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Denmark Case

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The Economic System in Denmark

The Economic System in Denmark
The current controversies that have developed in the welfare state of Denmark have been a concern throughout the world. As political systems shift, there have been questions as to the rise of unemployment, the sustainability of the country due to strict immigration laws, and the increase of discrimination cases.
Having the responsibility to sustain the cost of its growing population through high taxes, while entering into a recession, the country had to “enhance adaptability” (Daemmrich & Kramarz 2010) and change the traditional method of assistances. Through the demographic shift of immigrants and refugees the political issue remained prominent, while this climate was based on immigrants not adopting the Danish value system and identity while integrating into Denmark.
The economic changes across the globe have had an effect on the control of industrialization and the workforce in the country, as the business world becomes smarter by reducing costs through crossing borders. It has a negative impact on the policies for the welfare state and has raised the unemployment rates. “With the decrease of regulatory barriers in foreign nations, the economies have transformed increasing competition and welcoming foreign investment” (Hill 2005). Due to the current structure and lack of political momentum for reform, the spending on social protection grew exponentially.
Recognizing the increased competition due to globalization, and the need to implement a different strategy has helped generate a better economic outlook for the country. Through the development of “Flexicurity” (Daemmrich & Kramarz 2010) the country has been able to gain positive footing, turn their negative employment statistics around, and increase their economic standing. The basis of this reform was to create a “flexible economy without undermining the security offered by the welfare state” (Daemmrich & Kramarz 2010), which gave employers the ability to fire workers, but increased education and training for the unemployed. The government wanted to attract overseas employers, increase the backing of new firms, and support employee risk-taking.

(Flexicurity - Daemmrich & Kramarz 2010)
(Flexicurity - Daemmrich & Kramarz 2010)

The progress of this reform was seen in the mid-1990s as unemployment numbers decreased, the job market turnover increased. The job market turnover was 25% of the workforce changing positions annually, as the number of lost jobs amounted to 200K the number of created jobs amounted to 230K. This was an acceptable turnover as the programs and benefits offset the cyclic activity and resulted in a shorter time span for the unemployed. This also increased the availability of a highly trained, versatile employment pool, which attracted prospective employers.
(Europa)

(Europa)

In the past few decades Denmark has struggled to become an independent globalized body while maintaining a constitutional monarchy. They have walked a fine line between autonomy and full integration into the European Union (EU). The Edinburgh declaration was a response to the concerns voiced by Danes, and the European Council made provisions that would exclusively apply to Denmark, as regards to the third stage of European Monetary Union (EMU). These provisions would - “In accordance with the Protocol on certain provisions relating to Denmark, Denmark has given notification that it will not participate in the third stage of EMU. Accordingly, Denmark will not participate in the single currency” (Europa).
I believe that the Danish people should forge their own path and continue to withhold from the EU. They have managed to keep an independent monetary system, created new policies that ensure a positive employment pool in a cyclic environment, and have increased their economic growth through trading partners. They continue to oppose full integration into the EU, and most recently shown defiance on boarder controls. It is evident that they do not wish to fully integrate and continue to walk a fine line, but have not made the final decision. As they witness the economic hardships within other member states of the EU there is further evidence as to the opposition to pool their sovereignty in exchange for representation, as all eyes are on the current European debt crisis. Continuing to advocate for the preservation of currency, could be a way to gain ground for macroeconomic stabilization, as the number of supporters of the single currency are diminishing. Out of the 27 members 17 have adopted the single currency, while the struggle for economic growth continues. As the demographics of the global economy continue to change, there has been a better outlook for world trade and an increase of gross domestic product, as emerging economies continue to grow (Daemmrich & Kramarz 2010). This outlook could benefit the independence of Denmark.
The effects of increased globalization, coupled with lowering barriers for trade, and changing political systems, play a large part in the growth and the economic conditions throughout the world. As industry continues to grow and/or shrink due to progress and new technology, the employment demands change across the globe and can become volatile in a cyclic environment. In this changing environment the ability to stay competitive while sustaining the cost of social welfare, has had an economic impact which led to the implementation of “flexuicruity”. The applied focus for education, training, and placement opportunities in the public and private sectors has increased the flexibility of the workforce, which increased the opportunities to sustain employment. The advocacy of union membership for the whole workforce employed or not has adopted strategies to “embrace the new policy as a way to protect employment, through new job creation” (Daemmrich & Kramarz 2010).
The controversy of social welfare and the cost of maintaining such a system has been discussed throughout the ages, while Denmark holds fast to this belief system, they have placed provisions through the policy changes to maintain the cost and security of their population in this stance. As the global economic climate changes it is hard to predict or measure what will become of an economic slowdown, but as communities across the globe have increased their working relationships and desire for constructive change, it would make since that the economic situation will have a positive turn in direction. I don’t believe Denmark is in a social bubble, as they maintain this system; the policy changes enabled proportional growth to be competitive in the global market. However, maintenance of this magnitude will require appropriate planning, and the flexibility to handle the global changes in the marketplace, in order “to keep social expenditures compatible with an open, competitive, market based economic system” (Scientific American 2012).
I do not believe that the adoption this type of economic system would have a popular vote in America. We have all seen the current controversy and propaganda concerning the health care bill and the negative effect it has had on our republic. However, I would love to adopt some of the key aspects of “flexuicruity” (Daemmrich & Kramarz 2010). As the growing unemployment rate continues, and lack of funds to assist in training, education, and job placement, we do need a better system for the people. In order to stay competitive in a market based system we need to turn around the current status of having “the highest poverty rate among the rich countries and an exploding prison population” (Scientific American 2012). Our country is in trouble and with the current economic condition, lack of employment, healthcare costs through the roof, change is needed for substantial positive growth. Having the answer to this issue has no one answer, as multiple facets are essential to solve the issues in America. I think there is a lot of ignorance which inhibits the willingness for change, but it is imperative that we find a way to manage the cost and implementation of a new networked system in our country.

References
Daemmrich and Kramarz (2010) Denmark: Globalization and the Welfare State (Report No. 9-709-015). Boston, Massachusetts: Harvard Business School Publishing
Hill (2005) International Business – Competing in the Global Marketplace New York, NY: McGraw-Hill / Irwin
Europa – Summaries of EU legislation http://europa.eu/legislation_summaries/economic_and_monetary_affairs/institutional_and_economic_framework/l25061_en.htm
Scientific American, a Division of Nature America, Inc. 2012 - The Social Welfare State, beyond Ideology. Are higher taxes and strong social "safety nets" antagonistic to a prosperous market economy? http://www.scientificamerican.com/article.cfm?id=the-social-welfare-state…...

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