Beijing Law Review, 2012, 3, 24-30 Published Online June 2012 (
Social Capital in a Nordic Context
Noralv Veggeland
Lillehammer University College, Lillehammer, Norway.
Received April 22nd, 2012; revised May 20th, 2012; accepted May 28th, 2012
Europe and the European Union are today swept by an economic and social crisis. The EU is looking for a solution to
the crisis, and intends to make worse thing better through state actions and renewed endogenous development, both in-
side countries and across national borders. Nordic countries are only slightly touched by this crisis. How do Nordic
states conduct policies of crisis prevention? How do the interventionist and expensive Nordic welfare states survive in
the global age, with demanding and ever changing claims to international competitiveness? The answers seem to be
found in their active welfare state and labor marked policy.
Keywords: Social Capital; Flexicurity; Interventionism; Partnership; Administrative Traditions
1. Introduction
This paper addresses the questions about what the Nordic
states, Norway, Sweden, Finland, Denmark and Iceland,
are doing in a time of international crisis to endure sus-
tainable economic growth, social stability and a high le-
vel of welfare state offers. Social capital and partnership
building are introduced as terms and policy concepts in
order to find answers in the framework of intended or
unintended strategic mobilizing endeavors. As a critical
approach claims a contextual conceptualization, we shall
here view different European social models and adminis-
trative traditions in relation to comparative basic co ntexts
in order to arrive at analytical answers. Leaning espe-
cially on the Anglo-Saxon model, the traditional Scandi-
navian universal welfare-state model of the post-war
Keynesian order has gradually been transformed into the
contemporary Nordic model [1]. Contextual regulatory
innovations and path-dependent processes have gener-
ated the survival of universal welfare state arrangements
and collective action but with the mixed use of market
oriented mechanisms of Anglo-Saxon origin in the public
sector. In summary, this blending of po licies has resulted
in the advantageous social capital of what is called fle-
xicurity, social security combined with a flexible partici-
patory labor market. We shall discuss both flexicurity
policy and participatory subsidiarity defined downwards
as contributions to an explanation of why the expensive
welfare states of the Nordic type have not only so far
been doing well despite the ongoing international finan-
cial crisis and the grave economic problems in the Euro
zone of the European Union (EU). Due to special reasons
the small Nordic state of Iceland1 [1] represents and ex-
ception. Sustained both democratic and social stability
characterizes the five countries.
2. Social Capital
Since 2008 there is an ongoing crisis in Europe, charac-
terized by being both a private and public credit and a
financial crisis. Counteracting measures are needed, which
have caused a European policy change. The EU has be-
come active as an interventionist state in the sense of
what John Maynard Keynes recommended [2]. However,
principally, the framework has change and is new re-
garding Keynesianism, thereof the introduction of the
concept of neo-(state)-interventionism. Interv entionism is
classical in the sense of state intervention in order to
achieve effective demand as an instrument to stabilize
the economy. In the neo-interventionism framework an
untraditional method is used to construct social and hu-
man capital through the arrangement of flexicurity. It
means to take the advantage of the welfare state ar-
rangements, i.e. social security, and labor market flexi-
bility, (flexicurity) to achiev e sustained economic growth.
Neo-interventionism characterizes the five Nordic states
[3]. In the end of this paper we will elaborate this con-
cept further.
Several EU states like Greece, Portugal, Spain, Ireland,
Italy and others are in an economic situation of recession.
In order to help those countries out of this grave situation
the EU (together with the European Central Bank (ECB)
1Iceland and Norway are not members of the EU. Sweden, Finland and
Denmark are member states.
