What are the secrets behind the prosperity of the Scandinavian nations?

Why did Scandinavian nations fare so much better than the Mediterranean European nations in the wake of the 2008 financial crisis?

• Both groups of nations are social democracies, meaning a high rate of public tax and spend. And yet the northern European nations are faring much better than Greece, Italy, etc, Why the difference?

• Answer:

  There are several reasons, from deep structural and cultural differences to sheer luck and timing. Let us start with some deep ones. The Nordic countries are small and fiercely independent. Only Finland adopted the Euro, Sweden and Denmark rejected it by referendum, and Norway rejected EU membership twice by referendum. Having a separate currency gives short term volatility but long term stability. Being member of a currency union has the opposite effect. When the troubles escalated, nations with a separate currency could devalue it, stabilizing the economy. (This is why there has been so much talk about letting Greece leave the Euro zone, although it didn't happen.) The Danish currency is actually pegged to the Euro, but this could be undone overnight if needed, as opposed to reconstructing a dead currency. While Finland is not technically part of Scandinavia, it may be interesting to see how it survived as part of the Euro zone. Finland had quite recently adopted the Euro when the economy start to act weird. It was also, like the rest of Northern Europe, a net contributor to the Union. The countries that got in trouble were all formerly poor and received substantial contributions from the Union. Arguably this was the problem, exactly: EU infrastructure investment caused a construction boom that became self-inflating through credit leverage. It was this credit which came back to haunt the poorer countries when the financial markets imploded. The perhaps poorly considered decision of governments to bail out the banks then transferred the debt crisis from the financial institutions to governments that were utterly unprepared for the challenge. Part of the reason why governments could not process this new debt was that they already had dangerously high debt built up during the boom. Instead of paying off debts, government had bought popular vote by tax breaks or subsidies and, at least in Greece, not actually collecting taxes owed. Creative bookkeeping hid this until it was too late. Why were the Nordic countries all better off at the outset? That's where we would have to go really deep. Various theories exist, from Protestant Work Ethics to lack of Feudalism history, to the small and homogeneous population. However, I consider this beyond the scope of the question. Now for good timing and pure luck. The Scandinavian countries had their own credit-fuelled construction boom in the 1980es, leading to a housing bubble and a subsequent crash that lasted into the 90es. (I was one of those who lost money when my bank shares were zeroed at the time. The state set as a condition for saving the bank that shareholders first write off their entire stock. Smart move, if you ask me, although I was less than enthusiastic at the time.) Because of the previous boom and collapse, the Scandinavian countries were not yet at the top of their next boom, and the credit crisis did not expose a great deal of poorly secured mortgage this time. We had imported some subprime debt from the USA and to a lesser extent southern Europe, but not more than we could write off once the panic ended. Another stroke of good luck was China. The new superpower was still expanding rapidly and required oil, aluminium and other raw materials. As it happens, Norway exports some of these, and this export kept booming. Swedish and Danish workers would come to Norway and work for months or even years, easing the unemployment in their own countries and keeping Norwegian economy moving. The similarities in language and culture facilitate this. Norway is currently at the top of its own housing bubble. How we handle this should give some clues as to how much of our recent success stems from wisdom and how much from dumb luck.