A paper presented to the International Economics & Law Conference, 2016, by Peter Bowman
In March of this year the UN Sustainable Solutions Development Network published the 2016 United Nations World Happiness Report. These reports have been issued annually since 2012. They argue that happiness provides a better indicator of human welfare than more objective criteria than more traditional indicators such as income, poverty, levels etc. Over the years there has been refinement of this measure.
The report follows current practice by using a combination of accessible parameters. The six they choose are GDP per capita, social support, life expectancy at birth, freedom to make life choices, generosity and perception of corruption. This year the country at the top of the index was again Denmark. (The UK was 23.) It has held top place since the report was introduced except for 2015 when it dropped temporarily to third place.
Denmark is a country of Western Europe that over the last century has shared with its neighbours the same influx of ideas and the same turmoil of wars so why does its people, in particular, come out top of the happiness index? What do we find we look more deeply into the underlying socio-economic arrangements? Are there underlying reasons why it performs so well?
Denmark has no minerals, metals, coal or oil. It is blessed with soil that is good but not rich so it is naturally a land devoted to agriculture. It is the country with the highest percentage of its surface under the plough, and also has the highest percentage of owner-occupied farms. Its large number of islands and extensive inlet-filled coastline also gives its inhabitants a strong encouragement to engage in overseas trade.
To discover the possibly unique foundations upon which the modern Danish economy has been built it is necessary to back to the significant land reforms that took place there in the latter part of the eighteenth century. Land reform does not take place in isolation but brings with it significant social changes. The changes that took place in Denmark paralleled reforms that took place in England and in France over the same time period. Although the starting points for all three were similar remnants of the feudal system the outcomes were very different.
The developments that took place in Denmark provided a model for agriculture that was taken up in other western European countries, in preference to the English system and there are also similarities with the reforms introduced in Japan, Korea and Taiwan after the Second World War which laid the foundations there for fast growing successful economies.
The state of affairs in Denmark at the end of the eighteenth century was one of antiquated and inefficient feudal arrangements with a consequent low productivity and accompanying lack of prosperity. The rural economy consisted of a small number of large estates with 90% of the land covered by 900 estates owned by 300 landowners. 25% of land was owned by the crown, 46% by the nobility, 17% by gentry who were not nobility and 10% by the church leaving only around 2% owned by peasant farmers.
The usual arrangement was strip farming in a three-field arrangement. Tenant farmers had access to between fifty and a hundred small strips of around half an acre scattered over the estate. Around 10 – 15% of this was demesne land, owned by the lord and worked for him by the peasants. The system was fragmented, cumbersome and it was difficult to innovate. Choice of crops and the timing of essential tasks were out of the hands of individuals. Livestock was grazed on common land and was of poor quality.
The lord had considerable power over the peasants of the estate. He charged them rent for the lands they farmed (the church charged tithes). He exercised the right to command their service to work his land (known as haveri), he collected national taxes from them, chiefly the hartkorn or land tax but was himself exempt. He administered justice which would include inflicting corporal punishment. He also had the duty of providing soldiers for the militia.
In early eighteenth century, at a time when the peasants were beginning to drift away from their impoverished life in the country to the towns the landowners grip of power over their tenants was strengthened by the passage of domicile laws (adscription) which required all those between the age of 14 and 36 (later extended to 4 to 40) to remain on the estate on which they had been born. They could also be required to take on a farm when one became vacant in whatever state it happened to be. These domicile laws were enacted in the name of military service but was also needed to stop peasants drifting away to the towns.
Denmark at that time was an Absolute Monarchy. In the middle of the eighteenth century the King was Frederick V who ruled from 1746 to 1766. His first wife was Louise, daughter of George II of Britain. The system of administration under the king consisted of an unelected bureaucracy headed by a chief minister or Lord Chamberlain who at that time was Count Adam Gottlob Moltke. The chosen ministers would discuss matters of state amongst themselves and then present recommendations to the king for approval.
Although there were no democratic elections there was a certain openness about the arrangement. For example, in 1755 all persons so disposed were requested to submit treatises concerning any matter which might serve to maintain the flowering of the country.
This led to a passionate debate about agricultural. One motivation was the desire of the nobility to increase efficiency so they could extract more wealth to fund their lifestyles. They looked over to England and saw that the technical innovations known as “improvements” taking place there were leading to greatly improved output. Some Danish landowners had been experimenting on their own estates. There was also the influence of the French Physiocrats and their idea that agriculture was the ultimate source of all wealth. In addition, enlightenment humanitarian ideals also were at play.
Two schools of thought could be distinguished. One, leaning towards the way things were developing in England, favoured ideas of property rights and individual freedom enabling technological “improvements.” The other gave more weight to the preservation of the peasant farmer.
In 1757 a commission was set up under Count Moltke. What became clear was the need to replace the strip field system by a new arrangement in which landholdings were consolidated to produce separate independent farms. The big question was who would own and run these. By 1768 the commission had become a Government Department.
In that year Frederick died and was succeeded by his son who became King Christian VII. The new young king’s tutor had been a young Swiss scholar named Salomon Reverdil who now became his confident. Reverdil, a radical, persuaded the young king that he should give full consideration to the state of the peasants. To further this end Reverdil was established in the role of rural administration commissioner but unfortunately shortly afterwards before he could undertake any significant action he was expelled from the country as a result of a court intrigue probably not related to his reforming zeal.
