Whose economy? Scotland in Northern Europe: balancing

dynamic economies with greater social equality

Whose Economy? Poverty and Inequality

Whose Economy? Oxfam/UWS seminar series

• Why persistent poverty exists alongside high economic prosperity, leading to significant inequalities in income and wealth, and in life chances and lifestyles, between individuals and communities. Why, despite decades of economic growth, regeneration and anti-poverty policies, many Scots face a life characterised by high mortality, economic inactivity, mental and physical ill-health, poor educational attainment, and increasing exclusion.

• Conclusion: Our Economy, A Whose Economy Seminar Paper, June 2011,

• Why do we have less poverty than the United States, but much more than Norway, Sweden and Denmark? The reasons lie very much more in the distribution systems of the respective countries than in the personal behaviour of people in poverty. Why some affluent Western democracies maintain substantial poverty and others are more egalitarian and accomplish low levels of poverty is mainly due to “the generosity of the welfare state”.

• Adrian Sinfield, Whose welfare state now?, in Whose Economy?, http://policy-practice.oxfam.org.uk/publications/download?Id=436761&dl=http://oxfamilibrary.openrepository.com/oxfam/bitstream/10546/188809/5/dp-whose-economy-papers-complete-series-010911-en.pdf

Recent quote

• The prime minister said: “there are countries in Europe, small countries that make it on their own, but ... we are better off, we are stronger together, we're fairer together, we're richer together”.

• So must be able to measure strength, fairness, richness and so compare. And, given what we’ve heard here already this morning, can we identify an even better way?

• Are there countries that are more resilient, robust, competitive [stronger], more equal with less poverty, greater gender equality and a progressive tax/welfare system [fairer] and more prosperous [richer]?

Richer?

International Monetary Fund (2011 estimate)

Rank Country US$1 Luxembourg 122,2723 Norway 96,5914 Switzerland 84,9837 Denmark 63,0038 Sweden 61,09813 Finland 50,09014 Ireland 48,51721 Iceland 43,22622 United Kingdom 39,604

Rank Country Intl. $

1 Qatar 102,891

4 Norway 53,37613 Sweden 40,613

15 Ireland 39,50716 Iceland 38,07919 Denmark 37,741

21 Finland 36,72322 United Kingdom 35,974

International Monetary Fund (2011 estimate)

Rank Country Intl. $

1 Luxembourg 89,769

4 Norway 56,894

10 Ireland 39,727

12 Denmark 39,558

14 Sweden 38,947

19 Finland 36,660

20 United Kingdom 35,860

21 Iceland 34,949

World Bank (2010)

CIA World Factbook (2010)Rank Country Intl. $

1 Qatar 179,000

5 Norway 54,600

17 Sweden 39,100

18 Iceland 38,300

20 Ireland 37,300

21 Denmark 36,600

26 Finland 35,400

27 United Kingdom 34,800

Thirty year annual average GDP growth rate (1977-2007), %

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0K

ore

a

Irel

and

Lu

xem

bo

urg

Tu

rkey

Icel

and

Au

stra

lia

Mex

ico

No

rway

Un

ited

Sta

tes

Can

ada

Po

rtu

gal

Sp

ain

Fin

lan

d

Jap

an

Net

her

lan

ds

Un

ited

Kin

gd

om

Gre

ece

Au

stri

a

Fra

nce

New

Zea

lan

d

Sw

eden

Den

mar

k

Bel

giu

m

Ger

man

y

Ital

y

Sco

tlan

d

Sw

itze

rlan

d

Source: OECD, ONS

Scotland's long-term GDP growth performance (1975-2005)

Source: Eurostat, OECD, Scottish Government

Indicator Scotland Denmark Finland Iceland Ireland Norway Sweden GDP growth - 30 year annual average 4 4 2 1 1 2 3

GDP per head 3 2 2 2 1 1 2

Employment rate (15-64 yr olds)2 1 2 1 3 1 1

Productivity 2 2 2 3 1 1 2

Entrepreneurial activity3 3 2 1 1 1 4

Total R&D as % GDP3 2 1 1 3 3 1

Business R&D as % total R&D4 2 1 3 2 3 1

Graduates as % of the population (aged 25-64) 2 1 3 1 2 1 2

Population growth (1999-2006)4 3 3 1 1 2 3

Net migration as a % of the population 2 4 3 1 1 2 3

Export sales growth -3 yr annual ave 4 3 3 2 3 4 2

Fairer?