Copyright © 2012 SciRes. BLR
Social Capital in a Nordic Context 25
and the International Monetary Fun d (IMF), impose strict
regulations claiming savings and reduction of the public
outlays. This is a background for why Europe is looking
for ideas and concepts of social capital that might con-
stitute and give the integrated global reg ion an impetus to
new growth and more sustainable economic activity,
employment, and welfare. The EU intends to achieve this
through state actions and renewed endogenous develop-
ment, both inside countries and across national borders
Partnership-building that connects private and public
actors as well as public actors to other public actors
through state arrangements has the intention of strength-
ening existing social capital and raising new social (and
human) capital as strategic concepts for promoting eco-
nomic renewal and sustainable welfare [6]. The concepts
draw upon the belief that pooling actors in micro and
macro networks (clusters according to Michael Porter [7]
and organized “institu tional thickness” [8] in the form of
collective action are basic policy strategies when the tar-
get of the polity is to achieve and increase competitive
development capacity. The strategy goes for organizing
existing or new public and private actors for collective
actions through contracts and partnership formations,
both nationally and locally, as we know recommended by
European development programs. Making the labor mar-
ket more flexible is part of the strategy. Additionally,
partnership institutions fit into the mode of arm’s-length
steering, which characterizes the regulatory state [9,10].
The beneficial o utcome is the advantages that come with
the building of extensive social capital. We may, how-
ever, view social capital as a diversified notion. Let us
closely focus the concept of social capital.
The concept of social capital came about in James C.
Coleman’s [2,112] and Robert D. Putman’s [12,13] ver-
sion in the US in the 1980s. It was part o f a major politi-
cal change that took place in those years in the An-
glo-Saxon US and the UK and had wide-ranging conse-
quences. The neo-liberal economic discourse and NPM
organizational changes entered the global scene. Social
capital became an imperative economic notion. A critical
expression became resonant: social capital, social, but
still capital [14,15]. A past president of the American
Political Science Association, Theodore Lowi, indicated
that “economic language is the dominant language in
social science discourse today… we are witnessing the
de-politicization of politics” [16]. In other words, it im-
plies that social capital building has become a narrow
concept based only on economic values. Contrary to this
reductive notion, there also exists a wider concept of
social capital that accounts for additional social and sus-
tainable ethical values. Frédéric Lordon express it this
way: “…and virtue is going to save the world… After the
financial catastrophe, the salvation comes by ethics.”
The term “social capital” reflects not only the under-
standing that government uses capital but that the labor
force needs safety and earnings in order to compete or
survive better in the competitive and microeconomic
world as well. As capital, investment in building social
capital creates, therefore, expectations first and foremost
of economic revenues derived from the social realm and
expectations about business growth; if not these do not
happen, the investment is deemed a failure.We may ex-
press this notion in the following way. Building social
capital within this framework of economics tends to be-
come an art of social and human engineering [18,19].
The target of this art is the creation of competitive macro
arrangements and joined-up initiatives. To change the
building of social capital from an art of engineering to an
art of benefiting collective action may meet resistance in
some Western countries. The Nordic state-oriented social
model and administrative tradition seems contextual ap-
3. A Comparison of Social Models
Michael Moran’s thesis [19] is that social capital in the
sense of engineered micro-partnerships and institutional
changes has been a “fiasco” with the consequence of
generating more innovation in an ever ascending, or
more accurately, descending, spiral. He argues that in the
Anglo-Saxon UK, the last 30 years have been an era of
“hyper-innovation”, displaying “the frenetic fragmented
selection of new institutio na l modes like p artn ersh ips an d
arm’s length bodies, and their equally frenetic replace-
ment by alternatives” [19]. Other scholars have sup-
ported this thesis [20-22].
The implication of Moran’s thesis is that partnership-
building of fragmented kind encourages collaborative
governance and collective action at the micro-level be-
cause of “spill-over” effects but not at the macro level. It
becomes a strategy for promoting inefficiency, and in-
creasing transactional costs. Further, its unex pected “spill-
over” effects will manifest as unpredictable actions and
sudden dilutions of partnerships, which demand replace-
ments. Individualized interest conflicts and social inequ a-
lity among the partners devastate partnerships and cause
the “frenetic replacement by alternatives”. Increasing tran-
sactional costs becomes another threat because of this
“ascending, or descending, innovation spiral”. We should,
however, understand this properly. Of course, the part-
nership concept as a mode of action and social capital of
the engineered, economically valued variety also, in gen-
eral, encourages weak governance. Theodore Lowi [16]
2See Social theory and social policy: essays in honour of James S.
