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Denmark • Growth • Trade Unions

Hoping for growth

Kristian Madsen - 19 December 2012

Rather than putting forth new fiscal and other policy initiatives to stimulate growth and job creation, the Danish Social Democrats have shifted their focus on education reform to buy time in office

If you’re looking for fresh ideas from the centre-left on how to stimulate the economy, you can safely skip by the Danish government, led by Social Democratic prime minister Helle Thorning-Schmidt, and their policies.

This December, the government had to admit that their GDP growth prognosis had been too rosy, and revised their growth estimate for 2012 from a measly +0.9 to an outright horrible -0.4.

“Well, it’s not what we hoped for”, minister for economic affairs Margrethe Vestager conceded at a press conference. But not to worry, according to the government’s new prognosis for 2013, the economy will pick up at some point in the latter part of next year.

The bad news is, of course, that this is almost exactly what the government said last year, and there are no new fiscal or other policy initiatives to stimulate growth and job creation. On the contrary, the government has just passed an extremely tight 2013 budget, curtailed access to comparatively generous unemployment benefits, which will most likely force thousands of people out of the system by New Year’s, and are planning further cuts to social entitlement programs.

In short, the government is trying to address the lack of growth as a structural problem rather than as a result of the economic slump. This approach has attracted criticism especially from the major trade unions, who helped Mrs. Thorning-Schmidt win office in the 2011 elections. The leader of the largest Danish trade union 3F denounced the government’s economic policy as “a fiasco”.

The government seems bewildered and out of ideas to stimulate growth in the short term. They’ve adopted a wait and see strategy, blaming problems on the eurozone mess and the international crisis. ‘Who knows, maybe Mr. Draghi will come up with something,’ seems to be the overarching rationale. This seems like a recipe for electoral disaster, and the government is still well behind in the polls.

Unable to come up with short term economic ideas, the government has tried to shift attention to education reform, proposing a major overhaul of the public school system with a plan to improve results, especially in inner city areas with lots of pupils with immigrant backgrounds. A recent survey of schools in  Copenhagen showed that 55 per cent of kids with immigrant backgrounds cannot read a text more complicated than a comic book after nine years of school, rendering them ‘functionally illiterate’.

The reform has so far been the most popular proposal from this government, and parents and educational experts alike praised the government’s approach, of which PM Thorning-Schmidt personally took charge. It puts forth longer school hours, more focus on learning math and Danish, and physical exercise as a part of every school day.

The only vocal opponent has been the powerful and notoriously change-adverse Teacher’s Union. Pressed by the economic crisis, Mrs. Thorning-Schmidt has no real money to throw behind her reform, and has proposed financing most of it by making Danish teachers spend more time in classrooms without economic compensation.

This will set up a major confrontation between the government and the union early next year. It’s a battle Thorning-Schmidt just cannot afford to lose. If she wins it, she’ll have a major, popular legislative reform to show for it, and buy herself a little time to improve economic performance.

If she loses, it will further affirm the impression of many people in the Danish electorate of a government running on empty.

A contribution to State of the Left - Policy Network's monthly insight bulletin that reports from across the world of social democratic politics

Kristian Madsen is editor of Politiken

This is a contribution to Policy Network's work on Globalisation and Governance.

Tags: Denmark , Growth , Trade Unions , Kristian Madsen , State of the Left , SOTL , Helle Thorning-Schmidt , Social Democrats , Socialdemokraterne , Socialdemokratiet , Margrethe Vestager , Economy , Trade Union , 3F , Eurozone , Mario Draghi , EU , European Union , European Central Bank , ECB ,

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The Policy Network Observatory promotes critical debate and reflection on progressive politics. It is centre-left orientated but determinedly challenges social democracy. It is pro-European but restlessly questions EU institutions and practices.

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