Danish Capitalism and the Global Challenges -

 Seminar on Danish Welfare and Economy, April 11th, 2011 

Martin Jes IversenAssociate professor

 Centre for Business HistoryCopenhagen Business School

Point # 1:We have just experienced the largest upswing in modern Danish history – 

1993-2008 

Point # 2:The short heritage:The largest Danish 

corporations are in better shape than ever

Questions

Point # 4:Three Danish competencesto built on

Point # 3:The long heritage:

Danish capitalism and the journey     

Growing foreign demand =Export companies’ growth

Growing public demandProblem:

State budget deficit302 billion. DKK. / 18 % of 

BNP(2009)

Growing domesticprivate demand

Problem:Private debt:

2001 239 billion DKK.2005 351 billion DKK.2008 566 billion DKK.

The Danish upswing – 1993-2008 (long)Approx. 400.000 new jobs (deep)

The three large demand factors (broad)

Public sector jobs:1993 796.0002008 838.0002010 860.000

Private sector jobs:1993 1.77 mil.2008 2.12 mil. 2010 1.94 mil.

New record balance of payment surplus: 93.6 billion DKK. in 2010 (only Maersk Line contributed with approx. 20%)

Point # 2:The short heritage:The largest Danish 

corporations are in better shape than ever

Top 10 Danish Companies in 2009 (by revenue, billion DKK)

Sector: Company: 1994 2006 2009 2010 Foundation Year

Shipping A.P. Moller - Maersk 72,5 264,6 260,0 313,0 1904

Office Services ISS Holding 17,6 55,8 69,0 73,0 1901

Brewery Carlsberg 20,9 41,1 59,4 62,2 1847

Pharmaceutical Novo Nordisk 16,8 38,7 51,1 60,8 1923

Windmills Vestas Wind Systems 1,2 31,3 38,1 51,9 1898

Top 5 Total Revenue 128,95 431,54 477,61 560,97  

DK GDP 1242 1631,66 1656,11 1740,8

Top 5 Companies in 2009 in % of GDP 10,4 26,4 28,8 32,2

Point # 3:The long heritage:

Danish capitalism and itshistorical roots     

Creating Nordic Capitalism

Pan-Scandinavian textbook projectEditors:Susanna Fellman (Helsinki University)Martin Jes Iversen (CBS)Hans Sjögren (Stockholm School of Economics)Lars Thue (BI Oslo)

The Danish princess Margrethe in 1962

“Archeologist” metaphor:Defining layers of the past

Cases

Cases

Cases

Cases

Four phases of capitalism in Nordic region

1850s-1880s: Early liberal capitalism

1890s-1920s:Organized capitalism

1930s-1970s:Welfare capitalism

1980s-Market based capitalism

Weak states, liberal marketsSMEs, economic periphery

More active states, organized labour markets cartelization and export

Triangle of welfare states, org. labour and industries, “mixed economies”

Economic integration, strong stateemphasize on markets capitalism

Two fundamental problems with this conclusion:

These phases do not explain change

These four phases reflect changes in most West European economies

1980s-Market based capitalism

1930s-1970s:Welfare capitalism

1890s-1920s:Organized capitalism

1850s-1880s: Early liberal capitalism

Formative periods:“... internaland external pressuresacting on the established economicstructure”

1980s-Common Market

1930s-1970s:Plan economy

1890s-1920s:Cartelized economy

1850s-1880s: Bazaar economy

Ideological dimension of democratic movementLiberal Trade Acts:Norway (1839)Sweden (1848)Denmark (1857)Finland (1864)

Need for market order1) Cartels2) More active states3) Unions:LO Sweden (1898)LO Denmark (1898)LO Norway (1899)SAK Finland (1907)

Ideologically grounded response to The Great Depression1) State regulation of markets2) Social welfare policies3) National left-right compromises:Denmark (1933)4) Social Democratic dominans:Norway (1935-1965)Sweden (1936-1976)

Ideologically groundedresponse to the 1970s crises:1) Market based reforms2) Economic integration3) Opening of the economies4) Right wing governments:Norway (1981)Denmark (1982)Sweden (1991)

Important Danish industries controlled by one company or trust by 1908 The Sugar IndustryThe Bottle Glass IndustryThe Paper IndustryThe Cotton MillsThe Breweries