Income inequality in selected OECD countries

Source: OECD (2008), Growing Unequal? Income Distribution and Poverty in OECD Countries.

Gini coefficients of income inequality in OECD countries, mid-2000s

Note: Countries are ranked, from left to right, in increasing order in the Gini coefficient. The income concept used is that of disposable household income in cash, adjusted for household size with an elasticity of 0.5.Source: OECD income distribution questionnaire.

DNKSW

ELU

XAUT

CZESVK

FINBEL

NLDCHE

NOR IS

LFRA

HUNDEU

AUS

OECD-3

0KO

RCAN

ESPJP

NG

RCIR

LNZL

GBR

ITA

POL

USAPRT

TURM

EX

0.20

0.25

0.30

0.35

0.40

0.45

0.50

% of the total population % of total population

Persons at-risk-of-poverty

after social transfers

Persons severely

materially deprived

Persons aged 0-59 living in

households with

very low work

intensity

Persons falling under at least one of the three criteria (at risk of

poverty or social exclusion)

2009 2010

EU27* 16.4 8.1 9.9 23.1 23.4 Denmark 13.3 2.7 10.3 17.6 18.3 Ireland : : : 25.7 : Finland 13.1 2.8 9.1 16.9 16.9 Sweden 12.9 1.3 5.9 15.9 15.0 United Kingdom

17.1 4.8 13.1 22.0 23.1

Iceland 9.8 1.8 5.6 11.6 14.3 Norway 11.2 2.0 7.3 15.2 14.9

At risk of poverty or social exclusion, 2010

SEASONALLY ADJUSTED UNEMPLOYMENT RATES (%) Nov 11Youth (under 25s) Males Females

EA17 21.7 10.1 10.7

EU27 22.3 9.7 10.0

Denmark 14.9 7.6 7.9

Ireland 29.3 17.3 11.4

Finland 19.6 8.2 6.7

Sweden 23.2 7.6 7.4

UK (Sept 11) 22.0 9.0 7.5

Norway 8.6 3.3 3.4

Net Replacement Rates for six family types: initial phase of unemployment

2009, different earnings levels

67% of AW 100% of AW 150% of AW

No children 2 children No children 2 children No children 2 children

Single person

married couple

Lone parent

married couple

Single perso

n

married couple

Lone parent

married couple

Single perso

n

married couple

Lone parent

married couple

One-earner

Two-earner

One-earner

Two-earner

One-earner

Two-earner

One-earner

Two-earner

One-earner

Two-earner

One-earner

Two-earner

Denmark 83 85 91 89 88 93 60 63 74 75 72 77 46 48 61 64 59 64

Finland 64 75 78 85 83 83 52 60 72 74 72 76 44 47 63 60 57 67

Iceland 77 72 89 84 77 91 77 80 86 83 83 88 56 61 71 65 67 74

Ireland 46 72 73 69 76 77 33 52 61 60 63 65 25 39 50 48 49 55

Norway 67 69 84 88 89 86 65 67 80 87 71 82 47 49 65 65 52 67

Sweden 69 69 85 83 80 86 48 48 69 65 58 71 36 36 58 51 44 60

United Kingdom

55 66 59 72 77 69 38 46 49 64 71 58 26 32 39 46 51 47

over 90% in Finland;80%–89% in Belgium and Sweden;70%–79% in Denmark and Norway;60%–69% in Italy;50%–59% in Cyprus, Luxembourg and Malta;40%–49% in Romania;30%–39% in Austria, Ireland and Slovenia;20%–29% in Bulgaria, the Czech Republic, Germany, Greece, Hungary, the Netherlands, Portugal and the UK;10%–19% in Latvia, Poland, Slovakia and Spain;below 10% in Estonia and Lithuania.

