Danish miracle
From January 1, 1999, the Danish krone is tightly tied to the euro at a ratio of 7.46038: 1 and free to move in a narrow corridor (no more than 1%). Such a pegging requires the Danish government to constantly have free reserves in euros in order to keep the national currency rate in a given corridor if necessary. In such circumstances, the decision of Denmark to refuse to lend in foreign currency looks pretty risky.
So, according to the McKinsey Global Institute, the sovereign debt of 47 countries leading in terms of already existing debt increased from 142 trillion dollars in 2007 to 199 trillion in 2014 (40% in 7 years!). Over the same period, total global debt increased from 269% of total GDP to 286%.
Such a dynamic cannot but cause concern, since it is commonly believed that during these very years there was a deleveraging in the world economy a massive decrease in borrowed funds.
What is striking, however, is not so much the deliverance of Denmark from uncontrolled foreign currency debt at a time when the whole world is moving in the opposite direction, but the social and economic consequences of this step within the Scandinavian country itself!
The fact is that a sharp reduction (especially complete liquidation!) Of external sovereign debt dependence was almost always accompanied in history by a catastrophe both for the national economy and for the quality of life of citizens of the country who risked conducting this questionable experiment.
As an example, we can recall the socialist Romania of the 7080s, who first collected debts, and then decided to return them all at the expense of the proceeds from the enterprises, and then burned them out.
The more striking is the background against which the Danish Kingdom liquidated its sovereign foreign currency debt:
according to the World Happiness Report, published by the UN and taking into account such indicators as real income per capita, level of social protection and support, life expectancy, quality of medical care, freedom of life choices and corruption, citizens of Denmark share with their neighbors Norwegians first place in the ranking of the happiest inhabitants of the planet;
The unemployment rate is two times lower than the average for Europe;
The lowest social equality indicator in the world.
The lowest level of corruption in the world;
First place in the World Bank Ease of Doing Business rating (ease of doing business);
The highest sovereign credit rating (in addition to Denmark, AAA has a rating of only 10 countries: Australia, Canada, Germany, Hong Kong, Liechtenstein, Holland, Norway, Singapore, Sweden, Switzerland).
Parade of models
In Denmark, a unique model of the structure of society and the economy is being implemented, which is different from the notorious LME (Liberal Market Economy) and from CME (Coordinated market economy). The academic name of this model is Negotiated Economy (NE, contractual economy), but another term is better known the Nordic Model, the Scandinavian model.
Formally, the NE is considered a variety of CME, coordinated by an economic model, but it has a number of fundamental differences. In CME, the idea of corporatism is embodied by the state, which interferes in social and economic relations. In the NE, corporatism is decentralized. The agreements are implemented at the grassroots level: directly between entrepreneurs and workers (or rather, the trade unions representing them), as well as between other civic groups that have their own interests that deserve the attention of society. Everyone has the right to vote and the right to listen to this voice. The state is assigned the role of a mediator, a guarantor of a social contract that provides classical functions (legal proceedings, law enforcement, foreign policy etc.).
The Scandinavian model, as the name suggests, is implemented today in Denmark, Norway, Sweden, Finland, as well as in the Netherlands. This model has a common foundation due to the universal mentality of the Scandinavian peoples, as well as private specificity reflecting the historical evolution of each nation and country separately.
The Danish experience, in my opinion, is the most interesting, because only in Denmark the role of the state is reduced to such a minimum that it is time to doubt the model itself as a coordinated market economy.
FÅ HAR FOR MEGET OG FÆRRE FOR LIDT
The combination of a capitalist economy with the ideals of socialism is by no means Danish exclusive. The same values are shared by the rest of the peoples of Northern Europe, so it is logical to begin our analysis by considering the universal foundation on which any Scandinavian model is built today.
The negotiated economic model is characterized by the following set of principles:
private property, free market and free trade;
the welfare state (the so-called Welfare State);
collective bargaining agreement;
absolute autonomy of the individual;
social mobility;
free education and universal medicine;
public pension funds;
minimal market regulation; all-powerful trade unions;
a very high level of social payments from the budget (Sweden 56.6%, Denmark 51.7%, Finland 38.6%); very high level of taxes (Sweden 51.1%, Denmark 46%, Finland 43.3%); the enormous amount of unemployment benefits (Denmark 90% of the latest wage, Norway 87.6%, Finland 85.1%, Sweden 80%, for comparison, Germany 60%, in some US states 27%).
