An Uneasy Alliance

The Danes are all the rage. For more than a decade, Denmark and its fellow Northern European countries have been upheld as the standard bearers of democracy, countries that consistently place among the world’s leaders in education, employment and citizen happiness. During this election’s debate cycle, Vermont Senator Bernie Sanders has repeatedly cited Denmark as a template for the model of democratic socialism that he plans to bring to the United States, if elected. Sanders is not the first liberal to look to the Nordic countries for policy recommendations. In his 2007 piece on the Danish economic system, New York magazine writer Jonathan Chait wrote in The New Republic that “a growing number of American economists have begun looking across the pond for inspiration...especially, to Denmark." Thanks to political scientist and economist Francis Fukuyama, the phrase "getting to Denmark" has become shorthand for achieving a utopian vision of economic, social and political stability.Even Sanders’ opponent, former Secretary of State Hillary Clinton agreed, "I love Denmark."

And what’s not to love? As with the New Deal, Denmark’s welfare state emerged from the Great Depression. Today, Denmark boasts a nationalized health care program, heavily subsidized child care, one of the world’s lowest child poverty rates and a guaranteed maternity leave that covers mother for 18 weeks at 100 percent of its ordinary pay. No Dane leaves college with debt, and Danish students consistently place among the highest in the world in standardized tests. According to the National Center on Education and the Economy, “education seems almost to have attained the status of a national religion in this country.” Thanks to the pioneering reforms of Prime Minister Poul Nyrup Rasmussen, unemployment levels fell below the United States rate in 2002 and have remained lower ever since. Environmentally, the Danish lead the way once again, with a quarter of the country’s electricity from wind power and bicycle travel accounting for 40 percent of daily transportation in the country’s largest city, Copenhagen.

Of course, if you’re an economic conservative, there’s a lot not to love. Such a large welfare state comes with a hefty price tag, one that is passed on to the consumers in a number of taxes. Danish citizens in the top income bracket can be taxed as high as 57 percent. However, the upper class does not foot the majority of the bill. Middle class rates range between 35 and 48 percent, well above the rates in the U.S. And all goods and services come with a 25 percent sales tax, a flat charge that does not discriminate by income. With high taxes come high costs, and the Danish economy has centered around services and social welfare rather than consumerism. As a country, Denmark consumes similar levels of services as the United States.

Denmark’s success goes against fundamental beliefs of conservative economics. No country with such high taxes and an omnipresent welfare state should be able to demonstrate economic growth, much less lead the world. And yet, Denmark has defied these conventions, leading to praise from Sanders and his fellow democratic socialists.

But what does it really mean to “get to Denmark?” After all, Denmark is a country of just 5.6 million and is incredibly ethnically homogenous. How applicable can the lessons of the Danish economy be to the United States? According to Chait, what American politicians and economists should attempt to recreate is the Danish system of “flexicurity,” an economic model that combines a relatively free market with high levels of redistribution.  

Surprisingly, the conservative thinktank Heritage Foundation rates Denmark above the United States in its annual Index of Economic Freedom. “For those of you who are keeping score, the Heritage Foundation, which literally keeps score, rates Denmark’s economy as slightly more free—slightly more capitalistic—than that of the United States,” writes the National Review’s Kevin Williamson.Despite an overall tax burden that equates to 48 percent of GDP, Denmark maintains market freedom by making it easy for workers to switch careers and for citizens to start a business.  

The implications here are vast for both sides of the political aisle. Senator Sanders is calling for the implementation of Danish-style welfare state, but is not willing to implement the middle class taxes necessary to finance such an expense. For the right, Denmark serves as a signal that capitalism and a strong safety net are complimentary. Denmark managed to create an economy that exceeds America in terms of economic freedom, but only after the government established a strong welfare apparatus. After all, in order for people to support the levels of risk associated with a free market, they need to know that they are protected against a personal, fiscal collapse.

Denmark is not perfect. For instance, because of the government’s hefty long-term unemployment benefits and excellent job-training program, many citizens forego employment in the service sector. However, Senator Sanders is on to something in his fascination with Denmark’s success. But the core of Denmark’s success does not lie in a robust welfare state, as liberals like Sanders would have you believe. Nor does it stem from the country’s high levels of economic freedom, as Heritage suggests. Rather, Denmark’s success hinges on an unlikely balance between capitalism and socialism, between competition and security.