Higher among women than among men in half of the 20 countries examined – Denmark, Estonia, Finland, Hungary, Latvia, Lithuania, Norway, Poland, Slovenia and Sweden

TU Membership Density (2008)

Gender equality

• Proportion in Parliament• Proportion on Company Boards• CEOs• Childcare• Etc.

The Global Gender Gap Index 2010 rankings: Comparisons with 2009, 2008, 2007 and 2006

2010 2009 2008 2007 2006

Country rank score rank score rank score rank score rank score

Iceland 1 0.8496 1 0.8276 4 0.7999 4 0.7836 4 0.7813

Norway 2 0.8404 3 0.8227 1 0.8239 2 0.8059 2 0.7994

Finland 3 0.8260 2 0.8252 2 0.8195 3 0.8044 3 0.7958

Sweden 4 0.8024 4 0.8139 3 0.8139 1 0.8146 1 0.8133

Ireland 6 0.7773 8 0.7597 8 0.7518 9 0.7457 10 0.7335

Denmark 7 0.7719 7 0.7628 7 0.7538 8 0.7519 8 0.7462

United Kingdom

15 0.7460 15 0.7402 13 0.7366 11 0.7441 9 0.7365

Detailed rankings, 2010Overall Economic

Participationand

Opportunity

Educational Attainment

Health and Survival

Political Empowerment

Country Rank Score Rank Score Rank Score Rank Score Rank Score

Iceland 1 0.8496 18 0.7540 1 1.0000 96 0.9696 1 0.6748

Norway 2 0.8404 3 0.8306 1 1.0000 91 0.9697 3 0.5614

Finland 3 0.8260 16 0.7566 28 0.9993 1 0.9796 2 0.5686

Sweden 4 0.8024 11 0.7695 41 0.9964 80 0.9729 4 0.4706

Ireland 6 0.7773 25 0.7409 1 1.0000 89 0.9700 7 0.3985

Denmark 7 0.7719 23 0.7438 1 1.0000 68 0.9743 10 0.3695

United Kingdom

15 0.7460 34 0.7210 1 1.0000 90 0.9698 22 0.2933

Press Freedom Index 2011/2012, Reporters without Borders

Rank Country Score

1= Finland -10,00

1= Norway -10,00

6 Iceland -7,00

10= Denmark -5,67

12 Sweden -5,50

15 Ireland -4,00

28 United Kingdom 2,00

http://en.rsf.org/spip.php?page=classement&id_rubrique=1043

Stronger?

Country/Economy Rank/142 Score GCI 2011–2012 rankamong 2010 countries

GCI 2010–2011 rank

Switzerland 1 5.74 1 1Singapore 2 5.63 2 3Sweden 3 5.61 3 2Finland 4 5.47 4 7Denmark 8 5.40 8 9UnitedKingdom 10 5.39 10 12Norway 16 5.18 16 14Ireland 29 4.77 29 29Iceland 30 4.75 30 31

The Global Competitiveness Index 2011–2012 rankings and 2010–2011 comparisons

World Economic Forum (2011) The Global Competitiveness Report 2011-2012, http://www3.weforum.org/docs/WEF_GCR_Report_2011-12.pdf

Entrepreneurial activity rates -Scotland, UK, Arc of Prosperity countries, 2000 to 2007

TEA index 2007 Average annual TEA rate

Scotland as % of average TEA

rate

Scotland 4.6 4.8 United Kingdom 5.5 5.9 81%

Arc of Prosperity countries

Finland 6.9 5.7 85%Denmark 5.4 5.8 83%Norway 6.5 8.0 60%Ireland 8.2 8.8 55%Iceland 12.5 11.8 41%Sweden 4.2 4.4 110%

R&D investments by ICT Scoreboard firms per country of registered headquarters in the

EU, in millions of € (2005-2008)

ICT priority patent applications by EU Member State, 2000 and 2007

ICT patent Applications ICT Patent Applications /milllion

inhab.

