When Hillary Clinton and Bernie Sanders debated the future of the Democratic Party earlier this week on CNN, they talked about the usual global hotspots, places like Syria, Iraq, Iran, and China. But they also talked about a country that doesn't come up a lot in big-time American politics: Denmark.
Sanders cited it as a model of the kind of democratic socialism he'd like to bring to the United States. Clinton expressed considerable skepticism about the viability of turning America Danish, but nonetheless allowed, "I love Denmark." Tellingly, though the digression on Denmark doubtless took many viewers by surprise, moderator Anderson Cooper was sufficiently prepared for it that he was able to cite the country's exact population on the spot.
That's because Denmark — though small and of limited geopolitical significance — punches way above its weight in public policy circles. When left-wing Scottish nationalists were campaigning for independence from the UK, they said their new Scotland would be modeled on Denmark. And as Jonathan Cohn wrote in 2007, "Even as the pundits wring their hands at Europe's economic decline, a growing number of American economists have begun looking across the pond for inspiration — to Scandinavia and, especially, to Denmark." In his most recent book, Francis Fukuyama uses the phrase "getting to Denmark" as the shorthand for the ideal form of social and political development.
Denmark, in short, looms large in the imaginations of the English-speaking left even if most Americans don't actually know anything about it. But even though Denmark really does look like a significant success story, in many ways the real story of Danish public policy doesn’t line up as neatly with the US progressive agenda as some of the Nordic social model’s American fans like to think.
1) What is a Denmark? Is it full of Dutch people?
Dutch people, confusingly, live in the Netherlands. Denmark is full of Danes. Mark (or "march" in English, hence the Marcher lords who guard the frontier with Dorne in George R.R. Martin's Song of Ice and Fire) is a medieval Germanic term for a borderland, and sixth-century Roman sources refer to the general area of present-day Denmark as being inhabited by a tribe called the Dani. Hence Denmark, a border area full of Danish people.
Modern-day Denmark is divided between two primary landmasses, one that sticks out like a little hat on top of Germany and one that's a big island off the coast of Sweden. The island part contains Copenhagen, the capital and largest city, and is directly connected via bridge to the medium-size Swedish city of Malmö.
Denmark's history as a state is both unusually long (dating back to the eighth century, while Germany and Italy arose in the late 19th century and even Spain only goes back to the 1400s) and unusually dull by European standards. There was no great Danish Revolution, and though Denmark participated in the wars sparked by the French Revolution, it was never conquered and subject to externally directed institutional reform. Instead, over time Denmark gradually evolved the institutions of liberalism, then democracy, then egalitarian social democracy.
Denmark did have a run as something of a world power, featuring possessions on the west coast of Sweden, control over Norway, control over some German-speaking territory, and even a small colonial empire comprising a few Caribbean islands and Greenland. The loss, over time, of these possessions (save the barely populated Greenland) served to render Denmark a deeply homogeneous country. It contains no national minority groups and has a relatively small immigrant population.
2) Why do American liberals like to talk about Denmark?
People on the left in the United States and other English-speaking countries are fond of citing the Nordic states — Denmark, Sweden, Norway, Finland, and Iceland — as examples of countries with higher taxes and less inequality than Anglophone nations that nonetheless enjoy a high level of prosperity. Of the five Nordics, Denmark is the second richest. Norway, the richest, has a ton of oil and gas relative to its tiny population, so it doesn't seem like quite as good a model to cite as Denmark.
The Nordics also tend to score very well on subjective measures of well-being like happiness surveys.
Danish mothers enjoy 18 weeks of guaranteed maternity leave at 100 percent of their ordinary pay. Danish students leave college free of debt. Everyone is covered by a national health insurance system and can take advantage of subsidized child care; plus, thanks to a generous welfare system, Denmark's child poverty rate is about a quarter of America's.
Denmark is also an environmental model, a country in which 25 percent of electricity is generated by wind turbines; bicycles account for 40 percent of commuting trips in Copenhagen.
In a world where Republicans routinely deride taxes and spending as job killers, income redistribution as the mother of indolence, and tax cuts as a growth miracle, quietly prosperous Denmark stands as a powerful counterexample.
3) How did Denmark get to be so awesome?
Taxes. Denmark does it with really high taxes.
- In the United States, state, local, and federal taxes combine to amount to about 25 percent of GDP.*
- In the more generous German welfare state, it's more like 37 percent.
- In Denmark, it's 49 percent.
It's natural for Americans to think of ourselves over here in the Western Hemisphere enjoying the fruits of liberty in contrast to "European-style" welfare states. But the gap between Denmark and Germany is exactly as big as the gap between Germany and the United States. And those are not small gaps!
In part, this gusher of tax revenue is obtained by taxing the rich. Taking into account all forms of taxation, a high-income Dane can pay up to a 57 percent marginal tax rate. That's about what a wealthy resident of California would pay (combining state and federal income taxes with Medicare taxes) but considerably higher than the rates charged in most of the country. But this alone does not suffice to pay for the Danish system.
