The Danish Model and the Globalizing Learning Economy – Lessons for developing countries

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Lean production learning

Taylorist organisation

Simple organisation





















































































Source : Lorenz and Valeyre (2006)

Table 1 shows that people working in different national systems of innovation and competence building have very different access to learning by doing. It also shows that at lower income levels the bigger proportion of the workforce that work in either simple or Taylorist organizations. The richer the country the more workers are employed in discretionary learning contexts. But it is also important to note that countries at similar income levels – Germany and the UK – have quite different distributions of workers between the four forms. While the proportion of workers operating in the lean production is more than 40% in the UK, it is less than 20% Germany. The micro foundation of national systems of innovation differs not only because of levels of income but also because of other systemic features.

9. What lessons can be learnt for development strategies?

The Danish society is based upon high degrees of trust among citizens. This makes transactions less costly and interactive learning more efficient. It might appear as a paradox but the kind of ‘social capital’ that lies behind the dynamic efficiency of the economy emanates from the security offered by the welfare state. US-scholars see public expenditure as being equal to ‘transaction costs’ (North) and the welfare state as undermining social capital (Putnam and Fukuyama). The experience of Denmark and the other Nordic countries points in a different direction.

As the public sector has taken over some of the responsibility for the care of elderly and children it has contributed to creating a highly individualist social system where traditional social institutions such as family and religion play a minor role. The welfare state and the individual legal and social rights make it possible for all categories of the population (women, youth and old people) to act as sovereign subjects. This makes generalized interpersonal trust an attractive option (and somewhat of a necessity for individual survival). The downside is that it puts a heavy responsibility on each single individual for managing her happiness. Failure to succeed may result in serious crises for the individual (and in extreme cases in suicide). It is a normative question how far less developed countries want to go in this direction.

Another critical element behind the dynamic efficiency of the Danish system is the homogeneity of the population in terms of ethnicity and culture. This homogeneity contributes to generalized trust, low transaction costs and efficiency of interactive learning. Today this strength has shown some negative consequences as reflected in unsatisfactory integration of people with a different ethnical and cultural background in work and in society. The only way out of this problem consistent with Danish history would be to invest massively in education and training to make it possible for the newcomers to become full and fully accepted members of the ‘Danish Village Economy’ (Maskell 2004). The alternative would be either to dismantle central elements of the Danish model or to engage in a very selective and unsolidaric immigration of high skilled workers.

Some important lessons that can be drawn from the Danish experience are historical. The current success reflects a high degree of social cohesion and the historical background for this was:

  • The early rise of a broad based and democratic system of education. Already in 1814 came the first law on generalized basic education.

  • The social, economic, cultural and political emancipation of farmers and workers where social struggle resulted in peaceful reform processes. Local democracy goes far back in history while general suffrage for parliament was established 1915.

One important lesson to be drawn from the current strong performance may be the potential benefits from ‘flexicurity’ as a way to organize the labor market. The combination of high flexibility in labor markets (few restrictions on employers when firing employees and high rates of inter-organizational mobility) and income security for those that become unemployed seems to be especially effective in the current context where there is a need both for high mobility and commitment to change among workers and citizens.

Another important lesson is that broad participation of workers in decision-making is an advantage in a context characterized by rapid change and that such broad participation requires an active labor market policy as well as investments in education and training both for young generations and for adult workers. The Danish example illustrates how this kind of participation may flourish in a society with high degrees of social and economic equality.

The history and current reality of Denmark are in some respects very far from the reality of most developing countries. Nonetheless the Danish model may be useful in orienting development strategies. Also when the starting point is modest development strategies may comprise a parallel effort to upgrade workers’ and farmers’ professional skills and their self-confidence through broad education on the one hand and gradually enhancing the role they play in the transformation of working life and society.

The Danish case shows that successful national innovation systems may be reinforced by upgrading the skills of farmers and linking the upgrading of the knowledge base of agriculture to the formation of new industries. It is only in the most recent years that science-based economic activities and high technology sectors have began to contribute substantially to economic growth in Denmark.


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1 This reflects that the current world is characterized by ‘radical uncertainty’ – the only certainty is that unforeseeable events will take place in the not too distant future. This can be illustrated by the last decades where China and India have become major players in global competition, climate change has become a major concern, energy prices have exploded and the relationship to fundamentalist Islam has become a major concern for the Western countries. Just a decade ago these were all items seen as being of secondary importance.

2 Normally generous unemployment support is assumed to reduce the supply of labour. This assumption is not well supported empirically and in the case of Denmark we can see the opposite effect. Participation rates are high in all categories of workers. One reason may be that to become eligible for unemployment support workers need to be active in the labour market.

3 STI refers to the chain science, technology and innovation. While DUI refers to learning by doing (Arrow 1962), by using (Rosenberg 1982) and by interacting (Lundvall 1985; Lundvall 2006).

4 Christensen et al. (2004) find that collaboration on product development has not increased between 1997 and 2004, but the pattern of collaboration partners among those who do collaborate has changed: firms have more partners of different types, and collaboration with knowledge institutions has increased significantly. Especially collaboration with universities increased from 17% to 29%, much the same pattern as that found in CIS.

5 Looking at the distribution between the ‘R-part’ and the ‘D-part’, the vast majority (around 70%) is spent on development. Around 77% is spent on product development.

6 The Approved Technological Service Institutes (GTS institutes) functions as a bridging institution between research and firms. We will return to these institutions in section 4.4.3.

7 While the rich countries impose strict IPR-regimes on poor countries there are no limits for attracting their most scarce resource: Skilled labor.

8 The data originate from a survey of workers in 15 European countries on working conditions gathered by the Dublin Institute for Working and Living conditions. Discretionary learning refers to work situations where workers say that they learn a lot and that they have some freedom to organise their own work. Lean production learning refers to work situations where workers learn but where there is little discretion left for the worker to organise his/her own activities. Taylorist organizations offer little learning and very little freedom for the worker while simple production gives more autonomy in solving simple tasks that offer little learning opportunities.

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