Saturday, May 24, 2014

In Search of Capitalism: Copenhagen

Denmark has long dominated world happiness rankings. Last fall The Earth Institute ranked Denmark first in happiness based upon surveys and  a United Nations commission ranked them first this spring based upon a statistical analysis of life expectancy, GDP per capita and freedom with respect to life choices.  I have previously blogged about various aspects of the Danish economy, here, with a particular focus on its high standard of living, high taxes and low inequality. As noted in that post, Denmark sports the highest taxes in the world as well as very high economic performance.

Since I have long believed that an economic system is only as good as the well-being of its people, I visited Copenhagen this month to see first hand what life in Copenhagen is like and to learn more about the law and economics of Denmark. I learned some amazing things.

For example, Denmark boasts excellent transportation infrastructure. I took a high speed train (112 mph) from my hotel to the airport in minutes. The ride was easy, cheap, fast, safe, clean and even fun. No taxi was needed at all. The airport also has a subway connection but my hotel was too far for that even less costly option. Copenhagen  Airport itself was one of the most convenient and modern airports I have ever seen. It is currently the 17th ranked airport in the world. We cleared security in less than 3 minutes.

I also traveled across one of the coolest bridges in the world into Sweden. Oresund Bridge won the Outstanding Structure award in 2002. The bridge exemplifies the outstanding economic infrastructure Denmark enjoys, ranking 13th in the world according to this recent survey.

Copenhagen also is a bicycle paradise. An astounding 52 percent of the population commutes by bicycle. I spent several days biking around Copenhagen and the paths are so safe (separate lanes for bikes separated by curbs and with independent bike traffic signals) that few even need helmets. I am convinced that if I lived in Copenhagen I would live longer and happier based upon their bicycle infrastructure alone. In short, massive investment in infrastructure greatly improves life for everyone in Copenhagen.

Denmark also excels in investing in its people. I met a young college student working at a brewpub. According to him Denmark offers free college education to all its citizens and even pays students to attend through a generous living stipend. We in the US know that such a program pays economically as studies show that the original GI Bill paid between 5 to 12.5 dollars in growth and for each dollar the government spent educating our World War II veterans. In Denmark free higher education is viewed both as an economic imperative as well as part of a well-functioning democracy. Educated citizens are less susceptible to calls by growth-retarding elites for excessive tax cuts and macro-economically pernicious deregulation.

The rich and powerful live quite well in Denmark too. I saw more Benzs here than in Beverly Hills and more Porsches than on Chicago's Gold Coast. Further, Copenhagen boasts the best restaurant in the world and  many other world class restaurants. So the very wealthy can enjoy a dynamic and competitive economy and need not view competitive capitalism based upon broad empowerment of all citizens with fear and loathing as they clearly do in the US.

Finally, Copenhagen passed my beer test with flying colors. One measure of a vibrant capitalist system is a rich delivery of consumer goods and services. In November of 1989, I visited East Berlin. The beer was awful. I literally could not finish a German dunkle--or any East German beer. Ever since I have used beer quality as a proxy for consumer choice and quality of consumer offerings. In Copenhagen, I visited many microbreweries (such as Brewpub Kobenhavn) and consulted with many experts about the best. They are world class brewers and easily can compete with the best in the US. Copenhagen has outstanding beer! 

So, I really think the US should take some lessons in capitalism on board from Denmark. First, high taxes are fully consistent with high growth and general happiness. Denmark certainly proves this point. Second, we should return to massive funding for higher education. Denmark proves that a GI Bill for everyone is affordable and even pays in all sorts of economic and political ways. Third, we should go back to our roots as a nation of powerful public investment (the GI Bill, the Interstate Highway System, the space program and the creation of the internet by DARPA) and search out ways to invest in green transportation that both pay for themselves and lead to better lives for all. Finally, we should understand that high inequality leads to under-funding of the public sector and massive transfers from the middle class to the very rich as recently seen in the US.


  1. "Denmark has long dominated world happiness rankings." -- Steven Ramirez

    This has to be the most subjective, and thus meaningless, measure of well-being ever devised.

    Latin America has the world's highest murder rates, deep poverty and big gaps between rich and poor. But that doesn't seem to be getting in the way of the region's residents having happy feelings.

    The region has nine of the top 10 highest among 138 countries surveyed on "positive emotions" in a new survey released on Wednesday by pollster Gallup. ...

    The only non-Latin American country in the top 10 was Denmark, which consistently scores high in terms of well-being and happiness, researchers have found. The U.S. was tied for 19th place with several countries. -- WSJ

    So, you see, one can be just as "happy" given high murder rates, deep poverty and enormous wealth disparity in Latin America as one can with nearly the exact opposite circumstances in Demark.

  2. Copenhagen (AFP) - The Nordic model, known for high taxes and its cradle-to-grave welfare system, is getting a radical makeover as nations find themselves cash-strapped.

    During the post-war period, the Scandinavian economies became famous for a "softer" version of capitalism that placed more importance on social equality than other western nations, such as Britain and the United States, did. ...

    In Sweden, visitors are sometimes surprised to learn about year-long waiting times for cancer patients, rioting in low-income suburbs and train derailments amid lagging infrastructure investment.

    "The generosity of the system has declined," said Jonas Hinnfors, a professor of political science at the University of Gothenburg.

    "Much of this already started changing in the 1980s and especially in the 1990s," he added. ...

    In 2006, conservative Prime Minister Fredrik Reinfeldt's government accelerated the pace of reform, tightening the criteria for unemployment benefits and sick pay while lowering taxes.

    Income tax in Sweden is now lower than in France, Belgium and Denmark, and public spending as a share of GDP has declined from a record 71.0 percent in 1993 to 53.3 percent last year.

    Once the darling of progressives, Sweden has become a model for free-market-leaning thinkers including British weekly The Economist, which last year hailed the scaled-down Nordic model as "the next supermodel." -- China Post

    The Nordic countries, including Denmark, have elected conservative governments in an effort to deal with the fiscal nightmare resulting from years of socialism.

    All of these countries, including Denmark, offer parents school vouchers which can be used in a competitive system that includes both private and public schools - something that the American Left has fought to deny parents and children here.

    In Sweden, people are turning increasingly to private health insurance in order to compensate for the dangerous shortcomings of a sclerotic and underfunded socialist state run health system.

    “Socialist governments traditionally do make a financial mess. They always run out of other people’s money. It’s quite a characteristic of them.” -- Margaret Thatcher