The Danish Government

by DR. VIGGO STARCKE, M.P.Note 1
Cabinet Minister in the Danish GovernmentNote 2
(Reissued with the permission of Mrs Lis Starcke)

The Danish Government * 1957 - 1960 

This is a short report. Some Georgists will perhaps be interested in hearing something about what is happening under the new Government in Denmark, because it is still rather unusual that Georgists take an active part as members of a government.
     The ideas of land value taxation and free trade are old in Denmark. Therefore, the philosophy of Henry George is popular in Denmark. It is blood of our blood.
     Denmark has only one chamber in its Parliament with 179 seats. Of these "Danmarks Retsforbund" – what you call the Justice Party or The Danish Georgists – had only 6 before the election in 1957. There are 6 parties represented in the House, and some representatives for Greenland, The Faeroe Islands and Slesvig. In the election of May 14, 1957 the Social Democrats went down from 75 to 70, and the Socialist minority government resigned. The Liberals (Venstre) gained 3 seats and rose from 43 to 46. The Conservatives got 30 unchanged, and The Radical Liberals 14 unchanged. The Communists were reduced from 8 to 6.
     The Georgists, in spite of the Gallup predictions and prophecies of annihilation, gained 3 seats and rose from 6 to 9, an improvement of 50 per cent in representation, and 60 per cent in votes. Even if 9 seats in a house of 179 are not everything. it is something, and the result of the election gave the vested capital interested in the preservation of monopolies a shock.
     The victors of the election were the Georgists and the Liberals, both of whom had gained 3 seats. There were some negotiations between the two parties with a view to forming a liberalization-government, but the Liberals' plans were not liberal and in any case the combined strength of the two parties was too small. If the Conservatives had joined such a government, a coalition government would have been a possibility, but the Conservatives are not liberal, but protectionists, even if they are against socialism.
     The Radicals proposed a strong majority-government, consisting of the four biggest parties, and nobody can deny that 160 seats would be a majority in a house of 179, but neither the Socialists, nor the Liberals, nor the Conservatives wanted to enter such a government; and then the majority was gone.
     From 1950 till 1953 the Liberals and the Conservatives had formed a minority coalition government, and now they proposed to try again. But both the Radicals and the Socialists declared that they would vote against such a government, and the Georgists would not support it, but preferred to wait and see. Thus this plan failed.
     The Radicals then proposed that the Liberals alone should form a minority-government and negotiate for support from the other parties; but the Liberal leader, the former Prime Minister Mr. Erik Eriksen, would not consent to this out of loyalty to the Conservatives, with whom he had been in close co-operation between 1950 and 1953. He hoped for renewed co-operation in the future.
     It is believed that had the Conservatives suggested that Erik Eriksen should form a Liberal government, he would have done so. But they did not. In this way the Conservatives made a Liberal government impossible - and the new government possible.
     It was in this situation that the Georgists suggested forming a majority-government consisting of the Social Democrats, the Radicals and the Georgists with land value taxation as its foundation and uniting cement. All three parties, to a greater or less extent, support land value taxation.

THE PRESS WAS OUTRAGED
     Most of the Danish newspapers are owned by the wealthy Conservatives and Liberals, and they grinned at this curious idea of a government which included such queer people as the Georgists. They firmly believed that the negotiations would break down, and then, after all, a Liberal-Conservative government would be the happy ending. But, in spite of the newspapers, the negotiations succeeded, and the new government was formed. The newspapers flew into a rage and attacked the Georgists, charging them with everything short of murder: They had deceived the electors! They had broken their promises! They would ruin the country!
     Had the Georgists refused to join the government, I am sure, the papers also would have accused them of breaking their promises, saying: "The Georgists have been demanding further land value taxation for years, and now when they can have it, they do not dare  - what silly cowards ! "
     Some people believe that the vested interests behind the land monopoly have said to be the two old parties: "What an awful mess you have made. You have allowed the Georgists to play the ball right up to the goal mouth. The only way to prevent them from scoring is to attack the Georgists with all means available so that they break down." And they tried it - without success - using a barrage of articles, pamphlets, cartoons, backbiting and anonymous letters. In a way it is a compliment because few people use their elephant-guns against small game.

