[Culturechat] Denmark: A Case Study in Social Democracy (From Mises Institute)

Tue, 22 Jul 2003 10:57:52 EDT

Excerpt:
<<In conclusion, we can say that neither on crime, education nor health do we

see the favorable results we would have expected. Quite to the contrary. The

prospects for being able to rely on government or family for social security

are also rapidly diminishing. These are not very bright prospects indeed for

a country where each working citizen are forced to sacrifice such a large

share of his personal earnings to the common good.

One option for young people is to leave. It was recently proposed by one of

the three economists from the Danish Economic Council that if young people

in Denmark wish to move abroad after they have completed their education,

they should first have to pay back the costs of their education. Only when

they have paid enough taxes to cover all the expenses of their education,

would they be able to move abroad without having to pay the government

first.

Thus do we have proposed the social-democratic version of the Berlin Wall,

an economic barrier to prevent emigration so that the state can continue to

tax people to sustain a system that is unraveling. The mere suggestion is a

telling sign that Denmark has nearly reached the end of the road.>>

http://www.mises.org/fullstory.asp?control=1274

Denmark: A Case Study in Social Democracy

By Per Henrik Hansen

[Posted July 22, 2003]

In a previous article—"Denmark: Potemkin Village"—I documented the downside

to Denmark. Despite its reputation as a showcase of political utopia, 40

percent of its adult population live on government transfer income,

full-time, all-year. A little more than a third of these people are

pensioners and the rest are working age. About one third of the people who

actually hold a job work for the government or government-owned companies.

The effective tax level is around 70 percent, not the 50 percent that is

usually reported (the lower figure comes about by disregarding the effects

of the sales tax and excise taxes).

My article led to many questions and comments from readers. One reader

admitted that the Danish welfare state is very expensive but claimed that it

is worth the price. If high taxes buy a society where people feel secure,

where crime levels are low, and where people are well educated and live long

and healthy lives, maybe the high taxes aren't such a terrible thing!

For now, let's ignore the ethical question associated with all coercive

redistribution. Instead, let's look at the extent to which safety, security,

and quality of life really do characterize Denmark.

People can feel socially secure in Denmark—at least for now. People don't

get rich from welfare but they can live a comfortable life. Practically all

people are eligible for one program or another. But the system is

unsustainable in the longer run. In the early 1970s only about 300,000

people of working age lived full-time all year on government welfare. Today

it is about 900,000. The population size has remained unchanged at around 5

million. In the not too distant future, more people are going to be

pensioners and fewer people will be working age. At some point, the trough

will be empty.

The welfare state has also nationalized many of the formerly family support

functions. In 1960, 91 percent of all women 30 years of age were married.

Today, fewer than 50 percent are. Partly this is because people are marrying

later in life, and yet a considerable part of the explanation is that many

people do not marry at all.

Of the people who do get married, more people get a divorce today. In 1975,

18 per cent of all the marriages from 1950 had ended in a divorce during the

preceding 25 years. In 1995, 36 per cent of the marriages from 1970 had

ended in a divorce. Of  marriages in 1985, 20 per cent ended in a divorce

after only 7 years. As a result of the above, many more people live in

single households today than did in 1960. In 2000, one third of all adults

in Denmark were living alone.

If we next look at the crime level, the Danish Statistical Yearbook 2002

shows reported crimes from 1935 to 1960 to be stable: about 100,000 crimes

per year. But from 1960 until today, the number of crime reports has

increased by 500 percent, to more than 500,000 per year. And if we look at

violent crime, the picture is even grimmer. The number of violent crimes in

1960 was approximately 2,000; it is approximately 15,000 today. This is an

increase of more than 700 percent, and it is still rising steeply.

This is a very surprising development. Welfare state advocates often say

that crime is caused by poverty. Well, Denmark has become about twice as

rich per citizen during this period of rising crime. Another argument is

that poverty is caused by economic inequality. Well, Denmark has engaged in

the most comprehensive income redistribution program of any nation. Denmark

is the most egalitarian country in the world today.

So, a rising crime level is the last thing the welfare statists might have

predicted using their own theory. Maybe there is some other independent

factor causing the development? Denmark has taken in a great number of

immigrants and refugees from third-world countries. These immigrants

unfortunately are greatly overrepresented in the crime statistics—something

like 5 to 1—but they only account for less than 10 percent of the

population, and hence cannot account for the entire increase in crime.

There are better explanations. Massive redistribution schemes have undercut

people's respect for property rights. The rhetoric against wealth producers

that has accompanied the redistribution has created social antagonisms.

People on government transfer income have a lot of extra time on their

hands, and their hands do the "devil's work."

The best explanation may be the change in the views of intellectuals. In the

1960s, the theory emerged that crime should not be blamed on the offender

but on society. This led to the conclusion that crime should not be

punished—at least not very harshly—but instead socially treated.

This idea is still so widespread that the present Minister of Justice, who

is a conservative, proposed that prisoners be released when they have served

only half their sentence. This, she said, would solve the problem of long

waiting lists for the Danish prisons. But it might also make the lists even

longer!

Let's now look at education. Many people believe that if education were not

provided by the government, only rich people could afford it. Let us compare

Denmark to the U.S., where public funding of especially higher education is

not nearly as readily available as it is in Denmark. According to the report

"Education at a Glance" from the OECD, 15 percent of people between the ages

of 25 and 64 has a bachelor degree or more in Denmark. In the U.S.A., it is

26 percent—nearly twice as many. In Sweden, the number is 13 percent, and

Norway 16 percent.

If we look at the other end of the education level, those with only 9 years

of education, in Denmark it is 34 percent, whereas in the U.S. it is 14

percent. In Sweden the number is 26 percent and in Norway 18 percent. Again

the numbers are much more favorable in the U.S.

The U.S. has, according to this report, the best educated population in the

world measured by numbers of years of schooling. No country has as many

highly educated people as the USA and no country has as few people with only

9 years of education. This is information, I know, is surprising to most

Europeans (conceding of course that this is a quantitative and not a

qualitative measure).

In Denmark, many people are prevented from gaining the education they would

like. All higher education is publicly run and free. Central planners decide

how many doctors, architects, engineers, lawyers, economists, etc., that

society needs. Students are rationed according to their grades in high

school. If your grades are not high enough, you may not begin a degree

program of your preference.

There are no objective tests of the quality levels in Denmark that I know

off. However, one indication of the falling quality level in education could

be the considerable shift in applicants for higher education away from the

sciences and into the humanities. Everything involving mathematics, or other

clearly demonstrable skills such as natural science or economics, is

disliked by the applicants.

What about health? Denmark is one of the few OECD countries where the

average life span has hardly increased since the early 1970s. In the early

1970s, Denmark was at the top in OECD comparisons; today it is closer to the

bottom.

According to the politicians, this has nothing to do with poor quality at

the Danish hospitals or long waiting lists for examination and surgery. They

say it is due to the Danish people's habit of smoking and drinking. And yet,

often one can read in the news stories of people who die preventable deaths

simply because they were on a waiting list and unable to get care.

Sound economic theory can explain the shortages and continuously falling

quality in government-provided health care and education. When suppliers are

not driven by the profit motive, nor subjected to market competition, they

cease being customer oriented. Quality declines and costs rise. Due to the

lack of market prices, and therefore no economic calculation, they can

neither plan efficiently nor satisfy consumer demand. They do not have the

information or the incentives to make rational decisions. This was the case

in the formerly centrally planned economies. It is also the case in Denmark,

where central planning also prevails in parts of the economy, most

significantly in health care and education.

In conclusion, we can say that neither on crime, education nor health do we