Coleman/edited by Aage B. Sørensen and Seymour Spilerman. West-
ort, Connecticut; London Praege
Copyright © 2012 SciRes. BLR
Social Capital in a Nordic Context
(1992) and Vincent Navarro [15,26] have, however, iden-
tified the problem. Their view are that the narrow and
economically valued concept of social capital does not
only lead to the de-politicization of politics but will con-
textually, depending on social models, be a barrier for
building wider-valued social capital by flexicurity at the
societal macro-level. With this in mind, let us study some
lessons from Scandinavia [1].
With regard to the prospect of good governance within
the framework national macro-partnership for collective
action, for example, Simon Szreter and Michael Wool-
cock [6] have concluded that the Swedish welfare state
provides social capital of the wider-valued type to its
citizens better and more innov atively than do other social
models. How have these scholars supported such a
statement? Let us test their suggestion in a wider Nordic
Taking Szreter and Woolcock’s statement seriously,
we must say that they made such an assertion based on a
consideration of what is good or deficient social capital.
In other words, they must have drawn the conclusion on
the grounds of preferable Swedish welfare norms, social
ethics, and valued results, which the actual social model
fulfils. They conclude indirectly that social science should
be able to say whether or not social capital building has
led to “successes” along a scale of goal achievement. It
means we need criteria against which to assess and
measure success or failure. Neither Szreter and Wool-
cock nor Moran with his “fiasco” statement indicates
such criteria. Actually, reviewing the issue of “good-bad”
governance critically from a normative point of view is
all too rarely d on e [23].
What we do know though is that social models and
administrative traditions, which naturally have co me into
being in a socio-economic framework of values and ex-
periences, do influence the quality and practical outcome
of institutional change [24,25], and consequently also the
formation of partnership and the provision of social capital.
Let us review the Swedish case a little further. Szreter and
Woolcock’s observations warrant a serious consideration
of the Swedish welfare-state model as a major point of
reference in order to determine macro social capital in a
wider normative framework than the instrumental ap-
proach to the concept does.
In what follows, we shall take that approach, but we
shall view the Swedish model within the framework of
the major Scandinavian-Nordic model, in which the for-
mer model represents the core [1]. Szreter and Woolcock
refer to “other societies” in their statement but do not
point out which ones. Here we shall address this over-
sight by making a comparison of macro social capital
formation and policy belonging to the Nordic model and
its constituent countries, which are though influenced
normatively with social-capital policy from the Anglo-
Saxon model and the Continental model. Regarding the
former model, the focus will be on the social-demo-
cratic tradition responsible for the promotion of social
capital based on univ ersal welfare and social security, an
active labor-market policy, and an interventionist and
comparatively expensive state.
Contemporary focus on the building of social capital
through various partnership formations is a key part of
the debate on both “reinventing government” [26] and
“rediscovering institutions” [25]. As such, the focus re-
flects the pandemic search for ideas of institutional
change and innovation in the global age [27]. However,
the search for and the adoption of ideas do not happen
randomly but are linked to contextual “interpretation” of
values and substance [28]. Accordingly, this implies that
social models and administrative traditions affect the
interpretation of concepts of social capital connected to
flexicurity, and their attendant policy, which results in
diversified implementation [1].
In a comparative perspective, there are a number of
ways to demonstrate the position of the Nordic-model
countries. One way is to look at the size of the public
sector measured as general, total governmental outlays as
a percentage of the nominal GDP and as total taxes as a
percentage of the GDP, see Table 1. This indicates the
degree to which governments and countries’ citizens are
willing to spend money on collective rather than indi-
vidual goods in society. Welfare and social security is-
sues are part of the collective approach. The figures in
Table 1 show that this willingness in the beginning of
the 2000s is lowest in the Anglo-Saxon tradition and
highest in the Nordic tradition but with the Continental
tradition nearby. This is not so strange when we account
for the historical roots and framework of the Scandinavian
welfare-state model having its origins in th e Pr ussi an co l-
lective thinking of the late nineteenth century and the
performance of the Weberian neutral bureaucracy [29].
In 2010 the picture is something different, see Table 1.
