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Mary Rotar, 3^rd year student of the faculty of International relations and geopolitic, Institute of World Civilizations, Moscow

Abstract: This article gives the analysis of the Scandinavian model of the general welfare with a detailed review of the “Danish miracle” that shows that it is possible to govern a state with minimal interference in the state’s economy and to provide social security sector. The peculiarity of the Scandinavian model lies in its exclusiveness, because for a long time all Scandinavian countries stood apart from wars and revolutions and were least affected by their destructive impact. These countries also make the main contribution to the welfare of the state and its inhabitants, and it allows them to succeed in all spheres of human life.

Keywords: Denmark, economic crisis, policy, Europe, eurozone.

Introduction

The first stage of the global crisis, that began in 2008, is a crisis in the global economy. It made itself felt in the United States of America, when the downturn in the US economy pulled the European continent down with it. Despite the fact that a long period of time has passed, the crisis has not been completely overcome. It fully declared itself not only in the United States but also in Western Europe and practically destroyed the entire European economic system. The crisis was also fraught with the increase in the euro exchange rate in the CIS countries, with all the consequences that come with it.

However not all the countries of the European Union can improve the economic conditions. A striking example is: Spain, Greece, Germany, and other countries that depend on the European economic system. The economic crisis in the eurozone and the United States of America is the longest in the entire history of their existence. The main consequences of the economic catastrophe in the world are the impoverishing of the middle class on a global scale, complications in the situation of the unemployment in the whole world, external debts and refugees.

Different analysts explain the crisis in different ways, although they all converge on several main reasons. The Russian economist Kondratyev said: “The economy has its cyclical wave drops and rises.”

The basis of the crisis failures includes:

But not all the European countries had those economic problems. Some of them were like a good example of a perfect economic system.

Scandinavian model of universal welfare, transformation in the conditions of crisis

The idea of equality is not new at all. It goes back to the period of antiquity and is known from the time of Plato in his work “The State”. Plato in his works relied on total justice, thanks to which he extolled his state as an ideal one. His work influenced the time. As far back as in the fourth century AD, Greek society was familiar with the ideas of socialism, which Plato also reflected in his works.

The Middle Ages epoch reveals the concept of social equality in the form of communism among utopian philosophers, including Thomas More. In his idea, he creates a mysterious island – it is a utopia, where there is no private property at all, there is no personal property to hold on to, but there is only society and work, where every citizen must work together and enjoy. Families should share property with their neighbors in order to promote social equality in society, but this idea did not receive strong support.

The new rise of socialist ideas falls on the 19th century and is associated with such well-known names as K. Marx and F. Engels. Although basically Marx is the main acting figure in the development of ideas of the socialist movement, therefore he was the main influence on the minds of mankind. His vision went beyond the usual society. He believed that everything that preserves the features of the former does not give rise to communism. The theory recognizes the system of equality of labor spent, depending on how much time and effort the manufacturer has spent on manufacturing products and they are related to wages.

Time passed, but the capitalist society of philosophers did not develop, and capitalism gained momentum, although the ideas of thinkers influenced capitalism, thereby giving it development in the new direction, which included socialism and positive principles of communism ideas.

In modern Western European countries, the theory of socialism becomes an integral part of the life of the capitalist system, in which a materialistic view of things, earning money and running a business becomes impossible without respectful treatment of the population directly related to the further enrichment of resources created through the use of human labor. There was a reassessment of values: from the enslavement of an employee and a businessman by the top of capitalist society to respect for an individual who has his own needs for social support, economic stability, and ensuring the future well-being of the state.

Social guarantees provide the working class and incompetent population with a “safety cushion” in the world of money, where there are no guarantees and confidence in the future. Although the concept of “capitalism” is already implemented on a different, higher level, this is why many economically advanced powers unobtrusively demonstrate their “economic miracle” by example.

The formation of a special model of economic development should be in the developed world points of an economic oasis, which is distinguished by a more efficient system of managing economic and economic resources that can withstand the changes taking place in the global economy, which should result in the emergence of various models of the economy and market. One of the most successful of these models is the Scandinavian model of general welfare. On the world stage against the background of world economic confusion, the Scandinavian countries easily overcome the economic crisis. These countries are Denmark, Finland, Sweden, Norway and Iceland.

The Scandinavian countries show by their example how to manage their own resources to ensure economic stability without undue influence of politics. The key difference of the Scandinavian model is that many already call this model modern socialism, which differs significantly from the model of the 70’s.

To date, the Scandinavian countries have long caught up with the United States in terms of the level and quality of life, and health care and education are considered the best in the world. With the absolute freedom of the private sector, the public sector still plays an important role and is an essential part of the Scandinavian miracle. The main feature of the transformation model is the dominant role of the state in the socio-economic activity.