PROPHECIES AND PERFORMANCE
     The newspapers prophesied that everything would go wrong. The price of bonds and stocks would fall, interest rates would rise, the balance of foreign currency would shoot down, production would stop, savings and investment would shrink, unemployment would swell to enormous proportions and the younger generation would emigrate.
     And what happened? The opposite! The deficit in the budget was made good. The great deficit in foreign currency of a quarter of a billion kroner was changed to a surplus of one and a quarter billion kroner, the greatest surplus in many, many years. The price of bonds and stocks rose. so that half of the loss due to depreciation has been regained, and people can borrow money to build and buy more cheaply. The effective interest on bonds has fallen one and a half per cent - a great help to the building industry. The discount of the National Bank has fallen one per cent--a great benefit to trade and enterprise. Savings have risen enormously because people have more confidence in the value of Danish currency. Investments have risen. Exports of industrial goods rose 10 per cent last year. Construction of buildings for industry and trade rose by 35 per cent during the same period. Unemployment is at its lowest level for many years, and emigration has dwindled from 12,000 to 2,000. The whole economic atmosphere and temperature has changed in two years.
     Where is the explanation? Some of it is due to international conditions with falling import-prices on raw materials, but the export-prices for Danish agricultural products have not been good, due to protectionism, restrictions and state-subsidies in other countries. Some of it is due to the new government, not to the Georgists alone, but to the co-operation between the three parties in power.
     Inflation is a scourge in most countries. Before the election in 1957 there was a whisper of a new devaluation of the Danish currency. But, when the new government was formed, confidence, which is very precious thing, was re-gained, and people began to save and invest. The energetic balancing of the budget is another factor.
     It is evident that, when three different parties join in a coalition, compromise is necessary. The Georgists are for land value taxa.ion and free trade, and against inflation and taxation on labour and buildings but they cannot expect all their wishes fulfilled at once. They will have to vote for many things that they are against, but which would have been carried through in any case under other governments - in order to gain results that would not have been gained under other governments. A small party of 9 has too little power in Parliament, but in a government it has influence.
     In the cabinet the Social Democrats have nine members including Mr. H.C. Hansen as Prime Minister. The Radicals have four members, and the Georgists three, one being the Minister of internal affairs, one Minister of Fisheries, and one a political Minister without portfolio. As this is the first time that the Georgists have held office, it is important to stress that the country is run by a three-party government, and not by a Socialist government with participation of others.

LAND VALUE INCREMENT TAXATION INCREASED
     Last year the government passed an act improving the law governing the taxation of increments in land values. This taxation is now 4 per cent of all unearned increments since 1958 with the exception of general rises due to conjecture or inflation. The Georgists are against such an exemption, but have not yet been able to convince their partners.
     Post-war rent control of old flats in the towns led to a great disparity in the rents charged. The Coalition government restored a free market in rented accommodation with the result that these artificial differences have disappeared. Higher house rents would have conferred great benefits on the owners of real estate. Therefore, in the towns the municipal land value tax has been more than doubled - increased from 1.2 per cent of the assessed capital value by 1.4 per cent to 2 6 per cent. This is a permanent land value tax which the municipalities are not allowed to reduce.

CLEAR TAX SHIFT FROM LABOUR TO LAND
     To this was added a temporary tax on the capital value of old buildings - the new are tax free - in order to equalize the conditions, and because the owners now were able to obtain a higher rent. It is l.4 per cent, but in the coming years it will be gradually reduced, so that after 40 years all buildings will be tax-free. Together these taxes will yield an annual revenue of 140 million kroner to the municipalities, most of it deriving from land and some of it from old buildings. This revenue is used to reduce the local income tax - a clear tax shift from labour to land.
     Of course, the Conservatives were very upset, and claimed all the advantages for the owners of real estate. They were so upset that they blurted out that but for these laws the land-owners would have gained a capital sum of 2,800 million kroner. It was prevented. Not a bad result.
     These laws also provide for a gradual elimination of the state-financing of the building industry with a shift to private finance and private initiative.

THE NEXT STEP
     lnside the government the next step is investigated: How to devise a system to effect a voluntary transfer from private mortgaging of land values to a land value taxation with a ground-rent arrangement, especially when real estate is transferred. It is intended to be a further evolution of the special Danish laws of October 4th, 1919, under which young people can obtain land with full owner-ship, but without paying any purchase price for the land. We have in Denmark under the old law 10,000 such small ground-rent-holdings, and now we will try to develop this system. If it can be brought about the landholders concerned will then have to pay the full land value taxes - the economic rent - due to the periodical assessments. Details are not yet available.

TAX-FREE INVESTMENT AND FREER TRADE
     Two new laws which have made a very important contribution to the improvement in the Danish economy are those giving tax-freedom for investment funds - monies earned by companies which are re-invested in the firm - and for the right of writing off machines in the balance sheet.
     Although the government has not promised liberalisation of trade -the Georgists, of course, are for it - some progress in this direction has been made. Some restrictions have been removed, import licenses have been made more freely available, and the range of commodities which may be imported from the Dollar Area free from licence has been raised from 55 per cent to 88 per cent.
     Many other problems have been dealt with, but cannot be explained here, because they are only of interest for the Danes The cost of living has risen, but only half as much as in other European countries. The most important results of the new government in its first two years are improvements in practically all spheres of economic life, progress in the taxation of land values, and a hard braking of inflation. Of course, land prices are still rising, but land-speculation as such has practically stopped.
     Every step forward will be encouraging for Georgists. We have seen that it is possible to gain influence, whereas 30 years ago few would have believed that a government could be formed with land value taxation as one of its main objects. Even if this world - and especially Europe - is badly hurt by protection and restrictions, it is encouraging to see that today liberalization is earnestly discussed in all the different market plans.
     The experiment of taking responsibility in a government has been justified. No experience has occurred that could prove that the ideas of Georgeism are wrong. On the contrary: Righteousness will always be right.

Notes:
1: 1945 - 1960 
2: 1957 - 1960

First published 1959.

 
Hovedside/Main Page: Grundskyld - Henry George

Summary of pages in English: The Land Question