DEBATING POLITICS, ECONOMICS AND OTHER TIMELY TOPICS WITH PAUL KRUGMAN OF THE NEW YORK TIMES

FRIDAY, OCTOBER 23, 2015

PAUL KRUGMAN

Is Denmark Really
A Good Role Model?
One of the great moments in the
recent Democratic presidential
debate, at least for those of us who
think that America can learn from
other countries, was the exchange
over Denmark. Senator Bernie
Sanders said he wants America to
become more like Denmark, while
Hillary Clinton was a bit skeptical,
but agreed that Denmark is a good
role model. And it is!
Denmark has combined high taxes and strong social benefits (including free college, heavily subsidized
child care and more) with strong
employment and high productivity.
This combination shows that strong
welfare states can work.
But it is worth noting that Denmark has had a fairly bad run since
the 2008 global financial crisis, with
a severe slump and a very weak recovery. In fact, its real gross domestic product per capita is about as far
below precrisis levels as that of Portugal or Spain, although with much
less suffering. So whats going on?
Part of the answer may be high
levels of household debt. But Sweden
has high private debt, too, and despite its monetary missteps has
done far better (see the chart).
My interpretation is that Denmark is paying a high price for shadowing the euro it hasnt joined

the eurozone, but it runs monetary

policy as if it had and for imposing
a lot of fiscal austerity in the past few
years despite having very low borrowing costs.
None of this has much bearing on
the welfare-state issue: Short-run
macroeconomics policy is a different
subject. But just in case you wanted
to think of Denmark as a role model
across the board, this is a useful
reminder.
Monetary Conspiracy Theories
According to The Huffington
Posts Pollster tracker, there is still
no sign of a return to establishment
candidates in the Republican Party.
In fact, the triumvirate of crazy
Donald Trump, Ben Carson and Ted
Cruz has about three times as
much support as the combination
of Jeb Bush, Marco Rubio and John
Kasich. Amazing.
So why dont G.O.P. voters realize
that these people are crazy? Maybe
because the things they say arent
all that different from what supposedly reasonable Republicans say.
A case in point: The Donald has
just come out with a monetary conspiracy theory. According to Mr.
Trump, the reason that the Federal
Reserve Board hasnt raised interest rates has nothing to do with low

MICHAEL DROST-HANSEN FOR THE NEW YORK TIMES

The tomb of Gorm the Old in Jelling, Denmark. The country was compared to the United States in the recent Democratic presidential debate.
Percent
change

104
102
100
98
96
94
92
90
88

Real G.D.P. Per Capita

Note: The data has been indexed (2007=100)

SWEDEN
DENMARK

2007

2008

2009

2010

Mr. Krugman, I dont think

that you and I watched the same
debate.
To make her point, Mrs. Clinton
said: But we are not Denmark. I
love Denmark. We are the United

States of America. I would not

characterize her comment as an
expression that Denmark can be a
good role model. On the contrary,
I would characterize it as a chestthumping expression of American
exceptionalism, perfectly delivered
in order to stir the sentiments of a
broad swatch of Fox News watchers.
Mrs. Clinton was very clear that
Denmark has absolutely nothing to
teach the God-blessed U.S. of A.
F.F., MARYLAND

During the debate, Anderson

Cooper, one of the moderators,
pointedly noted that Denmark is a
country of just 5.6 million people.

2014

PELHAM, ILLINOIS

This was likely intended to imply

that whatever successes the Danes
have achieved bear no relevance for
the United States.
Ive heard similar notions before,
but Ive never heard explanations for them. Why, for instance,
shouldnt the United States be able
to do better than Denmark?
Of course, Denmarks per-capita
gross domestic product is higher
than that of the United States, although American per-capita G.D.P.
is quite a bit higher than Germanys.
Given that fact, as well as our larger
population, shouldnt we at least be
able to provide far more security for
residents and support a more robust

Few people understand that

free-market capitalism allowed
Denmark and Sweden to go from
being among the poorest nations
in the world to being among the
richest between 1850 and 1950.
FRANK H., SWITZERLAND

There are 320 million people

in the United States. Denmark
has a bit more than five million
people, as do Norway, Finland
and Ireland. Sweden and Belgium
have 10 million; the Netherlands
has 16 million; Spain has 40 million;
Italy has 60 million; Britain and
France have 65 million each; and
Germanys population is about 80
million.
Thats about 355 million people

were supposedly going to produce?

