Finland was able to maintain a democratic and capitalist system despite its special ties to the Soviet sphere. Finland in particular and Scandinavia in general can thus be considered anomalies in the predominantly bipolar world of the Cold War. In spite of partial submission to the logic of the Cold War, the Scandinavians never really abandoned the bridge-building approach to international relations that they had pursued in the immediate postwar years. The superpowers in their turn were willing to relax their confrontation in this region and to grant some rather extraordinary exceptions.
Scandinavian nations shared many mutual historical and cultural ties, although Finnish is not a Scandinavian language. Finland was a grand duchy under the Russian tsars during 1809–1917 but is nonetheless an integral part of the Scandinavian community. In the Scandinavian languages, and similarly in Finnish, this community is designated with the term "Norden" ("the North"), whereas the term "Scandinavia" in these languages is ambiguous and might exclude Finland, Iceland, and Denmark. Therefore, the terms "Norden" and "Nordic" are often used instead of "Scandinavia" and "Scandinavian" in the comprehensive sense described above.
Despite their attempts to establish a common policy of neutrality at the end of the 1930s, the Scandinavian countries were unable to escape the harsh realities of World War II. Finland was attacked by the Soviet Union and ended up as an ally of Nazi Germany, while Denmark and Norway were attacked and occupied by Germany. Denmark's North Atlantic territories (which at that time also included Iceland) were controlled by Great Britain and the United States during the war. Only Sweden was able to retain its neutrality. These different historical experiences were fundamental to understanding the future orientation of these countries.
In the case of Finland, which in its turn had attacked the Soviet Union and had been forced to conclude an armistice in 1944, additional compulsion came into operation. In regard to Denmark and Norway, small parts of these countries were liberated by Soviet forces in 1945, and citizens of both countries felt uneasy about their presence until they departed in 1945–1946. Norway also came under Soviet pressure to participate in a common defense of the Svalbard (Spitzbergen) Archipelago in these years.
Denmark and Norway were in a position to pursue a policy of bridge building after World War II and adhered to this policy until the spring of 1948. The election of Norwegian Foreign Minister Trygve Lie as the first secretary-general of the United Nations (UN) in early 1946 was an acknowledgment of this effort. In the meantime, Sweden actively tried to improve its strained relations with the Soviet Union while maintaining nonalignment. This effort paid dividends in April 1953 when Swedish diplomat Dag Hammarskjöld was elected as the second secretary-general of the UN. Except for Finland, Scandinavian governments decided to participate in the 1947 Marshall Plan, but they also displayed some discomfort with having to take a stand in the Cold War.
The discomfort of nonalignment, however, became ever more pressing as the Cold War deepened. In particular, the February 1948 communist coup in Czechoslovakia was viewed as a signal to seek some sort of security arrangement beyond the framework of the UN. Furthermore, the fact that Finland was forced to conclude a Treaty of Friendship, Cooperation and Mutual Assistance with the Soviet Union in April 1948 raised fears of the possible Sovietization of Scandinavia. In Norway, which shared a border with the Soviet Union, but also in Denmark, there were signs of near hysteria in the spring of 1948.
Against this background, and in order to prevent diverging security paths among the three Scandinavian core countries, Swedish Foreign Minister Östen Undén suggested an outwardly neutral defense pact to Norway and Denmark in May 1948. Such an arrangement was seriously considered in the latter part of 1948 but collapsed in January 1949 because of irreconcilable differences between Norway and Sweden. While the Swedes insisted on independence from other military alignments, the Norwegians sought security guarantees from the West. The Danish government would have joined either configuration and, with a low-profile approach to foreign policy deeply rooted in its political culture, would even have preferred a bilateral defense union with Sweden over a more comprehensive Western arrangement. For strategic reasons, however, this solution did not appeal to the Swedes.
Thus, Denmark and Norway as well as Iceland were among the founding members of NATO in April 1949, while Sweden continued its policy of armed neutrality. The Swedish stance was also meant as a deliberate disincentive aimed at the Soviets so that the latter would not toy with the status of Finland. Even in the security policy of the Scandinavian NATO members, elements of neutrality or disengagement in the superpower conflict were preserved. Iceland placed the Keflavik Military Base at the disposal of the United States but did not establish any military forces of its own. Denmark and Norway built up their own defense rather slowly, and they accepted neither nuclear weapons nor foreign bases on their territory. The only exception was Greenland, where the Thule Military Base set up during World War II remained an American asset. On the other hand, the Danish government excluded from NATO military activity the island of Bornholm, the easternmost outpost of Denmark in the Baltic Sea, except as a listening post.
