Copenhagen. It is quite well known that Denmark is a typical welfare state and has been so for quite a long time. As many other countries (including the USA) are striving to achieve a similar type of society, it should be of general interest to consider the experience which has accumulated in such a well-developed welfare state as this one. Particularly so, because at this point in time our welfare state is showing a very definite pattern of development which, I believe, is typical of any welfare state because it is caused by an inherent mechanism in that type of society.
At present 25 percent of the working population is employed by the public sector, 40 percent of the adult population (over 15 years) lives wholly or partly off welfare and 45 percent of the total net national product is at the disposal of the State (including local administration). The rate of growth of these factors surpasses that of the population growth and the economic growth and the prospect 10 years from now is really frightening. How and why we arrived at this point and what it will develop into within the next 10 years is what will be analyzed briefly in the present column.
The sources which I have used are mainly two official reports (more than 1000 pages in total) which have been elaborated by working groups appointed by the government in 1968 when the gravity of the situation became apparent even to the politicians. These reports contain a detailed status of all aspects of the Danish society including a prognosis until 1987 dealing in particular with the intersection between the public expenses and the economy as a whole.
The reports were published in 1971 and 1973, respectively, and painted a disastrous picture of the situation if it were allowed to continue—which is exactly what has been the case so far, to such an extent that the predictions of the first report about the increase in personnel and expenditure of the public sector were already exceeded at the time when the second report was being written.
The two reports were, of course, widely discussed and have at least given rise to some very interesting popular books on the subject (if not any real political action). Also, part of the popularity of the tax-negating Progress Party (which I have previously written about in this column) is probably an expression of the anxiety of the population in regard to the alarming forecasts.
What, then, is the cause of the explosive and seemingly uncontrollable growth of the public sector which gives reason to worry not only about the present situation but even more about the immediate future?
The basic ingredients of a welfare state are the generally accepted principles that the State must help those who cannot help themselves and that some form of income equalization must take place. This in a democratic system leads inevitably to the situation where everybody wants something for nothing (i.e., from the other taxpayers) and the public sector expands accordingly, especially that of health, education and welfare. This was particularly true during the happy, prosperous sixties with their expanding economy, and during those years a large number of welfare laws were passed whose economic consequences at a later stage were not taken into account. Furthermore, as the mechanism of the marketplace is completely out of function in connection with public expenditure, needs are boundless and the setting of priorities almost impossible.
All this is well known to a great many people, but what can be learned from the Danish experience is that at a certain point, when the welfare state is sufficiently developed, it acquires its own autonomous dynamics which keep it growing and growing with almost no possibility of stopping—at least not while still preserving democracy.
The forces behind this mechanism are mainly the economic interest of the public employees and those living off welfare or at least getting a bite of the pie, together with the political influence of these groups. Out of a total population of 5 million there are presently 1½ million living wholly or partly at the public expense (pensioners, invalids, students, and those working to produce and administer the public services) which means that 40 percent of the voters are economically directly dependent on the state. It is therefore not difficult to imagine that this condition alone makes it almost politically impossible to cut down the public budget.
In particular it can be seen that the public employees are gaining more and more power (especially those working in health, education and welfare which constitute 60 percent of the total number)—so much that those of them with a higher education are being called the new ruling class. They are the experts who participate in the preparation of the laws to be passed and who naturally have an unequalled expertise in explaining why their particular area more than any other needs expansion and not reduction, without any regard for cost/benefit relations. Their arguments are basically those of altruism and the common good and their motives are probably mainly a genuine interest for their work and a desire to make it grow. They are simply trying to improve their own existence but without being impeded by normal economic mechanisms.
Furthermore, experience has shown (quite predictably) that when people have become accustomed to get something from the state, they will under no circumstances be willing to give it up. This is not only valid for those that under the present conditions are directly dependent on welfare for their living but also applies to those who receive minor benefits such as free or reduced medical aid, cheap housing, free education, free library service, etc., which means every citizen in the country. And quite understandably so, because everyone knows that if he gives up something he will get nothing in return, and the distant goal of tax reduction is no longer believed in as it has too often been seen to turn into tax increases instead.
The result is a society which presents the sad picture of every group fighting the other groups in order to maintain and enlarge its benefits at the expense of the other groups. A society which is so permeated by the public sector that nobody is the master of his own life because any small change in the laws may radically change his living conditions. A society which shows signs of a growing disbelief in the democratic system because of its inability to deal with the economic difficulties created by the growth of the welfare state while at the same time it has become politically almost impossible even to slow down the rate of growth as too many people make their living by producing that growth.
But if the present difficulties are great, the prospects for the immediate future are really frightening. In the second of the official reports mentioned above, it is foreseen, on the basis of all the material gathered in the report, that by 1987 the total working force in the private sector will be reduced by about 100,000 persons while the number of adult persons receiving their income from the public sector (i.e., as employees and welfare beneficiaries) will be increased by about 700,000. This means that instead of supporting one person on the public payroll as the worker in the private sector is doing now, he will have to support 1½ persons in addition to the children and women who are not in production. It also means that the percentage of voters directly dependent on the state will just about exceed 50 percent.
Normally I'm very skeptical about doomsday theories—but in this case I must reluctantly admit that just the basic figures and their political implications lead directly into economic and/or political disaster within the next decade if nothing drastic is done. However, it does not seem possible to do anything about it because too many people have become dependent on the state and its growth. And that is precisely the lesson to be learned from the Danish social experiment, that having reached a certain stage the welfare state can no longer be controlled by democratic means but continues to grow as if of its own accord like a cancerous tumor or a population of bacteria until it reaches self-destruction.