The uniqueness of the Scandinavian model lies in the fact that for a long time countries stood apart from wars and revolutions, and therefore were least affected by the destructive impact. In the thirties of the last century the Social Democrats came to power in the Scandinavian countries. They set a course for a market type of economic activity, including the entire degree of protection of the population at the same time. Consequently, we can say that the Scandinavian economy is a mixed type of economy with the overwhelming role of private property and the constant participation of the state.

Danish miracle

From January 1, 1999, the Danish krone is tightly tied to the euro at a ratio of 7.46038: 1 and free to move in a narrow corridor (no more than 1%). Such a pegging requires the Danish government to constantly have free reserves in euros in order to keep the national currency rate in a given corridor if necessary. In such circumstances, the decision of Denmark to refuse to lend in foreign currency looks pretty risky.

So, according to the McKinsey Global Institute, the sovereign debt of 47 countries leading in terms of already existing debt increased from 142 trillion dollars in 2007 to 199 trillion in 2014 (40% in 7 years!). Over the same period, total global debt increased from 269% of total GDP to 286%.

Such a dynamic cannot but cause concern, since it is commonly believed that during these very years there was a “deleveraging” in the world economy – a massive decrease in borrowed funds.

What is striking, however, is not so much the deliverance of Denmark from uncontrolled foreign currency debt at a time when the whole world is moving in the opposite direction, but the social and economic consequences of this step within the Scandinavian country itself!

The fact is that a sharp reduction (especially complete liquidation!) Of external sovereign debt dependence was almost always accompanied in history by a catastrophe both for the national economy and for the quality of life of citizens of the country who risked conducting this questionable experiment.

As an example, we can recall the socialist Romania of the 70—80s, who first collected debts, and then decided to return them all at the expense of the proceeds from the enterprises, and then burned them out.

The more striking is the background against which the Danish Kingdom liquidated its sovereign foreign currency debt:

– according to the World Happiness Report, published by the UN and taking into account such indicators as real income per capita, level of social protection and support, life expectancy, quality of medical care, freedom of life choices and corruption, citizens of Denmark share with their neighbors Norwegians first place in the ranking of the happiest inhabitants of the planet;

– The unemployment rate is two times lower than the average for Europe;

– The lowest social equality indicator in the world.

– The lowest level of corruption in the world;

– First place in the World Bank Ease of Doing Business rating (ease of doing business);

– The highest sovereign credit rating (in addition to Denmark, AAA has a rating of only 10 countries: Australia, Canada, Germany, Hong Kong, Liechtenstein, Holland, Norway, Singapore, Sweden, Switzerland).

Parade of models

In Denmark, a unique model of the structure of society and the economy is being implemented, which is different from the notorious LME (Liberal Market Economy) and from CME (Coordinated market economy). The academic name of this model is Negotiated Economy (NE, contractual economy), but another term is better known – the Nordic Model, the Scandinavian model.

Formally, the NE is considered a variety of CME, coordinated by an economic model, but it has a number of fundamental differences. In CME, the idea of corporatism is embodied by the state, which interferes in social and economic relations. In the NE, corporatism is decentralized. The agreements are implemented at the grassroots level: directly between entrepreneurs and workers (or rather, the trade unions representing them), as well as between other civic groups that have their own interests that deserve the attention of society. Everyone has the right to vote and the right to listen to this voice. The state is assigned the role of a mediator, a guarantor of a social contract that provides classical functions (legal proceedings, law enforcement, foreign policy etc.).

The Scandinavian model, as the name suggests, is implemented today in Denmark, Norway, Sweden, Finland, as well as in the Netherlands. This model has a common foundation due to the universal mentality of the Scandinavian peoples, as well as private specificity reflecting the historical evolution of each nation and country separately.

The Danish experience, in my opinion, is the most interesting, because only in Denmark the role of the state is reduced to such a minimum that it is time to doubt the model itself as a coordinated market economy.

FÅ HAR FOR MEGET OG FÆRRE FOR LIDT

The combination of a capitalist economy with the ideals of socialism is by no means Danish exclusive. The same values are shared by the rest of the peoples of Northern Europe, so it is logical to begin our analysis by considering the universal foundation on which any Scandinavian model is built today.

The negotiated economic model is characterized by the following set of principles:

– private property, free market and free trade;

– the welfare state (the so-called Welfare State);

– collective bargaining agreement;

– absolute autonomy of the individual;

– social mobility;

– free education and universal medicine;

– public pension funds;

– minimal market regulation; all-powerful trade unions;

– a very high level of social payments from the budget (Sweden – 56.6%, Denmark – 51.7%, Finland 38.6%); very high level of taxes (Sweden – 51.1%, Denmark – 46%, Finland – 43.3%); the enormous amount of unemployment benefits (Denmark – 90% of the latest wage, Norway – 87.6%, Finland – 85.1%, Sweden – 80%, for comparison, Germany – 60%, in some US states – 27%).

