(Bloomberg View) -- Somebody stole my phone in Copenhagen. I was aghast.
I grew up in New York during the gritty years when the city was a sort of Hobbesian war of all-against-all. Somehow, I never got mugged, never got my pocket picked. For that to happen I had to travel to one of the safest cities in the world, a place where an acquaintance lost a scarf in an amusement park and found that someone had picked it up and put it on a nearby bench, neatly folded.
It’s a funny story, but it became a kind of a metaphor for a recent reporting trip. I’d gone to Copenhagen to see how Denmark achieved one of the world’s highest levels of social cohesion, and whether its virtues could be imported, like Lurpak butter and pickled fish. Having my phone swiped, it turns out, helped me find some answers.
Denmark had been on my mind since it surfaced so oddly during the 2016 U.S. presidential campaign as a challenge to the American faith that individualism is the best engine of social and economic improvement. Then came the election of President Donald Trump, which did nothing to lessen my curiosity about a place that seemed immune from the stresses that were tearing U.S. society apart.
When I asked people in Copenhagen about the secret of Denmark’s remarkable success, I kept hearing the same thing: “Trust.”
“Trust,” said a photographer, when I asked him the best thing about living in Denmark. “If we agree on something, you would live up to that.” That confidence, he added, “makes everyday life more comfortable.”
“There’s a lot of social trust,” a speechwriter at the culture ministry told me. “Farmers putting out their products by the roadside, and then putting a jar and saying, ‘Put money in this.’ It’s very common here, and it works.”
Las Olsen, chief economist at Danske Bank, said: “We have this high trust, and it is a huge asset. It is very good for productivity that you don’t have to spend a lot of time and money checking everything.”
Olsen has lived abroad, and when I asked him if it was really that different in Denmark, he said: “Oh, yes. When you come from Denmark to other countries you tend to trust people too much. Danes can get ripped off in the beginning.” He paused for emphasis. “It is a real phenomenon. And it is often one reason why people seem to be happier, and I think that makes sense. It’s very detrimental to be cheated, to feel that you’re cheated, or that you might be cheated.”
And yes, statistics show that the Scandinavian countries are the most trusting places in the world.
So I relaxed when I rode Copenhagen’s excellent public transit system, feeling some of the trust. And somewhere during a journey to my hotel, a thief lifted my phone out of my bag, along with all of my cash and credit cards.
The Happy Country
Denmark showed up in American politics during the first Democratic primary debate in October 2015, when Senator Bernie Sanders cited it when asked about his vision of democratic socialism. “I think we should look to countries like Denmark, like Sweden and Norway, and learn what they have accomplished for their working people,” Sanders said.
Americans soon learned that Denmark was indeed the happiest country in the world, according to the United Nations World Happiness Report. And also one of the richest, with a per-capita gross domestic product just a few thousand dollars less than the U.S. one. Income inequality is extremely low there, thanks to a combination of high entry-level wages and low executive salaries. Danes enjoy more economic freedom than Americans, according to a Heritage Foundation tally. To the consternation of many conservative economic theorists, they were somehow pulling this off despite the highest tax burden in the world.
Conservatives naturally wanted to take the little showoff down a peg. Arguments erupted over whether Denmark really was as great as American leftists claimed — or whether the political economy of a homogeneous country of 5.7 million people could really be exported to one of the largest and most diverse polities in the world. So I went to see for myself.
To an American, Copenhagen can feel like a supersize college campus. The city center is dominated by charming old buildings and cobblestone streets. Thanks to government environmental policies (new vehicles are taxed at 100 percent) and some of the best bike lanes in the world, half the city bikes to work every day, which conveys a youthful feel. The lack of economic pressure also feels collegiate to those of us who studied on a combination of loans and parental contributions.
And so, a curmudgeon might note, does the homogeneity of the people you see around you. Although roughly 10 percent of the population consists of immigrants, in the downtown at least, the crowds look strikingly white and blond.
All this is apt to make conservatives roll their eyes. They’d hate having to do without their cars, hate the small living spaces and the monstrous expense of almost everything. High Danish wages translate into sky-high costs, especially for services. At a McDonald’s in downtown Copenhagen, a Big Mac meal set me back more than $10.
