No doubt surprising many of the people watching the US Democratic presidential debate, Democratic presidential hopeful Bernie Sanders cited Denmark as a role model for how to help working people.
Democratic presidential hopeful Hillary Rodham Clinton demurred slightly, saying “we are not Denmark,” but agreed that Denmark is an inspiring example.
Such an exchange would have been inconceivable among Republicans, who do not seem able to talk about European welfare states without adding the word “collapsing.”
Basically, on Planet Republican, all of Europe is just a bigger version of Greece, but how great is Denmark, really?
The answer is that Denmark gets a lot of things right, and, in so doing, refutes just about everything US conservatives say about economics. It is also possible to learn a lot from the things Denmark has gotten wrong.
Denmark maintains a welfare state — a set of government programs designed to provide economic security — that is beyond the wildest dreams of US liberals.
Denmark provides universal healthcare; college education is free and students receive a stipend; daycare is heavily subsidized. Overall, working-age families receive more than three times as much aid, as a share of GDP, as their US counterparts.
To pay for these programs, Denmark collects a lot of taxes. The top income tax rate is 60.3 percent; there is also a 25 percent national sales tax. Overall, Denmark’s tax take is almost half of national income, compared with 25 percent in the US.
Describe these policies to any US conservative, and they would likely predict ruin. Surely those generous benefits must destroy the incentive to work, while those high taxes drive job creators into hiding or exile.
However, strange to say, Denmark does not look like a set from Mad Max. On the contrary, it is a prosperous nation that does quite well on job creation.
In fact, adults in their prime working years are substantially more likely to be employed in Denmark than they are in the US.
Labor productivity in Denmark is roughly the same as in the US, although GDP per capita is lower, mainly because Danish take a lot more vacations.
Nor are people in Denmark melancholy: Denmark ranks at or near the top on international comparisons of “life satisfaction.”
It is hard to imagine a better refutation of anti-tax, anti-government economic doctrine, which insists that a system like Denmark’s would be completely unworkable.
However, would Denmark’s model be impossible to reproduce in other nations? Consider France, another country that is much bigger and more diverse than Denmark, but also maintains a highly generous welfare state paid for with high taxes.
You might not know this from the extremely bad press France gets, but France, too, roughly matches US productivity, and French are more likely than those in the US to be employed during their prime working years.
Taxes and benefits just are not the job killers right-wing legend asserts.
Going back to Denmark, is everything copacetic in Copenhagen? Actually, no. Denmark is very rich, but its economy has taken a hit in recent years, because its recovery from the global financial crisis has been slow and incomplete.
In fact, Denmark’s 5.5 percent decline in real GDP per capita since 2007 is comparable with the declines in debt-crisis nations like Portugal or Spain, even though Denmark has never lost the confidence of investors.
What explains this poor recent performance? The answer, mainly, is bad monetary and fiscal policy. Denmark has not adopted the euro, but it manages its currency as if it had, which means that it has shared the consequences of monetary mistakes like the European Central Bank’s 2011 interest rate hike.
While the nation has faced no market pressure to slash spending — Denmark can borrow long-term at an interest rate of only 0.84 percent — it has adopted fiscal austerity anyway.
The result is a sharp contrast with Sweden, which does not shadow the euro — although it has made some mistakes on its own — has not done much austerity and has seen real GDP per capita rise while Denmark’s falls.
However, Denmark’s monetary and fiscal errors do not say anything about the sustainability of a strong welfare state.
In fact, people who denounce things like universal health coverage and subsidized childcare tend also to be people who demand higher interest rates and spending cuts in a depressed economy.
Remember all the talk about “debasing” the US dollar?
That is, US conservatives actually approve of some of Denmark’s policies — but only the ones that have proved to be badly misguided.
So, yes, nation’s can learn a lot from Denmark, both its successes and its failures.
Let me say that it was both a pleasure and a relief to hear people who might become president talk seriously about how it is possible to learn from the experience of other nations, as opposed to just chanting: “USA, USA, USA.”
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