The difference between establishment Republicans and the likes of
Mr. Trump, in other words, isnt so
much the substance of what they say
as the tone. Were supposed to be
convinced that Mr. Bush, Mr. Rubio
and Mr. Ryan are moderates because they insinuate their conspiracy theories rather than bellow them
and talk about voodoo economics
with a straight face. But why should
we be surprised if the G.O.P. base
doesnt see why this makes them
more plausible candidates?

who have access to universal

socialized (or nearly socialized)
health care and free (or nearly free)
access to higher education.
If people are hung up on
comparing Denmark and the United
States, they are being disingenuous
and deceitful. The point isnt the
size of the country its that the
mechanism works. Socialization is
simply about many people sharing
the cost of beneficial programs.
If 5.5 million people can do it in
Denmark, 320 million should be able
to do it even better.

I wish that we were living in an

ideal world where Bernie Sanders
would be elected president by acclamation, and the United States
would follow the sterling examples of Denmark and Sweden.
But since we live in a world where
there is a possibility of Donald
Trump, Jeb Bush or Marco Rubio being elected next November all of
whom would implement policies that
make yawning inequality worse I
am willing to be a little forbearing
with Mrs. Clinton.
Politicans like her are simply trying to deal with the world as it is.

TIM KANE, ARIZONA

PARTHA NEOGY, CALIFORNIA

As a Dane, I should point out

that Denmark has not only shadowed the euro, officials there have
also shadowed the German governments policies.
JACOB AAGAARD, BRITAIN

ONLINE: COMMENTS
Comments have been edited for clarity and
length. For Paul Krugmans latest thoughts
and to join the debate online, visit his blog at
krugman.blogs.nytimes.com.

PAUL KRUGMAN

BACKSTORY

The Threat of Extreme Inequality

Praise for Angus Deaton

Angus Deaton, the Princeton

economist, has won the Nobel in
economic science which is wonderful for his dogged, careful
empirical work at the microeconomic level, tracking and making
sense of individual households,
their choices and why they matter.
Cue the usual complaints that
this isnt a real Nobel. Hey, this
is just a prize given out by a bunch
of Swedes, as opposed to the other
prizes, which are given out by a
bunch of Swedes.
Anyway, Mr. Deaton is also
a fine writer with important
things to say about the political
economy. On his personal blog,
Cardiff Garcia from The Financial
Times excerpted a passage from
Mr. Deatons book, The Great
Escape, in which Mr. Deaton explains why we should care about
the concentration of wealth at the
top: [T]here is a danger that the
rapid growth of top incomes can
become self-reinforcing through
the political access that money
can bring. Rules are set not in the
public interest but in the interest
of the rich, who use those rules to
become yet richer and more in-

BEN SOLOMON FOR THE NEW YORK TIMES

Angus Deaton speaks at a news conference at Princetons

Richardson Hall after winning the Nobel in economic science.
fluential. ... To worry about these
consequences of extreme inequality has nothing to do with being
envious of the rich and everything
to do with the fear that rapidly

growing top incomes are a threat

to the well-being of everyone else.
As if to illustrate Mr. Deatons
point, a remarkable piece of recent reporting in The New York

Times by Nicholas Confessore,

Sarah Cohen and Karen Yourish
(read their article here:
nyti.ms/1LcuEva) documents
the incredible fact that campaign
finance this election cycle is
dominated by a tiny number of
extremely wealthy people in the
United States: More than half the
total funding is coming from just
158 families. And this money is
overwhelmingly flowing to Republican candidates.
Some analysts have suggested
that this is happening because
there is more action on the Republican side, with the presidential
nominating contest still wide
open. But Im pretty sure thats
nowhere close to the whole story.
The biggest piece of the superrich, super-donor story is money
from the financial sector. And
there has been a huge swing of
finance capital away from Democrats toward Republicans, which
began in the 2012 election cycle
that is, after the passage of financial reform.
Basically, were looking at the
people who brought you the financial crisis trying to buy the chance
to do it all over again.

READER COMMENTS FROM NYTIMES.COM

Money Is the Root of All You Know

Who could possibly ever imagine
that billionaires would use money,
of all things, to retain and enhance
their power? In order to figure that
out, one would have to be a genius
worthy of a Nobel prize doubly so
in order to discover that the interests
of the rich dont always align with
those of the rest of the population.
This sort of thing has practically
never happened in the history of the
world, let alone in the United States,
where money has never before
influenced politics except in the
ravings of Hollywood directors.
C., NEW YORK

2013

middle class than the Germans do?

A Bit of Nationalism During the Debate

A., FRANCE

2012

THE NEW YORK TIMES

READER COMMENTS FROM NYTIMES.COM

Mr. Krugman, you write that

Hillary Clinton was a bit skeptical, but agreed that Denmark is a
good role model. Well, someone
didnt see the debate that everyone
else saw. Mrs. Clinton was not a bit
skeptical.
She prepared a put-down response
in advance, then wrapped herself in
the American flag and delivered it.