Those conservatives are probably right; they would hate living in Denmark. But that doesn’t mean the Danes do. Even the market liberals I talked to (the closest Denmark has to an American-style libertarian), were pretty pleased with the place.
“A lot of the public sector is incredibly efficient,” said Martin Agerup, the head of Cepos, a Danish free-market think tank.
Don’t get me wrong: Agerup wanted change because Denmark has genuine problems. Denmark is the world leader in generating power from wind, but that power is very costly, leading to electricity bills that are almost 50 percent higher than the European Union average. Labor productivity is high, but according to Danske Bank’s Olsen, domestic services and government productivity are not nearly as strong as the country’s dynamic export sector. The welfare state creates problems in the labor market, especially for immigrants (more on that later).
But these are, on the scale of things, reasonably minor problems. They can be fixed. Moreover, there’s some chance that they will be fixed because Denmark’s political culture is remarkably effective at tackling problems that have stymied the rest of the world.
For example, almost alone among the developed countries, Denmark has solved its pension problem, keeping budgets in balance, generously pre-funding private retirement accounts, and linking retirement ages to rising lifespans. After 15 years of watching every other country fail to address the coming demographic bulge, it’s hard not to think that if the Danes can do that, they can do anything.
So, sorry, conservatives: Denmark really does combine high wages with high employment, high taxes with prosperity, fiscal responsibility with high levels of government spending. No wonder leftists ask if policymakers couldn’t do something like that in the U.S.
But also … sorry, leftists. After a week in Copenhagen, the conclusion I came to is that no, they probably can’t. Not because the Danish model doesn’t work, but because it’s so very, very Danish.
From the Government, Here to Help
A while back, I went to Utah to ask why residents of that state are more upwardly mobile than other Americans. On measures of social mobility, in fact, Utah looks a lot like Denmark. In Salt Lake City, a child born into the bottom fifth of the income-distribution scale has about a 10.8 percent chance of making it into the top fifth; in Denmark, that figure is 11.7 percent.
In other ways, Utah looks little like Denmark: It is highly religious, socially conservative and fiscally restrained. And yet both emit the same feeling of extreme cohesion. You see it in the statistics, but you also see it in everyday life; for example, in their unusually functional governments.
Six years ago, I interviewed a Danish small businessman for a book on failure. During the course of the interview, he casually mentioned getting a safety inspection. In the U.S., every business owner I’ve ever interviewed complains bitterly about government safety inspections, with their impossible-to-interpret rules, capricious inspectors and violations that seem to have been flagged mostly so that the inspector will have something to write on a clipboard.
“Was it awful?” I asked sympathetically, expecting to commiserate. The Danish businessman seemed surprised by the question. No, he said, the inspector had come in, pointed out a few problems and helped him figure out how to fix them. After all, he didn’t want to work in an unsafe environment either.
I was astounded. It had never occurred to me that a government inspector wouldn’t approach the job with overbearing hostility toward the inspected; it seemed never to have occurred to him that they would.
I heard similar things on my recent trip. You can see it in the data: Overall, Danes report high levels of trust in one another and in their government.
If you’re used to reporting on U.S. business and government, it’s eerie to hear people talk like that. The only other time I’ve had a similar experience was when I talked to people in Utah.
There are officious bureaucrats and silly regulations in Denmark and in Utah, just as there are everywhere else. Nonetheless, the emphasis on collaborative rather than adversarial proceedings is palpable. In both places, it seems to have its roots in a consensus-based culture founded on trust.
Turnstiles? What Turnstiles?
Trust is measured by questions like “If you lost your wallet, would you expect it to be returned,” or, “Will most people do the right thing most of the time?” Or simply, “Can most people be trusted?” Scandinavians routinely get some of the highest scores in the world.
Obviously, a more trusting place is a more pleasant place to live. But trust also provides economic and political bonuses. In low-trust places, crime and corruption are rampant, which suppresses and distorts economic activity. Moreover, because you can’t trust people to do what they say they will, everything needs to be spelled out in advance. That means a lot of money and energy go to monitoring and enforcement.
