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Title : The Truth Close Denmark Together With Socialism: What Bernie Sanders Doesn't Empathise Close The Country
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The Truth Close Denmark Together With Socialism: What Bernie Sanders Doesn't Empathise Close The Country

By Otto Brøns-Petersen

Increasingly, both inward Kingdom of Denmark together with abroad, I listen the claim that Kingdom of Denmark is somehow proof that a gentler socialism is preferable to free-market capitalism, promising to a greater extent than happiness, greater wealth, or both. Recently, Democratic presidential candidates Bernie Sanders together with Hillary Clinton declared their admiration for Denmark. I came across the ascent attraction of the so-called Danish model before this twelvemonth at conferences inward Athens, Greece, together with Sofia, Bulgaria. My advice at those events was together with continues to be, “Don’t attempt this at habitation — at to the lowest degree until yous sympathize what the Danish Model is about.”

The get thing to recognize is that Denmark, similar the other Nordic countries, has quite a free-market economy, apart from its welfare province transfers together with high regime consumption. The Nordic countries tend to acquire rather high rankings on global measures of economical freedom. Kingdom of Denmark is so number 22 on the Fraser Institute’s Economic Freedom of the World (EFW) index together with number xi on the index published past times the Heritage Foundation.1 Denmark ranks at number 3 on the World Bank’s Doing Business report, which assesses the ease of doing concern around the world.2

Table 1. Economic Freedom inward Denmark, Ratings together with Rankings (maximum rating 10.0)

Source: James Gwartney, Robert Lawson together with Joshua Hall, Economic Freedom of the World: 2015 Annual Report (Vancouver: Fraser Institute, 2015)

Table 1 shows the Danish scores on the 5 sub-indices of the EFW index. High taxation revenues, marginal taxation rates, together with regime spending related to the welfare province earn Kingdom of Denmark a really depression rank on those “size-of-government” measures. On the other indicators, however, Kingdom of Denmark scores quite high, inward some cases inward the exceed ten. Its ratings on the protection of holding rights together with the integrity of the legal organisation are really high past times international standards, equally is the soundness of its monetary organisation (with the Krone having been pegged to the Euro or the Deutsch Mark for to a greater extent than than thirty years). Being a modest province really subject on the international partitioning of task together with comparative advantage, Kingdom of Denmark has a long tradition of costless merchandise with the exterior basis (nowadays the merchandise regime is to a high grade determined past times the European Union). With honour to regulation, Kingdom of Denmark scores quite well. Credit markets are with the less regulated internationally. During the recent financial crisis, taxation payers did non conduct keep to subsidize banks, together with some banks were allowed to fail. The Danish task marketplace is really flexible: in that location is no legislated minimum wage, together with in that location are few restrictions on hiring together with firing. The overall task marketplace score on the EFW is, however, dragged downwardly past times the existence of conscription. Finally, Kingdom of Denmark is the to the lowest degree corrupt province inward the basis according to Transparency International.3

Second, Kingdom of Denmark did non acquire a rich province recently. As Figure 1 shows, Danish per capita gross domestic product relative to other countries reached a maximum xl to threescore years agone (ignoring the “noise” from the Great Depression together with World War II). Kingdom of Denmark caught upwards to together with overtook “old Europe” inward the fifties, spell it narrowed the gap with the US together with other Western offshoots until the early on 1970s, when the procedure of catching upwards came to a halt. Danes are silent non equally rich equally Americans.

Figure 1. Danish Per Capita gross domestic product Relative to Other Countries

Source: Angus Maddison, Historical Statistics of the World Economy: 1-2008 AD, 2008, available at: http://www.ggdc.net/MADDISON/oriindex.htm.

At the fourth dimension Kingdom of Denmark became rich relative to the residual of the world, it was non a welfare state. In fact, Kingdom of Denmark has historically been a depression taxation province past times international standards (see Figure 2). Until the 1960s the ratio of Danish taxation revenue to gross domestic product was the same equally inward the US together with lower than inward Great Britain. The sudden departure inward the Danish taxation flat actually occurred inward the instant one-half of the 1960s, when get a left-wing coalition regime together with and so a right-wing 1 increased the tax-to-GDP ratio past times some 10 per centum points. Interestingly, regime spending was to a large extent driven past times increases inward taxation revenue stemming from the introduction of a value-added taxation together with withholding taxes on wage income.

Figure 2. Historical Tax Burden

Note: The Danish serial has information intermission inward 1947 together with 1965, the American inward 1948 together with 1965.

Source: OECD Tax Databse, “Fiora consolidated govt revenue,” Whitehouse.gov, taxfoundation.org, “Økonomisk vækst i Danmark” - Svend Aage Hansen, “Beskatning i Danmark” - DST 1987, together with ain calculations.

