When I follow the political debate in North America I am often struck by how little Canadians and Americans know about Europe – and it is particularly frustrating when certain European countries are used as Socialist Bernie Sanders often has done to say that my native Denmark (and the other Scandinavian countries) are “socialist”.
In a new book published by The Fraser Institute, titled “The Free Enterprise Welfare State: A History of Denmark’s Unique Economic Model,” which I have co-authored, we endeavor to explain the unique Danish model and what has made Denmark prosperous.
Denmark: A Model for the World?
Denmark often captures the world’s attention as a model of prosperity and social well-being. Danes are known for their good health, wealth, and happiness. People from both the left and the right sides of the political spectrum frequently point to Denmark as a policy model worth emulating. However, what sets Denmark apart is its exceptional blend of free-market principles and a robust welfare state.
In our book’s introduction, we explore the Danish economic model, its origins, and the valuable lessons that can be drawn from Denmark’s remarkable experience.
The Power of Economic Freedom
For over a century and a half, the people of Denmark have enjoyed unparalleled economic freedom. They can establish and run businesses with minimal government interference. They can engage in trade domestically and internationally on their terms, without state intervention. The Danes can accumulate savings without fear of inflation eroding their hard-earned money. Property rights are protected, and contracts are enforced. This economic freedom has been a driving force behind Denmark’s high standard of living, which is a key lesson we explore in the book.
Taxes and the Welfare State
While Denmark’s economic freedom is noteworthy, it is important to recognize that the Danish welfare state is funded through some of the highest taxes in the world. The country’s two primary sources of state revenue are the value-added tax (VAT) and personal income tax, which largely burden the middle class. Danes, regardless of their income level, contribute to the VAT when they make purchases, and it stands as one of the highest rates globally. Moreover, Denmark’s top personal income tax rate is among the world’s highest and applies to a relatively low income threshold. This means that the burden of financing the welfare state is shared by all citizens.
Learning from Mistakes: The Limits of Big Government
Our book also highlights an important historical lesson. Denmark, like many other countries, faced a challenging period when it experimented with an unsustainably large government. While for most of its history, Denmark had a relatively small government, in the 1970s through the early 1990s, government spending surged, accounting for nearly 60 percent of the GDP by 1995. This expansion led to significant deficits, mounting debt, and spiraling inflation.
However, as the 1990s rolled in, Danish policymakers realized the necessity of change. They embarked on a path of reducing spending, aligning it with government revenue, and committing to sustainable budgeting practices. This shift towards a more balanced budget resulted in declining inflation and interest rates, illustrating that there are indeed limits to the size of government.
Exploring Denmark’s Economic Model
In “The Free Enterprise Welfare State: A History of Denmark’s Unique Economic Model,” my co-authors and I take you on a journey through Denmark’s economic history. We examine what has made Denmark prosper and the delicate balance between economic freedom and a comprehensive welfare state.
I invite my followers to explore the book as a free PDF download. Feel free to share this exciting release with others who share an interest in economic models, welfare states, or Denmark’s unique path to prosperity.
Read more about the book, the authors and download it here.