Danes, by contrast, simply come to a general agreement about what should be done and rely on the other party to do it. Which is how I ended up cheating the Danish government out of a few subway fares.
I want to emphasize that I would never intentionally cheat anyone. The first time I used Copenhagen’s extensive transit system, I dutifully bought a transit card, loaded it with money and carried it onto the platform. To my consternation, there was no turnstile.
“Ah,” I figured. “They must collect the fare on the train.”
The train arrived. I got on. There was no fare collection on the train, either.
It took me several rides to realize that I was expected to tap my card against unobtrusive pillars set up along the platform. The Danish train network, it turns out, works on the honor system (though there are spot checks, and some of the Danes I met told funny stories about a wild youth spent dodging the inspectors).
The Danes are not the only people to think up a system like this; Athens, for example, used to work on the same principle. The difference is that in Athens, as a translator there once told me, “People cheat.” She was amused when I bought a ticket anyway. In 2017, the Greek government finally installed turnstiles to crack down on the rampant abuse.
In Denmark, they can do without the turnstiles. The trains run on electricity but the system’s finances run on trust. This is true of the Danish economy as a whole.
There’s an idea on the American left that Denmark disproves key conservative economic principles like the belief that high taxes are a drag on economic growth, that high levels of government benefits discourage work and that high minimum wages cause unemployment.
Yet in Denmark, many of the people I talked to agreed that these supposedly conservative ideas were true. It’s just that Denmark’s extremely high levels of trust allow Danes to get away with policies that would cripple another economy. Unlike Greeks, Danes don’t cheat (much) on their high tax rates, nor do they take (many) benefits they’re not entitled to or don’t need. They match their extraordinarily high wages with high productivity because they trust one another.
The trains aren’t the only things operating on the honor system. A college cafeteria I visited functioned the same way — not with a supervised self-checkout line, as in the U.S., but using a completely automated system with no one watching to make sure nobody slips a few candy bars into a bag.
This sort of thing allows Danish labor to be more productive than workers elsewhere. An economy’s labor productivity, after all, is its output divided by the number of hours worked. Supervision and enforcement are in some sense wasted labor; they don’t, by themselves, produce extra output. So if you can get rid of the people who are paid to stand around ensuring that people do their work and don’t cheat, and instead redeploy them to make something or perform a necessary service, productivity will go up. When labor is highly productive, employers can afford high wages.
Left Out
Danish social cohesion works great for Danes. It’s not so great, though, at doing another thing modern advanced economies need: Absorbing outsiders.
In the U.S., the unemployment rate of foreign-born workers is almost a percentage point lower than that of native-born citizens. In Denmark, it’s almost 6 percentage points higher, more than double the native-born rate. And many first-generation immigrants also seem to be having difficulty integrating themselves into the Danish economy.
There are many possible explanations for this, including discrimination. But the most prevalent is that Denmark’s system, so functional for Danes, throws up a lot of barriers to assimilation.
“In a Danish shop you expect a shop assistant to be highly trained,” said Agerup, the think-tank liberal. “In the U.S. you expect a lower level of knowledge.” To give one small example, every restaurant server I encountered in Denmark spoke English.
Some of the low-skilled jobs that immigrants often do in the U.S. either have been eliminated in Denmark, or made more productive and better compensated by requiring a higher level of skill. Or they’re being done by workers from poorer EU countries who don’t qualify for Danish benefits. And the Danish re-employment system has so far proved poor at adapting to deal with the country’s now-sizable immigrant population.
“In Denmark we think of working as ‘You need to be trained,’” said Agerup. “The unions push this — you can’t mention anything to a union official without hearing about education. We never think, maybe we could have some people who speak English and some guys who don’t and make less.”
Denmark’s extensive training programs have attracted attention in the U.S. as part of the “Flexicurity” model: Both labor law and collective bargaining agreements make it relatively easy to fire workers, but displaced workers can rely on generous unemployment benefits and government retraining programs. From the outside, it seems to be an ideal policy, combining compassion and economic dynamism. But inside the country, I heard a lot of skepticism that the retraining is actually doing much.
