In July I joined 40 CEOs and Chairs on a week-long NZ Initiative visit to Denmark to see how their public policy settings compare with New Zealand. What can we learn? It is a country of 7 million and has a GPD/Capita 38% higher than NZ. On measures such as lack of corruption and transparency we are very similar to Denmark but on GDP per capita - economic performance - we are not in the hunt.
Denmark’s productivity rate is phenomenal. Their GDP per hour worked is 78 percent higher than New Zealand’s. Per capita in New Zealand we work 939 hours annually. The Danes only work 714 hours per capita but every hour is worth 78% more than an hour a New Zealander works. Their productivity is the third-highest value in the developed world.
For a small country Denmark makes a big impact – Carlsberg beer in our bars, Lego toys in so many homes, Maersk ships dominating our ports, and Ecco shoes and BoConcept retail brands in our high streets. We have brands on the global stage but other than Fonterra, not with the kind of scale they have. Our productivity is very low, theirs is high.
Denmark is often characterised as a socialist or social democrat country. In reality, it is a highly liberal free-market, free-trading, light-touch regulation economy with a company tax rate of 20%. On the other hand, personal taxation is over 70%, they have a large social security system and a large public sector. The combination of approaches is a paradox for us and our political battle lines.
We gained a number of other insights including that local communities and local government control primary and secondary schools and hospitals, not central government; 20% of housing is social housing yet they are more wealthy than us; there is no minimum wage yet there are workplace labour agreements mediated by Government.
In summary, we came to understand that Denmark became wealthy largely because of its free-market economy. In turn that has enabled it to grow and support a large government sector and welfare system. The growth of the welfare system has occurred in recent history. They call it flexicurity because it works alongside their strong commitment to enabling business to succeed. It is a mistake to call them a social democrat or socialist country.
Fundamentally, in Denmark they champion business and business has responded with high value-producing global brands. Government has responded with a comprehensive welfare system for its citizens. There are lessons here for us in New Zealand. Their public policy settings reflect their philosophy which is to encourage business to create wealth, which in turn enables government to support the population with a range of important social services, public infrastructure, law and order, and defence.