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