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What Makes the U.S. and Danish Economies Work?
 

Two leading executives compared and contrasted the shortcomings and merits of the economies of the United States and Denmark in front of a standing-room-only audience at the Forbes CEO Europe Forum in Copenhagen on June 19.

Steve Forbes, president and chief executive officer of Forbes Inc. and editor of Forbes magazine, and Mads Øvlisen, chairman of LEGO Holding A/S, discussed their respective countries’ economic models at the opening session of the two-day forum. Other sessions considered the current state of personal incentive in Europe, the global political scene, the renewable energy markets, and the Asian economic powerhouses.

During the opening session, Forbes pointed out two things that policymakers, economists, and business executives in the United States can learn from the Danish economic model: the efficiency of its public sector and its tradition of communication between management and labor. That relationship is contentious in the United States, he said.

Øvlisen said Danes should take note of the American entrepreneurial spirit and dynamism. In Europe, decision makers spent time discussing why something can’t be done; in the United States, they talk about how to get it done, he said.

Øvlisen said the Danish economic model – a comprehensive welfare state that is highly competitive – works because of the balance between the state and the free market, flexible labor laws, global orientation of the private sector, and the skill sets of its small- and medium-sized companies.

According to Forbes, the broad flexibility and innovation engine of the American economy has worked for the United States. Comparing Denmark and the United States, Forbes pointed out, is like comparing apples and oranges; it makes more sense to compare the United States and the European Union, he argued. Incidentally, the United States wins that comparison easily, he said, because it has created three times as many jobs as the EU during the past 30 years.

Forbes said that lower Danish tax rates would boost productivity, grow SMEs and keep young Danish entrepreneurs in Denmark, creating wealth here. Forbes argued that a flat tax would generate more startups, increase competitiveness, boost revenues, keep brainpower in Denmark, reduce the size of the gray, off-the-books economy, and result in more tax compliance.

Denmark is clearly doing some things right, Forbes acknowledged, such as its strong rule of law and property rights, comparatively low payroll taxes, stable currency, trade strategies, and ease of business startups.

Øvlisen added that Danes tolerate their high taxes because it is important for them to know that if they lose their jobs, the welfare state will provide a measure of security for their families.

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