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Oct

515:45

“The 2025 plan is a Thatcherite wet dream”

 
Should Denmark gamble its future wealth on tax cuts and underfinanced public services? Kasper Fogh from think tank Cevea doesn't think so. He argues that preparing Denmark for a technological future requires investing in lifelong education for everyone

“This idea that you can make such long-term plans for the future – it’s technocratic arrogance and carnival economics with make-believe money”.

Kasper Fogh is not impressed by the government’s National Reform Program 2016 – dubbed the 2025 Plan in the media. Head of policy and communications at centre-left think tank Cevea, he’s a likeable, outspoken and ironically self proclaimed champagne-socialist, whose job is to provide knowledge that shows the value of community.

Because Denmark has accomplished something rather unique, he argues. It has shown that collective solutions are a viable alternative to competition. When the government decides to invest in green energy it results in a lot of wind turbines, green jobs and competitive business. When the government focusses on healthcare, the result is diabetes medicine and hearing aid-companies. Then there is district heating so everyone can sustainably warm their homes and affordable daycare so children can have a safe childhood, while women are set free to pursue their ambitions.

In other words, Danes found solutions to modern problems by distributing the burden of finding solutions amongst each other.

“But if we continue to turn all corners of society into business, I’m afraid the welfare system won’t survive,” he warns. “We meet the world with collective efforts that have been able to perform on more than one bottom line – we’ve shown that you can make solutions that are both competitive, sustainable and human.”

Fogh’s concern for the future of the welfare state started early in his career while he was working for Copenhagen’s former Lord Mayor Ritt Bjerregaard, a Social Democrat. His co-workers were disillusioned, had little time to do their actual job, the public schools were doing poorly, and the nursing homes were not a place he’d want to grow old in.

While the city has since invested heavily in welfare, particularly in affordable day care, successive governments have passed welfare reforms that reduced unemployment benefits, limited early retirement and cut funding for further education. Municipalities have also been told to cut one percent of their annual budget per year until 2019, which will potentially impact frontline welfare services, such as elder care.

The 2025 Plan only piles pressure on the welfare state.

“This new plan is an expression of the continuous target management of the public sector, kind of like the corporations’ target management of the production cellphones,” Fogh argues, adding that we could be witnessing the dark and final hours of the welfare state.

“You can’t run a school-system like you run a car-company. You pervert the public sector with absurd goals and standards. The employees hate it and don’t respect it. Guess what that does to the quality of the schools and nursing homes?” he asks rhetorically.

“There are other things too – like the privatisation of clean drinking water and district heating. It won’t give us cheaper water or heating – to me it seems more like a way to slowly squeeze the life out of something spectacular and working great with community ownership.”

READ MORE: Tax and welfare cuts central to 2025 economic plan

A gigantic consumer loan
In the 2025 Plan, the government argues for the need to make some small adjustments to the Danish economy in order to avoid much larger reforms further down the road.

Among their proposals is the ambition to cut the rate of the top tax bracket from 15 percent to 10 percent, for earnings of up to one million kroner. The argument is that it would give high earners a larger incentive to work more, which would then stimulate the economy and generate the tax income that was lost from the cut.

Fogh is unconvinced.

“If all of their fantastic assumptions come true, then public finances might balance at best in nine years time,” he says, arguing that top earners won’t necessarily work more if they pay less tax. They are wealthy people, after all, and they might just choose to work a little less and spend that time with their children instead.

Either way, Fogh stresses that we do not have enough knowledge or insight into the future and how it’s going to turn out. This makes the tax cuts an extreme risk and a massive blow to the Treasury.

“It is like going to your bank and telling them that you want to spend more money now, because you expect to earn much more in nine years time. It’s not math, it’s not science – it’s bullshit,” Fogh says.

Reducing tax receipts also makes public finances incredibly vulnerable to the turbulent global markets. If anything unexpected should happen in the world economy – another financial crisis, the collapse of China’s debt bubble, or rapidly rising oil prices – government finances could just fall apart and lend Denmark in a lot of debt.

But raising taxes to pay off the debt won’t be an option. Globalisation has placed a downward pressure on all sources of government income, as nation states compete to appear attractive to global investment. The only solution is to cut welfare programs, pushing the poor further into poverty, and lining the pockets of the wealthy.