1982 1986 1992 1999 2008

Denmark 2,35 2,84 10,86 29,51 56,12

Finland 1,28 3,23 7,77 25,88 42,21

Norway 1,00 2,08 9,20 18,75 38,00

Sweden 5,41 11,45 18,25 41,33 66,41

Germany 6,12 7,71 8,65 19,29 39,73

FDI Stock, Outwards as % of GDP

Formative phases inScandinavian capitalism

Focus on State-company relationsin terms of changingmarket formation

The State

The Financial System

Education andTraining

The LabourMarket

The Company

Combining Economic Integration and Economic Sociology

To bridge two contrasting market perceptions:1)Integration economists: competition as the main driver for economic efficiency (Treaty of Rome)

2) Economic sociologists focuses on ”The Architecture of Markets”

Market Formation:Competition & Regulation

Plan economy Public regulation Common market

Restricted

Private regulation

Competitive

Cartel economy Bazaar economy

Market Formation:Competition & regulation

Plan economy Public regulation Common market

Restricted

Private regulation

Competitive

Cartel economy Bazaar economy

1850s1890s

1930s

1980s

1850s 1890s 1930s 1980s

The changing market structure, Denmark 1850-2000

CompetitionLaws

1857Free Trade ActProhibition ofthe guild systempure negative econom. integration

19121st competitionregulation proposal

19371st law againstprice agreementsincluding registrat.and publication ofprice agreements

1955Monopoly LawMonopoly Councilwhich registered allmonopolies and approved prices

1989Law on competitionbased on the control of efficient markets1997 - EU changes

1847-1890sExpanding on the Danish beer market. 1st industrial brewerLoosing market shares butalso early export

1903-1970Trust agreement with the competitor“Tuborg”. Constant + 70 % of Danishmarket = monopoly-investigationsExport breakthrough

1970-2000Sales international:1970: 24% 1980: 60%2000: 90%1988 Danish beer cartel abolished (1899-1988)

Market Formation:Competition & regulation

Plan economy Public regulation Common market

Restricted

Private regulation

Competitive

Cartel economy Bazaar economy

1857 Free Trade Act

1989 Competition Law/1997 EU Law

1937 1st Law on Price ageements

1955 Monopoly Law

1903-Trust Agreement1880s “Manchester Like”

1950s Trust investigation

1970 Merger with Tuborg

1980s- International brewer

1910s-1960s, +70% marketshare

Founded, 1847

New record balance of payment surplus: 93.6 billion DKK. in 2010 (only Maersk Line contributed with approx. 20%)

Point # 2:The short heritage:The largest Danish 

corporations are in better shape than ever

Top 10 Danish Companies in 2009 (by revenue, billion DKK)

Sector: Company: 1994 2006 2009 2010 Foundation Year

Shipping A.P. Moller - Maersk 72,5 264,6 260,0 313,0 1904

Office Services ISS Holding 17,6 55,8 69,0 73,0 1901

Brewery Carlsberg 20,9 41,1 59,4 62,2 1847

Pharmaceutical Novo Nordisk 16,8 38,7 51,1 60,8 1923

Windmills Vestas Wind Systems 1,2 31,3 38,1 51,9 1898

Top 5 Total Revenue 128,95 431,54 477,61 560,97  

DK GDP 1242 1631,66 1656,11 1740,8

Top 5 Companies in 2009 in % of GDP 10,4 26,4 28,8 32,2

Point # 4:Three Danish competences

to built on:1)”Hidden champions”2)New private jobs

3)From industrial pol. to Innovation policy  

1) ”Hidden Champions” in Denmark:Cases: From A.P: Møller-Mærsk til Logstor RørHow can the private succes be transformedto new Danish privatejobs?

2) New private jobs Schlüters recipe in 1982: Focus on private growthHow?! = From public services to private servicesInnovation policy

3) The frequency of innovation depends on the knowledge Level in the society-

The Creative Response in Economic History (1947):

”the doing of new thingsor the doing of things that are already been done in a new way (innovation)”

”… it can always be understoodex post but it can practicallynever be understood ex ante ...cannot be predicted”

The frequency of innovationdepends on:a)the quality of personnelavailable in societyb)the relative quality comparedto others at the same timec)Individual decisions, actions,and patterns of behaviour

The quality of our innovation depends on our educational competencies

Schumpeter,innovation &education 

Questions