Capitalism in Denmark

There have been a few articles, here and there, about Denmark and its “socialist” type of government, probably brought about by Bernie Sanders’ references to Denmark. But most of the articles that I’ve read all say that Denmark is actually a combination of socialism (or welfare state) and hyper capitalism. The oldest article that I found goes back to 2015. The author describes a basic social security net that most people would probably envy, but we must realize this social welfare is funded by a much higher tax system.

“Denmark maintains a welfare state — a set of government programs designed to provide economic security — that is beyond the wildest dreams of American liberals. Denmark provides universal health care; college education is free, and students receive a stipend; day care is heavily subsidized. Overall, working-age families receive more than three times as much aid, as a share of G.D.P., as their U.S. counterparts.”

New York Times, Paul Krugman, “Something Not Rotten in Denmark”, October 19, 2015.

A more recent article talks about the strong capitalism that Denmark embraces:

“As the former Danish prime minister Lars Lokke Rasmussen once remarked in a speech at Harvard’s Kennedy School of Government to those who might not fully grasp the Danish model: “I would like to make one thing clear, Denmark is far from a socialist planned economy. Denmark is a market economy. The Nordic model is an expanded welfare state, which provides a high level of security for its citizens, but it is also a successful market economy with much freedom to pursue your dreams and live your life as you wish.”

It is through these engines of capitalism, free trade, economic openness and globalization that Denmark has managed to become wealthy enough to afford the social safety net that Sanders rightly admires — as do I: access for all to child care, medical and parental leave from work, tuition-free college, a living stipend, universal health care and generous pensions.”

New York Times, Thomas Friedman, “Joe Biden, not Bernie Sanders, is the True Scandinavian”, March 10, 2020.

But it’s the latest article that is so heartbreaking that I’m compelled to comment in this post. Read it and weep.

“Starting pay for the humblest burger-flipper at McDonald’s in Denmark is about $22 an hour once various pay supplements are included. The McDonald’s workers in Denmark get six weeks of paid vacation a year, life insurance, a year’s paid maternity leave and a pension plan. And like all Danes, they enjoy universal medical insurance and paid sick leave.

One reason Denmark was more effective than the United States in responding to the crisis is that no Dane hesitated to seek treatment because of concerns about medical bills.

Abu Sayeed knew that Americans working in fast food don’t do so well. “I heard about the movement,” he said, trying to remember its name. “Fight for something. Fight for $20? What was it?”

“Fight for $15,” I explained. “They want $15 an hour.”

There was an awkward silence. He nodded sympathetically. Then he tried not to sound condescending.

“I feel for them,” he said earnestly of American workers at McDonald’s. “We are from the same brand.””

New York Times, Nicholas Kristof, “McDonald’s Workers in Denmark Pity Us.”, May 8, 2020.

Yeah, we’re exceptional!

No wonder the millennials and Generation Z find Bernie Sanders’ position attractive and lean more towards socialism or communism while the older generations stridently scream “Socialism!” in fear.

Our brand of capitalism is cruel.

But how did we get into this generational divide where Gen Z and Millennials (Gen Y) go for socialism and communism while Gen X and Boomers, especially Republicans, are strident capitalists? I have a theory that is based on the environment we grew under and experienced.

There are two time periods that I think molded the generations: before coming down of the Berlin Wall in 1989 and the post-2008 Great Recession years. I have no proof for my theory; it’s just an idea but it might help explain the psychology of the generations.

The Berlin Wall marker would impact the Boomers and Gen X more because a) they simply were born at the time and b) they may have been old enough to be cognizant of the significance of the wall falling down. Before the wall fell, these generations grew up with the story that communism was evil and some may have even prepared for war with “atomic bomb” fire drills. They lived through Reaganism and the rise of shareholder capitalism. When the Berlin Wall fell, the story was of victory for capitalism and democracy and failure for communism and central planning. It’s the story of American exceptionalism beating back those communists and socialists. These are stories of pride for the Boomers and Gen X.

Millennials and Gen Z were, for the most part, too young or not born yet during the fall of the Berlin Wall. But it’s the Great Recession of 2008 that left the lasting impact as the majority were probably either teenagers or young adults facing a brutal job market. The years after 2008 were searing, with inequality becoming more apparent and starker. Businesses’ insistence that the youths did not have the right skill set, the continuing layoffs, and the increasing profits while wages stagnate all turned off the youths’ desire for capitalism.

Now we have the pandemic and the associated Great Cessation (which may actually be the start of a depression). This event will further entrench the youths’ inclination towards socialism or communism and might even persuade some of the elders. Society can’t live through two searing economic events within a decade of each other without turning people towards some kind of agitation.

The question I have of the youths is what kind of socialism are they looking for? Is it Venezuela’s kind whose economy is in shambles or are they thinking of Denmark? If they are thinking of Denmark, they might be able to persuade some of the elders to move toward some kind of socialism, but they have to realize that socialism must be combined with capitalism – a better kind of capitalism without the shareholder primacy. We can’t throw away capitalism because it is the engine for innovation; however, we must temper the kind of capitalism we have today.

The question I have for the elders is does this event kill the exceptionalism story that they have carried since the fall of the Berlin Wall? Does it open their eyes to something else, something kinder?