“I think that there are a lot of people in the conservative-liberal Denmark, who are fine with an underfinanced welfare state,” he says, arguing that previous efforts to streamline the public sector made it more expensive without improving its performance.

“If you’re a hammer, the world’s a nail. If you’re an economist, the world is about performance management and productivity. New Public Management is how we run the Danish community and it’s a slow cannibalization of something rather spectacular, the welfare state, which was developed in the middle of the last century,” he says.

READ MORE: Denmark is rich enough

No mention of the good life
Fogh also criticizes the 2025 Plan for lacking any reflection on what the good life consists of – it focuses singularly on economic growth and consumption.

“Is it just super awesome to work a lot?” he asks rhetorically. “Like John F. Kennedy said about the GDP – it measures everything, except for the things that matter.”

In Fogh’s view, Denmark is a wealthy and successful country in large part due to its free education and health care, combined with a fair work-life balance, which enables citizens to enjoy time with family and their interests. Sustainability is also highly prized in Denmark, which has committed to become fossil free by 2050. How, then, could the 2025 Plan make no reference of climate or sustainability?

Still, there is one aspect of the 2025 Plan, which Kasper Fogh can get on board with – support of small businesses.

“Studies have shown that almost all new jobs in the economy come from new businesses,” Fogh says. “This is important when trying to stimulate economic growth.”

The problem is that most new and small businesses rely on banks for investment, who in turn are reluctant to lend them money. This results in poor conditions for growth. The government’s new proposal offers the possibility of using retirement savings as capital, a tax deduction for private investments, while new business owners can postpone paying business tax the first few years.

It’s a small part of the larger equation, but it all adds up says Fogh.

“We need to make sure that people want to start new businesses and, more importantly, we need to get them out of the strong grip of the banks. I’m impressed that the government proposed something so diametrically against the interest of the banks,” he says.

Another positive feature in the government’s plan is making it easier to save up for retirement.

“One of the biggest poverty bombshells in Denmark, and the largest cause of financial inequality, are the people on the road to retirement who don’t have any savings,” he says.

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Disillusion about education
Before you start a business or reach retirement, you’ll probably need to get an education. But while Denmark’s future wealth depends on its intelligent and educated population, the 2025 plan does little to support this future.

“If we want to compete globally based on the fact that we are skilled and hard-working people – as opposed to our non-existent diamond mines or mineral resources – the important thing isn’t only how many people we educate, but how good the education itself is,” he says, arguing the Danish education and research sector is challenged by successive cuts.

“The fact that our educations aren’t good enough isn’t addressed anywhere in the plan. This means that the government does not understand the future it is planning for.”

Fogh isn’t against making savings in the public sector. His issue is that the 2025 plan is not focused on improving public services, just making them cheaper. He points to the cuts that have been proposed for the student grant system, SU.

“In Norway they’ve tried to increase self-financing for students, which resulted in a lower completion rate. I’m afraid we’d see the same trend here. And it would probably be at the expense of the kids from non-academic homes – and that just violates my sense of justice.”

With a constantly developing economy where technology is making many jobs redundant, while creating new markets and opportunities, people are entering a reality where they may have to change jobs far more often than in previous generations. Fogh believes that developing a lifelong educational system is the right way to address this new reality.

“Unless you are able to offer people new proficiencies continuously, the chance of them being able to handle big changes decreases. To me that’s logic for dummies,” Fogh says.

So what are Fogh’s final thoughts on the 2025 Plan as a whole? Well, he wouldn’t call it a plan for a start.

“It’s an irresponsible budget that is basically a large spending loan. To use business language, there is no research and development and there is no innovation capacity to develop the unique welfare system, which is to be permanently underfinanced. It’s a grinding down of something unique, and financed by a Thatcherite wet dream – not reality.” M

Further Reading:

Tax and welfare cuts central to 2025 economic plan

Denmark is rich enough

Features, News

By Hana Hasanbegović

Originally from the Balkans, Hana has a Master's degree in English, with a focus on literature and linguistics. @hanahasanbegovic

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