Ground Floor: I guess it's good news that Ireland has moved from 30th to 26th in the world ranking of competitive economies released by the World Economic Forum last week, writes Sheila O'Flanagan

We're so used to being told that we live in a high-cost country it's a bit of a shock to realise that we seem to be more competitive for business than many of our European neighbours. Italy is placed at 47, France at 30 and Spain at 29. Ahead of us, Germany is placed at 15 (though it has slipped from 13th position last year, the UK is currently 13th), Netherlands 11th and Switzerland 8th.

But the main news story that came out of the competitiveness survey was that the Nordic countries practically own the Top 10. For the third year in a row, Finland is the number one country, followed by Sweden (3rd), Denmark (4th) and Norway (9th). Not only that, but the latest European Social Survey shows that the Finns are only beaten by the Danes in happiness rankings, followed by the Swiss, the Norwegians and the Swedes.

You don't really think of the Nordic races as being the happiest Europeans or indeed the most competitive. In fact, many people would think that the cost of living in all these countries (and Switzerland) is high, relative to the rest of us. (Prices in Finland are around 23 per cent higher than the European average.)

The Nordic social model is very different to that of the US (which came second in the competitiveness survey; the happiness survey was restricted to 20 European nations). According to Markku Ojanen, head of the psychology department at the University of Tampere in Finland, "equality and the sense of security reflect positively in the research findings".

Although the Finns know that their country can be expensive, they also know that they can afford to live there because of their social structure.

It's still difficult to think of Finland as competitive. Whenever we discuss the competitive nature of our own economy we generally refer to the US and the UK and, to a lesser extent, to central and southern Europe. We like to think that we are continuing to improve against them. Yet we have a long way to go to match the Nordic countries.

The report cites the excellent state of the Finnish national economy as well as company innovation and low levels of corruption as being positives. On the downside, as far as the report goes, are high taxation and strict regulation of the labour market. And there's the thing. The Finns are operating an economic model that seems to be the polar opposite of the US and yet it has beaten the Americans into second place.

For the past 10 years the accepted wisdom has been to keep costs, particularly labour costs, as low as possible to gain competitive advantage. But do poorly paid employees really add to productivity?

That's one of the issues raised by the Irish Ferries saga. Competing companies were able to undercut Irish Ferries by employing people at significantly lower rates of pay. Irish Ferries responded with its now-infamous redundancy packages to staff and its desire to hire low-paid workers in order, they said, to stay in the game.

And yet Finland, with its different approach to labour, is more competitive than us. The Finns didn't join the EU until 1995 and acknowledge that when they applied for membership in 1992 the country was in the middle of a recession. Like Ireland, membership has been good for the Finns as they increased trade with both EU and non-EU partners. Their industry has shifted from agricultural and forestry to electronics and bioscience.

The Finns have a centralised incomes policy and, prior to membership, price increases were offset by currency adjustments. Since the introduction of the euro that option is no longer available, but according to the government the labour market "understands" the requirements of membership in monetary union. Although they are critical of the EU they support deeper integration and stronger institutions.

Another element (on the opposite side of the Finnish equation) is the low level of corruption in the country. We are, of course, going through a seemingly endless corruption catharsis. But there is no doubt that shady deals in the past enriched few at the expense of many. The concept is less prevalent in Finland apparently. Maybe it's to do with their more encompassing social structure.

But it's not only corruption. It's use of resources. The private sector is generally more efficient at this than government but the costs of production also include generous compensation to directors.

The US model seems to positively require huge payments to directors! In the US, company directors now earn more than 300 times the average salary of a blue collar worker. Last year salaries increased by around 12 per cent for executives compared with 3.5 per cent for workers. Although some of the excesses of the late 1990s (where the ratio was 419 times) have been cut back, the thorny question of stock options and other additional benefits is still around.

Is there any justification for a director being paid 300 times more than an employee? Has capitalism become the notion of enriching yourself at the expense of others? Is our immediate solution to every problem of competitiveness for management to cut labour costs, though not necessarily their own salaries?

What will we need to catch up with the Finns? A satisfactory conclusion to tribunals? To understand the concept that low pay doesn't equal high productivity? A reassessment of our value system?

But maybe the grass is greener on the other side of the fence. Ojanen pointed out that Finns suffer from depression, exhaustion and alcohol-related problems.

And when he looks at that side of their culture he thinks it's a miracle that, despite the competitiveness, they're happy at all!