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Flexicurity, the Danish model and the welfare state

by JakeS Wed Jul 23rd, 2008 at 06:48:50 AM EST

One of the first replies I got to a comment here on ET ran along the lines of "cool, you're Danish, can you do a diary on the Danish social model?" And I've been meaning to do so since then - but never quite gotten around to it. So with no interesting current events in my neck of the woods right now (one of our parties is disintegrating, but hey, what else is new?), I figure I might as well.

The first thing to remember in any discussion of "the Danish model" is that it's actually a Scandinavian model, not an explicitly Danish. It evolved in all three Scandinavian countries more or less in parallel. I don't know about Finland, but I'd suspect that they had a slightly different trajectory because their primary trading partner is and was Russia, while the Scandinavian countries were firmly in the American sphere of influence.

The second thing to remember is that the Scandinavian model is not an economic model. It's a social model. The fact that it provides a number of not insignificant economic benefits - such as flexicurity and built-in counter-cyclical spending - is incidental. Nice, but incidental. Because its justification is fundamentally one of social justice, not economic efficiency.

What is usually discussed in the context of the "Danish model" is the labour market model, because it is the part of the Scandinavian social contract that most obviously increases economic efficiency. But as I argued above, this view is entirely too narrow: The labour market structure is a part of a coherent social contract that has evolved as a whole. It is possible that the labour market structure could be taken out of this context and transplanted into other countries with different overall social models. But it's equally possible that it can't. And we don't know, because it's never been tried.

Keeping these points in mind, we can identify six principal pillars of the Danish welfare state (I'll focus on the Danish because it's the one I know, but most of the conclusions should be applicable to all Scandinavian countries and a lot should be applicable to Finland as well):

Promoted by afew


  1. Free, easy and equal access to child care.

  2. Free, easy and equal access to education (and educational subsidies that you can live off).

  3. Free, easy and equal access to health care.

  4. The labour market system.

  5. Universal pension that one can live off, and reliable care for the elderly.

  6. Reliable public infrastructure.

The purpose of ensuring reliable and free child care is twofold:

First, it enables the emancipation of women in society by relieving them of many of the practical aspects of child care (even to this day and age, there is a significant gender difference in the amount of work put into childcare in Denmark, so anything that reduces the workload in childcare becomes a vehicle for greater gender equality). As a corollary to this point, it also increases class equality, because it eliminates the distinction between those who can afford a nursemaid and those who can't.

Second, it socialises the children. Having the children of the rich and the children of the poor attend the same daycare, the same primary schools, play in the same playgrounds and generally interact helps build inter-class solidarity and helps ameliorate the tendency of the rich and privileged to insulate themselves from reality as experienced by those less fortunate than themselves. Bluntly put, everyone in Denmark should - at least at some point in their lives - have seen, talked and played with both someone of higher social stature and someone of lower social stature. Further, Conventional Wisdom holds that children develop better social skills if they interact with many other children instead of solely with their siblings and parents. I'll reserve judgement on whether the latter part of the socialisation scheme actually works as designed, because I can see some significant drawbacks as well - but let's leave that for another diary.

Free, equal and easy access to education serves many of the same purposes as childcare: It levels the playing field between rich and poor, because there's no such thing as "can't afford to send my kid to college." It integrates different social classes in the same educational system, which helps build inter-class solidarity. And it gives the rich and privileged a stake in the same system that supports the education of the poor and underprivileged.

But it has a separate bullet because it serves another purpose as well: It makes children independent of their parents much earlier than in countries with tuition fees for higher education. Bluntly put, if an American teenager has a sufficiently severe falling out with his parents, he's screwed financially as well as privately, because he just lost the most likely source of funding for college. In Denmark, this is not the case. Not even the most antagonistic parent can financially prevent their child from seeking higher education.

An aside: This is a general theme of many of our social institutions - they provide the individual with the possibility of distancing himself from his family without risking financial ruin. This is one of the reasons that a little red flag goes up in my mind whenever people start talking about family this, family that and family the other. Yes, living in a stable and supportive family is A Good Thing, and society should do what it can to help build (or at least not actively undermine) stable and supporting families. But by making the family financially unnecessary, we have effectively created a two-tiered social safety net where the state helps those whose families can't or won't provide the necessary aid. And I cannot help but think that the (primarily conservative) focus on the family has more than a little to do with a desire to yank away the second tier of this net.