“Often it’s hard to find the impact of training,” said Birthe Larsen, an economist at Cophenhagen Business School. The retraining program may have important secondary effects, she said — keeping people’s attention on actively searching for a job, keeping them getting up in the morning and going somewhere. But it doesn’t provide seamless entry into a new career.
Those secondary effects may be enough to re-employ someone who speaks Danish, and has friends and family to recommend them for jobs. But it doesn’t seem to be enough for immigrants, who find it difficult to get a toehold in the labor market. Generous welfare benefits mean they don’t have to, so hopelessness seems to get passed on to many immigrants’ kids.
Chickens or Eggs
Which came first? A trustworthy Danish government or a trusting Danish society? Did social cohesion produce the welfare state? Or does the welfare state provide security against things that divide a society, like inequality, corruption and crime? It’s a question interested Americans should answer before deciding which parts of the Danish system might be successfully imported.
“There is a large part of Danish society that thinks it must be the welfare state” that created the trust, said Christian Bjornskov, an economist at Aarhus University who studies trust. “We know that’s not true,” he added. “Trust was just as high in the 1930s.”
There’s other evidence against the proposition that trust starts with government programs. Lots of countries with generous welfare systems aren’t particularly trusting, for example, and those systems produce all the dire effects American conservatives warn about. And as Bjornskov suggests, low corruption distinguished Scandanavian societies centuries ago. That’s a trait that may go all the way back to the Vikings.
So may Denmark’s benevolent attitude toward markets. As one economist told me, people forget that the Vikings were not just warriors, but also traders, with networks that stretched from Kiev to Dublin and from Greenland to Constantinople.
On my first day of interviews, I met with Lars Hvidberg, who works as a speechwriter at the culture ministry. Hvidberg has lived in the U.S., so he seemed well qualified to speculate about the differences between the two countries.
“There are basically four stories about Denmark,” he said. Here’s a breakdown:
- The social liberal story: Free education, free speech and democratic government have created social trust and the ability of people to take responsibility and to act for themselves.
- The social democracy story: Benefits are high and the taxes are high, which creates equality and trust and enables people to plan for the long term without fear of destitution.
- The market liberal story: The real reason Denmark is so successful is that compared to other countries, it’s actually very classically liberal. It has free trade, low regulation, almost no corruption, and makes it easy to start a company.
- The nationalist version: The reason Denmark has a well-functioning society is that it’s homogeneous, with a lot of people who think the same, and who place a high value on things like work and honesty and trust toward strangers. In other words, Denmark works so well because it’s full of Danes.
A little apologetically, he said, “I believe all of these stories are true.”
Americans who look enviously at Denmark generally want to import some of these things. The conservative Heritage Foundation would undoubtedly like the U.S. to copy Denmark’s collaborative, low-key approach to business regulation. The progressives who write articles about the cradle-to-grave welfare system would like to copy its generous benefits, and believe that if the U.S. did so, the trust would follow. The emerging U.S. nationalist wing would perhaps like to copy the homogeneity.
But what Hvidberg is suggesting is that these things come in a package. You can’t simply pull some elements out and get the same results. And basically all the Danes I spoke to, from far-left Green Party types to market liberals, agreed that Denmark would be hard to replicate without Danes.
I asked Bjornskov if there was some way the U.S. could make itself more trusting. Unfortunately, he told me, the literature is better at showing us how to destroy trust than to build it.
Trust can improve over time. Bjornskov says that trust levels have risen in Europe in the decades following World War II. But scholars don’t know how societies can engineer that kind of improvement. Declines can also be remarkably persistent; areas of Africa that were ravaged by slavery still show social trust deficits centuries later.
“Trust in strangers is something you copy from your parents at a very early age,” he told me. “And it goes on to your kids.”
Just how persistent and culturally bound these effects are can be seen by looking at U.S. data from the General Social Survey, a study by the research organization NORC that’s been monitoring American social attitudes since 1972. Superimposing the data on a U.S. map shows that the regions with the lowest trust are those that straddle the southern reaches of the Mississippi River, where the slave economy was expansive. The highest-trust areas are in the old Puritan redoubts of New England and the Midwestern states that were heavily settled by Scandinavians.