ICT Patent Applications/GDP (billion

euro)

2007 2007 2007DE 7971 Finland 136 Finland 4.03FR 3030 DE 97 DE 3.28UK 1809 Sweden 62 Sweden 1.69Finland 723 AT 52 FR 1.60Sweden 571 FR 49 AT 1.58NL 497 IE 36 BG 1.35AT 430 NL 30 SI 1.06IT 350 UK 30 CZ 0.91ES 318 Denmark 29 EE 0.89

BE 236 BE 22 UK 0.88

Number of ICT and non-ICT patent applications per million inhabitants, by EU Member

State, 2007

EU Member States’ innovation performanceInnovation leaders: Denmark, Finland, Germany, Sweden all show a performance well above that of the EU27 average

Happiness and quality of life?

HappinessOnce again, Norwegians rank among the happiest people in the world, behind only their fellow Nordic neighbours in Denmark and Finland. The latest Gallup World Poll indicates that the Nordic countries, with their social welfare states and relative affluence, must be doing something right.

Only the people of Iceland were missing when four out of the five Nordic countries grabbed the top spots on the Gallup World Poll’s list. Sweden ranked just after Norway in a tie for fourth place .

Forbes Magazine, from OECD report

Place

In Norway, also considered by the United Nations to be the world’s best place to live, fully 69 percent of the population were said to be thriving while none of the respondents was “suffering.” But 31 percent were considered to be “struggling,” compared to 30 percent in Sweden, even though the economy in Sweden is considered to be weaker than Norway’s.

OECD Better Life Initiative. (2011)

‘Happiest countries in the world’ [OECD plus economic stability]

10. Austria 9. Israel 8. Finland 7. Switzerland 6. Sweden5. The Netherlands 4. Australia3. Norway 2. Canada 1. Denmark

Human Developme

nt Index (HDI)

Gross National

Income (GNI) per capita

GNI per capita rank minus HDI

rank

Nonincome

HDI

HDI rank

Value(Constant

2005 PPP$) Value 2011 2011 2011 2011

1 Norway 0.943 47,557 6 0.975

7 Ireland 0.908 29,322 19 0.959

10 Sweden 0.904 35,837 4 0.936

14 Iceland 0.898 29,354 11 0.943

16 Denmark 0.895 34,347 3 0.926

22 Finland 0.882 32,438 0 0.911

28 United Kingdom 0.863 33,296 -7 0.879

Human Development Report 2011 - Sustainability and Equity: A Better Future for All Human Development Index

Resilient and robust?

Legatum Prosperity Index (2011)

1 Norway

2 Denmark

5 Sweden

7 Finland

11 Ireland

12 Iceland

13 United Kingdom

The Road to a Better Place?

• Can we join this group – that is move into the high income, high wealth, sustainable, low inequality, high opportunity, coherent economy and society?

Traffic problems: the Road

The Arc of Prosperitybecomes

“Only prudent Norway is holding its head above water”.

• Associated Press: “Iceland teeters on the brink of bankruptcy”• International Herald Tribune: “Iceland is all but officially bankrupt”• Forbes: “Iceland teeters on bankruptcy”• New York Times: “Iceland, in financial collapse...”

