In the past, people never asked for help unless they needed it

A quite interesting article in the New York Times, Danes Rethink a Welfare State Ample to a Fault by Suzanne Daley. The article recaps the state of welfare reform in Denmark. This is akin to the reforms that the Swedes had to put through in the 1990s and with which they are still tinkering.

The fundamental challenge of course is how do you maintain systemic productivity in order to afford the "free" stuff which is nice but not productive. What rarely is discussed is the larger issues regarding tactical and strategic, short term and long term trade-offs. And most critically, what is not discussed are the unintended consequences. If we implement a systemic realignment of values which are likely to affect future productivity, how do we avoid unintended consequences which might include the undermining of the cultural values which create the productivity necessary to sustain the system?

Socialism usually can be made to work for a generation or two with a culturally cohesive population that has a pre-established work ethic and futurity orientation. Once you introduce low transparency and remove consequences to behaviors and actions, which is one of the side-effects of welfare systems, it takes a while to see what the strategic long-term results are. But the results are usually predictable - a diminution of personal responsibility and accountability, a fraying of communal bonds, increases in financial irresponsibility (personal bankruptcies), destruction of sustainable budgets, reduction in productive engagement (work force participation), etc.

Denmark has among the highest marginal income-tax rates in the world, with the top bracket of 56.5 percent kicking in on incomes of more than about $80,000. But in exchange, the Danes get a cradle-to-grave safety net that includes free health care, a free university education and hefty payouts to even the richest citizens.

Parents in all income brackets, for instance, get quarterly checks from the government to help defray child-care costs. The elderly get free maid service if they need it, even if they are wealthy.

But few experts here believe that Denmark can long afford the current perks. So Denmark is retooling itself, tinkering with corporate tax rates, considering new public sector investments and, for the long term, trying to wean more people — the young and the old — off government benefits.

“In the past, people never asked for help unless they needed it,” said Karen Haekkerup, the minister of social affairs and integration, who has been outspoken on the subject. “My grandmother was offered a pension and she was offended. She did not need it.

I recently posted about Sweden's reforms and experience at the frontier between personal agency and communal support: Sweden, Socialism and Culture. The Scandinavian countries are in some way the canary in the coal mine. They are strong and productive cultures which went the furthest the fastest in attempting to explore the possible balance between communal welfare systems and personal agency. Now that they have found the furthest limits, they are retrenching to try and find what is sustainable. Other countries (think Greece, Argentina, etc.) with weaker communal bonds or cultures less oriented towards the future and personal agency, are far less able to undertake such reforms and instead simply go over the financial cliff to the detriment of all.