The benefits of universal health care are well known and we need not dwell excessively on them: It ensures that illnesses are not a financial catastrophe for the afflicted, it ensures (like universal education) that the rich have a stake in the system that supports the poor, it takes the pressure off families because they are not pressed into service as improvised nurses when one of their members falls ill, it maintains the health of the population and it makes people less dependent on having their own social safety net, by taking expenses and complications from the private into the public social support system.

I will not cover the structure of the labour market here, because doing it justice requires a diary in itself (which can be found here is already half written - I just decided to cut it out of this diary).

A public pension scheme that one can live off serves many of the same purposes as the other institutions - it reduces the gender gap (because women are still working less and for lower wages, so their employer pensions and private wealth are generally lower), it reduces the reliance on the family as the primary social safety net and it ensures that nobody has to work literally until he dies of old age, irregardless of their social class.

The benefits of reliable public infrastructure should be crushingly obvious to all regular readers of this blog. But it deserves mention, if only because maintaining a reliable public transit system (and the road network) is one of the biggest items on the finance bills and absolutely essential for the smooth functioning of Danish society.

So far, so good. But so far it's been about ambitions and goals for constructing a welfare state. What's the actual state of the welfare state in Denmark?

The answer is, generally, very good, but going in the wrong direction.

1) Child care: Relatively inexpensive - it was never quite free, but the rates have been going up lately. The quality is quite high, but deteriorating as employees are cut and wages stagnant. However, the most worrying trend is the segregation of upper, middle and lower class (and the even worse off class formed by some groups of immigrants...).

  • This segregation is based partially on ghettoisation: As people became more mobile, they congregated according to their wealth, income and general social standing. Thus, we have entire municipalities with nothing but upper-middle-class neighbourhoods (well, under the old municipal structure we did - with the newer, bigger ones, maybe not) and municipalities with mostly or only immigrants, unemployed and people in low-paying jobs with little in the way of job security.

  • The other driver in this segregation is the fact that the rich and privileged (and, worryingly, increasingly the middle to upper-middle class) simply remove their children from public daycare and public schools in favour of private daycare and schools.

  • Segregation risks undermining the inter-class solidarity that derives from common childhood experience - and of course it also means that the rich and privileged can casually watch as the public childcare system is gutted, safe in the knowledge that their children won't suffer for it.

2) Primary and secondary education is much the same story: Lower budgets, fewer employees and so on and so forth. So far, tuition fees for primary and secondary education are not on the table - or even on the horizon - but it is a running battle to keep higher education free and accessible.

  • All the same segregationary trends that are mentioned for childcare hold true for public schooling as well, and given that the formative years of most people is in secondary school and higher education, the consequences of class-incestuous educational environments are potentially far more disastrous.

  • As an aside, I am not against private schools or private daycare - they provide breathing room for people who have different ideas about the hows and wherefores of education and child care than the government, and that is valuable to any society. But I think it is a sign of trouble when private schools are preferred purely because their pupils have a better record of academic accomplishment. That is a sign of failure in the public school system.

3) Health care is a mess, in no small part due to the fact that it is in many ways best viewed as several different systems that have evolved separately, but just happen to have health as a common denominator.

  • Dental care is pay-per-use with small or non-existing subsidies.

  • Primary care is free and accessible, although there have been rumblings about instituting fees for doctor's visits.

  • Hospital care is free in public hospitals, but increasingly we are seeing a trend towards private hospital care and private health insurance. This wave of privatisation by the back door was initiated when the Fogh 1 government decided to make health insurance tax deductible. Since most health insurance is employer-paid (and usually falls in the category "nice to have" rather than "need to have"), the emergence of a privatised health care industry and health insurance industry has passed virtually without public debate, providing the infrastructure for further privatisation down the road. Nobody ever said the Danish liberalists were stupid. Irresponsible ideological fundamentalists, yes, but not stupid.

  • Medicine (both over the counter and prescription) falls in two categories: The medicine you get at the hospital counts as part of the hospital treatment and is thus free, while the medicine you get out of hospital does not, and thus you have to pay for it (I did say the health coverage was a mess :-P). Prescription medicine is subsidised to various extent.

  • Cosmetic surgery and such things are privately operated and mostly user-paid.

