When people think of the Nordic countries—Norway, Sweden, Denmark, and Finland—they often picture high-welfare societies: free healthcare, quality education, generous parental support, and reliable pension systems. These indeed paint an enviable picture of life. But have you ever wondered how all this is made possible? How do high taxes, high wages, and corporate profitability intertwine? More importantly, what role does globalization play in all this? Today, let’s explore the story behind the Nordic welfare model—from the street cafés of Stockholm to distant cocoa plantations in Côte d'Ivoire and textile factories in Bangladesh—and see how this invisible global network connects different worlds.
High Taxes: Where Welfare Comes From
Let’s start with the “money bag” of Nordic welfare—high taxes. Public services in the Nordic countries are almost entirely funded by taxes. Sweden’s corporate tax rate is 20.6%, Denmark’s is 22%—seemingly similar to the US (21%)—but strict tax oversight and transparent compliance make tax revenues very stable. In addition to corporate income tax, companies pay social security contributions, which directly fund healthcare, pensions, and other welfare programs. For individuals, the Nordics use a progressive tax system: the higher your income, the higher your tax rate. In Sweden, the top marginal tax rate reaches 57%; in Denmark, 55.9%. For example, a Swedish monthly salary of 40,000 SEK (about $4,000) leaves only about 22,000 SEK after tax.
These taxes support massive public spending. In 2022, Sweden’s public expenditure was 49.3% of GDP, Denmark’s even higher at 52.7%, far above the OECD average of 41.4%. Where does the money go? Healthcare, education, paid parental leave, and pensions are the main areas. In Sweden, hospital stays and surgeries are basically free; in Denmark, unemployment benefits can reach up to 90% of your salary for two years. Why is tax money used so efficiently? Partly due to transparent governance, partly due to public trust—people believe their taxes truly provide security. This trust is not built overnight, but is the result of decades of social contract.
Of course, high taxes also mean a high cost of living. In Stockholm, renting a regular apartment costs about 12,000 SEK ($1,200) a month, and a cup of coffee is around 40 SEK ($4). Expenses are high, but most people accept it, knowing their money is transformed into real social security.
High Wages: Both a Burden and a Driving Force
Beyond taxes, high wages are another cornerstone of the Nordic model. Wages in the Nordics are among the highest in the world. In 2022, the average hourly wage in Sweden’s retail sector was about 160 SEK ($16), and construction workers could earn 200 SEK ($20). In Denmark, even fast-food workers earn about 25,000 DKK ($2,500) per month—more than double their US counterparts (average $1,200). These high wages are mostly achieved through union negotiations rather than government mandates. Union coverage is 68% in Sweden and 67% in Denmark—among the highest globally.
High wages not only ensure a decent standard of living but also drive domestic demand. In 2022, per capita consumption in Sweden was about €28,000, and in Denmark nearly €30,000, benefiting retail, dining, and tourism sectors. But high wages also bring considerable cost pressure. A regular burger meal in Sweden costs 150 SEK ($15), almost three times that in many Asian countries. To cope, companies must pursue greater efficiency. Nordic workers are highly educated, with university graduation rates among the top in the OECD (about 40%), and automation is widespread—think Volvo’s robotic assembly lines in Sweden or Maersk’s digital logistics in Denmark—all helping to cut costs.
But efficiency alone isn’t enough; the pressure of high wages pushes many companies to look overseas, using globalization to share costs.
High Welfare: Every Aspect of Life
When it comes to Nordic welfare, many see it as the epitome of “ideal living.” Sweden and Denmark offer new parents up to 480 days of paid parental leave, which can be flexibly split between parents. The government also provides a monthly child allowance of about 1,250 SEK ($125) per child. Education is basically free from kindergarten through university, and Danish university students even receive a monthly stipend of 6,000 DKK ($600).
Healthcare is universally covered, with costs almost entirely borne by the government. In 2022, Sweden’s per capita healthcare spending was about $5,800, Denmark’s slightly higher at $6,000. Pensions are also reassuring—Norway’s pension replacement rate (pension as a percentage of pre-retirement income) is around 60%. Where does the money come from? Mainly taxes and corporate profits. In 2022, Sweden’s tax revenue was 42.6% of GDP, Denmark’s 46.1%, with corporate taxes and social security contributions making up a large share. Norway has a special source—state-owned energy company Equinor, which earned $150 billion from oil and gas exports in 2022.
