Today is election day in Denmark, and the polls all indicate that the government center-right coalition is likely to be defeated by the center-left opposition. This is good news for non-Danish people everywhere (which obviously is most of us) largely because the center-right coalition has been consistently dependent for support on the far-right Danish People’s Party which brandishes a fairly ugly form of populist nationalism. By contrast, the governing center-right coalition in Sweden cruised to re-election fairly recently. Not surprisingly, the contrast in Swedish and Danish economic trajectories matches this:

As you can see, the issue here isn’t that the labor market in Sweden is so much better than the labor market in Denmark. But Sweden’s recession was much milder than Denmark’s, and it seems to be on track for a faster recovery. What happened? Well, consider the exchange rates:

Pre-crisis, both Sweden and Denmark were pursuing de facto currency pegs to the Euro. Denmark and Sweden were also both prosperous high-tax high-spending countries. Denmark had, however, substantially less structural unemployment than Sweden. They have some different labor market policies and also very different immigration policies that I believe gave them a more favorable demographic. But whatever the reason, there’s a clear structural gap here. Then comes the crisis, and unemployment rises in both countries. Yet it more than doubles in Denmark, which sticks with the peg, while increasing by a smaller percentage in Sweden which ditches it. Then the recovery in Sweden is sufficiently more rapid to catch up with Danish unemployment for the first time since the Nordic Banking Crisis of the early 1990s. Resolving the sources of the underlying structural gap would be nice, but it was by no means necessary to weathering the crisis better. And unlike the Australia-America gap, I trust nobody’s going to try to tell me the Sweden-Denmark gap is all about Chinese demand for coal.

Max Chafkin of Inc goes to the socialist dystopia of Norway and finds that it’s a hotbed of entrepreneurship. He makes various excellent points in the course of doing so, but I do always think people need to be careful when talking about Norway since they’re so rich (on a per capita basis) in terms of oil and gas reserves. The primary thing Norway is a good example of is excellent management of natural resources, a score on which many resource-rich countries have fallen down.

But what if Chafkin had hopped on a plane and flown to Copenhagen? I was struck to learn recently that a Heritage Foundation / WSJ op-ed page survey decided Denmark has more “economic freedom” than the United States of America. Well, it also has taxes as a much higher share of GDP, much less inequality, stronger labor unions, and it’s dramatically “greener” in terms of per capita (or per unit of GDP) carbon emissions. It seems to me that all things considered, progressives would gladly make the swap. And apparently conservatives would, too.

Price Fishback’s recent argument that social spending in the United States is actually higher than what you see in Sweden and Denmark attracted a lot of attention around the blogosphere. Lane Kenworthy, an excellent scholar of such questions, examines the issue and reveals that in most relevant ways it’s not true (although it is true in some other ways). Probably the most telling one is this:

Fishback tries to account for this, but as Kenworthy explains he gets it wrong:

In his paper, Fishback cites similar numbers from the OECD. He cautions, though, that “One advantage the poor Americans would have had in spending their disposable income is that they face consumption tax rates in the 4 to 7 percent range, while consumption taxes in the Nordic countries are above 20 percent.” Actually, consumption tax rates are incorporated in the purchasing power parities (PPPs) used to convert incomes to a common currency, so these income figures already adjust for differences in consumption taxes.

Two important things to further note about this. One is that as Fishback himself notes “[p]ublic services not counted in disposable income, like health care and education, likely are better for the very poor in the Nordic countries than in the United States.” The other is simply that Denmark and especially Sweden have per capita GDPs that are lower than America’s in PPP terms (Denmark I think is close at market exchange rate, and Sweden is lower either way). So for better or for worse, the Nordics are clearly putting a lot more effort into helping the poor. Conversely, America is doing much more than Denmark (and I think a bit more than Sweden) to help poor people born in foreign countries by letting them come live and work here, though again the Nordics have more foreign aid.

This seems a bit like a joke designed to get me to write a blog post, but apparently Caron Butler is coming back to DC to promote bicycle-friendly cities in concern with Crown Prince Frederick of Denmark:

Caron Butler, one of the few, the happy few, members of the Washington Wizards these last few seasons before the team got blown up, returns to town this morning to, according to organizers, promote “a more bicycle-friendly America.”

Butler’s partner on this patriotic ride will be…Frederick Andre Henrik. He’s billed as the Crown Prince of Denmark.

Copenhagen and Amsterdam are the leaders in developed world bicycle commuting, and there’s a fair amount mid-sized American cities could learn from them. Here’s an amusing account (“As the night wore on, she touched his smooth hairless chest and showed interest in the prince’s kingdom”) of the Crown Prince’s courting of his Australian wife. Butler learned to play basketball in prison, which I imagine is rather different than the upbringing of Danish royalty.

(her majesty's publick domaine photougraphe or something)

Tyler Cowen says spending cuts will be necessary in the UK and asks “what is the U.S. ‘progressive’ take on this question. Is it admitted that spending cuts are necessary?”