  1. The state of the labour market system will be covered in the diary about the organisation of the labour market.

  2. The public pension system is a bad joke. I suppose that it's not that bad compared to much of the rest of the world, but measured against the ambition that everyone should be able to live off a public pension alone, it is a miserable failure. The principal source of pension funds for most people are the employer-paid pension schemes and the two or three payroll taxes that are directed into private accounts (but managed by a quasi-public pension company). But if you have only the public pension, you have to turn every coin over in your hand before spending it (even worse: If you haven't lived long enough in Denmark, you only get a fraction of the public pension. Then you're just plain screwed).

  3. The public infrastructure is not bad. We have fairly comprehensive intercity rail coverage and good bus networks. We have a good public water supply (I've diaried on that subject in the past) and our road network is in good shape. Now for the bad news, which is all too familiar:

  • Mass transit is being heavy-handedly outsourced - with all the attending cost increases and loss of coverage and reliability

  • We're building highways when we should be building railroads

  • Light rail coverage in our major cities is either non-existent or a bad joke

  • Renewable energy was shafted by Fogh 1 (I think it was Crazy Horse who very aptly called Anders Fogh the Don Quixote of the Danish wind industry...)

  • Our railroads have not been adequately maintained for the next best thing to thirty years (it took a complete breakdown in the summer of 2006 to finally get the politicians going, and even then restoration is spotty and focuses on repairing the cracks (literally: The cracks) in the rails)

  • A good third of our rail lines are still not electrified(!)

And there's probably a couple of other things that I've forgotten.

In summary, we have a strong set of institutions and social support systems, but even the best society can only withstand irresponsible governance and market fundamentalism for so long. And we're going in the wrong direction with worrying speed.

- Jake

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I'll put up the labour market and flexicurity part later today or sometime tomorrow.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 21st, 2008 at 08:19:58 AM EST
The second diary is up now and can be found here.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Jul 22nd, 2008 at 01:05:31 PM EST
[ Parent ]
... one moderately important point: The whole scheme is financed by a fairly steeply progressive tax structure (although since one of the Nyrup cabinets, we haven't had a wealth tax).

This is a point that I very much doubt can be cut out of the Danish model, no matter which other parts are left by the wayside: If you remove the progressive taxation, the whole system - as well as the underlying social contract - would collapse.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 21st, 2008 at 09:24:31 AM EST
There are some minor differences between the Scandinavian and Finnish models, but basically they are the same both historically and in current trends.

Rail investment is one of the larger differences. Fast Pendolino trains run between the business cities, and the amenities for business passengers - support for laptops, space for meeting, coffee, sandwiches, newspaper etc brought round on a trolley to your seat etc etc make this an alternative that more and more are choosing. A business ticket costs about the same as a tourist flight to the same destinations, except for those in the far North, where the faster flights remain popular.

It costs me 9.60 € for instance to rail it to Lahti from my nearby station of Kerava. That's a bit under 90 kms. I have a client there, and have only driven once.

You can't be me, I'm taken

by Sven Triloqvist on Mon Jul 21st, 2008 at 09:29:44 AM EST
A good third of our rail lines are still not electrified(!)

You must mean mainlines. Overall, it's much more still on diesel: only around a quarter electrified.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Mon Jul 21st, 2008 at 10:27:35 AM EST
Main lines, of course. To be truthful, I just looked at my mental map and decided that the line between Aarhus and Middelfart was justabout a third of the net. Well, the main line net. But I wasn't aware that it's quite as bad as you say.

OTOH, it's a simple exercise to electrify, because on much of the non-electric parts of the main line, the masts are already there - they just need the copper.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 21st, 2008 at 11:06:11 AM EST
[ Parent ]
The masts already there - do you mean the telegraph lines? But catenary needs something stronger, and with a given spacing. Also, the copper itself, and the electrical substations are important cost factors. But anyway, if Switzerland could electrify 100%, so can Denmark.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Mon Jul 21st, 2008 at 12:19:13 PM EST
[ Parent ]
I mean the mast you hang the lines in. Dunno what they're called, but if you look out the window when you go by train in Jylland, you'll see that there are poles next to the track that look suspiciously like there ought to be wires hanging on them - which is because there ought to be, but for some reason the wires never got up...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 21st, 2008 at 06:47:32 PM EST
[ Parent ]
we are seeing a trend towards private hospital care and private health insurance.

What is the framework for that? Are hospitals just privatised without much ado, or are private entrepreneurs allowed to build new hospitals, or is just care in hospitals privatized (turning public employees into contract workers; also see the top-level comment in my Slovakia frontpage story)?