The smooth operation of the Nordic welfare system relies on transparent management. In Sweden, tax data is public—anyone can check how much tax someone pays; in Denmark, welfare application processes are streamlined and resource allocation is fast and accurate. This transparency and efficiency inspire confidence in the welfare system.
How Companies Profit: Premiums and Global Reach
How do Nordic companies make money in an environment of high taxes and high wages? There are two main strategies: product premiums and global supply chains. First, the premium. Nordic companies are adept at using branding and design to boost product value. H&M’s fast fashion, IKEA’s minimalist furniture, and LEGO’s creative toys all ride the wave of the “Nordic lifestyle.” An H&M T-shirt might cost $2 to make but sells for $20; an IKEA bookshelf costs $30 to produce but sells for $150; a box of LEGO bricks costs $10 to make but retails for $100.
These premiums are not conjured out of thin air—they rely on continuous innovation and brand building. In 2022, Sweden’s R&D spending was 3.4% of GDP, Denmark’s 3.0%, both above the OECD average of 2.7%. In 2022, H&M, IKEA, and LEGO had global revenues of about $22 billion, €44 billion, and $9 billion respectively. Part of these profits, through corporate taxes, flow back into the Nordic welfare system. Norway also has a “big treasury”—the Government Pension Fund, managing $1.4 trillion in assets, which earned $120 billion from global investments in 2022, providing stable support for welfare.
But premiums alone aren’t enough to offset high costs; Nordic companies rely even more on global supply chains, shifting production to low-cost countries. Most H&M clothing comes from Bangladesh, India, and Vietnam; in 2022, Bangladeshi suppliers made up 30% of H&M’s global supply chain, with local workers earning only $100–150 per month—far below Swedish standards. IKEA’s furniture is mostly made in China, at less than half the domestic cost. This setup saves companies a lot, helping them stay competitive and contribute more tax revenue.
Exports are another major plus. In 2022, Sweden’s exports accounted for 49% of GDP, Denmark’s 58%. High-value-added products like machinery, pharmaceuticals, and energy are sold worldwide, with emerging markets like China and India becoming key customers for H&M and IKEA.
The Other Side of Globalization: Distant Costs
Nordic high welfare and corporate profits are largely enabled by globalization. But behind this network lie some uncomfortable realities. Child labor in Côte d'Ivoire and sexual harassment in Bangladeshi textile factories are closely tied to Nordic lifestyles.
Take Côte d'Ivoire, the world’s largest cocoa producer, with 2 million tons in 2022—40% of global supply. According to the International Labour Organization (ILO), about 2 million children aged 5–17 work on cocoa plantations, harvesting pods, spraying pesticides, carrying heavy loads—often for less than $1 a day, sometimes just for food and shelter. This is driven by extreme rural poverty and persistently low cocoa prices; farmers earn only $1–2 per kilo, less than 6% of the final product’s value.
What does this have to do with the Nordics? Swedish brands like Cloetta, Finnish Fazer, and supermarkets like ICA and Coop source much of their chocolate from Côte d'Ivoire. Nordics love chocolate—in 2022, Swedes consumed 6.5 kg per person, Danes 6.2 kg—driving up imports. Some companies promise to use sustainably certified cocoa (Fazer aims for 100% by 2025), but in 2022, only 50% was certified, and the global average is just 10–15%. Certification loopholes and weak oversight make child labor hard to eradicate. Norway’s pension fund invests in food giants like Nestlé and Mars—holding 1% of Nestlé shares (worth about $1 billion) in 2022. Despite ethical investment guidelines, supply chains are too complex to fully monitor. In terms of aid, Sweden and Denmark gave Côte d'Ivoire $20 million and $15 million respectively in 2022 for education and poverty alleviation, but that’s a drop in the bucket compared to the estimated $8 billion needed annually to end child labor.
Now, Bangladesh—a global textile export powerhouse, employing 4 million workers, 80% of whom are women aged 18–35. According to a 2019 ILO report, 60% of female workers have experienced sexual harassment, and 30% have suffered physical assault. Causes include low wages ($100–150/month), weak legal protection, ineffective unions, and the fast fashion industry’s relentless pressure on deadlines and costs.
