However, small, open economies are particularly vulnerable to international economic fluctuations, as was demonstrated by the financial crisis in 2008. Iceland was hit especially hard this time around, but Finland and Sweden endured severe economic crises in the early 1990s, and Norway experienced a banking crisis around the same time. In the 1980s, Denmark suffered a serious structural crisis that led to the implementation of a comprehensive emergency programme – the so-called “potato diet”. The crises of the 1990s also led to many structural changes in the Swedish and Finnish economies, and Iceland is now undergoing its own painful process of transformation.

Similarities and differences

The Nordic countries industrialised late, but quickly. Early industrialisation was often based on the exploitation of rich natural resources. In Finland and Sweden, the forest was the primary source of opportunities for increased exports, while Sweden’s large ore deposits also contributed to its early economic growth. With roots that can be traced back to the 1200s, Sweden’s Stora Kopparberg, now part of Stora Enso, is believed to be the world’s oldest functioning company.

Norway has used its many waterfalls to generate power, and the Norwegian economy has been further strengthened by oil exploration in the North Sea. Norway and Iceland have also had an extensive fishing industry. Denmark’s economic development was based to a large extent on its fertile agricultural land, and the food industry has been key to Danish economic success.

In recent decades the Nordic countries have undergone rapid structural change, with particularly swift expansion in the service sector and in industries based on modern technology. The Nordic countries are considered to be extremely innovative. Companies such as Nokia and Ericsson are global leaders in the ICT sector.

In recent decades, foreign ownership in the Region has increased, which has in the main had a positive effect on the Nordic economies – particularly when it comes to expansion in new growth sectors. As regards the Nordic future in a globalised economy, the countries have continued to demonstrate their ability to adapt effectively to and exploit the benefits of changing circumstances.

Different relationships with the EU

The Nordic countries relate to European integration in different ways. Norway and Iceland have chosen to remain completely outside the EU, although they are members of the European Economic Area. Denmark, Finland and Sweden are all EU members, but only Finland is a member of the eurozone.

Despite their differences with regard to the integration process, the Nordic countries have become more closely linked in recent decades. The integration process and globalisation are often reflected in growing regional economic activity. Nordic business has integrated rapidly through acquisitions and mergers between big corporations in two or more countries. The best example is perhaps the Nordic banking group Nordea, but Arla, Stora Enso, Tieto, TeliaSonera and Sampo Bank (within Den Danske Bank) all arose out of Nordic alliances.

As trade between the countries has been extensive, the Nordic countries have often been perceived as an extended home market. Economic interaction between countries was also significant in the past. This was partly due to economic and structural factors, but it can also be attributed to similar institutional environments and historical, cultural and linguistic proximity.

Welfare states are good for the economy

The Nordic countries have followed relatively similar institutional development patterns. In all of the Nordic countries, the state and the public sector have played major roles to play in the economic sphere, primarily through investment in infrastructure, education and research, but also interms of social welfare. Although taxation levels have been high in all of the Nordic countries, the welfare state is considered to be a strength when it comes to economic development.

Not only does the welfare state benefit the whole population, but it also has a positive effect on the economy. The public sector and welfare services have helped the countries to develop a highly skilled workforce and a high level of employment. This, combined with a stable civil society, a strong democratic tradition and an effective regulatory framework, has led to the emergence in the Region of an extensive social capital, one of the main pillars of the Nordic economy.