If we believe that the small, open economies of Nordic Europe are paragons of good governance, why are they so prone to economic crisis? In Good Governance Gone Bad, Darius Ornston provides evidence that adapting flexibly to rapid, technological change and shifting patterns of economic competition may be a great virtue, but it does not prevent countries from making strikingly poor policy choices and suffering devastating results. Home to three of the "big five" financial crises in the twentieth century, Nordic Europe in the new millennium has witnessed a housing bubble in Denmark, the collapse of the Finnish ICT industry, and the Icelandic financial crisis.
Ornston argues that the reason for these two seemingly contradictory phenomena is one and the same. The dense, cohesive relationships that enable these countries to respond to crisis with radical reform render them vulnerable to policy overshooting and overinvestment. Good Governance Gone Bad tests this argument by examining the rise and decline of heavy industry in postwar Sweden, the emergence and disruption of the Finnish ICT industry, and Iceland’s impressive but short-lived reign as a financial powerhouse as well as ten similar and contrasting cases across Europe and North America. Ornston demonstrates how small and large states alike can learn from the Nordic experience, providing a valuable corrective to uncritical praise for the "Nordic model."
Introduction: The Nordic Paradox
1. Good Governance Gone Bad: Overshooting in Nordic Europe
2. Manufacturing a Crisis: Planning in Sweden
3. Connecting People: Innovation in Finland
4. From Banking on Fish to Fishy Banks: Liberalization in Iceland
5. Overshooting in Comparative Perspective: Contrasting Cases
6. Overshooting beyond Nordic Europe: Ireland and Estonia
Conclusion: Lessons for Large States
Appendix 1: Measuring Cohesive, Encompassing Networks
Appendix 2: Characterizing Economic Adjustment
"In this well-written and ambitious book, Darius Ornston situates the experience of economic governance in the Nordic countries, and argues persuasively that these small states have, on several occasions, engaged in radical restructuring of their economies. Ornston’s corrections of the conventional wisdom are important."
Jonas Pontusson, University of Geneva
"Darius Ornston breaks through the stereotypes and provides new insights into the Nordic economies, whose qualities—high levels of trust in dense socio-economic networks—deliver rapid innovation but also ‘over-shooting’ and crisis. Networked governance, often lauded in theory, can have a real-world downside, as Ornston ably demonstrates."
Martin Rhodes, University of Denver, and co-editor of The Political and Economic Dynamics of the Eurozone Crisis