The Danish welfare model, lauded and emulated by lawmakers, executives and union bosses from around the world, has lost some of its sheen.
Denmark has lost its place among the world’s most competitive, richest and best countries to live in, and as a result the ‘Danish model’ is forced to adapt or perish.
In a matter of just five years, Denmark has fallen from its second-placed ranking as Europe’s most competitive country, ranked by European business school IMD, to seventh place in 2012, behind Germany, the Netherlands, Sweden and Norway.
The fall is more than just bad news for companies as it also undermines the foundation of Denmark’s open, progressive welfare state. The situation calls for immediate action to change the way our society is organised. Lawmakers, employers and employees all need to chart a new course if Denmark is to regain its position as one of Europe’s most competitive countries.
We, the Danish executives living abroad who make up the Copenhagen Goodwill Ambassador Corps, and our partners have, with help from IMD, Berlingske newspaper and the Danish Industry, compiled a white paper that presents specific recommendations for what Denmark needs to do to improve its competitiveness.
Among our recommendations is a call to rethink the Danish model. It is high time that we realise that we’re not as competitive as we think we are. We can’t compete with developing countries on wages, but we should be placing more focus on research and development and on high-quality niche markets. It is here that Danish companies perform best, and it’s here where they can earn most.
Doing that requires us to place less emphasis on formal education and instead encourage life-long learning and the development of skills like critical thinking and creative problem solving. We need to ensure that ‘untrained’ workers become a thing of the past. One way this can be accomplished is through a combination of on-the-job training and classroom learning. This would provide individuals with the first steps toward full qualification.
Improving competitiveness also calls for rethinking the job market as a whole. We can no longer justify retiring after working 30 years when life expectancy is approaching 80 years, and many live to be over 100. People need to work for 40 years or more, regardless of how long it took them to finish their studies.
We can’t afford anything less.
When it comes to taxes, the focus shouldn’t necessarily be on our tax rates. Taxes are what we all pay to keep the welfare state running. What matters is what we get in return for our taxes.
Next, we believe that Denmark should adopt the concept of social capitalism, in which individuals have a greater personal interest in the competitiveness of businesses and public sector institutions.
Finally, the public sector needs better management. This can be attained through governance models that clearly delineate what elected officials are responsible for and what non-elected public officials are responsible for. This can help streamline bureaucracy, reduce political meddling and improve employee efficiency.
Rethinking the Danish model is one of the five recommendations we present in our white paper. The others include:
A new vision for Denmark: We need to involve companies, individuals and all other elements of society. Doing so requires explaining why reforms are the way forward.
Improve Denmark’s image: Denmark needs to be more visible in the global economy, and it needs to entice more consumers to purchase our products, more investors to put money into our companies and more tourists to visit our country. But it isn’t enough just to be more visible; Denmark needs to be a valued brand.
Better support for entrepreneurs: Denmark needs to make it easier for private companies to establish themselves and expand their operations. Examples of barriers we see in the way of this include: taxation, administrative burdens, a lack of venture capital, and a lack of collaboration between start-ups and established companies.
Inspiration from abroad: Denmark needs to be better at attracting new foreign workers and keeping the ones who already are here from leaving again. We need to be a land of opportunity for skilled specialists and entrepreneurs.
We have written the white paper because we, in the first place, are deeply committed to our country and, in the second place, because can see that there are lessons to be learned from the countries where we live and do business. We wrote the white paper as Danes and as businesspeople. We are not politicians.
The white paper and its themes were developed by us, and its recommendations are our own. Political, commercial and personal interests played no role in their formulation.
How our recommendations can become reality will depend on the decisions elected officials make. We suggest they begin by starting with a reform of the ‘Danish model’.
The white paper is just the first step, and the goodwill ambassadors will gladly take part in the next step as well. Restoring Denmark as Europe’s most competitive nation is critical for the survival of a welfare state that Danes want.
Martin Manniche lives in the US and is the founder and chairman of Greenwave. Martin Roll lives in Singapore and is the managing director of Venture Republic. Waldemar Schmidt lives in Switzerland and is the former managing director of ISS.