Monday, January 15, 2007

Denmark is getting a Globalised Upper Class


It is well-known that Denmark is one of the countries that is most open to globalisation. What is less well-known is that the country is getting a globalised upper class. Denmark normally prides itself with being "a very egalitarian society".

This is being undermined by increasing economic differencies between the "haves" and the "have-nots". It's like in America. The incomes of ordinary workers and employees do not increase very much. Whereas those at the top get extremely well-packed pay-deals. Last year the top manager of the tele giant TDC got nearly 100 mio. kroners in reward for the selling of the tele-empire to foreign capital. A manager on his way out of Keops, an investment conglomerate, leaves with 170 mio. kroners in "after-payment". A number of bank managers scored more than 100 mio in stock options. Several thousand top employees in private business enjoyed the fruits of the globalised economy by raking in millions in stock options and bonuses.

The owners of houses and flats in the "right" neighbourhoods in Copenhagen and other big cities are becoming milionaires just by sitting on their backs raking in millions in free equity values. One doesn't pay any taxes whatsoever on this kind of capital income, whereas an ordinary worker who works hard in a 7-16 job has to pay upwards to 60 per cent or even more of what he or she makes in income tax to the Danish state.

Together with leaders of the media and politicians the business elite form a close-knit circle that won't let the underdog in. They regulate who "get on" in the media. They go to receptions together and make deals that only the initiated understand. They live in the same classy neighbourhoods, their kids go to the same schools. They even use the same beauty parlours for their dogs.

If an ordinary worker complains about this, he or she is told that they have no understanding at all of what it's about! It is necessary for Danish competitiveness in the global economy that the elite enjoys "certain benefits". Likewise, it is "necessary" that workers wages are frozen, because Denmark has one of the highest hourly wage costs in the world, making it difficult for Danish business to compete. Alas, what a sorry state of the world we're in!

6 Comments:

Anonymous Anonymous said...

It is true that globalization has internal income distribution effects for all countries since factor prizes equalize. But nevertheless the net result is that society, as a whole, gains. The income inequality created from the globalization process can be alleviated by national income redistribution. This is Basic macroeconomics.

Furthermore I agree with Mr. Duck that the Danish tax system is in need of dire reforms. Presently the incentive to work or work more is marginal. Several thousand recipients of government unemployment subsidiaries will gain less than 10 dollars pr day (before tax) compared to staying at home and simply being unemployed.

Capital income should be taxed, and in turn the tax on personal income should be significantly reduced both for top and bottom earners.

But I do not share Mr. Ducks very antiquated Marxist inspired view of top earners being evil vile pigs (as the picture suggest). The top earners in Denmark will, more often than not, be simple craftsmen instead of highly educated academics. This is due to the disgustingly high marginal tax rate and the fact that craftsmen have plenty of opportunity to get paid a bit more creative than the Danish IRS would like.

1:32 AM  
Anonymous Anonymous said...

I am irritated by some of the statements that Cosmic Duck has made.

Firstly it is true that some leading CEO's have gotten generous paychecks, but this is more idiosyncrasies than a general trend. Secondly a pay rise of more than 4% will, aggregated be much more harmful to the Danish economy than the odd big salary for a CEO (despite the envy this causes for some).

Even the head of one of Denmark’s biggest unions (LO) has declared that a pay rise of 4% would be in the workers best interest. This expert also states that a pay rise of more than 4% will lead to inflation. And unemployment in the medium and long run. ( http://politiken.dk/erhverv/article225877.ece )

If the workers are either to stupid or doesn’t care about this... then they deserve the unemployment that the will create for themselves in the future (OECD expect that Denmark will have the lowest GDP growth of the OECD members in 2009-2013).

Cosmic Ducks ignorance and or economical populism would be funny if it wasn’t so common.

The workers are welcome to shot themselves in the foot; if they so desire. Just don’t come and whine in two years time when unemployment rises.

4:38 AM  
Anonymous Cosmic Duck said...

Economic populism?

Is it economic populism to demand a fair share for workers? It is not only bosses that have to pay electricity bills. You make it sound as though it is the sole responsibility of the workers that the economic balance is not put at stake. If those responsible were a little more concerned they would have dampened their own acquisitiveness a bit.

6:57 AM  
Anonymous Anonymous said...

"Is it economic populism to demand a fair share for workers?"

No, but it is economic populism to depict the reasonable fair of a price and pay spiral as an evil conspiracy or voodoo economics.

"It is not only bosses that have to pay electricity bills. You make it sound as though it is the sole responsibility of the workers that the economic balance is not put at stake."

A general pay raise in the order of 4 - 5 percent would be understandable but one should forget what inflation does to a country’s compositeness in the medium and long run.

"If those responsible were a little more concerned they would have dampened their own acquisitiveness a bit."

It almost reminds me of a song by "the streets"... dry your eyes mate... Again a very few isolated instances can hardly be called a trend. Furthermore the aggregated effect by several hundred thousands demanding 6-8 percent more is many times more serious than the rare CEO getting a mind-blowing check. But of course I can’t blame the workers in wanting a bit more than they normally receive. Still one should think of what will happen in the medium and long run. But hey, who cares if you become unemployed in 2010 as long as you can have 6-8 percent more this year.


By the way… what a nice picture depicting those in charge as pigs. Very nice retorik dehumanizing your political opponents. Seems very retro german somehow...

9:24 AM  
Anonymous Anonymous said...

Some words above were spelled wrong.

Fair = fear
compositeness = competitiveness

9:27 AM  
Anonymous Cosmic Duck said...

The cartoonist wants to say something about their human faces being media lies. That's why they are portrayed as pigs. You've got to allow artists som artistic freedom.

He wants to say that upper-class in the 21st century is not only something economic or financial. It's connected to media dominance, culture and royalty. Royalty and big business are connected. You need an artist to tell it in an amusing way.

10:16 AM  

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