2011

Source: Eurostat

inflation and global headwinds

actually, Chairwoman Janet Yellen
is just doing President Obama a
political favor (read the Bloomberg
article here: bloom.bg/1OHOrac).
Crazy, right?
But how different is this, really,
from Representative Paul Ryan and
economics professor John Taylor
claiming in 2010 on Investors.com
that quantitative easing wasnt a
good-faith effort to support a weak
economy, but an attempt to bail out
fiscal policy by preventing the fiscal crisis that Mr. Obamas policies

One of the reasons that the

Republican Party is in trouble
right now is that it has focused
too much on getting money from a
small pool of donors. Its true that
these rich donors give them a huge
advantage, but they cant completely
ignore what regular people want.
I also dont think that Americans
appreciate how fragile the
Republican Party is. If David Koch
or Roger Ailes were run over by a
bus, the whole house of cards could
collapse.
Chasing the super-rich has made
Republicans repellent to many

voters, and thats a big reason why

no candidate with a track record in
the party can get any traction.
ALEX S., NEW YORK

Earlier this month, the Princeton

economist Angus Deaton was awarded
the Nobel Memorial Prize in Economic Science for his analysis of consumption, poverty and welfare, according to
an announcement from the prize committee.
Mr. Deatons work has spanned the
field of economics since the 1970s, but
he is perhaps best known for creating
research methods that revolutionized
the professions understanding of poverty and development.
Before his work, much of development-focused economics dealt with
very broad measures of poverty (such
as income) without much regard for
country-specific variations in purchasing power, consumption habits or governmental and economic structures.
In contrast to these one-size-fits-all research theories, Mr. Deaton pioneered
the use of individual household surveys
in order to gain a more nuanced understanding of peoples behaviors and the
factors that affect their overall well-being.
Writing for The New York Times,
economics professor Justin Wolfers explained Mr. Deatons deep im-

The fact that theres more

action on the Republican
side of the campaign is itself a
consequence of the money.
The donations arent there
because there is a large number of
candidates. Rather, there are so
many candidates because theres so
much money out there.
ERA, SPAIN

I agree with your assessment

of Angus Deaton, Mr. Krugman.
Anyone who does careful
and useful work should be
commended.
And, yes, envy should not
be a reason to oppose wealth
inequality. The real danger is the
self-perpetuating concentration of
political power.
RON, COLORADO

Real Nobel or not, the

bunches of Swedes have a pretty
sorry record. I cant speak for
economics, but the literature prize
is a political animal entirely, with
unaccountable inclusions and
shameless omissions. The Nobels
are not much better than the Oscars.
And what about that pre-emptive
Nobel Peace Prize given to

President Obama the guy who

redefined combatant to mean any
remotely military-aged man in a
crowd hit by drones?
J.R.D., NEW YORK

When the wealth that buys

political influence in the United
States extends to our judicial
system, we will see the wealthy
dictate Supreme Court rulings.
JOHN F. MCBRIDE,
WASHINGTON STATE

What is the point of getting

really rich if you cant make
everyone subservient to your
point of view? You can only spend
so much on stuff. What drives the
Kochs? The answer is dominance.
N.B., TEXAS

pact on global development: A generation ago, development economics was a

field populated by country doctors
globe-trotting macroeconomists willing
to make house calls to any country. ...
The countries varied, but the prescriptions rarely did. Today, development
economics is a far more interesting and
nuanced field, with practitioners focused on understanding the lives of the
poor, and in uncovering the subtle ways
in which immature economic institutions hinder their development.
John Cassidy, a staff writer at The
New Yorker, also praised Mr. Deatons
work. Renowned for his meticulousness, Mr. Cassidy wrote earlier this
month, [Mr. Deaton] believes that the
world is a complicated place and that
reducing it to simple theories is almost
always dangerous. ... At a time when
economists often get a bad rap (sometimes justifiably so), his work conveys
an important message: If you are clear
about the theoretical assumptions you
are making, and you are careful
very careful about how you interpret
the data, economics can provide a powerful tool with which to analyze and improve the world.

Paul Krugman
joined The New
York Times in 1999
as a columnist on
the Op-Ed page
and continues
as a professor of
economics and
international
affairs at Princeton
University. He was awarded the
Nobel in economic science in 2008.
Mr. Krugman is the author or editor
of 21 books and more than 200
papers in professional journals and
edited volumes. His latest book is
End This Depression Now!