This is the 10th anniversary of the Lehman Brothers collapse. The biggest bankruptcy of all time sparked the financial crisis which developed into the worst recession since the Great Depression.
Exorbitant amounts of money vanished into thin air and millions of jobs were lost. Many lost both jobs and savings and families were thrown out of their homes. Society protected the banks and, instead, workers bore the brunt of the crisis in order to safeguard the government finances.
The crisis reminded us that the market does not regulate itself. Untamed market forces do not produce a well-balanced, stable economy and – and certainly not a fair distribution of benefits and burdens. The crisis clearly underlined the need for the state to provide a framework for taming the market forces – a framework that ensures a more stable economic development to the benefit of everyone.
Danish workers showed wage restraint while banks were bailed out
The crisis hit Denmark harder than its neighbouring countries. This was because the politicians had deregulated the financial sector and made a number of irresponsible choices in the time leading up to the crisis.
When the economy was still soaring, the government led by Anders Fogh Rasmussen poured petrol on the fire with its tax freeze and its expansionary fiscal policy.
The government eased financial regulation significantly and lowered the requirements for financial institutions. This is why the crisis hit us extra hard.
Workers were asked to stay longer on the labour market and to exercise wage restraint. All the while, unemployment benefits were eroded and cuts were made to our welfare society. The unemployment benefit period was cut in half, the accrual period was doubled and the voluntary early retirement scheme was dismantled. Public sector employees had to work harder and longer. Banks were bailed out and taxes and duties were lowered for businesses and the most wealthy.
Workers showed responsibility during the crisis while the ones who were responsible for it went unpunished.
10 years after the collapse: has the system improved for workers?
So where do we stand now, on the 10th anniversary of the Lehman Brothers collapse? The sun shines on the Danish economy again. Once more, short- and long-term public finances are sustainable and we are slowly reaching full employment. It is tempting to say that things are going well in Denmark – but only for some – and grey clouds are gathering in the horizon.
The gap between rich and poor is growing and more and more children are growing up in poverty. They have poorer prospects compared to children of the same age. More and more feel insecure about the future. What if I lose my job and have to seek unemployment benefit – will the money suffice? What if I fall seriously ill – will there be good health care for me? Will society help me when I need it?
In other words, we need to realize that the market does not ensure a fair outcome for everyone. This requires the right political decisions – and are these decisions being made?
Not in my opinion. For while inequality and precariousness are on the rise, the government continues to make cuts to welfare, education and to the safety net that is supposed to catch us if we lose our jobs. It lowers taxes for the most wealthy and makes it cheaper to bring in foreign labour instead of making sure that the remaining 100,000 unemployed Danes find a job.
How about the financial sector – has it learnt its lesson?
This does not seem to be the case. Its focus is still on the short-term gains rather than taking a more cautious approach with a long-term perspective. The many scandals of this past decade have accentuated this approach, and the huge Danske Bank money-laundering scandal is the latest example of this continuing tendency. Proper regulation and supervision goes a long way, but it’s not enough. It is also a question of ethics and values. And it is obvious that there is still room for improvement.
If workers are to bear the brunt of a recession and are left out come the economic upswing, it’s no wonder that many of them feel powerless and angry, lose faith in politicians and the future and vote for Trump or Brexit.
The market forces are blind to social fairness
In Denmark, we have historically chosen a different model that redistributes the wealth created by the market economy. We have created more and better workplaces and greater economic wealth while at the same time ensuring that everyone gets their fair share. This is thanks to a strong welfare society, investments into training and education, collective agreements, organising and collective demands.
Denmark is proof that more equality and security create greater wealth –both in money terms and also in terms of welfare, knowledge and happiness.
Let us protect this model. Let’s not repeat the mistakes of the past by removing sensible checks on the financial system and by lowering taxes for companies and the most wealthy. Let us invest in each other in stead, in our community, and in everything that has made Denmark one of the wealthiest countries in the world.
The market does not care about social balance. The market forces are blind to social equilibrium and redistribution. They need a regulatory framework. This requires the right political decisions in order to create a more stable and fair economy. A better society.
The question is: What do we choose?