The Nordic Model Under Pressure

The election campaign was dominated by issues around the cost of living and inequality. Denmark, once one of the most egalitarian countries in the world, has seen four decades of rising economic inequality. Much of this has been driven in recent years by the unequal distribution of asset ownership.

The top 1 percent have profited from a stock market boom, with record corporate profits going to national champions like shipping giant Mærsk and Novo Nordisk, which in the aftermath of the launch of Ozempic became the most valuable company in Europe by market capitalization. At the same time, a decade-long rise in real estate prices has left many young people unable to access housing, while at the same time enriching owners of houses and apartments in Copenhagen and other large cities.

It was in this context that Frederiksen made the wealth tax the main policy of her campaign, a modest tax on the top 1 percent to be spent on public education. A month prior, the proposal of a wealth tax was adopted by powerful Danish union federation FH as a key political demand, alongside pension reform.

The proposal enjoyed wide popular support across a range of polls, but a fierce mobilization from Danish billionaires and the business world, supported by the right-wing press, pressed the defenders of the proposal onto the defensive. It remains unclear whether the proposal will survive coalition negotiations with centrist parties.

The campaign against the wealth tax had great similarities to the previous year’s business mobilization against Norway’s Labor Party, which had increased that country’s wealth tax on the wealthiest to 1.1 percent. It was even the same lobbying firms who organized the campaign. This raises the question of a broader radicalization of the Scandinavian business class.

Traditionally, the core of this elite had been relatively moderate in its outlook, favoring accommodation with the unions and the welfare state. If this recent turn to political activism is sustained, it may mean a destabilization of the corporatist foundations of the Nordic model.

A worrying historical parallel, can be found on the other side of the Øresund strait. The Swedish program of wage-earner funds in the 1980s provoked a forceful mobilization by the Swedish employers’ organization, which in subsequent years poured large sums into defeating the funds as well as supporting a broader program of liberalization, much of which was implemented following the financial crisis of the early 1990s.

A European Pattern

Denmark now sits squarely within a broader European pattern where traditional bloc politics are breaking down but no stable alternative has yet emerged. The likely outcome is prolonged and difficult coalition negotiations, with the possibility of another cross-bloc government spanning the left-right divide, despite the clear electoral losses for its participants. The more decisively voters move away from the center, the more reliably institutions tend to reproduce it.

Notably absent from the campaign, despite this turbulent political context, were the issues that dominated Danish politics throughout the 2000s and 2010s. Immigration has largely disappeared as a decisive electoral factor. This is the result of Frederiksen’s longstanding policy of pursuing one of Europe’s strictest immigration regimes, aiming to make the right to asylum and entrance as difficult as possible within the scope of Denmark’s human rights obligations.

The strategy successfully neutralized the issue from the Right, but it came at a cost: it led Frederiksen to alienate herself from the mainstream of European social democracy, while the Social Democrats’ identity as a party of the broader left eroded, likely accelerating the drift of voters toward SF and the Red-Green Alliance.

Foreign policy also played a surprisingly minor role, despite the recent existential crisis over Greenland. The threats from the Trump administration dominated the political scene for weeks. Yet virtually all parties, including the far-right Danish People’s Party, which earlier flirted with Trumpism, rallied to a hard line in defense of Greenlandic territory, removing it as a point of differentiation between them.

The Left’s Dilemma

It will probably take several weeks before a new governing coalition is in place. It seems overwhelmingly likely that Frederiksen will continue as prime minister, despite the electoral losses for her party and government. But the result represents another step in the slow disintegration of the large popular parties of the center left and center right. The Social Democrats and center-right Venstre collectively now represent less than a third of the votes, a far cry from their former dominance as leaders of competing blocs.

For the Left, the position is a precarious one. The Socialist People’s Party will aim to enter government with the Social Democrats, despite the dismal experience of their last participation in a center-left coalition from 2011 to 2015, which ended up splitting the party.

The Red-Green Alliance faces a more delicate situation. Without a majority for the broad left, and with reliance on Rasmussen’s centrists, it will be difficult to hold Frederiksen to her many left-leaning campaign promises. The Social Democrats usually move rightward when in government.

In the face of another round of price rises on energy and basic goods, there is little sign that a new centrist government will face a more forgiving electoral landscape than the last one. The question remains whether it will be forces on the Left or on the far right that mobilize the voters disillusioned by the traditional parties.