Best Countries to Live In - Part 6 : Denmark

Denmark

LOCATION AND SIZE.
Denmark is in Northern Europe, bordered primarily by the Baltic Sea and North Sea. It consists of the peninsula of Jutland, north of Germany, and close to 406 islands, about 80 of which are inhabited. The most populated and largest of the islands is Zealand, where the country's capital can be found; Funen; and Jutland. Denmark occupies 43,094 square kilometers (16,621 square miles), a little less than twice the size of Massachusetts. Germany shares 68 kilometers (42 miles) of border with Denmark, and the other 7,314 kilometers (4,545 miles) is coastline. In 1 July 2000, the Øresund Bridge was completed, connecting Denmark and southern Sweden. The Kingdom of Denmark also includes the island of Bornholm in the Baltic Sea, and the territories of Greenland and the Faroe Islands.

POPULATION.

Denmark's population in 2000 was 5,336,394, and was projected to fall to around 5,200,000 in 2025. From the late 1960s to the present, the fertility and mortality rates have been declining. Average life expectancy at birth has increased, but it is notable that life expectancy for men and for women in Denmark is still lower than all of its neighbors, especially for women (in 1999 life expectancy for women was 78.3, while in the United States it was 80.1). The overall population growth rate has been consistently low at 0.31 percent.

The Danish population is extremely homogenous. As of 2000, 97 percent are Danes (ethnic Scandinavians), and the rest are Inuit (Eskimo), Faroese, and Germans. The proportion of elderly people in the population has been increasing as well, with the result that in 2000 only 18 percent were under 14, and 15 percent were over 65.

The population is highly urbanized, with around 85 percent living in cities. However, population density is low compared to places such as the United States and European countries farther south. It is worth noting that to be classified as "urban" in Denmark, a settlement needs only 250 people (compared to Greece, where "urban" is defined as a settlement of 10,000 or more). Urbanization has slowed in the 1990s, with some Danes reversing the pattern and moving back to rural areas.

OVERVIEW OF ECONOMY

Denmark has a technologically advanced free-market economy, mainly involved in high value-addedproduction such as processing and finishing products, rather than extracting and producing raw materials. Main exports are industrial products, followed by agricultural products— chiefly livestock-based products such as cheese, pork, and other meats. Denmark's reliance on export trade has meant that its economy has been sensitive to fluctuations in world demand, although its generous welfare state policies since the 1960s have cushioned the population from suffering much from this volatility. Because of its geographic location, Denmark is an important distribution point for Eastern Europe, Scandinavia, England, and the rest of Europe.

Denmark's high-tech agricultural sector is the latest development in a long history of Danish farming. Before the late 1800s, Denmark's chief agricultural products were grains, but at the end of the 1800s an influx of cheap grains from the Americas and Russia caused prices to plummet. Danish farmers, supported by the government and the Folk High School Movement (a cultural and educational movement that encouraged knowledge-sharing, adult education, and agricultural research and reform, especially in rural areas), switched to livestock production, feeding their animals on the cheap grain. Danes developed an industry making processing machinery for its agricultural products. By the 1960s, industry had overtaken agriculture as the largest sector of the economy.

From the 1960s to the 1980s, the Danish economy followed a fairly regular cycle: increases in wages and benefits raised costs for firms, which led to price hikes and thus less ability to compete in foreign markets. This upset Denmark's balance of trade , as the high wages raised demands for imports, so the government would attempt to control rising consumption, usually by tightening credit and imposing a new tax. The 1970s and 1980s saw labor, political, and economic troubles as the government attempted to impose austerity measures such as harsh savings programs. Strong public opposition (including labor strikes) to various plans led to the repeated dissolution of the ruling coalition governments. After 1973, rising oil prices and the international recession led to high unemployment and low domestic demand.

External debt stayed high during the 1980s, consisting mainly of bonds bought by outside investors that required interest payments by the government. However, the extent of debt was not enough to discourage foreign investors, thus Danish business did not have to worry about financing drying up. While Denmark's balance of trade was positive from 1990 to 1997, that surplus was used to pay off the debt, which gradually fell from over 40 percent of GDP in 1990 to 24 percent in 1997. The budget deficit was not eliminated until the mid-1990s, but since then government has generally run a small surplus.

Businesses in Denmark are mainly small- and medium-sized. Over 75 percent of Danish industrial companies employ fewer than 75 people. Most farms are family-owned, a tradition that was partly supported by a law prohibiting public companies from owning farms. This prohibition was lifted in 1989. The increasing accessibility to consumers in Europe has begun to encourage Danish businesses to look at ways to supply these consumers on a larger scale, including the possibility of merging small companies together into larger ones, as well as developing networks of coordination and communication between several companies.

Across most of the political spectrum, Danes are committed to ensuring a basic level of economic equality, which has been the impetus behind the creation and maintenance of a large and generous welfare, social security, national health care, and education system. The public sector in 1999 employed close to 800,000 people, over 25 percent of the labor force . Since the 1960s, the public sector has ensured that despite economic fluctuations, everyone in Denmark has completely free access to health care and education, as well as unemployment benefits, sick leave, parental leave, and housing and childcare subsidies . Although unemployment has been one of Denmark's most persistent problems, in the new century it has fallen remarkably, to a current low of just under 6 percent.

In 2000, Denmark opted out of the final stage of the European Monetary Union (EMU), choosing to keep their own currency rather than join the euro. However, as the krone is closely tied with the euro, the Danish economy is not autonomous. Arguments against the EMU in Denmark mainly accentuate the need to retain political autonomy. These opponents stress that integration into the EMU could result in a threat to Denmark's commitment to economic equality and the environment, especially if Danish businesses were required to compete with those based in countries which do not require them to comply with similar environmental or labor regulations.