Denmark also has:
- A 25 percent value added tax — basically a form of sales tax
- A 180 percent tax on car purchases
- A carbon tax of about $13 per ton of CO2
- Income taxes that are high on the middle class as well as the rich, with effective rates averaging in the 35 to 48 percent range
4) Yikes! How do people survive in this overtaxed dystopia?
If you visit Denmark, you will be shocked by how expensive banal consumer goods are. Restaurant meals, cab rides, sodas, etc. all cost a bundle by American standards. And so do bigger-ticket items. A 64GB iPhone 6S costs a hefty $849 in the United States, but its Danish price is more than $1,000 at current exchange rates.
And don't even think about buying a beer; hefty alcohol excise taxes drive prices into the stratosphere.
The flip side is that if you actually live in Denmark, then things like child care, college tuition, and health care are all much cheaper than they are in the United States. In total, Danes and Americans consume a similar quantity of taxes and services. But because of high levels of taxation and spending, the nature of the consumption is quite different. People enjoy more social and personal care services, and fewer cars and other consumer goods. The upper middle class has less, and the poor and the working class have more.
But on the whole, Denmark's high taxes have not prevented it from being a wealthy, happy society.
5) Scandinavia has lots of great music, right? How about a Danish music break?
It's really Sweden that specializes in music exports and has tons and tons of great bands.
But Denmark does have its moments, including the 1997 novelty hit "Barbie Girl" (that the band is Danish explains why the pronunciation of "Barbie" is somewhat off), plus my personal favorite Danish band the Raveonettes.
6) Is Bernie Sanders right? Should we be like Denmark?
Most people would find Danish weather unpleasant, but one good way to think about this is with a table that Demos's Matt Bruenig made based on Luxembourg Income Survey data. The table looks at disposable household income (i.e., after taxes and transfer payments) at different deciles of the income distribution, showing the United States and countries that rank ahead of the United States:
The upshot is that people in the bottom third of the Danish income distribution have more disposable income than people in the bottom third of the US income distribution, but for the more privileged the reverse is the case.
According to utilitarian moral theory, that probably makes Danish institutions superior, since the value of an extra dollar in terms of well-being is higher for people at the bottom of the income distribution than for those at the top. And according to the academically popular moral theory of John Rawls's A Theory of Justice, the Danish institutions are certainly superior, since Rawls argues that the distribution of economic resources should be organized so as to maximize the welfare of the least privileged.
Of course, in brass tacks political terms you need to try to appeal to a majority of voters, and the Danish disposable income stats fails that test (a problem that's exacerbated by the fact that many low-income Americans are noncitizens and that low-income citizens vote at a lower rate than richer ones). But note that this is only a measurement of disposable cash income and doesn't include the value of in-kind public services like free health care and college. Nor does it count the fact that the typical Danish worker enjoys about 150 extra hours of leisure time per year.
For the middle class, then, the question of Denmark versus the USA comes down to these trade-offs. A typical American has more cash but worse public services and less time.
7) Isn't Denmark ridiculously small?
During the debate, CNN's Anderson Cooper reacted with incredulity to Sanders's waxing about Denmark, observing that it's a country with just 5.6 million residents. And it's true there's an enormous difference in scale between United States and a country with a population somewhat smaller than Wisconsin's.
But the direct applicability of this point to the welfare state is not obvious.
Indeed, on some level the small size of Nordic countries cuts the other way. A place as small as Denmark might worry more reasonably than the United States that highly skilled individuals would simply flee to avoid taxes, or that companies would refuse to do business there. Due to America's larger size, this kind of concern about the possible downside of high tax rates would be attenuated.
On the other hand, in a small country tax dollars tend to be spent close to home, ensuring that the people who pay also receive the benefits. In a big country, money can be taxed and then spent in far-off places, which might make people more reluctant to pay the tax in the first place, as well as making it more difficult to verify that the money is being spent well.
8) Isn't Denmark ridiculously homogeneous?
Modern-day Nordics are not quite as homogeneous as Americans sometimes seem to believe. Sweden, in particular, actually has a higher share of its population born abroad than does the United States, with many coming from Eastern Europe and Iraq rather than from its rich neighboring countries. But Denmark is considerably less diverse than Sweden, and all things considered Sweden contains significantly less racial diversity than the United States.
This point is often raised, but it can really be interpreted in two different ways.
1) Ethnic diversity is a political problem for the welfare state
In their 2001 paper "Why Doesn't the United States Have a European-Style Welfare State?" Alberto Alesina, Ed Glaeser, and Bruce Sacerdote argue that the racial diversity of the United States leads to public skepticism of redistributive policies. "Voters will dislike giving money to the poor if, as in the United States, the poor are perceived as lazy," they write. "In contrast, Europeans overwhelmingly believe that the poor are poor because they have been unfortunate."
They show that "across countries, racial fragmentation is a powerful predictor of redistribution" and "within the United States, race is the single most important predictor of support for welfare." Donald Kinder and Cindy Kam mount a similar argument in their book US Against Them: Ethnocentric Foundations of American Opinion.
