The Scandinavian Welfare Model

The terms “Scandinavian” and “Nordic” are used interchangeably to refer to the political model that is characteristic of Northern Europe. However, geographically speaking, they are not synonymous: “Scandia” was the old Latin name for three countries of northern Europe—namely Denmark (5.8 million people in 2019), Norway (5.3 million people) and Sweden (10.2 million people)—that constitute today the Scandinavian countries. The Nordic countries include, in addition to the Scandinavian countries, Finland and Iceland. The Scandinavian model differs from both the Anglo-Saxon and the continental models (Lane 2016), at least when it comes to two salient features. First, a particularity of the Scandinavian political model, inherent in the Scandinavian culture of compromise, is the strong role played by interest and civil-society organisations in both policymaking and policy implementation processes— a feature that has been referred to as corporatism (Olsen 1983). Secondly, Scandinavian countries share specific institutionalised welfare arrangements, referred as the “social democratic welfare regime” (Esping-Andersen 1990)—a term that indicates that the Scandinavian countries constitute a group or “family” of welfare arrangements.

Features of the Scandinavian welfare model include a heavy reliance on universal public social services and transfers (benefiting all citizens)— and, consequently, small income differences and low poverty rates—as well as an extensive social legislation, which provides a safety net “from cradle to grave”. Additionally, as advanced by Pedersen and Kuhnle (2017: 221), three dimensions might be considered to be characteristic of the Nordic welfare model:

  • • the active role played by local and national state agencies in providing welfare benefits and services (the Scandinavian welfare model is based on an extensive public responsibility for providing welfare benefits and services);
  • • the principle of universal social rights (services and cash benefits are not selective nor targeted on the basis of needs, but are available to the entire population, including the middle class);
  • • the value of equality (Scandinavian countries have historically inherited small class, income and gender differences. The fact that

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child care, elderly care and care for rhe disabled are a public responsibility enables women’s high labour-market participation and reduces gender inequalities).

The Scandinavian model of welfare policies is not only about expenditures and compensation, but also about social investment (Kvist et al. 2012). The Scandinavian social-investment strategy consists of welfare services whose provision is the responsibility of municipalities and which address individual needs in different phases of the life cycle. These welfare services include child care and pre-school education in early childhood, and primary, secondary and tertiary education for young people. Thanks to child care and social care, adults can be active in the labour market, and life-long learning and active labour-market policies help them to update their skills to accommodate changing labour demands. In old age, various policies aim to provide care for the elderly.

Welfare Policy Reforms in Scandinavia and their Implications for Social Enterprises

In the Scandinavian countries, the provision of welfare services has been, since 1945 and until the 1980s, the quasi-monopoly of the public sector, with over 80% of welfare services provided by the public sector in each of the three countries analysed. During the last decades, NPM socialpolicy reforms have contributed to a more diversified welfare mix and diverging trends in these countries.

Given the centrality of the public sector in the provision of welfare services in Scandinavian countries, welfare policy reforms, inspired by new public management, have focused on the enhancement of productivity, innovation and effectiveness within state agencies and local governments. NPM reforms have involved the introduction of marketbased methods and instruments within the operation of the public sector. These reforms have provoked a reorganisation of the boundaries between—and the relationships among—the public, non-profit and for-profit sectors, and of the practices of the public sector itself. However, within the field of welfare services, the efficacy of pure market mechanisms is limited by a series of market failures. Indeed, welfare services (1) are provided in response to demand from a target group that frequently cannot or can only partly afford to pay for them; (2) are characterised by an informational asymmetry between provider and beneficiary, which means that certain procedures need to be established to guarantee the quality of the services and the protection of these beneficiaries; and (3) generate, at the level of society as a whole, external effects which are not “internalised” by the market. NPM reforms have involved the introduction of an array of marketbased regulatory instruments, including outsourcing, competitive

SE and the Scandinavian Welfare State 305 tendering, quasi-markets and performance-related funding (Pollitt and Bouckaert 2011). NPM has also emphasised user-driven innovation and free-choice schemes for public-service users—reframing them as “consumers” or “customers”—and the individualisation and personalisation of welfare services.

The introduction of NPM reforms in the Scandinavian countries has its origins in debates related to the “welfare-state crisis” in the 1980s. These discussions lay grounds for subsequent reforms that in many ways were influenced by ideas of new public management. But although NPM reforms were implemented in all three Scandinavian countries from the 1980s onward, Denmark, Norway and Sweden followed different paths in incorporating NPM into their existing welfare institutions and policies, and they have also recently diverged in introducing, especially at the local level, post-NPM reforms.