POLITICS, GOVERNMENT, AND TAXATION

Queen Margarethe II is officially the head of state, but actual power resides in the prime minister and his or her cabinet (called "the government" in Denmark and virtually all other parliamentary systems, and similar to a U.S. "administration") and the Folketing (the parliament). The Queen formally appoints the prime minister and the cabinet, but this appointment is always the result of behind-the-scenes maneuvering and coalition-building after a general election. The prime minister is accountable to the Folketing for his or her actions. Most ministers have their own ministries, (such as the Ministry of Finance or the Ministry of the Environment), but some individual ministers may be selected without being assigned to a specific ministry. Legislation is created cooperatively by the Folketing and the government. Proposals for laws are considered twice in the Folketing, and if approved, must then be approved by the Queen and the government. The Queen is not independent from the government in approving legislation, but rather acts under its advice.

The Folketing has 179 seats; members are elected by proportional representation (voters elect parties rather than individuals, that receive a number of seats in the legislature proportional to the percentage of votes received). This system encourages the proliferation of political parties that may form coalitions not only to form governments, but to pass legislation in the Folketing. The prime minister can call an election at any time in the hopes of gaining more seats for the ruling coalition. And as in virtually all parliamentary systems, new elections may be called if there is a vote of no confidence in the Folketing, although this has not happened since 1909. The minimum level of popular support necessary for a party to be represented in the Folketing is 2 percent (corresponding to 3 or 4 seats), and 2 seats each are reserved for representatives from the Faroe Islands and Greenland.

Like much of Scandinavia, Denmark has a good record on women's representation in government and politics at both the local and national levels. In the government in the year 2000, 35 percent of cabinet ministers were women, as were 37 percent of the Folketing (compared with the United States in 2000, where women were 41.4 percent of the cabinet but only 12 percent of Congress).

Since 1973, there have been 10 major political parties. Underlying all but the most extreme right wing of the parties is the Nordic emphasis on the importance of economic equality, ensured by strong social welfare programs. The issue of whether or how to join the European Community has been important to all the parties over the past 20 years, but does not divide them according to traditional "right-left" alignments.

The parties in the government in 2001 were elected in March 1998. The ruling coalition is comprised of the Social Democratic Party (65 seats), the Socialist People's Party (13 seats), the Radical Liberal Party (7 seats), and the Unity Party (5 seats); in the opposition are the Liberal Party (43 seats), the Conservative Party (17 seats), the Danish People's Party (13 seats), the Center Democratic Party (8 seats), the Christian People's Party (4 seats), and the Progress Party (4 seats).

The Social Democrats and Socialist People's Party do not wish Denmark to rely solely on market forces to organize the economy, and place a priority on equalizing income distribution and living standards. Trade unions are especially associated with the Social Democrats. The Radical Liberals (Det Radikale Venstre) are to the right of Social Democrats, and want to curb public spending, lower income tax rates for high earners, and reduce benefits for the unemployed. The Unity Party or Unity List is an alliance of far-leftist and environmental groups, to the left of the Social Democrats.

The Conservative Party (CP) has been generally gaining in popularity since the mid-1970s, although its peak was in the 1980s. Representing especially the interests of business and property owners, the Conservatives emphasize the rights of ownership while trying to reduce power of trade unions. While still supporting a welfare state, the CP wants to limit public spending on social programs, but increase spending on defense. The CP is fairly pro-European integration. The Liberal Party (Venstre) is close to but more extreme than the conservatives in wishing to reduce government spending and power, and are strongly pro-European integration. The Danish People's Party (DPP) is a nationalist party for ethnic Danes, against immigration and suspicious of refugees. They are strongly anti-European integration, although they support free trade and market-based agricultural policy. The DPP are for social welfare programs, but only for Danish citizens, and also support abolishing or greatly reducing property, inheritance, and other taxes. The Center Democratic Party wants fewer taxes, especially for individuals. They do support social welfare programs and are also pro-Europe. The Christian People's Party (CPP) was formed in response to the late-1960s legalization of abortion laws and lessening of restrictions on pornography, both of which they oppose. They want to decentralize political decisions, avoid special interests, and emphasize protecting the environment and quality of life. They have historically had a small share of popular vote, usually just above the 2 percent threshold required for representation in the Folketing. The Progress Party (PP) was founded in 1990, an extreme right-wing party with a reputation for unruliness. Their main platform is to abolish income taxes and greatly reduce government spending, and to restrict immigration. Against joining the European Union, their arguments often alienate more tolerant Danes, while some of their leaders and members have espoused more explicitly racist attitudes. Many of the other parties are reluctant to form a coalition with them.

In 1997, the public sector employed around a quarter of the workforce, and provided health care, welfare, social security, education, and administration of the government. Government-owned businesses are also still important to the economy, although there has been increasing privatization in recent years. Recently privatized businesses include a life insurance company (now totally private), the national telecommunications company TeleDanmark (totally private), Copenhagen Airport (now 49 percent private), and the computer services company Datacentralen, 75 percent of which was sold to the U.S.-based Computer Sciences Corp. The large Postal Service and Danish State Railroads companies have also been turned into private companies, although the government actually owns these firms. Some other public services such as sanitation, cleaning, and catering to public institutions are also being privatized.

The value-added tax (VAT) is the main source of government revenue, accounting for over one-quarter of total revenue in 1998. At 25 percent, it is one of the highest VAT rates in the world. Income tax is also high. In 1999, the marginal income tax rate was 40 percent for taxable incomes up to $21,500, while the highest bracket was about 60 percent for taxable incomes of more than $37,000. In 2001, 40 percent of all Danes in full-time employment were in the highest tax bracket. The Danish government, fearing an economic slowdown, is beginning to shift its tax burden somewhat away from individual incomes. "Green taxes" on pollution and to enforce environmental regulations are expected to make up some of the difference, and are already generating significant revenues; in 1995 over 8 percent of tax revenue came from environmentally-related taxes (over 2 percent of GDP). In the same year in the United States, only 4 percent of tax revenues came from environmentally-related taxes (less than 1 percent of GDP).