The 1970s saw a rigid taxation revolt, equally Mogens Glistrup’s newly formed Progress Party became the instant largest inward the 1973 “landslide” election. Nevertheless, spending kept growing equally the welfare province attracted novel clients together with novel programs were added, the economical crisis atomic number 82 to increasing unemployment, together with attempts were made to fighting the crisis past times increasing financial expenditures. By the early on 1980s the economic scheme was inward really bad shape, with high unemployment, a huge together with widening regime deficit, together with serious concerns over the large external deficit. All governments since the right-wing government, which came to ability inward 1982, conduct keep implemented structural reforms of the welfare province together with taxation system, reducing welfare province “generosity” together with cutting marginal taxation rates, equally good equally consolidating populace finances.

So, Kingdom of Denmark get became rich, together with and so introduced the regime programs that brand upwards the welfare state. The huge increment inward regime spending has been accompanied past times deep structural problems, which has made it necessary to reform the Danish economic scheme together with welfare state. It tin hardly live claimed that introducing the welfare province made Kingdom of Denmark rich; rather it was the other means around. Kingdom of Denmark get became rich, together with and so the authorities began to redistribute some of the wealth.

But what virtually Denmark’s apparent happiness? Maybe cloth wealth doesn’t affair that much if yous are satisfied with your life. In fact, life satisfaction together with income are highly correlated both across province averages together with across individuals inside a country, equally pointed out inward a comprehensive study of the literature past times Betsey Stevenson together with Justin Wolfers.4(The 2015 Nobel laureate inward economics, Angus Deaton, has made the same point.)5 They pass upwards the so-called Easterlin Paradox, which posits that inward the long run increased income doesn’t correlate with increased happiness (and that saw solely a between- together with non a within-country correlation), together with so could live interpreted equally a illustration for redistribution. If redistributing from the rich to the wretched didn’t brand the rich less happy, redistribution could increment “gross national happiness.” And inward that case, welfare province redistribution could live the argue for the Danish basis tape inward self-reported happiness.

Alas, Kingdom of Denmark is no longer the happiest province inward the world, having been overtaken past times the low-taxed Swiss inward the latest survey.6 More important, equally already mentioned, the Easterlin Paradox is non supported past times the literature. The Danes’ high happiness flat is likely due to their high income level. Furthermore, equally pointed out by Christian Bjørnskov, a high flat of trust also seems to increment life satisfaction, and, equally Danes are quite trustful, that mightiness play a utilisation hither too.7 Again, the high flat of trust preceded the welfare province inward Kingdom of Denmark rather than existence caused past times it.

In many respects, Kingdom of Denmark could serve equally a model for the world. But if yous neglect to acquire the correct lessons, it could live unsafe to attempt to copy our model, specially the thought that yous tin acquire rich past times redistributing wealth or that in that location is a gentler, to a greater extent than successful means to socialism than the 1 experienced past times typical socialist countries.

And it would for sure live ironic if the Danish illustration were to acquire an excuse for politicians inward the United States, Greece, or other countries to avoid financial consolidation together with economical reform, since nosotros Danes conduct keep been reforming together with consolidating for decades to bargain with the problems created past times the introduction of our welfare state.

Notes

1. James Gwartney, Robert Lawson together with Joshua Hall, Economic Freedom of the World: 2015 Annual Report (Vancouver: Fraser Institute, 2015), co-published inward the US past times the Cato Institute.

2. World Bank, Doing Business 2015: Going Beyond Efficiency (Washington: World Bank, 2014).

3. Transparency International, 2014 Corruption Perception Index (Berlin: Transparency International, 2014).

4. Betsey Stevenson together with Justin Wolfers, “Subjective Well – Being together with Income: Is There Any Evidence of Satiation? American Economic Review: Papers & Proceedings 2013, vol. 103, no. 3, pp. 598-604.

5. Angus Deaton, The Great Escape: Health, Wealth, together with the Origins of Inequality (Princeton University Press, 2013), pp. 18, 21.

6. John F. Helliwell, Richard Layard, together with Jeffrey Sachs, eds, World Happiness Report 2015(New York: Sustainable Development Solutions Network, 2015).

7. Andreas Bergh together with Christian Bjørnskov, “Historical Trust Levels Predict the Current Size of the Welfare State,” Kyklos International Review for Social Sciences, vol. 64, number 1 (February 2011): 1-19.

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Otto Brøns-Petersen is the manager for analysis at the Center for Political Studies (CEPOS), a intend tank inward Denmark.

The higher upwards was get posted on December 31, 2015 at Cato.org.

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