Institutional Competitiveness in the Global Economy: Denmark and the United States

Despite high taxes, a large state budget and welfare state, much economic regulation, and a very open economy, Denmark continues to compete successfully against the other advanced capitalist economies. Hence, Denmark presents a paradox for neoliberalism, which predicts that these policies will hurt national competitiveness under conditions of economic globalization. Following the varieties of capitalism literature, this paper argues that Denmark's success has been based in large part on its institutional competitiveness-its capacity to achieve socioeconomic success as a result of the competitive advantages that firms derive from operating within a particular set of political and economic institutions. The institutional basis for successfully coordinating labor markets, vocational training and skill formation programs, and industrial policy are examined for Denmark and the United States—two countries that are very different institutionally. The analysis shows that there is no one best way to achieve success in today's global economy, except perhaps for reducing socioeconomic inequality; that the type of capitalism known as coordinated market economies are oversimplified in the literature; and that high taxes, state spending, and economic regulation can actually enhance socioeconomic performance.