Christian was not of sound mind and in 1770 his physician Johann Federick Struensee took over control of the Government. He was a radical reformer and was also interested in ending serfdom but he met with considerable resistance. He did supervise the passing of laws that would enable peasants to buy their own farms but his position was compromised when he became the lover of the queen Caroline Mathilda sister of George III of England and in 1772 he was convicted and executed.
Power now fell into the hands of a reactionary regime with the country now effectively ruled by Christian’s stepmother, Juliane Marie of Brunswick-Wolfenbüttel, his half-brother Frederick and the Danish politician Ove Høegh-Guldberg. There was no interest in the reform of the condition of the peasant but enclosure of agricultural land now started to move ahead. This required a detailed process of surveying, reallocating and then relocating farms.
In 1784 after twelve long years of intransigence a coup led to the overthrow of the old regime. King Christian was still alive but the Government was taken over by Crown Prince Frederick with the statesman Andreas Peter Bernstoff taking charge. The reformers were now able to return and re-establish a reform agenda. Chief amongst these was Count Christian Reventlow. Although from an aristocratic background he overflowed with progressive ideas, especially as regards agriculture, and he devoted himself, heart and soul, to the improvement of his property and the amelioration of his serfs.
He was humane, intelligent practical man with an unshakeable faith in the potential of the peasants.
As a result of a proposal received by the Rentekammeret, the ruling council, from a lower court official, which suggested that a court and not the estate owner be empowered to appoint the assessor for the settlement of a tenant’s estate, the whole question of how to secure the rights of the peasants under their tenure contracts was taken up. A lawyer in Rentekammeret, Chr. Colbjørnsen drew up a clear and eloquent statement to the effect that the rights of the tenants must be firmly secured in law, not left to the whim or goodwill of his lord. Reventlow agreed entirely and presented the matter to the crown prince in July 1786, warmly pleading the cause of the peasant and the need for reforms. The crown prince was impressed. The outcome was the creation on August 25, I786 of The Great Agricultural Commission, instructed to consider the whole legal position of the peasants. Of the commission’s 16 members, (4 represented the central administration, Reventlow among them, 4 the military, 4 the judiciary, and 4 the landowners. Reventlow persuaded Colbjørnsen to become its secretary.
Things moved quite quickly and a series of laws were soon passed. These covered three main areas. The first, passed in 1787, dealt with the conditions of the peasant’s leases. These were improved in favour of the tenants. For example at the beginning of a contract a proper inventory was made end of tenure the peasant would receive compensation for improvements he had made. The following year the law of Domicile was abolished restoring freedom of movement. In 1799 the hoveri arrangments were fixed by law and commutation to fixed payments was encouraged.
In addition, in 1786 a bank was set up to provide credit to the peasants to enable them to purchase the farms they worked.
The conditions of both the peasants and way agriculture was organised were transformed over quite a short period of time. The enclosure of land and it re-allocation to produce distinct farms proceeded apace with the relocation of the farm buildings following more slowly. The effects of these reforms on general prosperity soon became apparent. By 1818 two thirds of farms were owner-occupied with most of the sales having been completed by 1807. Those who remained as farm labourers now worked for money payments.
The effect on productivity was startling with grain production doubling, largely due to what had previously been common land coming into production. In addition, yields increased by around 25% due to improved practices – tasks could be carried out at the proper time, new crops and rotations were introduced, there was better preparation with double ploughing and livestock improved through more careful breeding.
However, the most significant change was in the stature of the people. As independent farmers, they now had both freedom and security of tenure, they had confidence and the incentive to innovate.
Reventlow was responsible for other reforms, encouraging free trade and reforming the tax system. In 1804 he wrote to the king:
“Even within the same province, land of equal quality is more valuable near the greater towns and in densely populated areas than it is far from a town and in sparsely populated areas. We believe, therefore, that it will be most impartial to assess the land tax (hartkorn) according to the total value of land, because that will give better evidence of how much the land can yield economically. On this total value and not on the quantity of farm land alone, taxes could fairly be paid by everybody.”
The period of reform was followed by the Napoleonic Wars in which Denmark suffered badly particularly at the hands of the British who were very keen that the Danish navy did not fall into the hands of the French.
The robustness of the reformed Danish agriculture was put to the test in the latter part of the nineteenth century. The drop in the price of wheat due to cheap imports, for example from the US, put Danish framers under threat but they adapted quickly, changing from cereal production to beef, pork, poultry and dairy products which utilized the cheap cereal to produce higher value products. They also concentrated on export. Well-managed cooperatives established with government assistance enabled the farmers to work together for their mutual advantage developing common standards, branding and managing export prices. By the 1880’s two thirds of produced was for export particularly to Germany and the UK. Between 1870 and 1914 the number of cattle doubled, the amount of butter produced increased fourfold and pigs increased six-fold.
Through the twentieth century, like other European countries, Denmark has had to endure two world wars and the ideas of liberal and social reform of their neighbours. The equitable and non-violent land reforms have given their economy a secure basis in which the fruits of endeavor are shared widely and evenly.
Starcke, V. (1967) Centuries of Experience with Land Taxation in Denmark [Available at: http://grundskyld.dk/2-centuries.html.] Accessed 17th December 2016.
Merlet, M. (2002) Denmark. Pioneer for Small Farms in Western Europe [Available at: http://www.agter.org/bdf/en/corpus_chemin/fiche-chemin-457.html.] Accessed 17th December 2016.
Friedman, K. (1979) Bureaucracy, Land Reform and Technological Progress: Denmark 1755 – 1810. Food Research Studies vol XVII No 2. [Available at http://ageconsearch.umn.edu/bitstream/135577/2/fris-1979-17-02-099.pdf] Accessed 17th December 2016.