John speaks about OPM at Copenhagen Business School

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Today John is talking about Other People’s Money at the Center for Corporate Governance in the Copenhagen Business School. Visit the event website for details.

For those unable to make it, or to get an idea of what to expect, this Google Talk is worth a look.

And, incidentally, Denmark was the subject of a recent FT article in which John points out it is doing well without trying to be a Top Nation, defined as a country that uses its power to push others around in an attempt to control territory and resources.

Indeed, John enjoyed one of his trips to Denmark so much that he wrote a letter to ‘Linda’ about it, as published in Everlasting Light Bulbs. See below.

 

 

Dear Linda,

Greetings from Copenhagen. It is 8.30 in the morning and I am sitting in my room on the 34th floor of the Hotel Scandinavia. The sky is blue and clear and views over the old city and across the Kattegat to Sweden are stunning. Below, the traffic is moving smoothly along the Amager Boulevard, the town’s main traffic artery.

We are here to discuss the crisis facing the European social model. The crisis is not immediately evident. From the moment of arrival at Kastrup Airport, you are overwhelmed by a sense that Denmark is efficient, rich and comfortable.

There is no sign of the economic and social tension evident when you arrive at Kinshasa, Bangkok – or indeed New York. Both the natural and the urban environments are enviable. The quality of public services, particularly education, is exceptional. By any criteria, Denmark is a pleasant place to live.True, the language is ridiculous. But it is reassuring that the taxi driver speaks English, which is rarely true in New York. And the facts and figures support these superficial impressions. In 1996, incomes per head in Denmark were around 20% higher than in the United States (the rise in the dollar since then will have reduced this differential).

Still, we must get down to work and discuss the crisis. Taxes in Denmark are nearly 60% of national income, the highest figure of any country in the world.The labour market is heavily regulated. Even in the private sector, over 90% of the work force is in trades unions, which work closely together with employers and government in one of the most corporatist of European economies. It is well known that this combination of policies and institutions is restricting growth, stunting innovation and damaging employment.

These things are well known, but what is well known is not always true. The Danish economy did experience a difficult phase in the 1980s. During the ‘blue period’ – a decade of Conservative government – there was some restructuring and reform. But since the Social Democrats returned to power in 1993, Denmark has grown at the same rate as the United States, and well ahead of the world average.

But what is most well known is the devastating effect of the European social model on employment and unemployment. And unemployment is indeed higher in Denmark than in the United States. The gap narrows when you adopt the standardised basis created by the OECD: 6.0% in 1996 as against 5.4% in America. However the OECD calculations do not adjust for differences in the prison population, presumably because prisoners are not actively seeking work. Since there are 1.7 million people in jail in the United States, and only just over 3,000 in Denmark, this is important.

If we add the proportion of the population incarcerated to the proportion unemployed, 6.6% of Americans were out of work in 1996 and 6.1% of Danes. There is a simple explanation for the difference in unemployment. Young men who in Denmark are at home watching television and desultorily looking for employment are in jail in the United States and therefore out of the unemployment statistics. Since there is much less crime in Denmark than in America, it is not clear that the Danes have got it wrong.

But there is a strong feeling on the part of the Danes that they have indeed got it wrong, which is why we are all at this conference. Whether or not there is indeed a crisis in the European social model itself, there is certainly a crisis of confidence in the European social model. For many of those who attend meetings like this one, the existence of the problem is self-evident and only the means of tackling it needs to be discussed.They tell us that the era of the high-spending state, in which business is governed by both explicit and consensual regulation, is over.And that the day of the stakeholder company, embedded in the local community, is at an end.The European social model is at best a transitional form of capitalism, a staging post on the route to a full market economy.

And yet the undeniable fact is that if you are looking for the world’s most successful economies,“smallWest European state” is more or less the best indicator you can find. Denmark ranks along with Norway, Switzerland,Austria, Luxembourg in any list of countries with high living standards, material and otherwise.And all these countries have other common characteristics. High, almost stifling levels of social cohesion and interlocking networks of corporations, employers and workers’ organisations, and the state: the principal features of the supposedly defunct European social model.

These examples attract little serious attention. The shelves of the Saïd Business School library groan with volumes about Chaibol and Keiretsu. The books on China stretch the length of the GreatWall. But you will look in vain for titles like Great Entrepreneurs of Norway. The Coming Economic Powerhouse – Denmark, Iceland – Europe’sTiger Economy. These weaknesses in our library are not because we have not bought the books. They are not there because no-one has written them.

When our students go on study trips they do not fly to Luxembourg or Finland. And when the international business elite meets in Davos, it appreciates Switzerland for its snow, sun and scenery, not as the world’s most successful economy.

Perhaps some rethinking is in order. The Danes are anxious to participate in fashionable discussion of the crisis facing the European social model.There is a deep-seated angst in the Danish character. This is the country of Hamlet, Hans Christian Andersen, and Carlsberg Special lager. Danes worry about whether they deserve their good fortune, and are fearful that it might not continue. But beneath it all there is a quiet self-satisfaction. They know that their system works. And they do not need lectures about their crisis. It is time to go back to London.

John

 

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