Nordic brands are deeply connected to Bangladesh. H&M has 1,000 suppliers there, with Bangladeshi products making up 30% of its supply chain in 2022. Danish Bestseller and Swedish KappAhl also source heavily from Bangladesh. To meet orders, factories often impose long hours and harsh management, and sexual harassment complaints are rarely addressed. H&M began pilot anti-harassment training in 2018, but it covers only 10% of suppliers. Nordic countries also provide aid—Sweden invested $30 million in women’s empowerment projects in 2022—but the scale of the problem dwarfs these efforts.
The Double-Edged Sword of Globalization
Nordic high taxes, high wages, and high welfare are all underpinned by corporate profits and a globalized network. Taxes come from businesses and personal incomes; high wages are sustained by unions and efficiency; welfare is funded by both taxes and corporate profits. Nordic companies like H&M and IKEA earn profits through product premiums and global supply chains despite high domestic costs. Bangladeshi textile factories, Chinese assembly lines, and Ivorian cocoa farms are all crucial links in cost control.
Globalization ties the Nordics ever closer to the Global South. In 2022, Swedish exports accounted for 49% of GDP, Denmark’s for 58%, and Norway earned $150 billion from oil and gas exports—money that ultimately becomes tax revenue supporting healthcare, education, and pensions. Nordics enjoy cheap clothes and food, pension funds reap global investment returns, and governments provide aid to developing countries. But within this network, value distribution is far from equal. Ivorian farmers receive only 6% of the cocoa value chain; Bangladeshi garment workers get just 5–10% in the apparel chain.
To some extent, the Nordic welfare model is built on the low-cost labor and resources of the Global South. Children toiling in plantations, women working in garment factories—though thousands of miles away—are indispensable parts of this network. The prosperity of Nordic societies is intertwined with the shadows cast by globalization. This supply web connects wealth and lifestyles, but also links regions through shared interests and persistent inequality.
Supplement:
Speaking of cobalt mines in the Democratic Republic of Congo and cocoa plantations in Côte d'Ivoire, I want to add a few words. The situation there can hardly be called “labor.” Labor, at the very least, implies some basic human rights protection—a minimal baseline. But here, such protection is almost nonexistent. A more accurate term might be “blood labor”—yes, labor paid for in blood, like the infamous “blood bun.” There is no concept of market capitalism, no contracts, no choice—only the struggle for survival itself. Can you expect a child who’s never even attended kindergarten to “voluntarily work”? Their plight goes far beyond the definition of labor.
By contrast, Bangladeshi textile factories, despite harsh conditions, severe exploitation, and rampant sexual abuse, at least maintain the basic organizational form of a “factory.” There is, at least nominally, an employment relationship, set working hours, wage payments, and even legal texts—though often ignored in practice. This is still within the logic of a “labor market,” albeit a highly distorted one under extreme poverty. Here, exploitation is the result of structural poverty intertwined with market-driven production.
But in Congo and Côte d'Ivoire, even this logic barely exists. This is not labor exchange, but naked survival coercion. Children don’t sign contracts or enter factories—they are thrown directly into the most primitive and brutal forms of survival work. There are no basic labor rights, no right to choose, not even a real “wage system.” Often, all they get is food scraps or just enough to stave off starvation. This is not a labor market; it is blood labor. In fact, even the term “blood labor” is a kind of civilized euphemism; reality is even more raw and brutal than language can express.
On a deeper level, when we try to describe these situations with language, we are already creating a distance. No matter how stark our words, once they become something describable and discussable, they inevitably seem cleaner and more manageable than the flesh-and-blood reality. So even when I say “blood labor,” I cannot truly capture the moment a child with broken fingers digs in a mine or plantation—the kind of existence where there isn’t even time to feel sorrow. The moment it is spoken, it is already distorted.
Ultimately, the situation in Bangladesh is a twisted labor market under extreme poverty, while in Congo and Côte d'Ivoire, it is a form of naked survival coercion, completely detached from market and contract logic. What exists in the latter is a model devoid of even the most basic human dignity—even the word “labor” is too neutral, too mild.