A Political and Economic Dictionary of Western Europe, First Edition
Denmark is a small Scandinavian state to the north of Germany which has had a democratic constitution since 1849. Denmark is traditionally a neutral state; it stayed out of the First World War in 1914–18 but was occupied by Nazi Germany on 9 April 1940. A resistance movement developed from August 1943 that lasted until the end of the Second World War. In the post-war era Denmark was a founding member of the United Nations in 1945 and joined the North Atlantic Treaty Organization in 1949.
Area: 43,000sq km; capital: Copenhagen; population: 5m. (2001).
A constitutional monarchy, Denmark’s head of state is Margrethe II, who ascended the throne in 1972. The Kingdom of Denmark includes the territories of Greenland and the Faroe Islands which were granted self-government in 1948 and 1979 respectively. A parliamentary democracy, legislative power is vested in the Folketing, the national parliament which has been a unicameral legislature since 1953, when a constitutional reform removed the upper house of parliament, the Landsting. Executive power lies with the government, which since 1909 has been a coalition government. The current government is a coalition between the Liberal Party and the Conservative People’s Party, headed by the Liberal Prime Minister Anders Fogh Rasmussen.
Since 1929 until recently Danish politics were dominated by the Social Democrats, and were based on a culture of consensus. There is traditionally a low degree of conflict between the Social Democrats and other mainstream non-socialist parties; election campaigns have tended to be fought on the issue of administrative and economic competence. There are, however, two issues in Danish politics which have broken the consensual tradition: European integration and immigration.
Denmark became a member of the European Community (EC) in 1973 together with the United Kingdom and Ireland. It had previously applied for membership in 1961 and 1967, but withdrew its request when Charles de Gaulle vetoed the United Kingdom’s membership. Negotiations resumed in 1969. The main political parties favour Denmark’s membership of the European Union (EU) and the country’s involvement in further integration. However, the population remains sceptical about relinquishing sovereignty to European institutions, and is concerned with defending the status of small states in the EU. Denmark manages to keep controversial European issues out of domestic politics by calling referendums on all major European issues, or dealing with them in elections to the European Parliament. The decision to join the EC was endorsed in a referendum held in October 1972 (yes 63.4%; turn-out 90.1%). Referendums were also held on: the Single European Act (February 1986: yes 56.2%; turn-out 75.4%); the Treaty on European Union (TEU) (June 1992: no 50.7%; 83.1% turn-out); the TEU with opt-outs (May 1993: yes 56.7%; turn-out 86.5%); the Treaty of Amsterdam (May 1998: yes 55.1%; turn-out 74.8%); and, most recently, on adopting the euro (September 2000: no 53.1%; 87.5% turn-out).
Referendums on two European issues have resulted in a no vote. The first was in 1992 when the Danes voted narrowly against the TEU. Prime Minister Poul Nyrup Rasmussen was obliged to return to the negotiating table where he managed to secure Denmark opt-outs from the single currency, defence, justice and home affairs, and European citizenship. In this way he was able to secure a yes vote less than one year later. The second issue that was rejected in a referendum (in September 2000) concerned Denmark’s membership of the single currency. This proposal was rejected despite the fact that the yes campaign had been sponsored by the incumbent Social Democrat government and all mainstream political parties, employers’ associations, most trade unions and daily newspapers. The yes campaign argued that membership of the single currency would be in Denmark’s economic interest: it would stimulate economic and employment growth, and help contain interest rates. The no campaign, made up of the extreme right-wing Danish People’s Party and the left-wing and extreme left-wing Socialist People’s Party and Unity List, argued that the single currency meant either a further surrender of national sovereignty or more political integration that would undermine Denmark’s welfare state. The fact that the smaller and more modestly resourced no campaign was successful has been explained in three ways. The yes camp concentrated on the economic rather than political arguments for membership even though the economic benefits were deemed to be ‘slight and uncertain’ by independent experts. Moreover, the referendum was held at a time when the euro was performing very badly. Finally, the referendum followed an event in a fellow small state—Austria—which had caused alarm in Denmark. The inclusion of the populist right-wing Freedom Party of Austria in the 1999 Austrian government led the other 14 EU states to impose diplomatic sanctions on Austria. This move was regarded by many in Denmark as unacceptable interference by the EU in the affairs of a small member state. The no vote was considered to be a victory for a small EU state, and the Prime Minister was obliged to concede that a second referendum on the issue of the single currency would not be held for a long time.
The second controversial issue in Danish politics is immigration. Denmark was historically a multicultural state but became increasingly more homogeneous as it lost territory; today immigrants and their dependants make up about 7% of the population. In recent years the issue of immigration has come to dominate political debate. Concerns centre upon the strain that immigration allegedly imposes on the Danish welfare state. Support for anti-immigration parties grew rapidly in the 1990s and mainstream parties began to address the issue in their own campaigns.
