Vox Populi
John
Campbell, the Class of 1925 Professor of Sociology, was recently invited by
the Prime Minister of Denmark to give the keynote address at the final meeting
of Denmark's Globalization Council, a body convened by the Prime Minister to
help sustain and improve Denmark's global economic competitiveness. He drew his
remarks, which he revisits here, from a policy paper written with a Danish
colleague advising the nation's largest labor union and from his new book,
National Identity and the Varieties of Capitalism: The Danish
Experience.
John Campbell
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Whenever a head of state asks for your opinion on policy-making matters,
it's important. This is certainly true for Denmark, a country that has achieved
institutional competitiveness in the global economy during the last 15 years or
so. When I spoke to the Prime Minister and his Globalization Council in
February, Denmark was still reeling from the international uproar over
Islam-themed editorial cartoons. While the cartoon crisis may seem a far cry
from the question of global competitiveness, the controversy served to
underscore one of the themes of my talk: the importance of social cohesion for
Denmark's success. That cohesion, and the institutions and policies that
undergird it, make a strong case for preserving the principles that have so far
guided Denmark, even when those principles sometimes contradict the tenets held
by other advanced capitalist countries.
The ability of countries to achieve socioeconomic success depends not just
on the macroeconomic policies that their governments pursue but also on the
institutions within which their firms operate. In other words, national
socioeconomic performance depends in part on the nation's institutional
competitiveness, or its capacity to achieve socioeconomic success as a result
of its political, economic, and cultural institutions.
Denmark can lay claim to impressive socioeconomic performance, stemming in
part from its institutional capacities to generate strong economic growth and
distribute the benefits of that growth rather equitably among the population.
That growth also raises questions about how best to manage Danish institutions
to ensure Denmark's institutional competitiveness in the future.
There is no one best institutional practice. Today, the most successful
countries—including Denmark—may have very different institutional
profiles.
For instance, contrary to conventional thinking in the United States and many
other advanced capitalist countries, high taxes and high levels of government
spending have had positive rather than negative effects on Denmark's
performance insofar as they have supported the systems and programs that have
provided for the nation's economic success.
The Danish case suggests that countries can have both high taxes and
generous spending and still achieve impressive socioeconomic performance.
Indeed, Denmark's performance is comparable to that of the United States-a
country with much lower levels of taxation and spending. The secret of the
Danes' success lies in their hybrid-style economy that combines features of
both Liberal Market Economies (LMEs) like the United States and Coordinated
Market Economies (CMEs) such as Germany and Sweden. The result has been a
system of "flexicurity," which ensures that the private sector has
enough freedom and flexibility to hire and fire workers in response to market
signals, while also ensuring that public funding is in place to provide
generous unemployment benefits, health insurance, and, most importantly,
training to help workers obtain new skills and return to work.
This national focus on worker health and security illustrates an important
point. For Danes, social cohesion is a national priority. As I argued before
the Council, that social cohesion has contributed significantly to Denmark's
ability to adapt flexibly to globalization. I maintain (and research confirms)
that the greater income and social equality experienced by Danes than by those
in many other advanced capitalist countries leads to more social trust and a
greater collective commitment to national goals, given that a more equitable
distribution of wealth ensures that national gains benefit everyone. Therefore,
welfare spending-and the taxes that support it-should not be reduced
significantly in the interest of institutional competitiveness.
Institutions are tightly coupled; changing one institution can have
unintended consequences for the performance of others. Tighter eligibility for
various welfare benefits may have helped push Danes back into the labor market
thereby reducing unemployment, but it also contributed to an increase in the
poverty rate and the increasing marginalization of certain segments of the
population like Islamic immigrants. Hence, when things are going well, as they
are in Denmark, decision makers ought to consider staying the course rather
than pursuing major institutional changes.
By JOHN CAMPBELL
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