Even though most Danes must give almost half of their salaries to the government as income tax, they get most of it back in the form of free, high-quality health care, education, and transfer payments . For example, in 1996, 47 percent of the DKr386 billion collected by the national government was returned to the public in the form of transfer payments such as unemployment and sickness benefits, old-age pensions and housing subsidies. Some 60 percent of all government revenues from taxes in 1996 were spent on the health service, while transfer payments accounted for 40 percent of total public revenues (22 percent of GDP).

At 32 percent, corporate taxes are high. Denmark plans to reduce them to 26 percent by 2002. However, contrary to many economists' predictions, Denmark's high corporate tax rate has not discouraged foreign investment. In a surprising situation that suggests that there must be multiple reasons why foreign companies choose to invest, Denmark in 1997 showed an increase in foreign investment that was an amazing 308 percent—al-most 10 times that of the European Union as a whole.

The Danish currency is pegged in a fixed exchange rate with the euro, so interest rates nearly always follow the European Central Bank. This relationship changed slightly after the referendum in 2000 when the Danes narrowly voted to reject the last stage of the EMU and keep their own separate currency. After the referendum, the Danish national bank raised its interest rates, which encouraged people to borrow less (since interest on loans was higher), and thus reduced the amount of money in circulation. As money became scarcer, its value increased, and the bank prevented the krone from devaluation . However, the krone has never been allowed to fluctuate beyond the level allowed by the exchange rate mechanism (ERM).

Denmark was the first country to establish a Ministry for the Environment, in 1972. Danes spend more per capita on environmental protection than most nations in the world. This has also inspired the development of a local industry of pollution control equipment, which is now a significant international force. This environmental focus has also affected the Danes' relation to European integration. Many have feared that joining the European Union (EU) would require them to lower their standards of environmental protection in order to remain in line with the other EU nations. Other than environmental protection laws, there are few regulatory controls on the economy.

INFRASTRUCTURE, POWER, AND COMMUNICATIONS

Denmark has a thoroughly modern and extensive infrastructure . Its numerous islands have encouraged the development of a network of ferry services in domestic waters with 415 kilometers (258 miles) of waterways. A well-maintained road and rail network includes 71,437 kilometers (44,388 miles) of highways (including 843 kilometers, or 524 miles, of expressways), and 2,859 kilometers (1,773 miles) of railways which serve almost every town. Some 508 kilometers (316 miles) of the railways are privately owned, while the rest are owned by the state.

In cities, environmental concerns have encouraged bicycle riding for all. Urban traffic is minimized by legislation requiring nearly all new shops be built within the existing commercial centers of cities, towns, and villages. Additionally, most new workplaces are required to be a short walking distance from a transit stop. Shops, offices, and factories must make accommodations for bicyclists and pedestrians. As a result, in 1998 less than one-third of travel within cities was via cars and trucks, and motorized traffic in the city centers had increased very little over the past 25 years.

As of 1999, Denmark had one of the world's highest density air networks, with 28 paved-runway and 90 unpaved-runway airports. Air service for Denmark, Norway, and Sweden is provided by Scandinavian Airlines Systems (SAS). Copenhagen Airport was voted "World's Best Airport of 2000" by the International Air Transport Organization, the same year that also saw the completion of the 7.8-kilometer Øresund bridge linking Denmark with Sweden.

Danes consumed 33.03 billion kilowatt-hours (kWh) of electricity in 1998, importing 2.68 billion kWh, and exporting 7.1 billion kWh. Most of the imported fuel is coal, which in 1998 amounted to 6.3 million tons. Denmark is shifting further away from coal use, as the 1998
Communications
Country Newspapers Radios TV Sets a Cable subscribers a Mobile Phones a Fax Machines a Personal Computers a InternetHosts b Internet Users b 1996 1997 1998 1998 1998 1998 1998 1999 1999
Denmark 309 1,141 585 248.4 364 N/A 377.4 540.30 1,500
United States 215 2,146 847 244.3 256 78.4 458.6 1,508.77 74,100
Germany 311 948 580 214.5 170 73.1 304.7 173.96 14,400
Norway 588 915 579 160.1 474 50.0 373.4 754.15 2,000
aData are from International Telecommunication Union, World Telecommunication Development Report 1999 and are per 1,000 people.
bData are from the Internet Software Consortium (http://www.isc.org) and are per 10,000 people.
SOURCE: World Bank. World Development Indicators 2000.

Figure is 60 percent lower than it was just 2 years earlier. Since the discovery of oil and natural gas reserves in the 1960s, Denmark was self-sufficient in oil production by the 1980s. In 1998 oil production was 238.35 million barrels per day (bpd) with exports of 8.98 million bpd, while natural gas production was 267.68 billion cubic feet (bcf), and exports were 95.35 bcf. The state owns significant shares in both oil and natural gas extraction, although the giant Maersk/A.P. Møller Corporation is also a dominant figure. Overall, in 1998 Denmark generated 4.27 billion kWh of electricity. Fossil fuel from its own reserves accounted for 90.8 percent of this electricity, hydroelectric power for 0.07 percent, and the remaining 9.13 percent was generated by other means, including wind power. Denmark has, since 1980, banned nuclear power, and focuses much research and development on conservation and alternative energy sources.

Denmark has an excellent telecommunications system based on 3.20 million telephone lines (1995). Cellular phone ownership increased by 304 percent from 1993 to 1997, and in 1999, such telephones were owned by 49 percent of the population, including nearly every person between ages 17-25. Cell phone ownership per capita in 1997 was 190 per 1,000, as compared to the U.S. figure of 128 per 1,000. Denmark's burgeoning IT services industry is supported by high Internet connectivity; 90 percent of all businesses use some aspect of the Internet. The Danish government has strongly supported the development of personal as well as business Internet use. In January of 2001, the prime minister announced that the government intends to provide all households in Denmark with access to the Internet, while at that time nearly 50 percent of all households with a computer were already connected.

