Welfare crisis and beyond: Danish welfare policies in the 1980s and 1990s

The last decade has witnessed many claims that the European welfare states in general and the Scandinavian welfare model in particular are badly equipped to meet the challenges of globalisation and demographic change (see e.g. Rhodes 1995; Esping-Andersen 1996; Taylor-Gooby 1996). Whereas the Swedish experience could at first glance seem to lend credibility to such theories (Lindbeck 1994), a record of the Danish welfare state in the 1980s and 1990s tells quite another story. In the early 1980s, the Danish welfare state indeed faced a serious economic crisis that seemed to threathen its survival: the budget deficit of the state exploded to 11.5 per cent of GDP in 1982, and from 1979 to 1983, net state debt rose from 14 to 55 per cent of GDP. Furthermore, by 1982 the balance of payment deficit was 4.1 per cent of GDP, and foreign debts reached 34.5 per cent of GDP. In spite of economic recession and mass unemployment, inflation remained above 10 per cent.