Is There Nothing Rotten in Denmark?

A propos of Morning’s Minion’s post last week on unemployment, I thought I would link to this post from Scott Sumner’s blog Money Illusion. I found the post to be a fascinating read, though it is quite long and hard to excerpt or summarize. Sumner notes that “countries with a high level of civic trust (such as the Nordic countries), tended to have generous unemployment compensation and fewer restrictions on firing workers, and countries with less generous benefits tended to have more rigid labor laws.” Basically, the idea is that people are more willing to give generous welfare benefits if they trust that they won’t abuse them, and this same trust translates into a trust that employers won’t abuse their discretion when it comes to hiring and firing.

Sumner then goes on to note that countries with high levels of civic trust were also among those that moved most quickly and most decisively towards freer markets after 1980:

Between 1980 and 2005 only New Zealand moved toward free markets more rapidly than Denmark. My interpretation is as follows. Free market reforms threaten to erode rents earned by various special interest groups. Thus after 1980 these reforms were more likely to occur in countries where the civic culture is more oriented toward the common good. (In other words if you hear that culture is “tribal,” or that “family comes first,” it’s economy is likely to have statist economic policies.)

There’s a lot more there, but I suppose that the above should be sufficient to pique the reader’s interest or thoroughly enrage him, as the case may be.

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What Are Your Thoughts?leave a comment
  • I’m just glad the US doesn’t have statist economic policies. Boy, we’d be in trouble now !

  • Now I know who you remind me of, Blackadder! The chopped-up Monty Python knight yelling “It’s only a flesh wound!” 🙂 God rest ye merry, gentleman, the USA will never stop screwing regular people, so your worries are baseless =o) Eventually people, and I use the term loosely, will vote back in Republicans and pillage and plunder will have a renaissance. If not Sarah Palin, than Trigg or Track, heck maybe Joe the Plumber.

  • Br. Matthew Augustine Miller, OP

    Consider my interest piqued. Thanks for the link BA.

  • blackadderiv

    I’m just glad the US doesn’t have statist economic policies. Boy, we’d be in trouble now

    Well, the US does have statist economic policies, though admittedly they could be worse.

  • Is capitalism without capital, say those 1:35 deals, even capitalism, btw ? Shouldn’t that be relegated to Atlantic City ?

  • Fascinating article.

    If I’m taking him correctly, it would seem that he’s arguing that the same cultural instincts result in people being both unwilling to take unfair advantage of government social programs and also unwilling to pursue business policies which result in those at the very top of the pyramid making off with a disproportionate share of the wealth created. It’s this sense of general responsibility and fair dealing which results in both generous social programs and very free markets being embraced.

    I find that pretty convincing, and also a laudable end state. Though I can’t help feeling that such a culture is probably a hard thing to attain if you don’t have it already — and potentially also is rather fragile.

    It would seem to reenforce the Robert Novack observation that capitalism can only flourish in a society with strong moral principles.

  • blackadderiv

    Yeah, the racial homogeneity issue occurred to me when I read Sumner’s piece as well. The interesting thing is that, if Sumner is right, then a lack of racial homogeneity within a country not only makes it harder to set up or expand a welfare state, but also makes it harder to reduce or dismantle one once established.

  • “capitalism can only flourish in a society with strong moral principles.”

    So, nowhere, in essence. 🙂

    It should be obvious that safeguards are needed to protect the weaker from the stronger to some degree. Exploitation is the basic human condition, but it can be Euro-style, you get wined and dined first or US-style, where you were “asking for it”. It also should be obvious that people with a gambling problem should not be given free reign over world finance and that a 1:35 ratio belongs at the roulette table.

  • blackadderiv

    capitalism can only flourish in a society with strong moral principles.

    I would put it a little differently. At whatever the level of virtue of a society, a society is likely to do better if it has largely free markets than if it does not. This, however, is not to say that the flourishing of a society depends a great deal on the virtue of its populace. Capitalism won’t work as well in a society where people are rotten, selfish, knaves as it will in a society of kind, conscientious gentlemen. But if you have a society full of rotten selfish knaves, putting a small group of rotten selfish knaves in charge of everything doesn’t strike me as being a good idea.

  • Any society has a small group of rotten selfish knaves in charge. The difference between Bush and Obama, e.g., is that the former is insane whereas the latter has a sense of reality and opportunism. Opportunism is good, it’s the true believers a la Bush that ruin everything. In the end, Democratic knaves are less likely to start wars and screw regular people. It should be pretty clear now that Republican policies couldn’t be any more disastrous. Eightballing highrollers with a penchant for war and piety.

  • blackadderiv

    Any society has a small group of rotten selfish knaves in charge.

    Not quite. Any society may have a small group of rotten selfish knaves in charge of the government (though I think even this tends to vary). Mercifully, however, in a free society the people in charge of the government are not really in charge, however much they might want to think so.

  • That would all depend on what you mean by “wars”, “screw” and “regular people” now wouldn’t it.

    Are you trying to think at all with these comments, Gerald, or is this some sort of absurdist rhetorical performance art where we should leave you to your muse?