As we have already said, the Danish version of NE is characterized, first of all, by a marginal decrease in the state intervention in the regulation of labor and economic relations. If, say, in Norway, the main burden of providing social benefits lies with the state, in Denmark these functions are delegated to private business by voluntary consent of all parties.
As a result in Denmark a completely insignificant public sector 30%! However at the same time here it is a Hellenic measure in action! Danish pension funds are the responsibility and responsibility of the state since the private form of ownership and control in this area is fraught with a conflict of interest.
Scandinavian countries are characterized by high liberalism in the spheres of public life, the forms of self-expression of personality, culture and art. However, Denmark not only advanced further than others, but always acted as a trendsetter: in 1989 it was the first to legislate the notion of marriage without gender. Even tensions in the relations of Western Europe with Islamic fundamentalism, and that arose after the cartoons of the Prophet Mohammed appeared in the Danish press.
Today you can incorporate your own business in Denmark in a couple of hours, and the almost complete absence of customs restrictions and duties on international trade allows the country to firmly hold, as we have already said, the leading place in the Ease of Doing Business rating.
Flexicurity
Flexicurity is a combination of Flexibility (Security, Elasticity) and Security (Well-Being, Security). Such flexibility allows Denmark to maintain a balance between a high degree of freedom in the labor market and guarantees of social security for workers.
The condition of flexibility (Flexibility) is realized through the right of the employer in the shortest possible time and without a long notice to dismiss any employee who isnt good for that job. As a result, the Danish business, which is not bound hand and foot by labor obligations, demonstrates the unique ability to quickly restructure the staff, quickly join new projects and at least quickly roll out unpromising initiatives.
Flexicurity
Flexicurity is a combination of Flexibility (Security, Elasticity) and Security (Well-Being, Security). Such flexibility allows Denmark to maintain a balance between a high degree of freedom in the labor market and guarantees of social security for workers.
The condition of flexibility (Flexibility) is realized through the right of the employer in the shortest possible time and without a long notice to dismiss any employee who isnt good for that job. As a result, the Danish business, which is not bound hand and foot by labor obligations, demonstrates the unique ability to quickly restructure the staff, quickly join new projects and at least quickly roll out unpromising initiatives.
Another condition of flexibility: the employer has no obligation for the minimum wage. This greatly facilitates the development of a business at the start, when an entrepreneur does not have enough funds to pay salaries, but he can motivate an employee, for example, a share of profits in the future.
Obviously, the flexibility that brings so much joy to employers must be compensated for by employees, moreover, it should be done energetically and otherwise the Danish state would have long fallen for the revolution.
Such compensation within the framework of Flexicurity is provided by the second component of the concept Security (well-being, security).
The Danish state guarantees its citizens for the period of temporary unemployment payment of benefits in the amount of up to 90% of wages. In addition, the state undertakes to provide all the conditions for advanced training or complete retraining of workers.
The synergy of all components of Flexicurity in Denmark was the highest employment rate for women in the world (73%), which, combined with the employment rate of men (80%), created a situation where in almost all Danish families both spouses work full time.
Denmarks spheres of influence
Recently more and more often doubts have been expressed about the ability of the Danish state to withstand the competitive struggle that has become aggravated to the limit in the era of globalization, and at the same time to preserve its unique system of social security.
In fact, how can you compete in the world market, say, with Chinese products, paying gigantic unemployment benefits?
I suppose the inconsistency of such doubts arises from the erroneous posing of the question itself. The fact is that Denmark is not going to compete with China at all, much less unleash price wars. Denmark has completely different priorities and trumps in the modern world system of labor distribution.
There are at least three such priorities:
a unique niche for elite products;
giants of national business, controlling entire sectors of the global economy;
technological leadership in a number of medical and industrial equipment sectors.
