Martin ÅgerupPresident

The case of Denmark - 30 years of reform

Socialism didn’t work…

Capitalism Socialism

...or is the Danish welfare state proof interventionism works?

“We should look to countries like Denmark”

“We should look to countries like Denmark” - Sanders

“I love Denmark” - Clinton

Conclusions• Denmark was rich and well functioning

country before the welfare state• Apart from tax-and-spend Denmark is a

relatively free market economy• Denmark wealthy because of economic

freedom• High taxes and redistribution hurt wealth and

create serious economic and social problems• 30 years of market oriented reforms have

kept Danish economy afloat and relatively competitive

5

Busting mythsabout Denmark

• Wealthy because of the welfare state?

Wealth of DK relative to”Old Europe” and US (1870-2030)

Sources: Maddison / OECD

Still: Denmark does (relatively)well despite welfare state – how?

Ideal frameworkfor the innovation process

• Markets– Competition– Ease of entry– consumer choice– Prices

• Rewards to risk taking– Private property– Regulatory certainty– Low taxation on

returns to risk

Economic freedom

Economic Freedom, Denmark (2013)

Slovak Republic:no 47 – rating: 7.29

15

The welfare coalition

Dependency as a percentage of the electorate, 1970-2013

Source: Statistics Denmark, the Ministry of Economic Affairs and the Interior, along with own calculations

30

35

40

45

50

55

60

65

70Pct.

In 1980 the fraction of the electorate dependent on the

government was above 50 percent

The nordic welfare-”model”Cases: Sweden, Denmark and both

Mar

ket

orie

ntat

ion

1945 1975 2014

”Taxreform of the century”

Pension-refrom

Privati-sation

Wealth taxabolished

Financialsectorderegulation

Inheritance tax abolished

Budgetprocessreform

Corporatetax cuts

DKK peg

marg taxrate cuts

Unemploymentbenefit reform Dereg of

airlines, tele,retail,

Retirementreform

Teacher Unionpower diminished

Development of real and structural employment (DK)

Real Structural

19

Kons. Soc dem. Liberal Soc. Dem.

(Thousand)

The top marginal tax rate in Denmark

(1975 – 2011)

Soc dem Kons. Soc dem. Liberal

Corporate tax rate in Denmark(1970 – 2016)

Expected official retirement age(after 2006 retirement reform)

Conclusion:You can have capitalism

without the welfare statebut

you can’t have the welfare state

without capitalism