During the Korean War, Sweden, Denmark, and Norway contributed a hospital ship, field hospitals, and medical personnel. Since the UN's first peacekeeping operation in Suez in November 1956, all the Scandinavian countries except Iceland have been among major contributors to UN peacekeeping missions.
In recent years, new archival evidence has made it evident that Scandinavian involvement in the Cold War was deeper than contemporary actors admitted at the time. Contrary to its declared nonnuclear policy, for example, the Danish government gave the United States free rein to deploy nuclear weapons in Greenland. Even more remarkable is that allegedly neutral Sweden throughout the Cold War maintained rather elaborate security arrangements with the Western alliance that were kept secret. It is characteristic of the peculiar position of Scandinavia that while such conduct did occur, all parties involved, including the Soviet Union, contributed to the silence. Moreover, political relations with the Western powers, especially relations between Sweden and the United States, were characterized by a certain degree of aloofness. The support of the Scandinavian states for international law and the belief in the superiority of the Scandinavian welfare state contributed to the image of Scandinavia as representing a third (and perhaps better) way to deal with the political, economic, and military exigencies of the Cold War.
Inter-Scandinavian cooperation consolidated the image of communality in the region and helped to establish a picture of unique security arrangements. In part to compensate for their different security policy orientation, the Scandinavian countries created the Nordic Council as a common parliamentary institution in 1952. They also closely cooperated in the framework of the UN, thereby frequently acting as mediators between East and West and increasingly between North and South. In 1955, the Soviet Union permitted Finland to become a member of the Nordic Council and of the UN. From then on, Scandinavian mutual cooperation helped Finland to retain a Western profile in spite of its foreign policy dependency on Moscow. The self-declared Finnish policy of neutrality was only at times acknowledged by the Soviet Union and has to be seen as a move in a game about sovereignty, not as corresponding to neutrality in the conventional sense of the word.
Tensions increased in Scandinavia in the 1970s and 1980s over external developments, one sign of which was the widely publicized incidents of Soviet submarines in Swedish waters. In this period, the considerable East-West military buildup began to threaten the status of Scandinavia as a quiet corner. There was some discussion of reviving proposals for a Nordic nuclear weapons–free zone, which had been considered in the 1960s, but nothing came of it.
Domestic developments in Scandinavia in the Cold War period were characterized by various peculiarities. Scandinavian countries were long regarded as representing a type of universal welfare state with a large public sector. They have all also been characterized as dominated by strong reformist social democratic parties as well as by a fragmented bourgeois camp and strong agrarian parties. Moreover, they have had a uniquely high degree of trade unionization, with up to 80 percent of the workforce, even white-collar workers, being organized in unions. Nonetheless, the capitalist and socialist sectors worked together with a high degree of consensus during the entire period of the Cold War.
Economically, in the Cold War the Scandinavian countries ranked among the most prosperous nations of the world, but there were characteristic time lags and substantial differences in economic structure. Sweden entered the postwar period with its industrial plan intact, with accelerated growth and an ever more pronounced tendency toward big business, unique for a country of its size. Denmark, for many years closest to Sweden among the Scandinavian states in terms of wealth, had a completely different economic structure based on agriculture and small-scale food industries. Finland was handicapped because of its lack of participation in the Marshall Plan and the reparations that it had to pay to the Soviet Union. A substantial portion of the Finnish workforce relocated to Sweden during the first decades of the Cold War. Not until the 1980s did Finland approach its Scandinavian neighbors economically or in regard to its welfare programs.
Norway has been characterized by its small industries. It owes its present status as one of the richest countries in the world per capita to the oil production in the North Sea begun in the 1970s. Finally, despite some attempts of diversification, Iceland has been largely dependent on fishery, which left that country economically vulnerable and placed it at the forefront of the fight for the extension of exclusive economic maritime zones.
Given these differences in economic structure, attempts in the 1950s and 1960s to establish closer economic collaboration and a customs union among the Scandinavian countries were doomed to failure. In part because of welfare state nationalism and in part because of nonalignment in the Cold War, the Scandinavian countries were hesitant to participate in the European Integration Movement. Only Denmark, which was heavily dependent on the export of agricultural products to the Federal Republic of Germany (FRG, West Germany) and Great Britain, became a member of the European Community following a referendum in 1972. While the Norwegian elites were also in favor of accession, 53.5 percent of the population rejected such a move in the same year. Thus, while Denmark left the European Free Trade Association (EFTA) in favor of the European Community (EC), Norway remained in the EFTA, with Sweden and Iceland among the other members. Finland was an associated member of the EFTA, but not until 1986 did the Soviet Union allow Finland to join the organization as a regular member.
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