ECONOMIC SECTORS

In modern Denmark, the economic sectors of agriculture and industry are so closely linked that it is difficult to separate their influences. Both food and wood-based industries such as paper depend heavily on agriculture for raw materials while using sophisticated technology to process them. In addition, agricultural production itself is quite technologically advanced. The agricultural sector's highly technical nature means that its great productivity is generated by a small fraction of the total workforce—4 percent in 2000. In contrast, well over two-thirds of the workforce was employed in the service sector in the same year.

Agriculture in Denmark also includes forestry and fishing. The agricultural industry was Denmark's first engine of growth, especially its livestock production and forestry industry. Agriculture's economic influence relative to other sectors has basically been declining; by the 1960s, industry had surpassed it in terms of employment and percentage of GDP, and by 2000 agriculture made up 3 percent of GDP. Despite the small size of Denmark's agricultural sector today, it is comparatively highly productive, accounting for around 15 percent of exports in 1999. In 1998, Denmark was the world's seventh-largest producer of pork, while the Danish fishing industry was the second-largest in Europe.

The lack of raw materials other than agriculture (until the discovery of oil and natural gas in the 1960s), meant Denmark's industries developed as secondary production and processing concerns, usually specializing in narrowly-defined fields. This has led to the predominance of small-or medium-sized firms making niche products, often with a high-tech or design focus. For example, in a small design-oriented field such as furniture making, Denmark excels—in 1998 accounting for 20 percent of furniture exports by EU countries. The complexity and versatility of this organization of the industry has somewhat sheltered the Danish manufacturing industry from fluctuations in the world market. Alongside food processing and agro-industry, chemicals and engineering are important industries, and electronics are increasing in significance. Denmark's position in the North Sea has led to the development of a strong shipbuilding sector—it is currently the world's third-largest shipbuilder after Japan. The general trend in the manufacturing industry is that work-and material-intensive industries such as food processing, textiles, and metals decline or stagnate, while knowledge-and technology-based industries such as chemicals, electronics, and engineering have been expanding. Industry contributed about one-quarter of GDP in 2000. The sophisticated technology of much of Denmark's industrial sector has meant that high or increasing productivity does not always correspond with high or increasing employment. Over the past decade, the percentage of the workforce employed in manufacturing has remained fairly constant at around 25 percent.

In 2000, Denmark's services sector contributed more than two-thirds of GDP. Private services accounted for around two-thirds of productivity, and public services the remaining one-third. However, many private services are in fact subcontracted to public institutions. The majority of public services are in health, welfare, and administration. In the service sector as a whole, business services and wholesale/ retail trade accounted for the most productivity growth. Wholesale and retail trade is the largest employer in private services, in 1997 accounting for a little over half of service sector employment. Between 1992 and 1998, the service sector saw a 12 percent increase in employment. Public services have consistently accounted for nearly one-third of employment in services (mostly in health and education) over the past decade, while telecommunications and business services have slowly increased their share of employment.

AGRICULTURE

Denmark is the only country in the Baltic region with a net export of agricultural products, producing 3 times the amount of food it needs for itself. A good percentage of arable land and moderate climate has been conducive to agriculture, but the sector's extremely advanced technology and infrastructure are what have made it so productive in recent years. Although agriculture's role in the Danish economy has steadily decreased as industrialization and economic development has progressed, it is still essential as a source of foreign currency, a direct and indirect source of jobs, and as a supply of everyday foodstuffs.

The increasing mechanization of agriculture, combined with changes in farm management and organization, plus the draw of industrial employment in the cities, has meant fewer people are required to farm ever-increasing quantities of land. Farm sizes have increased, and the number of individual farms has dropped dramatically since the 1950s. From the 1970s into the 1990s, 2,600 individual holdings disappeared every year, absorbed into larger farms. In the first half of the 20th century Denmark had around 200,000 individual farms, averaging 16 hectares in size; by 1997, there were about 60,900 farms averaging 43.6 hectares. Family-run farms are still dominant in Denmark, where even in 1997, some 91 percent of farms were family-owned and run, 7 percent company-owned, and the rest owned by the state, local authorities, and foundations. Along with increasing farm size, the typical farmer has to an increasing extent concentrated on one sole branch of farming, and specialization in animal production has led to fewer types, but larger numbers, of livestock.

In 1996, primary forestry occupied approximately 3,000 employees, while forestry formed the basis for most of the work for around 34,000 employees in the wood manufacturing industry. Denmark is Europe's primary supplier of Christmas trees. Profits from forestry have historically been invested both in modernization of the industry and in investment in other industries. The state is the largest owner of forests, with one-third of forested land under its control. The rest is owned by a multitude of private companies, individuals, and institutions.

In the early 1990s, Denmark was among the top 10 to 15 fishing nations in the world, catching 1.6 million tons in 1993. Industrial fishing (catching fish for industrial use, i.e. producing fish meal and fish oil) has been the most important branch of fishing with a total catch in 1993 of 1.2 million tons. In 1993, the export value of the fishing industry was around DKr10 billion, corresponding to some 4 to 5 percent of Denmark's total exports.

Environmental legislation has been on the increase in the past decade, some of which has directly affected productivity. For example, the greater emphasis on forests and parks has meant that some land had to be turned away from farming use. New restrictions on waste disposal and contamination have also forced some farmers to limit or end production.
INDUSTRY

MANUFACTURING.

In 1996, 45 percent of the manufacturing industry's total production went to export, corresponding to 75 percent of total exports. Mechanical engineering production, especially of electronic goods, was an increasing proportion of the sector's value, and also created some 12,400 new jobs between 1980 and 1996. Nearly all Danish electronics production is exported, including products such as measuring instruments, microphones, equipment for tele-and radio communication, computer networks, power units, engine controls, and hearing aids. Food, drink, and tobacco production/processing, by contrast, has declined between 1993 and 1997 from around 30 percent to around 25 percent of production in manufacturing. The Carlsberg beer company is the most significant producer of beverages, in 1998 having a turnover of DKr29.3 billion and employing 20,500 workers. The largest employers in manufacturing are the makers of metal products, machinery, and equipment; the food-processing industry (bacon factories, dairies, corn mills, and breweries); the paper and graphic industries; and manufacturers of transport equipment, especially shipbuilding. A significant percentage of workers are also employed making wood and wood products.
CHEMICALS.