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Mon Jul 21st, 2008 at 12:23:32 PM EST
The second and third. The actual medical staff isn't being outsourced, and the hospitals aren't being sold off, but damn near everything else is being outsourced, and the medical staff is jumping ship to the new (or expanded) private hospitals because the public wages can't keep up. The problem in Denmark isn't a shortage of buildings, it's a shortage of qualified doctors (because of another irresponsible government policy - namely cutting costs in medical education by not admitting as many medical students...).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 21st, 2008 at 06:50:34 PM EST
[ Parent ]
JakeS: because the public wages can't keep up. The problem in Denmark isn't a shortage of buildings, it's a shortage of qualified doctors (because of another irresponsible government policy - namely cutting costs in medical education by not admitting as many medical students...).

Are you saying that if there were more medical students graduating, there would be more doctors working, which would reduce doctor's incomes in the private sector, therefore allowing medical wages in the public sector to compete better against those in the private?

... all progress depends on the unreasonable mensch.
(apologies to G.B. Shaw)

by marco on Mon Jul 21st, 2008 at 07:11:19 PM EST
[ Parent ]
Yes and no... If more doctors graduated, there might be enough doctors to improve quality in the public sector. Private sector wages might still be higher, but the brain drain out of the public sector would have less serious consequences in terms of service quality and stability.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Jul 22nd, 2008 at 09:49:09 AM EST
[ Parent ]
It's worth adding that private competition in health services tends to cause problems because they find ways to engage in cream-skimming.
by Metatone (metatone [a|t] gmail (dot) com) on Tue Jul 22nd, 2008 at 10:57:19 AM EST
[ Parent ]
There is a similar limiting of the number of medical students in France, and the reason is not only to cut education costs, but also to reduce the supply of medical knowledge, so as to ensure its high price...

Un roi sans divertissement est un homme plein de misères
by linca (antonin POINT lucas AROBASE gmail.com) on Tue Jul 22nd, 2008 at 04:42:52 AM EST
[ Parent ]
May I warmly recommend [sorry if anyone posted it already]:

http://www.esping-andersen.com/ - see recent articles to begin with, like: http://dcpis.upf.edu/~gosta-esping-andersen/materials/welfare_state.pdf

Also: http://en.wikipedia.org/wiki/G%C3%B8sta_Esping-Andersen

Of his books, see: "Politics against Markets". Princeton: Princeton University Press, 1985

Others, like Giddens in his "Europe in the Global Age" [and many other books of his...], added to the story but E-A is the benchmark!

Cheers!

Enlightenment is man's emergence from his self-incurred immaturity I. Kant

by gorski (goggysan at yahoo dot co dot uk) on Tue Jul 22nd, 2008 at 06:28:08 AM EST
This is one of the reasons that a little red flag goes up in my mind whenever people start talking about family this, family that and family the other.

I would say you are definitely on track attributing this to "conservative" desires to maintain patriarchal control of the family. Any sense of the prevalence of patriarchal family structures in Denmark and of the all too often  resultant authoritarian personality type.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Jul 23rd, 2008 at 09:38:47 PM EST
Depends on where you look and how hard you look and what your definition of "control" is. If you go to fundie-land on the west coast of Jylland you'll probably find some - ah - traditional family structures. If you go to the ghetto and look at people from backwards countries, you'll probably find some there as well (although probably fewer than the smut press would have you believe...). If you look hard enough, you'll probably find some such relationships anywhere, but my gut feeling is that they are less common outside the ghettos and east of fundie-land.

That being said, there is still very much a glass ceiling for women career-wise, they still take care of a disproportional share of the housework and childrearing and generally have lower wages and less prestigious jobs. We have almost as many high-profile female politicians as male, but I'd guess that if you look at all our MPs most of them will be male (and I strongly suspect that it's even worse in municipal politics). That's just a guess, though.

But I have the impression that gushing about "family values" in Scandinavia is less about restoring or maintaining the patriarchy (outside a few fundie circles) than about shifting responsibility for maintaining a social safety net from the state to the family.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jul 24th, 2008 at 01:27:32 AM EST
[ Parent ]
but I'd guess that if you look at all our MPs most of them will be male (and I strongly suspect that it's even worse in municipal politics).

