Scandinavia has often been viewed by some as a model for economic success. With its high quality and low cost healthcare, high gender equality, and lower income inequality there is certainly a lot to admire.

However, there is an underlying problem beneath this economic facade of success. This problem is the large amount of consumer debt (such as payday loans) that households in Scandinavia hold, and this debt is progressively growing larger.

So, why is consumer debt increasing in Scandinavia? Here are 3 reasons why

Lax Monetary Policies

The main contributing factor for high consumer debt in Scandinavia is lax monetary policies. After 2009, the European sovereign debt crisis caused an influx of money into Scandinavia, as investors saw this region as a safe option because of its high credit rating.

This large surplus of money in Scandinavian banks, unfortunately led to lenders writing large quantities of loans in order to increase sales. These loans were often given out in a reckless manner, with disregard to proper lending practices.

This large surplus of money also led to a boom in more unscrupulous loans, such as payday loans. In fact, in the period from 2006 to 2011, the number of payday loan providers in Sweden went from only 95 to a whopping 277 lenders according to this source.

Moreover, Finland has also seen a very large increasingly amount of loan companies. This has resulted in lower interest fees on the payday loans, as you can see here, where lenders offer loans from 0% interest.

Credit Cards Only - No Cash Accepted

An interesting feature of the monetary system in Scandinavia, is that they are moving towards a cashless society.

  • In Sweden, 4 out 5 purchases are made electronically and banks have been removing cash machines at a rapid pace. One of the last few places to obtain cash in Sweden are only in supermarkets.
  • In Denmark, their Chamber of Commerce has set a deadline of 2030 to eliminate the use of cash completely.
  • As of November 2015, one of the largest banks in Norway (Nordea) has stopped accepting cash, leaving only one branch in Oslo central station to deal with cash transactions.

While this advancement in technology has its benefits, such as convenience, it is a double-edged sword. The convenience of a credit/debit card has made it easy to simply select “credit” on the checkout, whereas previously your spending might have been constrained by the amount of physical cash in your wallet. Consequently, consumer debt levels have deteriorated to dangerous levels.

Reduced Productivity

Whether you agree with the social welfare system used in Scandinavian countries, the fact is that productivity of workers is considerably lower in this region.

According to OECD Labour Productivity Level statistics, the average hours worked per person in Scandinavian countries are considerably lower when compared with other countries in the OECD.

The lowest is Denmark with 1430 total hours worked in a year. For comparison, countries with the highest total hours worked in a year include Mexico at 2,226 hours, followed by South Korea at 2,163 hours.

So how are Scandinavians able to rate highly on “happiness” surveys and afford to live comfortably on a lower amount of worked hours? It seems consumer debt is the answer.

Denmark households currently hold debt that is 320% of their household income, according to 2013 OECD statistics. As a comparison, United States households have debt levels which are 111% of household income.

The progression of payday loans and consumer debt is rapidly increasing in Scandinavia. This has been due to a number of factors, including lax monetary policies, changing monetary attitudes and lower worker productivity.


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