The chemical industry has also grown through the last decade, and in 1999 accounted for 24 percent of all chemical production in the EU. Denmark, in 1996, was the world's second-largest per capita exporter of pharmaceuticals, with exports valued at almost DKr15 billion. Novo Nordisk, despite its status as one of the largest chemical companies, is still in many ways typical of Danish industrial style: a high-tech, highly-specialized firm, investing heavily in research (in this case on insulin, hormones, and enzymes), exporting 98 percent of its products.
ELECTRICITY, COAL, GAS, AND OIL.

Denmark is the third-largest oil producer in Western Europe, in 1998 producing 233.35 million barrels per day (bpd) of petroleum, while in the same year natural gas reserves produced 267.69 billion cubic feet (bcf) per year. Natural gas exports at that time were over 95 bcf per year, primarily to Sweden and Germany. Danish oil and gas production in 1998 was worth just over DKr30 million. In 1999, the energy and water industries together employed 17,000 people. Maersk/A.P. Møller, the largest company (of any kind) in Denmark, is heavily involved in oil production, although it began as a shipping concern. Statoil (owned by the state of Norway), and the American-based multinational Amerada Hess are the other significant operators in this industry. At the end of the century, Denmark was still opening up new areas of the North Sea for exploration, and it is possible that new reserves will be discovered. The government retains its shares in some oil industries, and licenses the right to explore and extract.
CONSTRUCTION.

The construction industry illustrates the trend of a decline in work-intensive manufacturing. Devastated in the 1970s and 1980s by a severe fall in house building, production, and employment in this construction fell considerably and stayed low through the late 1990s. The value of construction products fell from 12 percent of GDP in 1972 to 6 percent in 1996. Over that time, employment fell by 43,000. The building and construction industry is mainly made up of small companies in which independent (paid) and assisting (unpaid) spouses constitute a relatively large proportion of those employed. The rapid decline in this sector in Denmark has in the first half of the 1990s led to the industry being more export-oriented, partly through Danish firms increasing activity in Germany. Construction has shifted somewhat from mainly making new buildings (which had accounted for 47 percent of its work in 1970) to a greater focus on repairs and maintenance, which grew from 23 percent in 1970 to 38 percent of construction work in 1999. New building construction in that time frame fell to 32 percent.

SERVICES

TOURISM.
In 1997, 2.2 million tourist arrivals in Denmark were recorded (a 4 percent increase from 1993). In 1999, tourism generated around DKr44 billion in revenues, an increase of 1 million from the year before. This made it the third-largest sector after industry and agriculture. The attractions most visited by tourists are Tivoli Gardens (Copenhagen), Lego Land (Billund), Hans Christian Andersen's House and Museum (Odense), and the Viking Ship Museum (Roskilde). Old manor houses and castles are also popular destinations, while Copenhagen harbor was in 2000 one of the most popular stops on European cruises.

Tourism employed over 70,000 (1999) people full-time in the facilities described above, as well as 650 hotels, 30 inns, 525 registered campsites, and over 100 youth hostels. In 1998, the Danish Ministry of Business and Industry, SAS, the Danish Tourist Council, and other tourism interest groups joined forces with local authorities to promote Denmark as a tourist destination for businesspeople and wealthy weekend tourists from the United States, Germany, Southern Europe, Sweden, and Russia. The 3-year international marketing project was estimated to cost a total of US$7.7 million, of which SAS was to pay US$4 million, the Ministry of Business and Industry US$1.3 million, and the rest will come from various municipalities.

WHOLESALE AND RETAIL TRADE.

Employment in the service sector is dominated by the wholesale and retail trades, with 441,000 people in 1998. However, employment has declined since the 1970s, as the sector has seen considerable vertical integration (an overall integration of retail, wholesale, and in certain cases production sectors). Moreover, 1980s-era mergers within the sector (horizontal integration) have marked both areas, leaving wholesale and retail highly concentrated (with a few firms dominating the market). In 1995, 4 percent of firms accounted for about 75 percent of the total turnover. In 1998, there were 8 wholesalers operating domestically, the largest 2 of which were Maersk and the cooperative FDB, which together accounted for 61 percent of the market in 1998. Total transactions in 1998 amounted to US$10.7 billion. In retail, even though a few large players dominate the industry as a whole, there are still a large number of small shops; 3 out of 4 retail shops are one-person businesses, while the remainder are mainly small companies or cooperatives.

TELECOMMUNICATIONS.

Growth in postal and telecommunications services was larger than any other business sector; from 1992 to 1998 productivity grew by 44 percent. Deregulation of the industry, beginning in 1986, paired with strong research and development supported by the government allowed firms to take advantage of new technologies. However, technological advances have meant that growth was not accompanied by much of a rise in employment, which in 1996 was 45,000 people, the same as in 1986. The major telecommunications companies are at least partly-owned by foreign companies. TeleDanmark, in which Ameritech (U.S.) owns a controlling interest, and Sonofon cellphones, almost half of which is owned by Bellsouth (U.S.), together account for over 75 percent of the market.

FINANCIAL SERVICES.

Between 1989 and 1996 there was a one-third decline in the number of domestic bank and financial institution branches. This was mainly due to Denmark's banks being burdened by a number of bad debts in the early 1990s. Since 1994, the improvement in both Denmark's economy and the banks' lending policies has contributed to more stability in the industry, along with a number of consolidations among the country's banks. The reduction of branches of institutions coincided with a 14 percent decline in the number of employees over the same 7 years. In 1998, Denmark had 95 banks with assets of US$216 billion, while total assets of the 5 largest banks totaled US$179 billion, over 80 percent of total banking sector assets. The 2 largest banks, Den Danske Bank and Unidanmark-Gruppen, also operate as financial "supermarkets" offering a wide range of financial services, and account for 50 percent of the financial service market. Danish banks are technologically sophisticated, and have invested heavily in computers and the development of electronic transfer systems, in 1998 adopting one of the first nationwide electronic payment card systems (Dankort). Employment in business services has been increasing throughout the last decade; by 1999, 326,000 people worked in the financial services sector, with Den Danske bank employing 11,409 people, and Unidanmark-gruppen employing 9,960.