The financial crisis has had its impact especially on the
Anglo-Saxon country of Ireland where government in-
terventions have lifted the outlay as per cent of GNP
from 45% to 53%. Taxes as per cent of GNP is quite sta-
ble, but with Norway as an exception with relatively lo w
share both in 2003 and in 2010. The reason is the domi-
nant petroleum sector which causes the low tax share of
the GNP. In the other Nordic countries the tax level is
very high especially compared with two Anglo- Saxon
Regarding unemployment, Table 1 shows that th e An-
glo-Saxon countries have been hard hit by the financial
crises; the unemployment rate has increased from 4.4% -
4.7% to 13.7% - 8.1% in 2010. In the period the unem-
ployment rate is rather stable high in the Continental
countries of France and Germany, but as low as 3.3 per
Copyright © 2012 SciRes. BLR
Social Capital in a Nordic Context
Copyright © 2012 SciRes. BLR
Table 1. The Nordic model: public outlays, taxes, and e m ployment in the context of other European social models.
Social models
Indicators Anglo-Saxon* Nordic** Continental***
Government outlays as
% of nominal GDP ( 20 04 ) 45% - 43% 58% - 48%3 [3] 54% - 47%
Taxes as % of GDP (2003) 31% - 37% 45% - 51% 42% - 46%
Unemployment rates (2004) 4.4% - 4.7% 5.4% - 8.8%4 [4] 9.5% - 9.7%
Government outlays as
% of nominal GNP ( 20 10 ) 53% - 44% 54% - 44%5 [5] 56% - 48%
Taxes as % of GNP (2010) 35% - 41% 42% - 55% 48% - 42%
Unemployment rates (2010) 13.7% - 8.1% 3.3% - 9.4%6 [6] 9.8% - 7.6%
*Represented by Ireland and UK; **The five Nordic countries ; ***Represented by France and Germany. OECD data 2005 and 2011.
percent in Norway. The unemployment rate is stable high
in the period, around 9%. The question is what legiti-
mates a high tax level among Nordic people, and what
role does social capital play regarding the state-centered
4. The Value of Collective State Action
Social constructions, like engineered partnership as so-
cial capital, are precarious, tending to erode and dissolve
over time, especially when short-term economic revenues
are expected [30]. These aspects concern the survival of
social models and administrative traditions. In contrast,
building long-term social capital presupposes basically
the existence of values found in national and local net-
works, identity, mutual consent, social equality, and
community life, besides public and private funding ac-
cess. Some social models may be good fits for these val-
ues and comparatively better than others [31,32]. Ac-
cordingly, these social models tend to benefit from ad-
ministrative traditions that contribute to social equality,
universal welfare, and social security [1], in addition to
the stable networking of local and region al communities.
Robert D. Putnam [12] has stressed the latter in his study
of the developmental success in Northern Italian com-
munities in the 1980s. Tight collective networking com-
munities provided long-term, “great” social capital. What
is missing in Italy is the building of social capital at the
national level which has made Italy very vulnerable vis-
à-vis the consequences of the international financial cri-
In our knowledge-based economy, we are constantly
looking for networking partnership and collaborative
government principles, i.e., models of collective action.
This search aims to find outstanding and innovative pol-
icy ideas that organize those socio-economic bodies that
make collaborative developments work. Network bodies
should involve the public sector and private partners in
innovative clusters across all sectors and areas of the
polity, among others Michael Porter says [7].
As such, we find public innovation measured in the
context of a geographical area (state, regions of different
scale), or a particular policy domain (welfare, labor mar-
ket, environment), or some other unit of analysis (an or-
ganization, individual), or some combination of the two
(social regulation or labor marked in Scandinavia) (see,
for example, Pedersen [24]). Actually, public innovation
is about intervention and co-ordination of joint activities
aimed at social capital through welfare arr angements and
partnership formations by territory, by function or even
by transcending national and transnational policies. Pub-
lic innovation defines in the knowledge-based society the
building and performance of new accountable and bene-
ficial collective skills and knowledge capabilities, through
social as well as human capital, and through fix ed strate-
gic processes in order to achieve and realize this capabil-
ity [33].