• ‘the arc of insolvency’• ‘the arc of darkness’• ‘the arc of delusion’

Financial crisis

• Surely small countries cannot cope ~ Nordic model(s) ‘not sustainable’

• Better together•Protection•Support•Recovery

Public Debt (% of GDP) 2010 Country Ranks, By Rank

Rank   Country Value 

10  Iceland 100.6 

22  United Kingdom 68.5 

27  Ireland 63.7 

29  Norway 60.2 

40  World 53.6 

53  Finland 46.6 

60  Sweden 43.2 

67  Denmark 38.1 

List of countries by public debt (2011)

Public debt as %GDP

(CIA and Eurostat) (IMF)Sweden 39.7 39.70Denmark 43.7 43.65Finland 48.3 48.39Norway 48.9 55.42World 59.3 79.25United Kingdom 79.9 75.50European Union 82.3 80.00Ireland 94.9 94.92Iceland 126.1 92.37

IMF Report:During the past twenty years we have witnessed several major crises throughout the financial world. The IMF study of banking crises around the world reveals that 133 countries experienced significant banking sector problems at some stage during the years 1980-1995. The amount of public expenditure needed for resolving the crises and reviving banking sector activity has been remarkable in all countries. According to the above-mentioned IMF study, in some 25% of the crises, the costs exceeded 10% of GNP. The figures from the Nordic countries show that taxpayers' costs have ranged from 3% (Norway) to 8% (Finland) of GNP. Considering that not only the government budget but the whole economy suffers from such a crisis, it is understandable that the countries around the world, together with international organisations, have joined forces to determine the most efficient ways to avoid systemic financial crises.

Banking crises

“The arc of prosperity become the arc of insolvency”

Sweden and Norway had banking crises in the early Nineties. The Scandinavian banks collapsed after ... a credit and property bubble in the 1980s that burst just like ours. The Norwegian government moved quickly, driving down the shares of the banks to zero, nationalising many and taking an equity stake in the rest. It restructured and recapitalised the banks and then sold them off, so that the Norwegian taxpayers didn’t lose and the bankers didn’t get bailed out.

http://iainmacwhirter2.blogspot.com/2008/10/arc-of-prosperity-become-arc-of.html

Stopping a Financial Crisis, the Swedish Way A banking system in crisis after the collapse of a housing bubble. An economy hemorrhaging jobs. A market-oriented government struggling to stem the panic. . banking system was, for all practical purposes, insolvent. … [but 3 years later, Sweden back on track]

But the final cost to Sweden ended up being less than 2 percent of its G.D.P. Some officials say they believe it was closer to zero, [with more returns to come].

However, the reforms enacted during the 1990s seem to have created a model in which extensive welfare benefits can be maintained in a global economy.

NY Times

A better fiscal way?

GDP, government deficit/surplus and debt in the EU (in national currencies)

2007 2008 2009 2010

Denmark Government deficit (-) / surplus (+) (% of GDP) 4.8 3.2 -2.7 -2.6

Government expenditure (% of GDP) 50.8 51.9 58.4 58.5 Government revenue (% of GDP) 55.6 55.2 55.6 55.7

Government debt (% of GDP) 27.5 34.5 41.8 43.7Ireland

Government deficit (-) / surplus (+) (% of GDP) 0.1 -7.3 -14.2 -31.3 Government expenditure (% of GDP) 36.6 42.8 48.9 66.8 Government revenue (% of GDP) 36.7 35.5 34.7 35.5

Government debt (% of GDP) 24.9 44.3 65.2 94.9Finland

Government deficit (-) / surplus (+) (% of GDP) 5.3 4.3 -2.5 -2.5 Government expenditure (% of GDP) 47.4 49.3 55.9 55.3 Government revenue (% of GDP) 52.7 53.6 53.2 52.5

Government debt (% of GDP) 35.2 33.9 43.3 48.3Sweden

Government deficit (-) / surplus (+) (% of GDP) 3.6 2.2 -0.7 0.2 Government expenditure (% of GDP) 51.0 51.7 55.0 52.9 Government revenue (% of GDP) 54.5 53.9 54.1 52.8

Government debt (% of GDP) 40.2 38.8 42.7 39.7United Kingdom*

Government deficit (-) / surplus (+) (% of GDP) -2.7 -5.0 -11.5 -10.3 Government expenditure (% of GDP) 43.9 47.9 51.4 50.4 Government revenue (% of GDP) 41.1 42.9 40.1 40.3

