Politics & Policies

Denmark / The Danish record offers no support for the social-spending-hurts-growth position

Danes are neither lazy nor poor. Despite high marginal tax rates (or perhaps because of them) they are about as rich, on average, as Americans are. The World Bank estimates that gross domestic product per capita in Denmark for the 2008-12 period at $59,889, compared with $48,112 for the United States. Adjusted for differences in the cost of living, Danes’ G.D.P. per capita is slightly lower than ours.

The Danes spend far less on health care per capita than we do in the United States, yet achieve better health outcomes in many areas, including life expectancy. Their child poverty rates are far lower: About 6.5 percent of Danish children live in families with disposable incomes under 50 percent of the median, compared with 23.1 percent in the United States.

The Danish banking system, like most, took a hit in the financial crisis. But its banking regulations prevented major losses in mortgage lending. Overall levels of public debt as a percentage of G.D.P. are far lower than ours, and remain well below the European Union average.

In short, the Danish record offers no support for the social-spending-hurts-growth position. That doesn’t mean that some economists can’t figure out a way to make that argument anyway. For instance, Daron Acemoglu, James A. Robinson and Thierry Verdier have devised a theoretical model to show why what they term “cuddly” capitalism of the Danish sort may just be free-riding on the “cutthroat” capitalism of the United States sort.

The model posits that cutthroat levels of inequality, as in the United States, promote high levels of technological innovation. The benefits of these innovations cross national borders to help Danes and other Scandinavians achieve growth. In other words, they may be able to get away with being “cuddly,” but some country (like the United States) just has to be tough enough to reward risk-taking, even if it leads to hurt feelings.

The gendered language deployed in this model echoes a general tendency to view social spending in feminine terms: women like to cuddle and are often described as more risk-averse than men. It’s not uncommon to see the term “nanny state” used as a synonym for the welfare state.

Call the Scandinavians sissies if you like, but plenty of evidence in the latest World Competitiveness Report testifies to high levels of overall innovation there — as you might expect in economies even more export-oriented than our own. Danes are world leaders in renewable energy technology, especially wind power.

Danes may do plenty of cuddling, but their form of capitalism is more aptly described as team-based. And international competition remains, to a very large extent, a team sport.

And about welfare queens: According to Ms. Daley, Carina is taking home about $32,400 a year in public assistance. A constitutional monarchy, Denmark spends roughly $52 million to $70 million a year supporting its royal family, headed by Queen Margrethe II.

Yet the Danish royal family is considered the most popular in Europe. Maybe that’s because queens can’t always be judged by their record of paid employment.

Chosen excerpts by Job Market Monitor


via Nancy Folbre: The Welfare Queen of Denmark – NYTimes.com.

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One thought on “Denmark / The Danish record offers no support for the social-spending-hurts-growth position

  1. Decent article, until you hit the remark comparing the Queen to the Carina-case, which seems both inappropriate and disrespectful. Also highly un-intelligent in an article talking about economy and welfare systems.

    Posted by Christian Jessen | May 2, 2013, 12:45 am

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