February 21, 2012

Denmark: Kickstarting the Economy?

After the American Century

A few words on the depressing state of Danish politics. For weeks there seem to be two stories. The first is that the ruling coalition is unable to define and put through its pet project, one of no interest to the majority of the country outside Copenhagen, namely to charge drivers tolls when they drive in and out of the city. This should not be a national issue. It should not be a headline every day, as it has been. It should not clog the radio waves. But the government did not have a clear plan when it began,  the coalition is not united, and the government is so myopic, it takes an enormous interest in all things to do with Copenhagen. Even worse, it now appears that after months of wrangling, nothing will be done except to find a new tax somewhere, no doubt paid by all Danes not just those in Copenhagen, so the city's bus fares can be reduced instead. Pathetic politics. Disturbing lack of perspective.

The second political topic is more general, namely that so many Danes are unemployed or otherwise living on some form of state subsidy. Before the election, the now governing coalition proclaimed that they would "kickstart" the economy by spending more money on all sorts of wonderful projects. Most of them would be projects that needed to be done anyway in the next decade, but they would be moved forward. Kickstart! We heard that word every day during the campaign. Once they got elected, however, the new government discovered that they could not spend more money without creating a larger deficit than was acceptable to the EU. This was awkward with Greece tottering on the edge of bankruptcy, especially as Denmark took over as temporary leader of the EU from January to June of 2012. So instead, the government has been busy kicking various groups in the face. They have not kicked them literally, of course, but one group after another is being blamed for draining the public coffers. The government has attacked the old for retiring too soon, the young who are not getting an education, the unemployed (even though more than 150,000 jobs have disappeared), the hospitals for being inefficient, and so on. 
The real meaning of "kickstart"

The new target is the universities. It is suddenly their fault that the young are not working. They are accused, rather vaguely, of not training people in the right fields. The rather absurd argument is that new graduates - who began their university education in 2006 during a world-wide boom and cannot find jobs today during a European bust - would have gotten jobs if the universities had done something (what exactly is not clear) differently. In 2006 the former government pressed universities to take in as many people as possible. The headlines then insisted that there would soon be an acute shortage of labor as the baby boomers began to retire. One "expert" after another proclaimed that there would be a dire need for highly trained people. Denmark would not have enough school teachers, gymnasium teachers, university lecturers, and researchers. It would need to import thousands of people from abroad to staff its hospitals and to keep its industries competitive, And so on.

The students who began in 2006 are emerging with their MA degrees into a much different economic situation than the one predicted. The government is forcing older people to work longer before they retire. It is firing hundreds of school teachers. It is firing lawyers and economists from the ministries. It is generally cutting budgets, like most other European countries. And in this situation the new graduates are not finding work. But it is more than absurd, it is hypocritical and beneath contempt for the government to blame the universities for unemployment. They have trained people as they were asked to do. It takes 5 or 6 years to do the job. During those years the world was convulsed by an economic contraction. Jobs disappeared, but the Danish universities were not responsible for that.

More generally, the government got itself elected by sounding as though they would adopt a Keynesian economic policy. It claimed it would kickstart the economy through deficit spending, as Roosevelt did in the United States during the New Deal or Kennedy did in the early 1960s. But once in power the new government proved to have quite a different economic policy. They are in fact going to run the Danish economy more according to the Chicago School, or the Milton Friedman brand of economics. I wish they would listen to Paul Krugman, the Nobel Prize winning economist whose articles in the New York Times continually have criticized the EU for adopting cutbacks as a "cure" for weak economies. This policy resembles the ancient practice of bleeding patients who are ill.

Deficit spending therefore is not on the Danish agenda. Instead of a kickstart, apparently it is time to cut the budget and kick the victims. So, blame the unemployed, blame the young, blame the pensioners, blame the universities, and believe it or not, to some extent even blame the handicapped and the mentally ill. 

This is a socialist government in name only.