BRUSSELS, May 17 (UPI) -- Most European and U.S. policy makers agree the key to social progress is economic growth and the way to boost competitiveness is to cut taxes, trim welfare spending and slash red tape. So how do the five Nordic countries manage to top almost every global league table -- whether on competitiveness, gender equality or high-speed internet access -- while having the highest taxes, most generous welfare systems and most stringent labor and environmental laws in the world?
"The Nordic countries have the best of both worlds," says Augusto Lopez-Claros, chief economist at the World Economic Forum in Geneva. "If they can afford social safety nets while maintaining fiscal probity and holding back inflation, they must be doing something right."
They certainly are. A WEF study measuring gender inequality in 58 industrialized countries ranked the five Nordic states -- Sweden, Denmark, Finland, Norway and Iceland -- top of the list.
"While no country has yet managed to eliminate the gender gap, the Nordic nations have succeeded best in narrowing it and, in a very clear sense, provide a workable model for the rest of the world," said the first ever "Gender Gap Index," which was published Monday.
The latest U.N. Human Development Report, which mixes quality of life with standard of living indicators, puts Norway top of its index of 177 countries, with Sweden second and Iceland, Finland and Denmark among the top 20.
And when it comes to media freedom, Denmark, Iceland and Sweden occupy joint first place in Freedom House's annual survey of media independence, with Finland and Norway sharing fourth place.
Ever since the 1960s, when countries like Sweden became world leaders in environmental protection, welfare provision and equality between the sexes, conservatives on both sides of the Atlantic have mocked the Nordic states' "touchy-feely" social policies and pilloried their onerous social, labor and environmental laws.
Critics of the Scandinavian model appeared to have a point in the late 1980s and early 1990s, when most Nordic states experienced sluggish economic growth, unemployment rose to 20 percent in Finland and the Swedish welfare state became so bloated it almost burst.
But a series of painful reforms pushed through in the 1990s, such as shaving corporate taxes, investing heavily in education, research and development and telecommunications and reducing welfare dependency, appear to have paid high dividends.
"Whereas some countries have traded down to keep competitive, the Nordics have traded up," says John Palmer, political director of the European Policy Center think tank in Brussels.
Nordic countries occupy five of the top 10 places in the WEF's latest annual competitiveness report, with Finland in pole position for the third time in four years.
The 2005 Index of Economic Freedom, published by the Heritage Foundation and the Wall Street Journal, ranks Denmark and Iceland ahead of the United States in terms of economic freedom, with Sweden and Finland hot on its heels.
A European Commission study on internet usage last week placed Sweden, Denmark and Finland at the top of the European league table.
And in its annual scorecard on progress toward meeting the ambitious economic reform goals set by EU leaders five years ago -- the London-based Center for European Reform ranks Sweden and Denmark first and second with Finland in fifth place.
Lopez-Claros says a belief in open government and an almost total lack of corruption are keys to the Nordic countries' economic success.
"When you have governments that are transparent and open and are perceived to be clean and dedicated to the public good, people are willing to pay higher taxes," he said. "They know their money is not going to be stolen, but channeled back into the economy and public services."
Some commentators have argued the Nordic model of cradle-to-grave welfare funded by high income taxes cannot be exported to poorer countries with larger populations and more diverse ethnic mixes. But Mark Leonard, foreign policy director at the Center for European Reform, believes the "Stockholm Consensus" -- in which a strong state underpins an open market economy -- offers a model to the rest of the world.
"The 'Stockholm Consensus' stands in opposition to much of the waste of the 'Washington Consensus,'" writes the author of "Why Europe will run the 21st Century." "Low levels of inequality allow Europeans to save on crime and prison, energy-efficient economies protect them from hikes in oil prices (and) the social contract gives people leisure and a helping back into work if they lose their jobs..."
The only problem with this thesis is that Europe itself has yet to adopt the "Stockholm Consensus." The British, Irish and central Europeans like the part about competitive, knowledge-based economies with pro-business policies, but dislike the idea of paying higher taxes for better public services. The French, Germans and Belgians, on the other hand, like the generous welfare system offered by the Nordic states but are less enthusiastic about making the economic reforms needed to pay for such a system. The Nordic countries, only one of which is inside the euro-zone area and two of which remain outside the EU, look like remaining the exception rather than the rule for a long time yet.