Support for the anti-immigration Danish People’s Party rose sharply at elections held in March 1998. It managed to increase its representation in the Folketing from four to 13 seats. Following the election held on 20 November 2001 the number of seats the party occupied increased to 22. In fact, that was a significant election in Danish politics in a number of ways. It was held shortly after the terrorist attacks of 11 September 2001 and security issues dominated the campaign. A decisive shift to the right occurred and, for the first time since 1929, the non-socialist parties secured a majority in the Folketing. The Liberal Party gained the status of largest party and it formed a coalition government with the Conservative People’s Party with Liberal Anders Fogh Rasmussen as Prime Minister. This is a minority government and relies on the support of the Danish People’s Party. The coalition promised to cut taxation and to provide extra funding for pensioners, hospitals, education and research. It has also introduced legislation to reduce immigration. A foreign spouse of a Danish resident is no longer automatically allowed to enter the country if she/he is under the age of 24. Furthermore, immigrants will now have to wait for seven years until they are entitled to the full benefits of the Danish welfare state. Within one year of the introduction of the new legislation asylum applications had fallen by 71%. In the most recent elections, held on 8 February 2005, the Danish People’s Party increased its parliamentary representation to 24 seats.
Economy: Denmark has a small but open economy which relies on foreign trade for around two-thirds of its total gross domestic product (GDP). Traditionally an agricultural economy, aid granted under the Marshall Plan in the early post-war era triggered a rapid phase of industrialization and by 1963 industrial exports had overtaken agricultural exports. The economy is organized as networks of craft-based, specialized small and medium-sized enterprises which produce niche products, rather than as large firms engaged in mass production. Today its main exports are pharmaceuticals and food products and its main trading partners are Germany, the United Kingdom, Sweden and, increasingly, Central and Eastern European Countries.
GNP: US $ 164,000m. (2001); GNP per caput: $30,600 (2001); GNP at PPP: $153,000m. (2001); GNP per caput at PPP: $28,490 (2001); GDP: $161,542m. (2001); exports: $77,856m. (2001); imports: $67,489m. (2001); currency: Danish krone; unemployment: 4.7% (2002).
Denmark has consistently campaigned for liberalization of world trade in the World Trade Organization, the Organisation for Economic Co-operation and Development and the European Union (EU). Denmark has been a member of the EU since 1973 and, since 1982, the Danish krone has been linked to first the Deutsche Mark (DM) and then the euro, meaning that the krone-euro exchange rate cannot fluctuate by more than 2.25%. Despite this, a majority of voters (53.1%) opposed giving up the Danish krone for the euro in a referendum held in September 2000.
The Danish economy is a corporatist economy. Trade union involvement in governments’ economic policy-making began during the First World War and developed further during the 1930s and 1940s. By the 1970s trade unions—especially the Danish Confederation of Trade Unions—were consulted on most important areas of economic policy, especially when socialist-led governments were in power. Trade unions are represented in the commissions which draft important legislation, they are consulted by government ministries before bills are placed before the Folketing and parliamentary committees consult trade unions when they scrutinize bills. Moreover, trade union leaders meet regularly with leaders of the Social Democrats and are represented in the Economic Council that was established in 1962.
The dominance of the Social Democrats during the 20th century, and the involvement of the labour movement in economic policy-making, promoted the development of a social democratic welfare state. The Danish welfare system offers universal welfare support, and all citizens—male and female—have equal rights to social security. It provides an extensive range of cash benefits and social services, such as child-care, health-care and education, funded by the state through general taxation. Public expenditure accounts for 26% of GDP and Denmark has one of the highest taxation levels in the world. However, public support for the welfare state remains high.
The Danish economy initially coped well with the global recession of the 1970s on account of its niche-oriented industrial exports and agricultural sector which was protected by EU subsidies. However, it was subsequently harmed by high public deficits, inflation, and an increase in the rate of unemployment from 2% in 1973 to more than 10% in 1983. Non-socialist governments in 1982–93 raised taxes, cut spending and broke from the tradition of indexing wages to prices. Tying the krone to the DM also enforced monetary restraint. During the 1980s Denmark launched large technological development programmes in order to upgrade its industrial infrastructure. To cut unemployment the government sought to boost demand for labour through wage subsidies to both private and public firms, and to reduce the labour supply through early retirement schemes. A generous, passive welfare state safety net existed for those who remained unemployed, and the rate of unemployment remained at around 12% until the early 1990s.
The recovery of the Danish labour market—sometimes referred to as the Danish jobs miracle—took place from 1993 when a Social Democrat-led majority coalition took office. This government reduced the rate of unemployment from 12.7% in 1994 to 7.9% in 1997 and to 5% in 2001. Its strategy was to transform the welfare state from a passive safety net into an active system aiming at returning the unemployed to the labour market. The welfare-to-work scheme reduced the period of benefit entitlement from seven to five years and increased the number of schemes which offer job-placement or training for the unemployed. The level of benefits was not affected. A number of employment leave schemes were also introduced to improve the circulation of the employed and unemployed in the labour market. From 1994 insured employees were given the right to take leave for education, child-care or (until 1999) a sabbatical.
The Danish economy has performed well in recent years. Unemployment has remained low and increases in exports have led to a substantial trade surplus. The government has significantly reduced the level of public debt. Moreover, the structure of the economy coupled with government-sponsored industrial and labour market policies have assisted Denmark’s transformation into a successful knowledge-based economy. The election of the liberal-conservative coalition in November 2001 and its re-election in February 2005 poses no real threat to the Danish welfare state. Liberal Prime Minister Anders Fogh Rasmussen moderated his free-market and anti-welfare stance for the election in 2001 and instead promised to cut taxation, and provide extra funding for pensioners, hospitals, education and research. However, new legislation introduced by the right-wing government means that immigrants, who are disproportionately affected by unemployment, will now have to wait for seven years before they are entitled to the full benefits of the Danish welfare state.
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