, for instance, emphasised the need to encourage the growth of small and medium firms in high-value-added, high-technology sectors, where more jobs and better pays are expected.

In addition, small and medium companies are expected to reduce concentration of economic power in the hands of a few players and help address "distribution and equity issues."

A large number of small and medium-size enterprises - rather than a few large companies - are also key to the success of the so- called Danish model. Under this system, the population is guaranteed nearly continual employment through 'life-long learning,' so that retrenchment is quickly followed by re-training and possible relocation into another job.

Denmark, however, also has one of the highest taxation levels in the world - but benefits are also more generous than, for instance, in the case of Britain.

Prof Anthony Atkinson, President of Britain's Royal Economic Society, and a leading speaker at the conference, pointed out that the so-called European welfare state was actually quite diverse.

But in a reference to recent moves to dismantle welfare provisions by European countries, Atkinson said, "I am not persuaded that the European welfare state is an anachronism which has to be scaled down. It is possible for national governments to make choices - they have to balance costs and benefits."

Many South East Asians were doubtful about the need for any one model; they pointed out that their own Asian Model, offered for replication just two years ago, was now mired in crisis.

"Rather, we would prefer to consider many such models and pick and choose what we like from them," said a delegate from Singapore. (END/IPS/dds/mk/99)

Origin: ROMAWAS/FINANCE/

[c] 1999, InterPress Third World News Agency (IPS)
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