The case of Denmark - 30 years of reform Martin Ågerup President

Socialism didn’t work… Capitalism Socialism

...or is the Danish welfare state proof interventionism works?

“We should look to countries like Denmark” “We should look to countries like Denmark” - Sanders “We should look to countries like Denmark” “I love Denmark” - Clinton

Conclusions Denmark was rich and well functioning country before the welfare state Apart from tax-and-spend Denmark is a relatively free market economy Denmark wealthy because of economic freedom High taxes and redistribution hurt wealth and create serious economic and social problems 30 years of market oriented reforms have kept Danish economy afloat and relatively competitive

Busting myths about Denmark Wealthy because of the welfare state?

Wealth of DK relative to ”Old Europe” and US (1870-2030) Sources: Maddison / OECD

Still: Denmark does (relatively) well despite welfare state – how?

Ideal framework for the innovation process Markets Competition Ease of entry consumer choice Prices Rewards to risk taking Private property Regulatory certainty Low taxation on returns to risk Economic freedom

Economic Freedom, Denmark (2013)

Slovak Republic: no 47 – rating: 7.29

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The welfare coalition Dependency as a percentage of the electorate, 1970-2013 Source: Statistics Denmark, the Ministry of Economic Affairs and the Interior, along with own calculations 30 35 40 45 50 55 60 65 70 Pct. In 1980 the fraction of the electorate dependent on the government was above 50 percent

The nordic welfare-”model” Cases: Sweden, Denmark and both Teacher Union power diminished Retirement reform Wealth tax abolished Corporate tax cuts marg tax rate cuts Market orientation Privati- sation Budget process reform Unemployment benefit reform Dereg of airlines, tele, retail, DKK peg Pension- refrom Inheritance tax abolished Financial sector deregulation ”Taxreform of the century” 1945 1975 2014

Development of real and structural employment (DK) (Thousand) Kons. Soc dem. Liberal Soc. Dem. Real Structural 19

The top marginal tax rate in Denmark (1975 – 2011) Soc dem Kons. Soc dem. Liberal

Corporate tax rate in Denmark (1970 – 2016)

Expected official retirement age (after 2006 retirement reform)

Conclusion: You can have capitalism without the welfare state but you can’t have the welfare state without capitalism