TRANSPORTATION.

Road transport, both trucking/hauling and personal transport such as taxi services, dominates the domestic transportation sector. Road transport in 1996 generated just under half of the total revenues from the transport sector, while the remaining value was divided among other types of the transport: shipping (16 percent), railways (11 percent), and aviation (7 percent). The transport sector created around 9 percent of Denmark's GDP and 7 percent of total employment in 1996. Activity in the sector as a whole has risen steadily and at a faster rate than overall productivity since the 1980s. Production value in the sector rose by 74 percent between 1986-1996. In 2000, over half of Danish international trade was by road, and most of the remainder by sea. Denmark's increasing expertise in making high-tech liner and tanker ships has helped the shipping sector in recent years. Shipping accounts for most of Denmark's international freight traffic, and the country's almost 600-vessel merchant fleet is the fourth-largest in the European Union. Denmark's Maersk shipping line bought the U.S.-based Sea-Land Services in 1999 to become the largest container shipping line in the world.

INTERNATIONAL TRADE

Denmark is one of the most trade-oriented economies in the world. As a base for exporting, Denmark has many advantages. Its key location as the only Scandinavian country connected to mainland Europe, plus its position on the Baltic sea, gives it access to lucrative markets for both EU and non-EU countries. Its extensive infrastructure and well-educated, high-skilled workforce also help promote trade and foreign investment.

Germany is currently Denmark's most important export destination, followed by Sweden and the United Kingdom. Exports to these 3 countries totaled 41.7 percent of Danish exports in 1997. The United States is the largest trading partner outside the EU, and accounted for almost 5 percent of Denmark's total trade value in 1997. Over one-third of Danish industrial exports are machines and instruments, while pharmaceuticals, energy (especially oil), meat, and meat products make up the rest.

Denmark's main imports are raw materials and unfinished products that are used in its own industrial sector. In 1997, imports for the industrial sector were about 70 percent of total imports, while the rest were consumer products, including cars. Of the services imported, computer software and management consulting are very important. Imports from Germany, Sweden, and the UK account for 42 percent of total imports.

The early 1990s were a difficult time for Danish international trade as its 3 most important markets—Ger-many, the UK, and Scandinavia—were all performing sluggishly. More recently trade has increased, especially due to a depreciation of the Danish krone. The krone is expected to remain stable through the next few years, which may reduce the growth in exports. However, Denmark is currently exporting more than it imports in all 3 sectors: industry, agriculture, and services.

MONEY

Since the 1980s, Denmark has pursued a fixed exchange rate linked to the German mark. On 1 January 1999, monetary policy was linked to the new European Central Bank. In September 2000, Denmark opted out of the European Monetary Union's (EMU) third phase (establishment of a joint EU currency and relinquishment of jurisdiction over monetary policy), although the country's economic performance exceeds the established criteria for membership. This was due to resistance on the right, especially from nationalist groups who wish to retain the Danish currency and not tie its economy so closely to that of Europe, and equal resistance on the left, where many fear that equalizing human rights and environmental regulations with the EU will chip away at the Danish welfare state and its environmentally-conscious business practices.

Revert to the state treasury. Although Denmark has retained its own currency, separate from the EU, its currency is so closely tied to the euro that monetary policy often closely follows the European Central Bank. The National Bank lends to smaller banks and to the central government, and is responsible for administration of the foreign exchange policy.

The Copenhagen Stock Exchange (CSE) was established in the capital in 1861, and in 1999 had 233 listed companies. At the end of 1999 its market capitalization was US$105.29 billion. The CSE was a pioneer in computerized trading, being the first in the world to introduce electronic bonds and shares.

POVERTY AND WEALTH

The Gini Index measures the level of income inequality in a country, with 100 equal to total inequality (basically one person receiving all the income), and 1 indicating total equality (everyone having exactly the same income).

Raija Julkunen, a lecturer on social policy at the University of Jyväskylä, describes the differing U.S. and Nordic attitudes towards the role of the state: "American culture conceives citizenship and welfare as diametrically opposed, as if state-ensured welfare did not go along with a free society. In the Nordic countries, on the other hand, the notion of a welfare state has a positive ring to it. Only social rights—guaranteed minimum income, employment, education, health care—make citizens free and equal." The Nordic approach has succeeded in that there is virtually no poverty in Denmark.

Denmark's extensive social welfare system has existed in its current form since the 1960s, but has roots in Danish culture back to the 1930s. Because of Danes' long-standing preoccupation with economic equality, there is less of a difference between Denmark's high-in-come and lowest-income citizens than in the United States or many other countries. People who work in restaurants or cleaning buildings have free access to the same quality of healthcare as those who are lawyers, professors, or accountants. They have paid holidays, maternity
GDP per Capita (US$)
Country 1975 1980 1985 1990 1998Denmark 22,984 25,695 29,332 31,143 37,449
United States 19,364 21,529 23,200 25,363 29,683
Germany N/A N/A N/A N/A 31,141
Norway 19,022 23,595 27,113 28,840 36,806
SOURCE: United Nations. Human Development Report 2000; Trends in human development and per capita income.

Distribution of Income or Consumption by Percentage Share: DenmarkLowest 10% 3.6
Lowest 20% 9.6
Second 20% 14.9
Third 20% 18.3
Fourth 20% 22.7
Highest 20% 34.5
Highest 10% 20.5
Survey year: 1992
Note: This information refers to income shares by percentiles of the population and is ranked by per capita income.
SOURCE: 2000 World Development Indicators [CD-ROM].