According to the Guardian when Labour took over in 1997, total public spending in the UK was something like 38.2 percent of GDP. That slowly-but-steadily rose over time until it stood at 43.3 percent of GDP in the 2008-2009 budget. I wouldn’t say that cuts from that level are “necessary” but it’s generally advisable for countries to have political coalitions alternate in power and after more than a decade of center-left spending hikes some center-right spending cuts could play a useful role in clearing out dead wood and such. Alternatively, a responsible center-left government could shut down bad programs of its own accord while perhaps continuing to boost overall spending. Then the crisis budget of 2009-2010 pushed public spending up to 48 percent of GDP (or probably more likely, the decline in GDP pushed the public share up).

That seems advisable as a crisis measure. The Tory-proposed austerity budget would have been a disaster. But 48 percent is at the very Scandinavian Bleeding Edge of what we’ve seen in terms of a sustainably-sized public sector and I think it’s perfectly reasonable to fear that one’s country can’t pull it off. So while I doubt cuts are strictly speaking necessary, they’re probably advisable once GDP is growing (which I believe was Gordon Brown’s position) which I believe is currently the case. The good news for Britain is that even in coalition mode it’s relatively easy for a UK government to act decisively.

Meanwhile at the moment both Denmark and Sweden are in the hands of center-right governments, but that’s likely to change in the near future. It will be interesting to see if one of those countries attempts to devise an economically and politically sustainable approach to getting over fifty percent.

(cc photo by @boetter)

In Copenhagen, like several other European cities, management of the public bus system is contracted out to a private company, in this case the British company Arriva. One consequence of this is that you get much more bus-related marketing gimmicks than you see in the socialistic United States. Ashley Braun at Grist tells us about the latest:

Copenhagen’s buses are introducing another way of getting around while you get around town: “love seats,” or “kærlighedssæder.” (Gesundheit!) A social experiment of Danish bus company, Arriva, these special spots aim to make things a little cozier for those would-be cuddlers who haven’t been feeling the love on public transit.

“You can sit here either if you want to signal to your fellow passengers that you’re single or if you feel in a very good mood,” Marianne Faerch of Arriva said.

These aren’t “love seats” in the sense of furniture that’s smaller than a couch but bigger than a chair. Rather, they’re specially labeled seats that you sit in if you want to signal that you’d be interested in flirting with strangers on the bus. This sounds not so promising to me, but it’s good to see cities trying to innovate with their bus networks. The low-hanging fruit of better transportation policy is finding ways to make buses more functional and appealing, since if you can create bus lines that people actually use it’s pretty cheap and easy to just add new lines. Copenhagen is, in general, a world leader in transportation innovation so it’s always worth watching their ideas.

Ezra Klein said something important but, I think, slightly wrong about what kind of health insurance people prefer:

People tend to prefer PPOs to HMOs. PPOs tend to be more expensive than HMOs. But HMOs tend to have a higher actuarial value. The average PPO is in the low 80s, while the average HMO is 93 percent.

The reason is that PPOs make up for their easy access to specialists by building in more copayments and cost-sharing. HMOs offer more first-dollar coverage, and though specialists are more irksome to access, there’s less cost-sharing. But people prefer ease of access to coverage, so the HMO’s actuarial advantage doesn’t translate into a market preference. In other words, actuarial value isn’t everything.

It’s worth observing that Danish people have the reverse set of preferences.

Danes have two insurance options to choose from for outpatient care. Group 1 is an HMO-style system in which all doctors’ visits are free, but in order to see a specialist you need to get cleared by your primary care physician. Group 2 is a PPO-style system in which there’s cost-sharing when you see a doctor (the government still pays most of the tab, but you need to pay some) but you have the right to go see a specialist directly. Group 1 includes a staggering 98.5 percent of the population indicating an overwhelming preference for cheaper over easier access.

I think the strong, but opposite, US and Danish preferences are mostly about status quo bias. In the United States, HMOs were a relatively new innovation and people have proved willing to spend a considerable amount of extra money to avoid them. In Denmark it’s the reverse, and the Group 2 option is an innovation after decades of non-availability, and Danes seem uninterested in giving up their traditional free medicine in order to get more flexibility.

Danish Defense Minister Søren Gade with Robert Gates (Denmark MOD photo)

The news that NATO defense ministers are prepared to back a counterinsurgency strategy for Afghanistan seems a little bit weird given that we’re in the middle of a debate about what to do here in the United States. Something I noticed in Europe was that NATO Secretary General Anders Fogh Rasmussen, former Prime Minister of Denmark, actually seemed considerably more hawkish in his rhetoric on Afghanistan than Barack Obama is.

And it actually turns out that Denmark, which until recently was under his leadership, was, in fact, putting more effort into Afghanistan than the United States was. Denmark only has 700 soldiers in Afghanistan of whom 26 have been killed, but Denmark has about as many people in it as Cook County. Scaled up to America’s population this would be as if we had had about 1,400 soldiers killed out of a 38,000-strong deployment. Of course in a war absolute number count and Denmark is still a small contributor. But part of the context for what happens at these meetings is, I think, the fact that NATO’s civilian chief is a guy who was the architect of what’s been, for his country, a pretty major war.