As we have already said, the Danish version of NE is characterized, first of all, by a marginal decrease in the state intervention in the regulation of labor and economic relations. If, say, in Norway, the main burden of providing social benefits lies with the state, in Denmark these functions are delegated to private business by voluntary consent of all parties.

As a result in Denmark a completely insignificant public sector – 30%! However at the same time – here it is a Hellenic measure in action! – Danish pension funds are the responsibility and responsibility of the state since the private form of ownership and control in this area is fraught with a conflict of interest.

Scandinavian countries are characterized by high liberalism in the spheres of public life, the forms of self-expression of personality, culture and art. However, Denmark not only advanced further than others, but always acted as a “trendsetter”: in 1989 it was the first to legislate the notion of marriage without gender. Even tensions in the relations of Western Europe with Islamic fundamentalism, and that arose after the cartoons of the Prophet Mohammed appeared in the Danish press.

Today you can incorporate your own business in Denmark in a couple of hours, and the almost complete absence of customs restrictions and duties on international trade allows the country to firmly hold, as we have already said, the leading place in the Ease of Doing Business rating.

Flexicurity

Flexicurity is a combination of Flexibility (Security, Elasticity) and Security (Well-Being, Security). Such “flexibility” allows Denmark to maintain a balance between a high degree of freedom in the labor market and guarantees of social security for workers.

The condition of “flexibility” (Flexibility) is realized through the right of the employer in the shortest possible time and without a long notice to dismiss any employee who isn’t good for that job. As a result, the Danish business, which is not bound hand and foot by labor obligations, demonstrates the unique ability to quickly restructure the staff, quickly join new projects and at least quickly roll out unpromising initiatives.

Another condition of “flexibility”: the employer has no obligation for the minimum wage. This greatly facilitates the development of a business at the start, when an entrepreneur does not have enough funds to pay salaries, but he can motivate an employee, for example, a share of profits in the future.

Obviously, the “flexibility” that brings so much joy to employers must be compensated for by employees, moreover, it should be done energetically and otherwise the Danish state would have long fallen for the revolution.

Such compensation within the framework of Flexicurity is provided by the second component of the concept – Security (well-being, security).

The Danish state guarantees its citizens for the period of temporary unemployment payment of benefits in the amount of up to 90% of wages. In addition, the state undertakes to provide all the conditions for advanced training or complete retraining of workers.

The synergy of all components of Flexicurity in Denmark was the highest employment rate for women in the world (73%), which, combined with the employment rate of men (80%), created a situation where in almost all Danish families both spouses work full time.

Denmark’s spheres of influence

Recently more and more often doubts have been expressed about the ability of the Danish state to withstand the competitive struggle that has become aggravated to the limit in the era of globalization, and at the same time to preserve its unique system of social security.

In fact, how can you compete in the world market, say, with Chinese products, paying gigantic unemployment benefits?

I suppose the inconsistency of such doubts arises from the erroneous posing of the question itself. The fact is that Denmark is not going to compete with China at all, much less unleash price wars. Denmark has completely different priorities and trumps in the modern world system of labor distribution.

There are at least three such priorities:

– a unique niche for elite products;

– giants of national business, controlling entire sectors of the global economy;

– technological leadership in a number of medical and industrial equipment sectors.

Just as Italy sets global trends in the production of men’s clothing, luxury sports cars and industrial design, France in perfumery, haute couture and nuclear energy, Denmark stands as a benchmark in at least two directions: dairy products (the world’s best milk Ostedmejeri, Lurpak oil, which has enjoyed for 110 years the reputation of the most delicious natural butter of the “premium” category, etc.) and luxury home appliances (Bang &Olufsen).

In addition to elite niches, the competitiveness of the Danish business is ensured by the activity of a number of giant national enterprises:

– A.P. Moller-Maersk, the world’s largest shipping merchant;

– Carslberg Group, the world’s fifth largest brewing company;

– Lego, a manufacturer of children’s toys, deprived Ferrari of the title of “the most influential brand of the planet” in 2015;

– Ecco, a shoe company with a turnover of one and a half billion euros, whose products are sold in 14 thousand retail outlets in 88 countries of the world;

– Arla Foods, the sixth largest dairy concern in the world.

Leo Pharma, which specializes in dermatitis medications, and Novo Nordisk, which set the tone in the treatment of diabetes and related diseases, provide leading positions in medicine.

Finally, the final touch, designed to calm everyone who doubts the prospects of Denmark to endure the globalization. In the world market the country is represented by:

– Grundfos, one of the world’s largest manufacturers of industrial pumps;

– Danfoss, one of the world’s largest manufacturers of equipment for automatic control, hydraulic and compressor equipment, as well as thermal control systems; MAN Diesel & Turbo, the world’s leading developer and manufacturer of diesel engines used on ships and onshore installations;

– Rockwool, one of the world’s largest producers of environmentally friendly refractory, waterproof, vibration and noise absorbing insulation materials based on mineral water.