The Nordic Paradox

This chapter introduces the “Nordic paradox,” asking why countries that are so economically successfully make such poor policy choices and suffer such devastating economic crises, including the banking crises of the early 1990s, the dot com crash, Finnish dependence on Nokia, and the recent Icelandic financial crisis. Nordic success is puzzling in its own right, as traditional theories based on state intervention, labor power resources, and employer organization cannot explain the diverse ways in which the Nordic countries have succeeded over time. Drawing on the literature on small states, the chapter hypothesizes that cohesive, encompassing networks best explain the Nordic region's capacity for radical reform and restructuring as well as its vulnerability to overshooting.