In Sweden, during the neoliberal transformation in which NPM was massively rolled out in the country’s welfare system, political rhetoric embraced civil society as well as references to social entrepreneurship, social enterprise and social innovation—not as constituting a sector in themselves, but as part of private initiatives in general. In addition, these types of initiatives were described as carriers of moral features, but not as actors that were in need of any “special support” from public policies. The opening of welfare services to competition has not led in Sweden to a strengthening of civil society, though, but to the expansion of the business sector into the welfare sector and to the consolidation of international chains specialised in the provision of specific types of welfare services (schools, elderly nursing homes, domiciliary care).

In the 1990s, while Sweden and Finland experienced economic downturns which led to major welfare reforms, Norway’s financial situation stabilised. Therefore, the discourse that had prevailed in the 1980s in Norway about the need to mobilise civil society subsided and despite the political aspirations to strengthen civil society’s role in the welfare state, non-profit welfare production continued to weaken, partly due to NPM reforms. Faced with competition by profit-making actors, many non-profit organisations lost ground. In Norway, it is only in the 2010s that these experiences have led to discussions on how to protect non-profit welfare production (Meld. St. No. 29 2012-2013; Norwegian Government 2016). The recent increasing focus on innovation in the many different parts of society has been thematised around the need for organisational change and user/citizen involvement, innovation and entrepreneurship. However, while the public debate at the national level about welfare policies is crystallising around the extent to which public welfare services should be provided within a system based on open competition among non-profit and for-profit providers, local public policies at the municipal level have increasingly been informed by post-NPM ideas, emphasising collaborative governance and co-production.

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Denmark has also implemented NPM since the mid-1980s and this has been a significant driver of change in the public sector. However, Denmark can be considered to have been a “modernising” nation rather than a “marketising” one (Greve 2006). Compared to other Nordic countries, Denmark has not gone far in privatising and marketising public welfare services and institutions. In general, the Danish public sector

has been built between two contrasting tendencies: decentralisation and centralisation. First, the Danish public sector is decentralised, with a strong emphasis on local government autonomy, which allows local politicians to reach out to citizens. The signal here is decentralisation and popular control. At the same time, the Danish public sector has never quite shaken its roots from a centrally organised state.

Greve (2006: 162)

Reforms in the Danish public sector have been embedded in the vocabulary of NPM: performance-based management, market mechanisms, quality systems, balanced scorecards, customer orientation, e-government, performance-related pay and contracts, and changed focus from needs-oriented categories to issues of competition, efficiency and individualised satisfaction (Jorgensen and Dalsgaard 2009: 8). These reforms also comprised, on the one hand, service and governance innovation (Hartley 2005), as well as institutional in-house collaboration, democracy and co-creation of local budgets in a top-down implementation. On the other hand, this was followed by a bottom-up demand for the public sector to adapt to the interorganisational, intersectoral and open-innovation practices (Hartley et al. 2013), leading to a “pluri-centric” coordination in public governance (see, e.g., Reff et al. 2011 or Buch and Andersen 2013). This development has paved the way for more diversified and plural market-based welfare services of significant importance for social entrepreneurship and social enterprises. Welfare-modernisation programmes have strengthened, within the public sector, a (social) entrepreneurial mindset when it comes to welfare services and organisation, including the introduction of “quasi-market-based” regulatory schemes, self-management and a stronger focus on user influence (Green-Pedersen 2002; Hulgard and Andersen 2009; Andersen 2015).

Table 18.1 shows the respective size of the non-profit, for-profit and public sectors in Scandinavia in terms of paid employment. The for-profit sector, as a result of NPM reforms, has grown significantly in Sweden over the last years; its growth has been more moderate in Norway and Denmark, and the welfare mix in these two countries is, by comparison with Sweden, relatively stable. Today, the relative size of the

Table 18.1 Paid employment in the welfare services in Scandinavia, total and sector shares1







5-year change



5-year change



5-year change

Share of the non-profit sector










Share of the for-profit sector



+ 1.2%







Share of the public sector










Total employment










Source: Translated from Sivesind (2016).

1 The total numbers for Sweden are number of workers, while the total numbers for Norway and Sweden are full-time equivalents (FTEs).

SE and the Scandinavian Welfare State

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public sector is approximately the same in all three countries, but with a larger non-profit sector in Denmark (Sivesind and Saglie 2017).

As illustrated by this short overview of the Scandinavian welfare-state reforms, the institutional context of SE development in the three countries has, since the 1980s and 1990s, been largely shaped by NPM-inspired public-sector reforms. During the last decade, especially in Denmark and Norway, public-sector reform has taken a “post-NPM” turn, entailing an increasing emphasis on co-production and co-governance and the need for a more holistic “whole-of-government” governance paradigm (Christensen and Laegreid 2007), leading to a complex sedimentation or superposition of policy schemes over time, which has contributed to shaping the opportunity structure for SE initiatives.

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