And paternity leave, sick leave, and unemployment benefits.

All families with children under 18 receive, irrespective of income, family allowances consisting of a regular, tax-free amount per child, with a higher rate for children under 7 years of age. Bread-winners who are single parents or pensioners can receive additional allowances per child. Families with children are entitled to free home help if the person who has the responsibility for the home and the children cannot manage it on account of, for instance, illness or confinement. Among other things, families living in rented accommodation can, depending on family income and the size of the rent, receive a housing benefit (in December 1998, there were 169,000 recipients).

According to sociologists Jens Hoff and Jorgen Goul Andersen in their article "The Danish Class Structure" in Acta Sociologica (1989), the concept of class is difficult to compare between countries with this kind of social system and countries such as the UK, the United States, or in less-developed countries. Class in Denmark is tied less to things like income and healthcare, and more to location, profession, and the kind of work engaged in, i.e. the amount of control over one's own responsibilities. Much of the Danish labor force works without much individual control over workplace decisions, without supervising others, and without much autonomy. This might make them working class by some definitions. However, these workers' quality of life is still very high by most standards, underscoring the impression that in Denmark, there is a lack of status distinctions between those who have high-skill or low-skill jobs.

One facet of the Danish welfare model has been the belief that benefits should not be tied to the kind of job one has, or whether someone is working or not. This approach has proven problematic as the country continually struggles with its unemployment rate—especially among the young. Critics argue that there is not enough incentive for people to choose to be employed rather than collect unemployment money. However, proposals of dramatic reductions in benefits are political suicide, as Danes are wary of what they might see as the sacrifice of a commitment to equality.

WORKING CONDITIONS

In 1999, the Danish workforce numbered 2.89 million, while the unemployment rate was 5.7 percent. The labor force is shrinking in Denmark. This is partly due to the aging of the population, as more workers retire than enter the workforce each year. High income taxes combined with generous unemployment assistance also may dissuade many, especially young workers, from entering the work-force. The government is currently attempting to restructure its taxation system to change this picture, shifting the burden of taxation away from individual income.

The standard working week is 37 hours, with a minimum of 5 weeks mandatory vacation. Three-quarters of those in employment have a 5-day work week, while those out sick may be paid up to 90 percent of their wage (with a maximum of DKr2,556 per week).

Danish laws guarantee the right of workers to organize and all (except civil servants and essential service
Household Consumption in PPP Terms
Country All Food Clothing and footwear Fuel and power a Health care b Education b Transport & Communications OtherDenmark 16 6 11 3 17 5 43
United States 13 9 9 4 6 8 51
Germany 14 6 7 2 10 7 53
Norway 16 7 11 5 4 6 51
Data represent percentage of consumption in PPP terms.
aExcludes energy used for transport.
bIncludes government and private expenditures.
SOURCE: World Bank. World Development Indicators 2000.


Workers) have the right to strike, as well as the right to bargain collectively. The government stands behind these rights, does not interfere with unions, and prohibits anti-union discrimination by employers. More than 75 percent of all wage earners are organized in trade unions, as are about the same percentage of salaried employees, and collective bargaining is very common. Strikes are also rather common; in 1997, 101,700 workdays were lost due to labor conflict.

Mothers get extensive maternity leave—4 weeks prior to the birth of a child, and up to 24 weeks after—while fathers get paternity leave of 2 weeks after the birth. From the fifteenth week after the birth the mother can transfer all or a portion of her remaining maternity leave to the father. A tax-free benefit (known as the "children's check") is paid to the parents of all children 7 to 18 years old regardless of the household income. Denmark's child-care system enables either or both parents to work outside the home. In 1994, 80.3 percent of 3 to 6 year-olds were in childcare, (compared to 57.4 percent 10 years earlier). Women who used to be expected to care for their own children no longer face the same demand; in Denmark women's rate of participation in the workforce is very high—in 1995 89 percent that of men. In the same year women's salaries were 88.1 percent of men's.

COUNTRY HISTORY AND ECONOMIC DEVELOPMENT

1871. Denmark's socialist movement is officially founded, the start of a strong and diverse socialist tradition influencing Danish politics in the years to come.

1901. Change of political system to a constitutional monarchy, creating the Government (body of ministers selected by the queen) and the Folketing (representatives elected by the people).

1914-18. Denmark remains neutral during World War I.

1915. Constitutional reform; women and servants are enfranchised.

1933. Social reform movement begins, expanding the welfare and education system.

1940. Denmark occupied by Germany during World War II.

1941. United States establishes military bases in Greenland (with Danish ambassador's approval).

1945. Denmark liberated from Germany at the end of World War II.

1948. Faroe Islands, until this time part of Denmark, are granted home rule, which allows them control over domestic policy.

1949. Denmark joins North Atlantic Treaty Organization (NATO), a strategic military alliance of Western European and North American non- communist nations.

1960. Denmark joins European Free Trade Agreement (EFTA), which reduces or eliminates barriers to trade (such as tariffs ) between participants.

1967. Pornographic text and photography (excluding photos of children) is legalized, a sign of Denmark's progressive/permissive social attitudes; however, response to this and the stance on abortion leads to the founding of the Danish Christian People's Party.

1973. Compulsory National Health Insurance set up (replacing sickness benefits fund).

1973. Denmark joins the European Economic Community (EEC—an organization of states that lowered barriers to trade between them).

1976. Social Assistance Act introduces a unified structure of public assistance and benefits, partly needs-based.

1979. Greenland, formerly part of Denmark, is granted home rule.

1985. Greenland leaves EEC over fears of EEC regulations' effects on its fishing industry.

1985. Denmark joins the European Union.

2000. Danes reject final stage of European Monetary Union (EMU) in a referendum.

FUTURE TRENDS

Danish manufacturing remains a strong base for growth, especially as research and development help support its further extension into high-tech industry. The Danish government's support for the growing use of Internet services for both businesses and individuals bodes well for Danish flexibility and responsiveness to global market trends. Public investment in education, particularly in relation to computers and computing, also supports prospects for growing computer-related services.