At least for MPs, according to IPU's table, Denmark is 7th in the world with 38.0% of MPs female.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Thu Jul 24th, 2008 at 02:46:50 AM EST
[ Parent ]
Compare it to "developing countries" like Germany (Bundestag 31.6%/Bundesrat %21.7%); and backward countries like the UK (Parliament 19.5%/Lords 19.7%), France (Assemblée nationale, Sénat both 18.2%), the USA (House 16.8%/Senate 16.0%) or Hungary (parlament 11.1%)...

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Thu Jul 24th, 2008 at 02:56:23 AM EST
[ Parent ]
And if the Social Democrats manage to not implode before the next election there's a better than even chance that we'll have a female head of government as well as a female head of state :-P

Unfortunately, her politics is pretty awful. But it'll be a nice change to have a government beholden to the SocLibs instead of a government beholden to the fatcats.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jul 24th, 2008 at 03:11:52 AM EST
[ Parent ]
Unfortunately, her politics is pretty awful.

You just put a lot of work into two informative diaries, but I hope you can find the time to write a "status report" about her, the new party(ies), and whatever is the issue of the day presently in Denmark. (Even if domestic issues.)

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Thu Jul 24th, 2008 at 06:24:59 AM EST
[ Parent ]
I suppose I'll do a who's who at some point this weekend or the start of next week. I'll need to read up on the recent news, though, because I haven't been following them as religiously as I used to do before the public radio was contaminated with bizniz and "coaching" programs.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jul 24th, 2008 at 02:22:14 PM EST
[ Parent ]
Jake, a very nice post, thank you. Those 6 pillars resume quite sharply why I'm on the Socialist camp and totally loath Liberalism.

I haven't read the labour market post yet, will go there after lunch. About an year ago there was much discussion about Flexicurity in Portugal, after the so-called-socialist government opened the debate on implementing it. Basically folks acknowledged the benefits but refused to pay for it. Liberalism is very strong in Portugal, raising taxes visibly is completely out of reach for any policy maker.

One thing that many people said back then was: "those systems are for wealthy states, we can't afford it".

So what I ask you is this: did Scandinavians built a strong welfare state because they became wealthy states after WWII? Or did they became wealthy states because they implemented a proper welfare state?

luis_de_sousa@mastodon.social

by Luis de Sousa (luis[dot]de[dot]sousa[at]protonmail[dot]ch) on Thu Jul 24th, 2008 at 06:48:11 AM EST
You'll have to ask a proper historian about that, but my impression is that Denmark was not what you'd call "rich" when we began building the welfare state. More than half the homes in Copenhagen still had outdoor latrines in the 1950s, and based on how it seems to usually work in other countries I'd guess that poverty was even more apparent in the countryside.

So it is probably fair to say that Denmark became rich during the same period that we implemented the welfare state. Of course, so did the rest of Europe, even though the degree to which they implemented welfare states of their own varied considerably.

If I had to guess, I'd say that building a welfare state is a net economic benefit, due to the counter-cyclical spending, improved public health and well-maintained public infrastructure (particularly in an age of increased energy scarcity) - not to mention a reasonably conflict-free labour market.

And this is at least not contradicted by a look at how Europe has developed - of the old West Bloc which started out in roughly similar shape (if anything, Western Central Europe was a bit ahead of Scandinavia), Scandinavia seems to have gotten the best deal, followed by France and Germany, with Italy at the bottom economically. This coincides with the degree to which the countries developed advanced welfare states. Of course it also coincides with a lot of other things, all of which might be contributing explanations (absence of overt CIA attempts to smash the local democracy, to mention just one thing).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jul 24th, 2008 at 03:01:27 PM EST
[ Parent ]
Looks like we are starting to have a test case of how well the US and UK models weather a severe downturn compared to Scandinavian models.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jul 27th, 2008 at 03:58:16 PM EST
[ Parent ]
We already have several. The dotcom crash? Barely noticeable. The Asian Tiger crash? A minor blip. I'm too young to remember Savings and Loan, but I think that was more isolated to the US, right?

In fact, I don't think we've had a really, genuinely serious economic crisis that actually hurt since the oil shock. Which is better than can be said for the US.

But the question was not whether one can hold on to one's riches with a welfare state - the question was whether building a welfare state and getting rich at the same time is possible. And I would say that it is at least no impediment, but that the data is insufficient to honestly claim that it is a significant advantage.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jul 27th, 2008 at 05:07:51 PM EST
[ Parent ]


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