Denmark Is No Proof that Socialism Is GoodBy
There seems to be a new (perhaps a recycled) argument about the greatness of socialism circulating around these days. I’m not sure what brought it forth, but I suspect it all started recently after Oprah did a profile of the country of Denmark.
Denmark, as you may know, is a country with quite a lot of social programs. And so the argument goes: Denmark has a lot of socialism and is a successful country, therefore socialism is good.
There are two main problems with this argument:
1. Is socialism the cause of Denmark’s relative success? Or are there other more significant contributing factors? (Answer: Yes there are.)
2. Is Denmark really such a smashing success? (Answer: No, it’s not.)
Let’s look at problem #1:
Denmark’s population consists of no more than two guys named Bjorn for crying out loud! Yet people are so ready to use it as a general example with comparisons to the U.S.
Thought Experiment: Let’s just try Denmark’s policies in the U.S. and see how it all works out… will it work out the same way?
Denmark is a tiny country with a homogeneous society, which has been settled in the same place for many generations. It’s of a specific European culture and ethnicity, and has a uniform mindset with strong collectivist tendencies that look down upon extraordinary success.
Now, *WITH SARCASM* I can’t possibly imagine why similar collectivist welfare policies won’t work the same in the U.S.?
The United States, in contrast to Denmark, is a huge country with an extremely diverse population. It has very large population segments originating from very poor 3rd world countries, and a much more individualistic mindset. Therefore, any socialist program implemented in the U.S. has a much greater potential of becoming an unsustainable burden on (the productive part of) society.
Comparing Denmark to the U.S. is essentially equivalent to cherry-picking the best working tiny part of European socialism and facing it off with the whole U.S. This is like taking stats for just American Jews, for example, and comparing those to stats of Europe as a whole. Who do you think is going to come out ahead?
And now for problem #2:
Is Denmark really that successful? Despite its clear cultural advantages over the U.S. (from the perspective of making socialist policies work), and its “cherry picked” tiny size, it’s far from being a clear winner in standard of living and economics… to say the least!
The arguably most successful part of European socialism isn’t as great as many make it out to be.
Here are some stats:
The average (2007) full time wage in Denmark is $39,143. In the U.S. it’s $49,483. 26% more. (Source: Wikipedia)
It is also true that in the U.S. the average worker works 25% more hours than in Denmark. (Source: Wikipedia) So one may argue that most of the increase in earnings is due to more work and hence less free time. However, it’s also indicative of greater opportunity for full employment or more work if one should choose to. And furthermore, the total household income in the U.S. is more than that of Denmark’s over and above the 25% increase in working hours…
The average (2004) household income in Denmark is $22,524. In the U.S. it’s $32,195. 43% more. (Source: Wikipedia)
In Denmark people receive more services and assistance from the government than they do in the U.S., however, they also pay WAY more taxes, and material things are WAY more expensive.
The income tax in Denmark goes up to 63%, the highest rate in the world. (Source: Wikipedia) And don’t think that it’s only a few rich people who pay that tax rate. The highest tax bracket in Denmark starts at 347,200 DKK (2009), which is about $66,000 per year. (Source: TaxInDenmark.com)
Denmark has a value added tax (a.k.a VAT, which is similar to sales tax) of 25%, again the highest in the world. By comparison, the highest sales tax levied in the U.S. is about 10%. (Source: Wikipedia) But it doesn’t end there. In addition to the general VAT, citizens are required to part with more of their money for special things the government targets for extra taxation. Cars, for example, are taxed at around a 200% level, making 2/3 of the cost of a car in Denmark go to taxes. This is effectively like paying for a luxury car and getting a compact.
So first the major portion of your income is taken away, and then to add insult to injury, the government makes sure that whatever you can buy with the measly remnants of your money is much more expensive.
Now, with all that in mind, I think it’s instructive to watch Oprah’s profile of “wonderful” Denmark. Notice how when Oprah visits a “typical” Danish family’s apartment, she keeps repeating stuff like, “this is your whole bedroom?”, “that’s your whole refrigerator?”, “this is the whole bathroom?”, “this is the bed?”, etc. Oprah is shocked at how small and spartan everything is. And that apartment is actually rather upscale as far as Copenhagen apartments go.
In addition to the austere, but supposedly happy lifestyle of its people, Denmark is facing long term problems.
The citizens of Denmark are reportedly among the happiest in the world. They are so happy, in fact, that young educated people who have a shot at earning a good salary are leaving Denmark in large numbers to work and earn elsewhere.
They get a government paid education in Denmark, and then leave to work where taxes are lower. How can this possibly be sustainable? This New York Times article describes the ramifications of the problem, which include a skilled labor shortage.