I have been seeing the same meme over and over again…Denmark has $25.00 per hour, Denmark has free healthcare, Denmark is the happiest place on Earth. Be like Denmark. This may not be the exact meme, but you get the idea. The implication is that Democratic Socialism is the cure for all things that are wrong with the United States and capitalism and that somehow, Denmark is foreverland. That might have been true in the 17th Century when that region of the world was one of the most prosperous places on Earth, and a dominion of emerging capitalism. But, let me throw a few things out there for those “Denmarkians” to consider today. This is only an article, not a full blown paper, but I hope to get you thinking about the fallacy of that meme.
Denmark is a tiny nation. One that consists of just over 5.5 million people. This means that the independent state of Denmark is smaller than Chicago and its metropolitan area which is around 10 million people. As such, implementation of socialist programs would seem much easier to implement and sustain. Paradoxically, Denmark and even the Netherlands were at the forefront of capitalist principles dating back to the 17th Century. Today, Denmark is not only a bastion of free trade principles, its credit market is one of the most unregulated in all of the world. In addition, there is no legislated minimum wage, and no regulations on hiring or firing of workers. Hardly socialist. This is all according to the Cato Institute. It should also be noted that when a progressive government was elected in the 1950’s, while Denmark was relatively solvent, the debt increased due to social programs enacted, but revenue did not keep up, so they had to raise taxes via VAT (Value Added Tax) as well as personal income. This led to a virtual implosion in Denmark, where the nation was in dire financial straits due to taxes not being able to keep up with expenditures as social programs increased.This means that Denmark was rich, elected a progressive government that expanded programs, raised taxes and literally became broke again by the 1980’s. Not what I would call much of a success.
In fact, let’s take a larger state, like the state of France. About 67 million people make up the population of France. That is slightly more than the combined population of New York State and California. They have implemented many of the same socialist measures, but the financial difficulties are more than problematic. The liberal leaning The Economist even stated that the French have not balanced their books since 1974! As of 2012, their public debt is at 90% of GDP and rising. In contrast, the United States public debt in 2016 stands at 75% or so. France is hardly a success story. French unemployment is high, not falling lower than 7% since the 1970’s. Today, France has an unemployment rate of 9.64%, with projections lowered to 8.8 by 2020. Denmark’s unemployment rate today is around 4.3. The United States you say? 4.4% Not bad, according to statistics and a population that is almost 5x that of France, and 60x larger than Denmark.
Let’s talk taxes. Denmark’s tax rate currently stands at 55.8% on personal income taxes (although the effective tax level is around 70% when sales tax is factored in). France? 50.2%. The United States? We are on a graduated scale with 10% the lowest and 39.6 the highest. We compare quite favorably to both, in fact, better. These statistics are for personal income taxes, not counting corporate taxes or sales taxes. In fact, sales taxes are much higher in both nations than the United States. Just a few short years ago, in an attempt to generate more income, France imposed a 75% tax on the wealthy but was forced to drop it due to many wealthy leaving, being seen as anti-business, and a backlash of non-support from a majority of French voters. Even the new French President, Macron, who was an economic advisor to Hollande, said that France was “Cuba without the sun.” (The Guardian – Dec, 2014)
The biggest problem, though, and why socialist policies cannot work here, and really do not work anywhere is simple, basic, economics. Expenditures will always outpace income, especially in a place like the United States in which there are, conservatively 325 million people, a large percentage of which pay nothing into the system. In fact, CNBC figured that 45% of families do not pay taxes at all. Even if a socialist style government were to be implemented, that 45% has to pay or there simply will not be enough money to make the system work. The fact is that there will never be enough money, ever. Hey, if Denmark is struggling, and we know that France is struggling, what do you think is going to happen to the U.S.?
Is Denmark really the happiest place in the world? Not any longer due to high taxation rates. In fact, Sweden surpassed them in that category, and even they are struggling at the moment. Why? Like all European nations, a significant influx of migrants who are taking advantage of the rather generous welfare system in all three nations (Denmark, Sweden, France) are not putting anything into the system, thereby requiring more public money to cover the costs. This is taking from Peter to pay Paul essentially, and the bank is running dry. The great argument that immigrants pay into the system is largely a fallacy. The amount of money that illegal immigrants pay into the system via taxes in no way covers expenditures. Consider Douglas Murray’s book, The Strange Death of Europe: Immigration, Identity and Islam. He states that, “Anybody can see that a family of people who arrive for the first time in their adopted country and who have never paid into the system are at the very least going to take some time before they have paid in as much in taxes as they will have taken out in housing, schooling, welfare benefits and all the other advantages of the European welfare state.” (Murray, 854). There is a significant lag period, one that may or may not be made up after a few generations, and with the amount of unemployment on the rise, the chances are that it will not be made up.
When numbers come in that are so large they cannot or will not assimilate, take but do not put into the system, the system will fail. It is like trying to dig a hole in the sand.
To date, things are beginning to change. Denmark, for example, passed a law that allows the government to seize asylum seekers valuables in order to force them to pay into the rather generous welfare system. The law also serves as a deterrent for migrants who are looking to take advantage of the system. Items like wedding rings, family portraits and things of sentimental value are exempted. The idea here is that there is no free ride, especially because the Danes have been quite homogeneous historically, but more importantly, they simply cannot afford to allow the free riders. By the way, it is not just Denmark, but Sweden and Norway have also significantly tightened their borders as well.
Denmark has also not significantly increased its people’s life span since the 1970’s and ranks near the bottom of the OECD (Organization for Economic co-Operation and Development) comparison of nations and health care. It is a well known fact that wait lists are rather long for both examination and surgery as the lack of competition means there is no urgent need to be customer oriented. Government central planners triage patients, determine who qualifies for free college and similar programs.
The point of this piece is this. First, Denmark is no haven of happiness, and in fact, statistically, the United States is a better place both in terms of taxation and opportunity. Denmark was built on a free market, not socialist controlling principles, but have largely abandoned those principles. Second, socialist policies, while warm and fuzzy and seemingly moral, cannot succeed in the long term, especially when a flood of immigrants are added. No place has done it successfully. No place, without incurring massive debt which will have to be repaid at some point.
Economic prosperity will never go on forever, and the ability to cope with the downturns are simply not built into a socialist system. The numbers simply do not support such policies, especially when newcomers are added that largely do not put anything into the system. They certainly have not supported France, Denmark, or even Sweden, the other nation that people like to think is some sort of socialist haven. Swedish unemployment for the demographic 18-24 is 24%! That towers over the 12% for Denmark and even the 13.4% for the United States (The male population for both…females are actually less for all three-in fact, female unemployment is less for most European nations…gender bias?).
The only way socialist policies can work is if everyone paid into the system, and everyone was working. A smaller nation like Denmark once was such a place, but as has been demonstrated, expansion of social programs decimated the once rich nation. Benefits were cut back, structural reforms were added, and the “generosity” of the state was also reduced. The solution? Free markets, expansion of trade, and self reliance, the very ideas that make up capitalism, and the very ones that Denmark championed after World War II.