“You can predict trust by where people’s ancestors come from,” Bjornskov told me.
Oh Yes, My Phone
Now let’s talk about my stolen phone.
You can think of a country’s formal institutions — it’s business regulations or its welfare state or its legal code — as a society’s hardware. But all hardware needs an operating system to tell it how to run, and that operating system is culture.
I learned a lot about Danish culture by the reaction to the theft of my phone. I discovered the loss the day after it happened, just as I was about to leave my hotel for a few last interviews. Suddenly, I had to my name only a few Danish kroner — too few even for a round-trip bus ride. I briefly debated canceling the interviews and spending the afternoon trying to round up some cash and a way to get to the airport the following day. Instead, throwing caution to the winds, I borrowed a bike from the hotel and set off, arriving bedraggled and half-an-hour late. Then I climbed four flights of stairs and nearly passed out.
The man I was interviewing responded by leaving to fetch me an enormous bottle of sparkling water, which I greedily consumed. (Maybe an American would have done the same.) The next man I interviewed, the think-tank scholar Agerup, offered to lend me whatever money I needed to get home. (Maybe an American stranger would have done the same, or maybe not.)
Later, I informed the staff at the Copenhagen Island Hotel that all my credit cards needed to be canceled, meaning that I would be unable to pay the considerable bill the next day. Also, that I had no cash and no way to eat for the next 24 hours. The clerk commiserated. Then he mobilized what seemed like the whole staff to make sure that it would be all right.
The hotel people pre-charged both dinner and breakfast to my room, figured out how to give the airport taxi service a hotel voucher and then closed out my entire bill a day early, right before I canceled my credit card. They did this all for a stranger they had no reason to trust.
It was exactly what I’d been hearing about Danish businesses and government all week — the individual initiative of relatively low-level employees, the pragmatism, the adherence to the spirit rather than the letter of rules.
I don’t mean to imply that my own company would have left me stranded in Denmark if it hadn’t been for the hotel — as soon as the U.S. woke up, I also had my own team of Bloomberg people trying to make sure I got home safely. The point is that I didn’t need much help, because the marvelously efficient and flexible Danes had already taken care of the problem.
Two weeks later, after I’d canceled my credit cards and replaced my phone, I got a package in the mail covered in foreign stamps. The Danish police had thoughtfully mailed my phone case back to me, at their own expense — sans phone, alas, but with driver’s license and credit cards and various wallet detritus intact. It saved me a trip to the DMV to replace my license, and gave me a warm feeling for the Danes who had, apparently as a matter of course, extended themselves to help a stranger.
When we talk about policy, we tend to focus on things that are easy to see, like laws, agencies and published regulations. But most of what actually matters is out of view: the way that these things are implemented by human beings, according to a rulebook that isn’t written down, and which most people couldn’t articulate if you asked them.
Denmark operates by one unofficial rulebook, the U.S. by a variety of different ones. (“I often have trouble treating the U.S. as one country,” Bjornskov told me, given how widely trust levels vary between regions.)
The American rulebook has many virtues. Americans may not have Danish levels of trust, but they do have a marvelously diverse culture that welcomes people from all over the world, turning ingenuity and hard work into the world’s biggest engine of economic innovation. All Americans are the motley inheritors of that diverse legacy, and I, for one, wouldn’t trade it for Denmark’s many fine and lovable qualities.
I think Sanders is right that the U.S. could learn useful things from Scandinavia. He’s just wrong about which things. Danish business regulations and its welfare state can’t be successfully imported without first learning to trust one another, and to be trustworthy.
And that’s something we’re all going to have to do together. Which means that whatever Danish-style institutions you like, you can’t get them by angrily vilifying the half of the country that disagrees with you. These institutions, it turns out, can’t be built with policy papers or political activism. They can only be built through better interactions with each other, one neighbor at a time.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of “The Up Side of Down: Why Failing Well Is the Key to Success.”
To contact the editor responsible for this story: Jonathan Landman at jlandman4@bloomberg.net.
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