17 Aug 2015

Hej Fra Danmark

Hail readers! Or should I say: hagl læsere!

As you may be able to ascertain, I am currently in Denmark; and though I am occupied deeply with the matters of the Ark—see this post for details—I will nevertheless endeavour to present you with some analysis of this peculiarly Scandinavian nation. Photographs shall also be present, though those shall arrive later: blame it on my lackadaisical efforts in amassing a suitable gallery.

EDIT: photos are now available! See this Google Photos gallery.

Firstly, however, please do get acquainted with the Ark, now complete with a second chapter. It has grown quite nicely—up to just under 40 pages—and will continue to do so as my efforts further in intensity. No more chapters shall arrive soon after these, however, for the Ark must remain secret until its birthday. Instead, expect to see analysis—both literary and personal in nature. The Machinations of a Writer series shall also be updated with a post concerning print formatting.

Now: onto Denmark.

Where is Denmark?

Located just south of Sweden, East of Norway, and next to Germany, would be the answer to that particular question. Denmark is a peninsula—here, in Aalborg, we are at the northern tip in the Jutland municipality—though its capital city, København, is located on an island.

This geographical position has translated into a nation with influences throughout its neighbours, and from its neighbours. The Danes are capable cheesemakers—much like the Dutch, their cousins—but also have a wide selection of bread (some very similar to those I sampled in Bavaria), and fish. I detest fish, however; and so I shall name a less well-known aspect of Danish supermarkets: wine.

Denmark’s position as a peninsula allows for the easy importation of German, French and other European wines. And the good news is: there’s no alcohol tax. Unlike Sweden, here in Denmark wine is purchaseable from supermarkets—and subject only to the standard 25% VAT rate.

Denmark’s landscape is a flat one, reminiscient of the Netherlands; and yet it possesses its own distinct features. There are a fair few forests—though not as numerous as its northerly cousin, Sweden—while the amount of agriculture is surprisingly high. Denmark, you see, possesses arable land (more than Sweden and considerably more than Norway); hence, agriculture.

The greatest defining feature, however, would be the wind turbines. They are everywhere. And they spin! Yes; Denmark is windy, though these past few days have also been curiously warm. Do not expect this to be the norm.

The architecture is... somewhat unremarkable. Once more, I am reminded of Holland; though the Dutch tend to engage in more dramatic expositionism. The Danes are content with Spartan architecture—red brick is used extensively, likewise white brick, and the motifs are simple rather than grand—and forsake any pretence of grandeur. I have not seen anything approaching the floating houses of the Netherlands; the vast cathedrals of Italy, and their impressive collections of art, sculpture and treasures; nor do I see any landmarks like the Tour d’Eiffel or the Arc de Triomphe. Denmark seems a place to live in, not to visit.

Speaking of which: I must address the economy and political system, as befits the burgeoning economist.

Skatt?

Denmark is usually at the top of the ‘Nations by Taxation’ lists. And it’s not hard to see why: cars are taxed at 180% (not a typo, my dear!); the marginal rate of income taxation is over 50%, and applies to incomes above half a million kroner or so (~£50k), while more ordinary citizens pay around 30–40% in income tax; while VAT is at 25%, and is applied almost without exception on all goods. Denmark has even toyed with wealth taxes, sugar taxes, fat taxes, and taxes on alcohol.

But what does the ordinary Dane get from all this?

The benefits are considerable. Health services are provided gratis; education up to and including master’s level is free; subsidies and grants are given to students, and can amount to over 5000DKK per month (per month!); childcare is subsidised (or free, depending on which government is in power); maternity leave is one year, unemployment benefits are 70% of your income for several months, pensions are reasonable; and the roads—smooth! Straight! England ought be ashamed.

Is the tradeoff worth it, though? That depends on your family and financial status, of course—and on political position, no doubt.

If you are unemployed, few places are better to be in. Very few indeed. If you are a student, prepare for zero debt, and fewer worries with regards to accomodation and living expenses; if you have kids—you’re in luck. And as for the McDonalds workers: a quarter of a million kroner is your yearly salary.

This system is very unfortunate if you require the perusal of a car, however. The exorbitant tax ensures that new cars are out of reach for all bar a few of the wealthier citizens; cars are old, significantly more so than the UK (by quite a margin) or Germany; and the rules are many. Though that may be said of most nations.

The public transportation network is capable, and there are bicycle lanes in many places—though not to the degree of Holland— but cars are still a necessity for some. It is very difficult for a family of five to do their biweekly shopping on a bike or a train, for example. If I were king for a day, I would abolish car taxation. Instead, I would focus on CO2-based taxation.

That said, Denmark has high GDP per capita; low income inequality; and very good outcomes with regards to crime, health, and more. The UK would do well to consider the Danish model.

On Economic Myth

The Danish model is a wonderful case study for an economist—it allows numerous myths to be put to rest.

Myth No.1: Tax Evasion

Denmark has the highest rates of taxation in the world, but one of the lowest—perhaps the lowest, though difficulties in measurement prevent me from saying this with certainty—rates of tax evasion (NBER 15769). The cause is multifold. Firstly, Danes have a strong sense of civic duty—tax evasion is frowned upon, and the overall attitude is far less blasé than in Italy, for example, or Greece.

Secondly—and more importantly, as the study reveals—Denmark has very strong tax collection methods. The tax code is short and simple; exceptions few. (Or at least, this is the case insofar as when compared to the UK or US.) Want to dodge land tax? No chance: the Danish tax authorities survey areas by plane and using advanced camera-based systems. Corruption is almost nonexistent, too—no bribing the officials here.

The study also reveals that tax collection efficacy and auditing are more significant factors than the actual rates—high rates of taxation don’t lead to tax evasion, provided that the civic duty is strong... and the tax authorities shrewd.

Myth No2: Fecklessness

Another myth—perpetuated readily by our wonderful Tory government—is that of benefits for the poor and the disabled leading to fecklessness and idleness. Or to corruption. The latter is a myth easily dispelled: the government’s own figures show that benefit theft claimants are around 0.9%, with a grand total of just 0.7% being overspent due to fraud. (DWP).

Denmark’s relatively generous benefits also go to show that benefits spent on the poor don’t necessarily lead to the poor not working. This is firstly because working still provides more money than not working—a fact helped significantly by Denmark’s high-wages for workers—while the benefits themselves do not allow for a particularly lavish lifestyle.

Benefits can also substantially improve the claimants’ educational situation. Without having to worry about eating versus heating, claimants’ morale improves; they are able to work more productively and vigorously; and it becomes feasible for them to attend university, for example, or some other educational course.

Though personal experience suggests that for every aspiring benefit claimant whose economic output increases due to benefits, there is one claimant that stays unemployed, or poor, or lazy. The net effect is neutral, however; and so it becomes a question of: why not help those less fortunate? This is especially pertinent considering the effect of decreasing marginal utility: billing someone earning £100K an extra grand in tax may not particularly affect their wellbeing—they’ll just buy a slightly less expensive Mercedes, or drop a room from their villa—but that £1000 will provide real tangible benefits for the working mum with 3 kids. Mansion, or heating for a family; which will it be?

To Finish

Apologies for my substantial essay on the matter. I hope my musings on Denmark have proven entertaining; and keep following for information on book formatting, for poetry, and for updates on the Ark.

Until then, may the stars be with you.

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