Crisis, Miracles, and Beyond: Negotiated Adaptation of the Danish Welfare System

By Erik Albæk; Leslie C. Eliason et al. | Go to book overview

4 PUBLIC EXPENDITURES
Is the Welfare State Manageable?

Peter Munk Christiansen

Around the world, management of public expenditure has become a key political debate over the last 30 years. In this respect, Denmark is no exception. However, the dramatic growth in public expenditures is one of the most striking features of the development of the Danish welfare state. Although most OECD countries have experienced expenditure growth, the increase from a level of less than 25 pct. of GDP in 1960 to the present 50 pct. is close to a world record; at the very least, it is an OECD record (cf. Castles, 1998: 106). Danish crisis management during the late 1970s and early 1980s, in the words of the Social Democratic minister of finance at that time, brought the country to the ‘brink of the abyss’. Although the Conservative-Liberal cabinets of the 1980s made management of public spending one of their main tasks, their results were meager compared to the goals they set. In the 1990s, the discourse changed, partly because Social Democratic cabinets came back to power, but also in response to a long and positive business cycle.

This chapter looks at the problems of managing welfare state expenses. What are the basic and overall political and managerial problems confronting Danish welfare spending? How are they dealt with and to what extent have they been solved? The conclusion – that problems of public spending management become more pronounced the more one approaches the micro-level – supports the findings of many studies that emphasize the incapacity to control public spending. However, the 1980s and 1990s did not leave the political and administrative apparatus without important insights about workable mechanisms for public budget management. The Danish case demonstrates that while controlling public spending is difficult – for political, bureaucratic, and economic reasons – it is not impossible. The experience in Denmark demonstrates that the collapse of the welfare state due to the structural incapacity to control spending is far from inevitable. We seek first to identify the potential capacity in the political and administrative apparatus to control and direct government spending. Then we turn to an analysis of the actual experience in Denmark to elucidate this perspective.

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