Government debt (% of GDP) 44.4 54.8 69.6 79.9

Government Expenditure and Revenue as % of GDP

2007 2010

DENMARK

Government expenditure 50.8 58.5

Government revenue 55.6 55.7

IRELAND

Government expenditure 36.6 66.8

Government revenue 36.7 35.5

FINLAND

Government expenditure 47.4 55.3

Government revenue 52.7 52.5

SWEDEN

Government expenditure 51.0 52.9

Government revenue 54.5 52.8

UNITED KINGDOM

Government expenditure 43.9 50.4

Government revenue 41.1 40.3

Fiscal Stability and Responsibility

Personal taxation

Current Account Balance to GDP

General Government OverallBalance to GDP

2009 2010 2011 2012 2009 2010 2011 2012

Advanced European Economies

0.7 0.8 0.8 1.0 -6.4 -6.0 -4.3 -3.3

Euro area -0.3 -0.4 0.1 0.4 -6.3 -6.0 -4.1 -3.1

Finland 2.3 3.1 2.5 2.5 -2.8 -2.8 -1.0 0.3

Ireland -2.9 0.5 1.8 1.9 -14.2 -32.0 -10.3 -8.6

Other EU advanced economies

Denmark 3.8 5.1 6.4 6.4 -2.8 -2.9 -3.0 -3.0

Sweden 7.0 6.3 5.8 5.3 -0.9 -0.3 0.8 1.3

United Kingdom -1.7 -3.2 -2.7 -2.3 -10.3 -10.2 -8.5 -7.0

Non-EU advanced economies

Iceland -11.7 -10.2 1.9 3.2 -8.6 -5.4 -4.1 -2.3

Norway 12.9 12.4 14.0 12.8 10.6 10.9 12.0 11.2

Memorandum

European Union -0.1 -0.1 -0.2 0.0 -6.8 -6.5 -4.6 -3.6

Advanced European Countries: Main Macroeconomic Indicators, 2009–12 (Percent) IMF

Total tax revenue as percentage of GDP, 2009, ranked by tax to GDP ratios

Summary

View from Wall Street

The happiest countries seem to be places where there is a good balance of work and leisure time. Not all nations can afford to keep unemployment low through government subsidies. Not all countries can afford to provide universal medical coverage. Not all countries can afford to educate almost all of their children, which in turn supports extremely high literacy rates and builds a population of skilled workers.

24/7 Wall St

Together or not:

The prime minister said: “there are countries in Europe, small countries that make it on their own, but ... we are better off Xwe are stronger Xwe're fairer X we're richer X

Impacts of poverty

• poor in a rich country intensely stressful• made worse by stigmatisation both in the

media and as result of political rhetoric. • Pressures to consume stem from a culture

that elevates passions and image above relationships, community contribution, and care for others and the environment

• There must be a better way

Routes out of poverty• Possible to overcome poverty, 6th richest =>

adequate resources. Need allocation in more effective and sustainable way.

• Greater role for businesses: paying taxes, ↑ employment of those further from the labour market, offering decent jobs in sustainable industries.

• Higher expectation on businesses to deliver social sustainability, particularly in return for the array of state support that businesses receive.

Social protection and equality• social protection measures (education, NMW

and social safety nets) strong mechanisms to increase equality.

• they are a collective good - all depend on and all benefit, cf. financial drain.

• funded fairly by progressive taxation.• Collective ownership, management =>

genuine participation in all economic activity – sharing ownership, work, and rewards

Can we move from poverty - prosperity

• new prosperity, a shared future where we are simply better at sharing, where there are fewer extremes of money and wealth, esteem and status, power and position.

• community-led economy focused on quality and distribution of growth, where the assets of communities and the value of individuals are utilised and enhanced to promote social and environmental sustainability.

Size matters

Iceland's Finance Minister Steingrimur Sigfusson has told the BBC that his country's size has been crucial in the move towards recovery: "You are quicker turning a small boat around than a big ship."