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  • Writer's pictureAmar Adiya

Should Mongolia Follow Nordic Model?

Prime Minister of Mongolia Ukhnaagiin Khurelsukh talks about Nordic Model

This week, Prime Minister Ukhnaagiin Khurelsukh made a series of televised visits across the country, ranging from Bulgan to Uvurkhangai, where he assessed the activities of various ministries and agencies.

During one of his public addresses, he asserted that the government should address failures within the 'free market' system and implement increased economic regulation. This statement stirred a public debate regarding the level of state involvement in the economy.

The opposition called out the prime minister's remarks as a death knell to the free-market economy citing the fact the country has become one of the least economically free countries in the world by the Heritage Foundation estimation.

Khurelsukh pressed on that Mongolia should follow the Nordic economic model. The state should control 'strategic' products and prices to prevent market manipulation and failures.

However, the prime minister did not address the prevalent high taxes and strong labor unions commonly found in Nordic countries.

Khurelsukh's comments came in response to rumors of an upcoming electricity price hike in October. The energy minister assured that there would be no immediate tariff increases but expressed uncertainty about covering the rising costs of power generation.

During a live television interview, the prime minister questioned local manufacturers about the continuous rise in bread prices while electricity, fuel, and flour prices remained stable. (It's worth noting that President Khaltmaagiin Battulga owns one of the largest pastry companies - Talkh Chiher).

He then called on the competition and consumer watchdog agency, now led by prime minister's protege Bat-Erdene, to investigate potential price gouging during the challenges posed by the pandemic.

Bat-Erdene has been gaining attention recently by examining Mongolian airline MIAT flight ticket prices, milk prices, and allegations of diluted gasoline being sold at gas stations.

Proponents of Khurelsukh have accused previous administrations of granting significant mineral deposits to foreign and private entities. They have pointed to Norway's success in achieving high living standards through state ownership of major businesses as a model.

It's important to note that the prime minister's anti-free market statements appear to be aimed at appealing to voters as the October local elections approach.

However, discussions about adopting a Norwegian-style resource governance model have been gaining traction recently. As lawmakers consider revisions to the mineral law, the Nordic model of state ownership may become a prominent feature in the mining sector.

What countries use the Nordic model and should Mongolia follow?

The Nordic model, also known as the Scandinavian model, is most commonly associated with the countries of Scandinavia: Sweden, Norway, Finland, Denmark, and Iceland. Whether Mongolia should follow the Nordic model or not, ultimately depends on the specific goals and values.

The Nordic model has been successful in the Nordic countries, but it may not be the best fit for other countries with different cultural, economic and political contexts. Additionally, the Nordic model is not a one-size-fits-all solution and may require significant adjustments to be adapted to other countries. It is important to consider the unique circumstances of each country before making a decision on whether to adopt a specific policy.

Why is the Nordic model successful?

The Nordic nations possess notable advantages. They have effectively merged a vibrant market economy with an expansive welfare system, known as the "Nordic model." This model has frequently bolstered economic growth by fostering a well-educated workforce and encouraging substantial labor participation.

What are the top criticisms of the Nordic model?

Some view the winner-take-all approach of capitalism, characterized by significant inequality, as more favorable than the Nordic model. Critics often raise concerns about the Nordic model's high taxation, extensive government intervention, and its comparatively lower GDP and productivity levels.

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