The unlikely tale of how the US gave birth to Denmark’s welfare state

US presidential hopeful Bernie Sanders wants to bring Danish social democracy to America. But as James Lewisohn finds, Denmark owes the very existence of its welfare state to the USA.


Bernie Sanders: "the goal of politics is to get to Denmark"

It's no secret that US Democratic hopeful Bernie Sanders reveres Scandinavian welfare states especially Denmark's his vision of America has Scandinavian social democracy at its core. "I think we should look to countries like Denmark, like Sweden, like Norway", he said at a Democratic Party nomination debate last October, "and learn what they have accomplished for their working people".

Sanders' embrace of Danish social virtues dates back to an article he wrote in 2013, shortly after touring Vermont with Denmark's ambassador. "In Denmark", Sanders wrote, "there is a very different understanding of what "freedom" means. In that country, they have gone a long way to ending the enormous anxieties that come with economic insecurity." There are echoes of the legendary US political scientist Francis Fukuyama of End of History fame who has said "the goal of politics is to get to Denmark".

But Sanders omitted a paradox: in fact, the country arguably most instrumental in creating Denmark' s modern welfare state and thereby "ending anxieties resulting from economic insecurity" was the United States.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

How come? Well, back in 1945, it was far from clear which side of the Iron Curtain Denmark was going to end up on after the war. Stalin wanted Denmark for the Soviet Union: occupying Denmark would vastly improve Russian access to the Atlantic (Russia's Atlantic fleet, based in Murmansk, was ice-bound for much of the year). The Allies, meanwhile, saw Denmark' s geopolitical position as critical Denmark controlled the entrance to the Baltic Sea, and Greenland, its North Atlantic possession, would become a linchpin of Nato defences. In early 1945, Swedish intelligence discovered Stalin was planning to renege on the territorial agreements he made at Yalta by launching the Soviet occupation of Denmark. The Allied response in part a personal intervention by Winston Churchill saw Denmark liberated by Britain.

Being a geopolitical football between Great Powers was not Denmark's only problem. Domestically, Denmark had a sizeable minority who would have welcomed Stalin. Denmark's Communist Party (DKP) had been a leading force in the resistance during the Nazi occupation, and had been rewarded with its first ministry (albeit the Ministry of Traffic) in the post-liberation government of May 1945. In that October's general election, the Communists won 12.5% of the vote (and seats), in an election where 86.3% of eligible Danes voted.

This election result, and Stalin's clear desire to take Denmark, made it seem crucial to both the Danish government and the United States to find ways to keep both the Soviet Union and a rising fifth column of Danish communists at bay. From the US perspective, as Danish political scientist Lars Bo Kaspersen puts it, "a strengthening of the social democratic welfare state with extended social rights to protect the poorest was the best means of undermining the strong Communist position in Denmark".

And so, in a strange piece of realpolitik, the Danish Social Democrats and the United States buried their natural ideological differences. And instead of supporting the Danish bourgeois political parties which would have been its more natural political allies, the US allied itself with Denmark's Social Democrats. US resources would become critical in financing post-war Denmark. And the modern Danish welfare state was born with the United States, its Marshall Plan, and Denmark's entry into Nato as the unlikely midwives.

If Sanders wins the Democratic nomination, becomes the 45th US president and enacts Danish social democracy in the US, it will be a remarkable unintended consequence of hard-nosed US realpolitik in the Great Power battles over the ashes of post-war Europe.

James Lewisohn began his career as an investment banker in New York with Bear, Stearns & Co. He went on to work as an M&A advisor in London at UBS Warburg, and was head of private equity for Lord (Jacob) Rothschild's investment group, including RIT Capital Partners Plc and the Yad Hanadiv Foundation. 


James currently works as an advisor to investment funds, family offices and companies, and is chairman of the Investment Committee of Poul & Erna Sehested Hansens Fond, a Danish medical and educational charity. He is also a trustee of Barry & Martin's Trust, a UK charity dedicated to HIV/AIDS prevention and care in China.