Accordingly, public innovation in networks and mat-
ters of strategic policy imply, on the one hand, trascend-
ing fiscal and regulatory interventions and the territorial
and functional creation of new organizations like partner-
ships as public-public partnerships. On the other hand,
such innovations also dispose change in norms, rules,
standards, and operating procedures; these changes in-
fluence the conceptualization of the reform processes.
3Finland’s 48 per cent makes an acceptance because of lasting reper-
cussions after the collapse of the Soviet Union.
4Finland 8.8 per cent, see previous footnote explanation.
544 per cent low because of the large Norwegian petroleum activities
are part of the GNP.
6Norway 3.3 per cent, Finland 9.4 per cent, the other states fall in be-
tween these figures.
Social Capital in a Nordic Context
Basically, path-dependence created by social models and
an administrative tradition that makes the changes con-
textually impacted and deep-rooted circumscribes such
interventions [1,34]. Simply put, public innovation means
the use of new solutions to address old problem, or old
solutions to address “new” problems of development. Ge-
nerally, we may see institutional innovation as the pu rsuit
of the modern, all-embracing project of change with re-
gard to rationalization, systematization, and ordering, but
this change does no t take place a p olitical an d ideological
vacuum [35].
Yet if all innovations are change, are all changes in-
novations? The latter, converse statement cannot be an
appropriate and reasonable conclusion. We should ap-
proach network innovation contextually and view it as
the application of new solutions to old problem, or new
solutions to newly “constructed” prob lems. This idea has
inspired studies that have attempted to determine the
criteria for differentiating superficial and short-term pol-
icy changes from deep-rooted and long-term innovations.
Hall’s typology of policy change is germane here [36].
He has identified three forms of changes:
The first-order change is instrumental, defining changes
to the levels and settings of basic instruments like
technology and budgetary restrains. Hall does not re-
gard instrumental changes as innovative.
The second-order changes are those that refer to modi-
fications in the use and administration of the instru-
ments in relation to current organizational processes.
But the art of engineering changes neither the overall
goals of policy, norms, and values nor the under-
standing on which the changes are based. Because
these second-based changes occur within existing so-
cial models and traditional frameworks of values and
norms without disturbing them, they may serve to re-
inforce the path-dependence of the models. Paradoxi-
cally, they may counteract reformatory change and
thereof deep-rooted and long-term innovations. The
instrumental concept of social capital represents such
a second-based change, as we shall see below.
The third-order changes are transformations of the
overall goals of the policy, changes in the cognitive
and normative framework of the networking regula-
tory regime on which it is based, accompanied by first
and second-order changes. These changes might lead
to deep-rooted and long-term public innovations, for
example, moves that remain path-dependent and also
aspire to reinvent the state and to rediscover institu-
tions in new settings but.
We shall see below that the traditional Scandinavian
model of the welfare state has undergone such a move,
and, as a result, has become known as the contemporary
Nordic model. This model has combined universal social
security and active labor-market policies innovatively,
and this combination constitutes a deep-rooted and long-
term, path-dependent social capital. This social capital
may be objectively experienced by individuals and col-
lectives and is suitable for studies that employ empirical,
statistical measurements. Third-order social capital repre-
sents substantial public innovation.
5. Social Capital of the Nordic Macro Type
In a transnational persp ective, we may view social capital
in the Nordic countries as a transformation of the tradi-
tional Scandinavian welfare-state capacity to what now is
named the contemporary social capital of the Nordic
model [1].
The aforementioned term of “Nordic flexicurity pol-
icy” represents contex tually collective action and a long-
term social capital embracing both economic and social
aspects. The driving force is a path-dependent political
will to sustain a national partnership between the regula-
tory authorities, the unions of employees and the em-
ployers, and the people. The goal is good governance in
the forms of universal social security, in stitutional stabil-
ity, and economic and competitive ad vantages. Universal
social security lays the foundation for the development of
flexible labor markets that all the partn ers benefit from in
different ways, including benefits irreducible to eco-
nomic factors.