US liberals tend to read this argument as saying that redistribution is a good idea that Americans refuse to embrace because they are racist. But the statistical evidence is also consistent with the opposite hypothesis — that redistribution is a bad idea whose shortcomings the Nordics are blind to because of excessive in-group solidarity. This data doesn't really bear on the merits of redistribution.
2) Nordic people — not institutions — explain Nordic success
Another form of argument follows Nima Sanandaji in noting, "Median incomes of Scandinavian descendants are 20 per cent higher than average US incomes. ... Scandinavian Americans have lower poverty rates than Scandinavian citizens who have not emigrated."
Scandinavian people, on this view, have superior cultural or genetic attributes that lead them to enjoy higher incomes than non-Scandinavians. But Scandinavians enjoy higher incomes under American institutions than they do under Nordic ones.
This is an interesting observation, though by no means a dispositive one — emigration from Scandinavia to the United States was not randomly assigned, and the families who chose to move might well have been disproportionately ambitious, hardworking, or skilled. And if people of Nordic stock are culturally or genetically superior to non-Nordic peoples, that naturally raises the question of why this superiority would not extend to the choice of social institutions.
8) How do left-wing Danish parties keep winning elections?
They don't. Various right-of-center coalitions have governed Denmark for about 11 of the past 15 and 21 of the past 33 years, meaning that the general trend toward neoliberalism inaugurated in the early 1980s by Ronald Reagan and Margaret Thatcher has also impacted Denmark. The current sky-high (by American standards) levels of Danish taxation actually reflect significant tax cutting under the conservative governments that ran Denmark in the aughts, and the most recent left-wing government of Denmark was a relatively short-lived and unhappy one in which Prime Minister Helle Thorning Schmidt largely found herself implementing an austerity budgeting agenda.
The key difference came in the past. Between 1929 and 1982, there were nine years of right-of-center governments, three years of occupation by Nazi Germany, and about 40 years' worth of Cabinets led by the Social Democratic Party.
The main reason the Nordic welfare state is so large today is not that conservative parties can't win, but that universal social welfare institutions tend to be "sticky." The UK Conservative Party has never dismantled the National Health Service, various right-of-center Canadian governments leave their single-payer heath-care system in place, and neither Ronald Reagan nor George W. Bush eliminated Social Security. Even if left-wing governments lose future elections, their accomplishments remain.
9) What do American liberals get wrong about Denmark?
American fans of the Nordic social model tend to overlook three points that differentiate Danish policy from the conventional progressive agenda:
- America's openness to low-skilled immigration is a significant benefit to needy people.
- Nordic welfare states tax the middle class much more heavily than the United States.
- "Getting to Denmark" entails more attention to the quality of public services and not just their existence or funding level.
On immigration, the point is not so much that generous welfare provision can only exist in homogeneous country, but that one should not overlook the distinctive virtues of the United States of America. There are countries that are more open to immigrants than the United States, but basically nowhere is more open to the immigration of low-skilled workers from poor countries. This relative openness is an enormous benefit to the people who manage to take advantage of it. But due to compositional effects, it tends to make social conditions look worse than they really are. Guatemala has a per capita GDP of about $3,500. A person who moves to the United States and earns triple that is going to register as falling below the poverty line. Preventing that person from moving would cut the US poverty rate but would not actually benefit anyone — it would simply push a poor person off the US's books and onto Guatemala's.
The points about taxation and service quality are linked.
It's not that Denmark doesn't tax the rich — it does, and generally more heavily than the US does — but that the gap in taxation of the 50th or 75th percentile is generally larger than the gap between taxation of the 75th percentile and taxation of the top 1 percent. American progressives typically try to sell the middle class on expanded public services with the argument that someone else will pay for it, while the Danish idea is more that the middle class should agree to pay high taxes because public services are more valuable than additional private consumption.
One consequence that follows is Danes care a lot about trying to deliver services cost-effectively.
In Copenhagen, for example, the metro is driverless, the suburban rail network features one-man train crews, and many urban bus lines are run by private companies. These are all kinds of measures that US labor unions would normally oppose, and the US debate tends to be sharply polarized between liberal coalitions with labor interests at their heart and a conservative coalition that simply wants to cut spending and service levels. The idea of reducing labor costs in order to improve service frequency without increasing spending tends to go missing. Similarly, the Øresund Bridge from Copenhagen to Malmö was constructed at a drastically lower price than the United States is prepared to spend to replace the Tappan Zee Bridge in New York even though the Nordic bridge is substantially longer and includes a major train component along with the roadway.
In other words, while at times it's the case that Denmark is able to deliver superior public services because it is willing to spend more money (you can't have a paid parental leave program without someone footing the bill, for example) the causation also goes in the other direction. Danish political economy places a greater emphasis on identifying and eliminating waste, which both improves the quality of public services and fosters greater willingness to pay for them. The United States is in a different political equilibrium where the service providers themselves are often the key political constituency for services, which makes it difficult to focus on cost-effectiveness, while conservatives prefer eliminating programs to trying to improve them.