Wednesday 17 May 2017

Competitiveness: Denmark’s happy achievers

Continued reform and progress are main challenges for governments and administrations during the era of globalisation. International comparisons and intensive contacts within the EU institutions offer member states opportunities for improvement and chances to learn from each other.
Having looked at Denmark in the European Union and with regard to the European Semester in Finnish on Eurooppaoikeus, in English here on Grahnlaw and in Swedish on Grahnblawg, we move to international comparisons in order to offer avenues for reform by the country and others.

In this blog post we look at comparisons regarding happiness, the good life, competitiveness and the business environment in Denmark.

World Happiness Report 2017
Life, Liberty, and the Pursuit of Happiness still seem to be worthy causes for governments instituted by citizens. Among the 155 countries ranked by the World Happiness Report 2017 (page 20) Denmark scored second, just after Norway, but ahead of the rest of the top ten: Iceland, Switzerland, Finland, the Netherlands, Canada, New Zealand, Australia and Sweden. (We take note that five Nordic countries fill half of the top ten places.)

OECD Better Life Index
Another international comparison for Denmark is the OECD’s Better Life Index measuring the good life from a number of angles, described and ranked among 38 developed economies (35 OECD members plus Brazil, Russia and South Africa).

Eleven topics reflect what the OECD has identified as essential to well-being in terms of material living conditions (housing, income, jobs) and quality of life (community, education, environment, governance, health, life satisfaction, safety and work-life balance). Each topic is built on one to four specific indicators.
Frequently Asked Questions offer more information to those interested.  

Global Competitiveness Report
According to the Global Competitiveness Report 2016-2017, from the World Economic Forum (WEF), Denmark was ranked twelfth among 138 economies, the same as the previous year.

As for other countries, Denmark’s country profile (pages 162-163) offers a detailed picture of strength and weaknesses through the rigorous health-check by indexes and sub-indexes around the twelve pillars of the developing global competitiveness index.

The executive opinion survey highlighted tax rates, tax regulations, restrictive labour regulations, access to financing and government bureaucracy as the five most problematic issues for doing business.   

The fascinating WEF report with a broad perspective grapples with the importance of skills and innovation in the light of the fourth industrial revolution.

Doing Business 2017

There is a short presentation on the World Bank’s Doing Business 2017 web page, where the 14th edition can be opened or downloaded:

Doing Business 2017: Equal Opportunity for All, a World Bank Group flagship publication, is the 14th in a series of annual reports measuring the regulations that enhance business activity and those that constrain it. Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across 190 economies—from Afghanistan to Zimbabwe—and over time.
Doing Business measures regulations affecting 11 areas of the life of a business. Ten of these areas are included in this year’s ranking on the ease of doing business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures labor market regulation, which is not included in this year’s ranking.
Data in Doing Business 2017 are current as of June 1, 2016. The indicators are used to analyze economic outcomes and identify what reforms of business regulation have worked, where and why.

What does Doing Business 2017: Equal Opportunity for All tell us about business regulation in Denmark?

The country table for Denmark (page 202) offers a more detailed view of the country’s ease of doing business rank as third out of 190 economies, after New Zealand and Singapore, but ahead of Hong Kong SAR, the Republic of Korea, Norway, the United Kingdom, the United States, Sweden and Macedonia (FYROM).

Index of Economic Freedom
The 2017 Index of Economic Freedom from the  Heritage Foundation’s is grouped into four broad categories, or pillars, of economic freedom:
  1. Rule of Law (property rights, government integrity, judicial effectiveness)
  2. Government Size (government spending, tax burden, fiscal health)
  3. Regulatory Efficiency (business freedom, labor freedom, monetary freedom)
  4. Open Markets (trade freedom, investment freedom, financial freedom)
Given the libertarian perspective, it is hardly astonishing that the Nordic welfare state Denmark ends up number 18 in the  the country ranking (among 180 economies), but attitudes among world business leaders are worth considering.    
The 2017 Index of Economic Freedom deals with Europe (from page 197). The table on economic freedom in Europe offers an overview of scores for Denmark and the rest of the countries in the region (pages 203-204).

Denmark may be fiscally sound, but the Heritage index disagrees with the tax burden and abhors the level of government spending.

The country pages concerning Denmark (226-227) start with the following summary, before commenting briefly on the different factors:

Denmark’s economy performs notably well in regulatory efficiency. Open-market policies sustain flexibility, competitiveness, and large flows of trade and investment, and the transparent and efficient regulatory and legal environment encourages robust entrepreneurial activity. Banking regulations are sensible, and lending practices have been prudent. Monetary stability is well maintained, and the judicial system provides strong protection for property rights.

Government spending has been expansive, and the overall tax regime needed to finance the ever-growing scope of government has become more burdensome and complex. However, such institutional assets as high degrees of business efficiency and regulatory flexibility have counterbalanced some of the shortcomings of heavy social spending.

However, in terms of economic freedom Denmark has been on a slightly downward trend.


Detailed study of these comparisons offers stuff for a structural reform agenda, but we are going to look at a few more in a later blog post.

Ralf Grahn

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