We have freedom of speech, period.
Competition between countries in Europe is healthy. “If you standardise and regulate too much, you create a systemic risk,” Martin Agerup said in an LFF interview. In a conference organised by Nordea Bank Luxembourg, the CEO of CEPOS, an independent Danish think tank, presented his views on capitalism and liberal democracy.
The Danish Centre for Political Studies (CEPOS) is dedicated to preserving and strengthening the foundations of a free and prosperous society. How can this goal be achieved and what is the role of CEPOS?
We are a free-market think tank, so we are of the opinion that the free markets can be used more than they are today. Our main focus is on the Danish economy and society, but we work on an international basis too. We have, for instance, a Freedom prize that we give to an individual that has done remarkable work for freedom. The first year we gave it to a Cuban and the second year to a Chinese dissident. The difference between the analytical work we do and the work done by universities is that we try to focus on policy reform and areas where reforms are considered to be a good idea. With the problems that we analyse, we always deliver solutions.
Are countries that have weathered the financial crisis relatively well become complacent and unwilling to undertake reforms at risk?
This danger certainly exists for some countries or regions of the world. In Denmark there is a reasonable level of acceptance that right now we are in a tricky situation and that reforms are needed. The main reason why countries like Denmark and Sweden have done relatively well throughout the crisis is that for the last three decades there have been numerous reforms of labour markets, financial systems, the pension system and the welfare state. In Denmark we now have an index on retirement age that follows longevity automatically. I think we are the only country that has that index. So we have solved the demographic problem. The problem we face now is how to bring in the growth of the welfare state.
Can other countries replicate this model?
I don’t think you can fully replicate one country’s model in another, but there are always certain elements that you can adapt in your own country. There is no reason why Luxembourg or Germany, for instance, cannot index the pension age. This works the other way around, too. There is no reason why Denmark shouldn’t be able to take ideas from the Netherlands on how to finance health care through private insurance and there is no reason why France shouldn’t take ideas from the German social reforms to increase the inclusiveness of the labour market. It is very important that countries learn from each other and have an open perspective that you can run economies in many different ways with many different models.
It has always been the strength of Europe that countries are constantly competing with each other. However, the danger of the political globalisation in Europe is that if you standardise and regulate too much on a pan-European level, you create a systemic risk. If you force everybody to do the same thing, the consequences can be very severe for everyone. If you have different regimes and one makes a bad decision, at least there is no risk of contagion.
How can Europe get back on track?
Most of the reforms need to be done in each country individually. Economic reforms are desperately needed in many countries, and as I mentioned before, countries should learn from each other. Denmark has a very flexible labour market, which many countries could learn from. In Sweden you have competition between public and private schools. Public schools can be run by profit-making organisations. The biggest danger in the current situation is that the good intentions that are put into solving the immediate crisis will take the focus away from the need to implement structural reforms. Giving money to Greece to help make the country more competitive is a short-term solution; we need long-term solutions too.
So government intervention is not a long-term solution?
No, I see the risk of a bailout culture in the European Union, which basically means taking responsibility away from member states. If you do that, countries can’t have national sovereignty. If I have to pay for your decisions, you cannot make decisions. That is a moral hazard. To put it more dramatically, that is a move away from democracy.
For you, a free and prosperous society implies limited government. How would you define that intervention?
It is closely connected to the word “federalism”. The idea of federalism is that you define what needs to be done on a coordinated, common, federal level. Limited government is defining what government is about and then deciding that government shouldn’t do anything else. In terms of regulating the economy, government protect private property, negotiate trade agreements and regulate areas where you have externalities, market failure or in cases of consumer protection. I think that’s about it.
Liberal democracy is one of the topics you presented here in Luxembourg. A liberal democracy takes various constitutional forms. Is there one you feel closest to?
I like systems that have evolved but which also create some quirks and inconsistencies. Take, for instance, having a queen like we do in Denmark. That really doesn’t make sense if you want to build a democracy from the ground up. You would never say: ok let us have a hereditary system in which the monarch’s son or daughter inherits power. But that is based on tradition and it works.
As time passes, you have this self-regulation and you have an evolution in the forms government may take. You have tradition and common law, which create something that works. I don’t want to think about the ideal system, I want to think about a system that works.
What should be the role of media in a liberal democracy?
The role of the media is very important, both politically and economically. Politically, it is pretty obvious that if you have power, the media can discipline your behaviour and you become more careful on how you spend your money and that you don’t abuse your power. There is a strong link between free media and the election cycle. In economic terms, the media play a very important role there as well: take on-going debate on how to allocate resources, for example. That cannot only take place between politicians; society needs to be involved. The only way of doing that is through the media.
Media also helps to increase competition between companies. Advertisements are often perceived as only being a nuisance, but they are a very important for new companies on the market or in a country to make sure that people become aware of their products.
If we talk about the role of media, what is your opinion on the caricatures shown by the French satire magazine Charlie Hebdo? How far can satire go?
Almost any kind of satire should be allowed. This means if people protest or burn down embassies, then what governments should do is to say: look I am not a critic and it is not my business to give my opinion on cartoons, drawings or amateur movies. We have freedom of speech, period. Politicians should not even debate whether they agree with these caricatures or not. Citizens, artists and intellectuals should enter that debate, but that is only possible if politicians stay out of it. CW