Just as Italy sets global trends in the production of mens clothing, luxury sports cars and industrial design, France in perfumery, haute couture and nuclear energy, Denmark stands as a benchmark in at least two directions: dairy products (the worlds best milk Ostedmejeri, Lurpak oil, which has enjoyed for 110 years the reputation of the most delicious natural butter of the premium category, etc.) and luxury home appliances (Bang &Olufsen).
In addition to elite niches, the competitiveness of the Danish business is ensured by the activity of a number of giant national enterprises:
A.P. Moller-Maersk, the worlds largest shipping merchant;
Carslberg Group, the worlds fifth largest brewing company;
Lego, a manufacturer of childrens toys, deprived Ferrari of the title of the most influential brand of the planet in 2015;
Ecco, a shoe company with a turnover of one and a half billion euros, whose products are sold in 14 thousand retail outlets in 88 countries of the world;
Arla Foods, the sixth largest dairy concern in the world.
Leo Pharma, which specializes in dermatitis medications, and Novo Nordisk, which set the tone in the treatment of diabetes and related diseases, provide leading positions in medicine.
Finally, the final touch, designed to calm everyone who doubts the prospects of Denmark to endure the globalization. In the world market the country is represented by:
Grundfos, one of the worlds largest manufacturers of industrial pumps;
Danfoss, one of the worlds largest manufacturers of equipment for automatic control, hydraulic and compressor equipment, as well as thermal control systems; MAN Diesel & Turbo, the worlds leading developer and manufacturer of diesel engines used on ships and onshore installations;
Rockwool, one of the worlds largest producers of environmentally friendly refractory, waterproof, vibration and noise absorbing insulation materials based on mineral water.
THE ISSUES OF SOCIAL POLICY IN DENMARK AGAINST A BACKGROUND OF ECONOMIC SUCCESS
Adrian Dragin, 3rd year student of the faculty of International relations and geopolitics, Institute of World Civilizations, Moscow
Abstract:This article analyses economic problems in the sector of social policy in Denmark and actions to resolve these problems. One of the methods for solving these problems can be the entry of Denmark into the eurozone. The result of such actions will reflect in the empowerment of the national bank of Denmark to resolve the internal financial problems. Thus, it will give a rise to even greater economic stability of the state and will facilitate trade relations with the eurozone countries, which are Denmarks main economic partners.
Keywords:Denmark, social security, Europe, eurozone
Many countries are discussing the ways to improve market mechanisms and social security policies. Some states prefer to talk about the ways to expand social security programs, while others say that this can lead to the deterioration of economic growth.
But the solution of this issue can be found by analyzing the successes in the economy of Denmark, Norway, the Netherlands and other countries. The Nordic countries manage a successful combination of social security with high incomes, stable economic growth and overall economic stability.
It should be noted that there are differences between the Scandinavian states. For example, social security spending is higher in Denmark, Netherlands, Norway and Sweden, and slightly lower in Iceland and Finland. A large level of taxation makes it possible to subsidize the state system of health care, education, pensions and other social services that is displayed in a low level of poverty and a small gap in income among the population.
The Danish economy seems to be very successful. The result of the impact of negative interest rates was: GDP per capita is higher than in 2007; The labor market is close to absolute employment rates; financial inequality is below average for Europe. However, there are some pitfalls here too. The Danish economy was affected by some potential threats in the years of ultra-low rates, and some of them are still in use today.
In the Nordic countries, there is a peculiar model of the state structure of the social democratic type, where the principle of universalism prevails in the provision of social services organized and financed by the state. This model of government was called universal welfare (Wohlfahrtsgesellschaft). This type of social policy was formed in a limited circle of countries, primarily Scandinavian. The necessary conditions for the formation and improvement of this policy were and still are the atmosphere of civil peace and the high political culture of the people. This model of social policy can function only with a high degree of socialization of national income. Here the principle is realized: from everyone whenever possible, to each according to needs. A distinctive feature of this system, compared with similar systems in other European countries, is the greater responsibility of society for solving social problems. In this regard, society plays a major role in regulating and fulfilling requirements aimed at ensuring satisfactory social security.