Academic journal article Review of Social Economy

Small Is Resilient-The Impact of Globalization on Denmark

Academic journal article Review of Social Economy

Small Is Resilient-The Impact of Globalization on Denmark

Article excerpt

Abstract The aim of this article is to investigate the impact of globalization on the Danish economy. We locus on four possible influences of globalization and European integration (as one of the expressions of globalization) which are widely discussed in the scientific discourse on this topic and appear to be relevant for the Danish case. These dimensions are the reduction of the repertoire and effectiveness of national economic policy, the pressure for industrial restructuring, the seemingly required welfare retrenchment and the ideological implications of globalization as a predominant neo-liberal discourse. On the one hand we discuss Denmark as a typical example of a small European state and a Scandinavian welfare state regime, on the other hand we put emphasis on its nation peculiarities. The article shows that Denmark changed and adapted successfully to challenges of globalization while keeping the core of its particular form of the Scandinavian welfare model. In addition, both its smallness and its distinctive national characteristics equipped Denmark well to turn the impact of globalization into a successful strategy for survival. However, there are indications that the translation of neo-liberal ideas in the Danish negotiated economy will lead to political disruption that challenges fundamental features of the model. Whether this may undermine the dam that had hitherto held back the globalization pressures in the Danish context and secured a response in accordance with the inherited characteristics of the Danish model remains an open question.

Keywords: globalization, Scandinavian model, welfare state, industrial structure, economic policy, neoliberal discourse, negotiated economy

INTRODUCTION

There is an extensive literature on the impact of globalization on the autonomy of nation states, social democracy and the welfare state. Much of this literature seems to agree on the fact that globalization has reduced the importance of national boundaries for economic transactions and has asserted structural pressures for change. However, there are diverging views about the overall effects of these changes. Some argue that the forces of global competition lead to reduced state spending and state intervention, more "market-friendly" policies, and the demise of social democracy and the modern welfare state (e.g., Garrett and Lange 1991, Gill 1995, Cox 1997). Others argue that the social and political impacts of globalization vary significantly dependent on the mediating role of the institutions of nation states (e.g. Hirst and Thompson 1999, Weiss 2002, Kjaer and Pedersen 2001). A growing literature, drawing primarily from an institutionalist perspective, stresses the growing empirical evidence of a wide variety of nation specific trajectories of national welfare and industrial-relations institutions and their path-dependence (Esping-Andersen 1996, Berger and Dore 1996, Crouch and Streeck 1997).

The predominant view seems to hold that economic globalization exposes all nations to policy constraints with the strongest pressures coming to bear on small nations who are more economically vulnerable. Yet this view is not uniformly held. Based on her review of three areas of economic policy and intervention--taxation, fiscal spending and industrial policy--Weiss (2002) concludes that the state has much more room for maneuvering than what she calls the "constraints school" seems to assume. She argues that globalization has even "enabling" effects, and that small states are not necessarily more "constrained" and less "enabled" by globalization than larger states. Size matters less. What matters more is the character of national domestic institutions.

Denmark is an interesting case in this respect. As part of the Scandinavian vanguard model of social democracy with its high-tax, high-spending regime, strong labor market policies, high income equality and equal wealth distribution, Denmark would seem a prime candidate for declining autonomy in the era of globalization. …

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