Socialism has failed across the world everywhere it has been tried. From the Soviet Union and Eastern Europe to China, Vietnam, North Korea and, most recently, Venezuela. So forget those power mad Marxists who got it wrong. Denmark is the socialist model to follow. Denmark is the Disneyland of socialism. It is where everybody is happy, healthy and well educated and everything is free…
Except for one little problem, for it to be true, Denmark would have to be a socialist country. But it’s not. If it were, it would have gone “Venezuela” a long time ago. That’s bad news socialism fans, Denmark does have high taxes and a high level of government spending. Those are key features of a socialist mentality. But in most other respects, Denmark is a full on free market capitalist country. Surprise!
Free market capitalism
Some of the strongest protections of individual property rights in the world exist in Denmark. It’s a particularly easy place to open a business. According to the World Bank, there is less bureaucratic red tape in Denmark than in any other country, except for New Zealand and Singapore. And the labor market is less regulated than in most countries. In fact there are no minimum wage laws in Denmark. Can you say free market capitalism.
It may be surprising to find out that Denmark ranks consistently as one of the top-ranked free market economies in the world by The Fraser Institute in Canada and The Heritage Foundation. So, Denmark is a small capitalist country whose citizens pay a lot of taxes in exchange for lots in benefits. Well, what’s wrong with that? You might ask. Only this: for the government to pay out such benefits, you need citizens to make enough money to pay the necessary taxes. That’s only possible through a free market economy.
Here’s some Danish history to help explain. Denmark, like its Scandinavian neighbors made a remarkable economic recovery after WWII. The combination of a highly productive work force and low taxes created a lot of wealth. So like every other wealthy welfare state, Denmark became wealthy before it created the welfare state.
Relative to Europe, Denmark’s economic high-water mark was in the 1950s. It was in the late ’60s and early ’70s, that the country’s ruling elite became preoccupied with wealth redistribution. The price paid for this social experiment was steep and swift. The expansion of public spending led to a severe economic crisis. The national debt skyrocketed. It took decades of consolidation, structural reforms and curtailing of welfare schemes to straighten out this mess. This is the rest of the story you never hear about from the “Danish model” crowd.
The sharp tax hikes and spending increases sparked a widespread popular revolt. They led to the emergence of the “tax protestors” party, Fremskridtspartiet. Even though the party no longer exists, the widespread desire to cut taxes remains.
Correcting the socialist myth
It’s worth noting that the welfare state originally began with government pension payments to the elderly. These social security like payments are now in the process of being replaced by private pension savings plans, the Danish equivalent to a 401K. Denmark is gradually moving away from US style social security. It can’t afford it. Denmark, the so-called socialist model, is returning the responsibility for retirement savings to its citizens.
But there’s free health care… right? Nothing is free. Danes pay for their health care through high taxes. Private health insurance is available, however. It’s becoming more and more popular as long wait times associated with government run medical care becomes less and less popular.
But there’s free education… right? Well, let’s understand “free”: it doesn’t mean ideal. Almost one in five parents choose to send their children to private schools, paying part of the bill themselves. But yes, college is free and it even includes a living allowance. However, there is a growing problem of getting students to graduate. Many wish to stay students because they quickly come to understand it is easy to be supported by the state. It’s one of those welfare state problems socialists don’t like to talk about.
So all this “free stuff” comes with a price. The average Dane pays 50% of his income in consumption and income taxes. That’s right; 50% goes to consumption and income taxes. But on the upside Danes earn 15% less than the average American. After taxes, an average American has a 27% more disposable income than the average Dane.
Don’t get me wrong, grey winters aside, Denmark has much to recommend it. It’s just that being a socialist paradise isn’t one of them.
Ref: Prager University, Otto Brøns-Petersen, economist for The Center of Political Studies, Copenhagen, Denmark