Unemployment has been reduced for the present, but the main mechanism was to shrink the size of the work-force through early-retirement plans and state-funded sabbaticals. A smaller workforce drives wages up, raising production costs for many Danish businesses, which makes them less competitive internationally. This has affected Denmark's balance of payments , which has even dipped into negative territory in recent years. It is not clear what effect this will have on the economy, but if the government can manage to strike a balance, keeping inflation and interest rates low without hurting industrial competitiveness, then a small deficit may be an acceptable price to pay.

Denmark's greatest challenge for the future is due to its aging population. Its welfare and social security system will be severely strained by the demands of the growing population of elderly people and the shrinking work-force and sources of tax revenues. If nothing is changed, Denmark will not be able to maintain the standard of benefits it currently grants to its citizens. As most Danes are fiercely supportive of state guarantees of a standard of living, any government attempting to reduce those guarantees faces hostility and resistance. The current government has made some changes in the labor market (reducing and altering some benefits and pensions), but it is unclear how much the public in the highly-unionized workforce will stand for reductions in benefits or wages. The governing coalition must tread carefully if it is to make changes without seeming to compromise its commitment to material equality.

In October of 2000, Danes voted not to join the last stage of the European Monetary Union, and to keep its own currency. Despite the urging of Prime Minister Poul Rasmussen, the Danish public did not support the euro. However, the krone is still closely tied to the euro, and Denmark's economic decisions, particularly monetary ones, will be heavily influenced by the EU. Resistance to the EMU has been made more on political grounds than economic ones. There is some fear that opting out of the EMU will hurt prospects for foreign investment, which in the previous 5 years had increased dramatically in Denmark. The current government has demonstrated its friendliness to business by lowering corporate taxes and other business taxes, which may help to counteract any possible flight of investment. It is too soon to tell if either effect has come to pass.

DEPENDENCIES

GREENLAND.
Greenland (local name Kalaallit Nunaat) is the world's largest island, with an area of 2,175,590 square kilometers (840,000 square miles), slightly more than 3 times the size of Texas. Only 15 percent of the island is not covered in ice. There are no crops or trees, but there are many plants and flowers, as well as seals, fish, and reindeer. The population in 1998 was 54,100 with high birth and death rates. Greenlanders (Inuit and what the CIA World Factbook calls "Greenland-born whites") form the majority with 87 percent of the population, and the rest are Danish and others. Languages spoken are Greenlandic (East Inuit), Danish, and English. The 56 towns and villages on the island are mostly small; 40 have fewer than 500 people, and only 3 have more than 4,000. The administrative capital is Godthåb, called Nuuk in Greenlandic, with around 12,100 people.

Greenland was first a Danish colony in the 1300s, when Norway and Denmark were united kingdoms. In World War II, when Germany occupied Denmark, the U.S. and Danish ambassador in Washington D.C. agreed that U.S. troops could be stationed in Greenland. Some U.S. air bases remain there even now. A referendum (a nation-wide vote on a particular issue) in 1979 gave Greenland "home rule." Denmark has jurisdiction over foreign policy, defense, and justice, and there is joint authority over its oil and mineral resources. Greenland has its own legislature.

The population depends on fishing, and some also hunt seals. There is a small amount of mining, but the harsh climate and lack of transportation infrastructure have prevented much development. Greenland's economy has not been strong in the past 10 years. Since 1990, imports have outpaced exports. Following the closure of Greenland's last lead and zinc mine in 1989, the fishing industry and grants from the Danish government became the mainstay of the economy. In 1999, grants from mainland Denmark and EU payments for the right to fish in Greenland's waters made up about 50 percent of the home-rule government's revenues. As the cod is threatened with extinction, shrimp fisheries have taken over as the most important income earner.

Greenland is also looking to tourism as a sector for growth; however, the season is quite short due to the long and harsh winters. The public sector—both publicly owned businesses and municipalities—plays a dominant role in Greenland's economy. Greenland joined the European Community together with Denmark but withdrew in February of 1985 (after a referendum in 1982) due to disagreement with the EC over fishing policy.

FAROE ISLANDS.

The Faroe Islands (local name Foroyar) are north of the Shetlands and northwest of Scotland, between the Norwegian Sea and the North Atlantic Ocean. There are about 30 islands, 18 of which are inhabited, with a total 2000 population of 45,296. The total land area is 1,399 square kilometers (540 square miles). The population is mostly descended from Viking settlers who landed there in the 8th century. The local language is Faroese, descended from Old Norse, although Danish is also required in schools, and adults on the island can speak it. The capital of the Faroes is Torshavn.

The Faroes have been part of the Danish Kingdom since the 14th century, but were granted home rule in 1948, although the Danish government is still responsible for defense and other aspects of administration. Denmark's Folketing (Parliament) reserves 2 seats for representatives from the Faroes.

Despite their small and remote location, the Faroes have a good domestic and international communications infrastructure, with 22,000 main telephone lines—about one for every 2 people on the island. There is also a satellite earth station and a fiber-optic submarine cable that links the Islands to Iceland and Denmark. There are 14 radio stations and 7 television stations.

The mild winters, cool summers, and rocky terrain of the Faroes are unsuitable for agriculture, and in the past, sheep farming was very important to the economy. Nowadays fish and fish products are the center of the economy, with fish products comprising 90 percent of exports. Most other food is imported. This near-total dependence on fishing means the economy is very vulnerable, both to the changes in world demand and to environmental change. Even with the fishing industry, the Faroe Islands depend significantly on grants from Denmark. Without Danish government bailouts in 1992 and 1993, the Faroese economy would have gone bankrupt. The Faroes did not join the European Community (EC) when Denmark did, because of disagreement with EC fishing policies, which, the Faroese felt, put them at a disadvantage.