The Nordic Active Public Labor Market Policy (ALMP)
is another expensive contribution to the social capital of
the grand partnership and the flexicurity concept. ALMP
is an important part of the state authorities’ responsibility
for planning, building, restoring, and protecting human
capital, and for making human resources the basic ele-
ment of partnerships and social-capital building. ALMPs
compel by regulatory innovations a range of public
means and measures in order to function together, and
the execution of these means and measures must take
place within the framework of the universal welfare-state
model. The mechanisms behind the Nordic flexicurity
are as follows:
Universal welfare and social security allow employ-
ees to feel free to move and change job and part-
ners—safety and equal access to welfare rule inde-
pendently of geography, position, employer, and net-
work attachment. The ongoing international financial
crisis does not change this fact.
ALMP performs collaborative governance by com-
plex partnership policies (social capital) and by edu-
cation, individual training, and life-long learning
(human capital). The performance involves not only
the public sector but also partners across all sec-
tors—from public services to private actors to NGOs.
Nordic flexicurity is a nationally implemented policy
concept but is basic for partnership-building and re-
Copyright © 2012 SciRes. BLR
Social Capital in a Nordic Context 29
gional development capacities domestically and across
borders. Flexicurity reproduces long-term welfare, an
effective labor market, high labor productivity, high
employment rate, and a high level of social and hu-
man capital.
All together, Nordic flex icurity as an important part of
the social capital concept is indeed expensive and im-
poses a high tax burden on the citizens, but even so the
policy sustains its legitimacy from its double efficiency
with regard to returning economic revenues and social
security. The Nordic countries benefit from:
Economic growth;
Labor productivity;
Active Labor Market Policy (ALMP);
Labor-market flexibility but social security, called
Regional and local development policy;
Research and development investment;
Performance in the high-tech and telecom sectors;
High rates of employment (including among women
and older workers).
In this context, so cial capital as flexicurity turns out to
be not only “capital” but also “social”. Szreter and Wool-
cock [6] were indeed right in their statement about Swe-
den; countries in the region “(provide) greater social capi-
tal to its citizens than do other countries”.
6. The Threat of Non-Maintenance
Basically, social-capital building may promote good go-
vernance and long-term positive consequences in one
polity context, but in an other contex t it may turn ou t very
differently. From the analysis of this article, we learn that
social models and administrative tradition do influence
the quality and practical outcome of partnership forma-
Professor Vicente Navarro of Johns Hopkins Univer-
sity asks [15] in a critical commentary: “Is capital the
solution or the problem”? In a response to Theodore
Lowi’s statement, his answer is that dominant neo-liberal
discourse in social science as a consequence of the 1980s,
we have seen the appearance of concepts such as social
capital and human capital. He writes:
This dominance by an economic discourse was herald
as an indicator of the supposed triumph of capitalism—
which had closed any debate about the type of society
and economic system we might want and refocused the
debate on how to manage the on ly system we have. Con-
sequently, the purpose of all social actions is reduced to
accumulation of capital so that the individual can com-
pete better. The capital might be physical, monetary,
human, or soci al , but it is capital nevertheless.”
Thus, as “social capital” has become an economic term
in the era of neo-liberalism, it seems that flexicurity will
likewise be threatened by the same shift of connotation
away from a policy for national social action. In the po-
litical debate, even in the Nordic countries, the economic
connotation is given su periority as a policy f or incr easing
European and national competitiveness and economic
growth rather than for keeping the policy as a steady path
to good welfare policy in the global age. The flexicurity
policy faces serious challenges today by the embracing
of labor immigration from Europe and other, more re-
mote regions. The international financial crisis is stress-
ing the Nordic model despite the protection of the fle-
xicurity principles. The focus tends to change from the
social connotation to the economic. The Nordic model is
in drift; the maintenance of path-dependence is threat-
ened [21,37-40].
Flexicurity policy as social-capital building should re-
main a path for collective action and for solidarity, for
reasons of democracy, social security and welfare, and
for keeping the labor market flexible. As academics, we
are not really responsible for policy performance, but we
do have another responsibility. We are responsible for
the definition of the terms and thereby the language in
use. With reference to Navarro’s statement above, there
is a need in social science today to break the trend that
supports the dominance of economic language and the
considerable reductionism and myopia this dominance
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Social Capital in a Nordic Context
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