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Socialism has a horrifying track record throughout the world, characterized by oppressive regimes and pervasive poverty. Still, some apologists claim that socialism can be implemented successfully — just look at Denmark, they insist. As Danish Atlas Network partner CEPOS (Center for Political Studies) points out in a recent analysis for Punditokraterne, however, the “Danish Model” isn’t all it’s cracked up to be — and certainly isn’t an example of successful socialism in action.
“The first thing to realize is that Denmark, as are the other Nordic countries, quite free markets, apart from their welfare state transfers and high government consumption,” writes Otto Brøns-Petersen, CEPOS director for analysis. “They tend to get rather high rankings on measures of the most free economies in the World. Denmark is thus number 22 on the Economic Freedom of the World (EFW), published by Fraser Institute et al, and number 11 on the one publish by the Heritage Foundation. It is number 3 at the World Bank ‘Doing Business’-list.”
Although Danish tax rates and revenue are high, nearly every other measure on these lists indicates a significant degree of economic freedom, with robust international trade, low-regulated credit markets, and flexible labor markets. So, rather than being an example of a controlled socialist economy, Denmark has a largely free economy that exists in tandem with an expansive welfare state. It’s important to note, though, that Denmark did not achieve its current prosperity during this redistributionist period.
“At the time Denmark became rich relative to the rest of the World, it was not a welfare state,” Brøns-Petersen explains. “So, Denmark first became rich, and then introduced the programs, which make up the welfare state. The huge increase in government spending has been accompanied by deep structural problems, which has made it necessary to reform the Danish economy and welfare state ever since. It can hardly be claimed that introducing the welfare state made Denmark rich; rather it was the other way around. Denmark first became rich, and then authorities began to redistribute some of the wealth.”
Far from being an example of a successful socialist country, Denmark is an example of the prosperity that a free economy can bring — and a cautionary tale about what can happen when that prosperity is squandered by government expropriation.
“In many respects, Denmark could serve as a model for the World (just like most other countries),” Brøns-Petersen writes. “But if you fail to learn the right lessons, it could be dangerous to try to imitate our model. Especially the idea that you can become rich by redistributing wealth or that there is a gentler way to socialism than the one experienced by typical socialist countries in general could get you into trouble.