Notes on a Butter Republic
S E E D E D C O N T E N T
Variety of cheeses at a cheese shop in Copenhagen.
Francis Dean/Corbis, via Getty Images
To be clear, I am in no sense an expert on the Danish economy, now or in the past. I only know what I read and can pull out of readily available databases. So this is really about using Denmark as a mirror to hold up to the rest of the world. But it’s an interesting mirror (and much nicer to think about than the outrages at home.) There are, in particular, two lessons I think Denmark can teach us: a hopeful story about globalization, and another hopeful one about the possibilities of creating a decent society.
Blessed are the cheesemakers
OK, as a helpful bystander points out in Life of Brian , it’s a metaphor, not to be taken literally: the blessing extends to all manufacturers of dairy products. The blessing certainly worked in the case of Denmark.
During the creation of the first global economy, the one made possible by railroads, steamships, and telegraphs, the world seemed to bifurcate into industrial nations and the agricultural raw/material producers who catered to them. And the agricultural nations, even if they grew rich at first – e.g., Argentina – seemingly ended up getting much the worse of the deal, turning into banana republics crippled economically and politically by their role.
But Denmark became, not a banana republic, but a butter republic . Steamships and steam-powered cream separators allowed Denmark to become a huge exporter of butter (and pork) to the UK, leading in turn to impressive prosperity on the eve of World War I.
One interesting point about this export surge is that in a way it was value-added production, like the exports of modern developing economies that rely on imported inputs – except that in Denmark’s case it was imports of animal feed from North America that helped provide a crucial edge.
The good news was that this agricultural orientation didn’t turn out to be a dead end. Instead, it laid the foundation for excellent performance over the long run. And in Denmark’s case globalization seems to have been equalizing, both politically and economically: instead of fostering dominance by foreign corporations or domestic landowners, it led to dominance by rural cooperatives.
Why was the Danish story so happy? The Danes may have been lucky in the product in which they turned out to have a comparative advantage. Also, like the Asian countries that led the first wave of modern developing-country growth, they came into globalization with a well-educated population by world standards. They may also have been lucky in the enlightened behavior of their elites.
Anyway, I’m not pushing a universal lesson that globalization is great for everyone; just the opposite. The point is that the results depend on the details: a country can produce agricultural products, be “dependent” by most definitions, yet use that as the basis for permanent elevation into the first world.
And in today’s world, Denmark manages to be very open to world trade, while having very low levels of inequality both before and after redistribution. Globalization need not be in conflict with social justice. Speaking of which …
The non-horrors of “socialism”
A number of people on the U.S. right, and some self-proclaimed centrists, seem totally taken aback by the rise of politicians who call themselves socialist. But this rise was predictable and predicted.
Here’s what happened: for decades the right has tried to shout down any attempt to sand down some of the rough edges of capitalism, whether through health guarantees, income supports, or anything else, by yelling “socialism.” Sooner or later people were bound to say that if any attempt to make our system less harsh is socialism, well, they’re socialists.
The truth is that there are hardly any people in the U.S. who want the government to seize the means of production, or even the economy’s commanding heights. What they want is social democracy – the kinds of basic guarantees of health care, protection against poverty, etc., that almost every other advanced country provides.
Denmark, where tax receipts are 46 percent of GDP compared with 26 percent in the U.S., is arguably the most social-democratic country in the world. According to conservative doctrine, the combination of high taxes and aid to “takers” must really destroy incentives both to create jobs and to take them in any case. So Denmark must suffer from mass unemployment, right?
Yep, Danish adults are more likely to be employed than their U.S. counterparts. They work somewhat shorter hours, although that may well be a welfare-improving choice. But what Denmark shows is that you can run a welfare state far more generous than we do – beyond the wildest dreams of U.S. progressives – and still have a highly successful economy.
Indeed, while GDP per capita in Denmark is lower than in the U.S. – basically because of shorter work hours – life satisfaction is notably higher.
Macro muddles
Despite all this good stuff, there is something rotten – OK, maybe just slightly off – in the state of Denmark. While the long-term performance has been great, Denmark hasn’t done too well since the 2008 financial crisis, with real GDP per capita falling substantially, then taking a long time to recover. In particular, Denmark has lagged far behind Sweden:
There’s no mystery about this recent underperformance. Denmark isn’t on the euro, but unlike Sweden, it has pegged its currency to the euro. So it has shared in the euro area’s problems.
Leaving aside the general issue of exchange rate regimes, this is a reminder that microeconomics – things like the incentive effects of a strong welfare state – is different from macroeconomics. You can do great things on the micro front and still screw up your monetary policy.
So those are my notes on Denmark – plus one more observation: nothing in Danish is pronounced remotely the way the spelling suggests to an English speaker. (The famous astronomer Tyco Brahe was, if I got it right, something like Tuco Brawwww.) The same isn’t true for German. Why did they do this?
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I hate to break this to you Bob, but thinking about Shakespeare would ALSO make you a nerd!
Fearsome indeed...
Who's Shakespeare?
Great article.
My first trip to Denmark was in 1960 and very enjoyable. Over the years I saw first hand how Denmark flourished...My last trip there was in 2000.
Damn socialism.../s
Denmark is in the enviable position of all other European NATO members- they are able to skimp on their military and self defense because the US military is there to ensure their safety. It is easy to be a "butter economy" when you don't have to spend on "guns".
Not to mention it's "whitetopia."
Denmark is like 90% of Danish descent. They have few of the racially related social challenges we deal with in the US. That and they are like the size of Wisconsin.
The more people you get, the more potential problems you have. I love these comparison with countries that basically have zero racial diversity, have basically no military spending and are 2% of our size.
Way to go Krugman. You've outdone yourself once again.
It's amusing to see people twist themselves into pretzels, to avoid learning anything from anywhere.
It's been a while since I heard anyone say that America cannot succeed because there are too many non-Whites.
Well unfortunately the little yarns you've been spinning lately are getting less and less amusing and definitely less informative.
That and/or you seem to be having comprehension issues. One never knows when dealing with a radical left element these days.
C'est la vie Bob ..... keep on spinning baby!
You said
How can that be understood, other than, "America's problems are due to too many non-Whites"?
That not what i’m saying, not entirely but then again you know that. You insist on pushing a disingenuous narrative to further whatever the hell you’re trying to accomplish here.
We’ve had this discussion before Bob, why you still insist on playing your sophomoric mind games, when you that dog don’t hunt with me, is beyond me.
If you are interested in having a sincere conversation i’m more than willing. Otherwise, not interested in the little mind fuck you trying play here.
Quoting one of the great story tellers of our time ....... good day!
"Not entirely"... but at least a significant part... otherwise there'd be no reason to mention it at all.
Your words not mine.
Still playing your sophomoric word games eh Bob? Sadly that speaks to character or lack thereof i'm afraid.
I simply pointed out that more ethnic diversity can clearly complicate the issue. Or in this case clearly makes it less complicated in a country that has little of it.
Do you disagree?
True.
But that's not what you said. You didn't speak of "ethnic diversity", you spoke of race.
Look... I'm not trying to spotlight "you" as particularly racist. On the contrary. Your casual statement about race is significant precisely because you use it so easily.
We are all racists. Every one of us. (Well... maybe there's an exception or two... but I haven't met them...)
We were raised in a society where racism is endemic. We partake of that society. We have profited from our "superior status" since the day we were born.
Unless and until we recognize our society for what it is, we will continue to be accomplice in racial injustice.
I don't disagree that we are all racist to some degree. We are all flawed human beings (except for a couple people here, at least in their minds) so it stands to reason. What i disagree with now is your representation of the definitions or "Race" and Ethnicity." The fact that i used "race" to mean "ethnicity" and as it were vice versa, is entirely appropriate within the context of the discussion. It's not racist. Not in the least. I know its the PC thing to say that it is but it is not.
According to Merriam Webster:
So by definition, they clearly can be used interchangeably. That said it doesn't change the fact that society has tougher challenges the greater the racial diversity the country has. Drilling back to the whole point of my comment, Denmark is simply not a good example of that since they have so little racial diversity.
I would like to agree... but I'm afraid that... you're wrong.
For most Americans, race is tagged by skin-color, and a whole bunch of supposed characteristics are then attached to "race".
An ethnic German is not identifiable visually, regardless of how distant his culture may be from "American standard" (whatever that may be). OTOH, a Black man is immediately identifiable visually, regardless of how close his culture may be to "Apmerican standard".
In order to know a person's ethnicity, a minimum of interrelation is needed. There's no need to know the person to know their race.
Yeah, we don't agree.
Do you know the numbers? Or are you drawing conclusions from... thin air?
I see no reason that I would prefer that over what we have here. I’d like to see the socialism, taxes and government cheese reduced here. Krugman once again fails to represent my position. I actually prefer harsh and roughed individualism over soft socialism.