DENMARK is one of the weakest and at the same time one of the most exposed members of the North Atlantic alliance. Placed at the narrows of the Baltic like a cork in a bottle, her territory commands the straits through which the formidable Soviet submarine fleet would have to pass in a major war. An area of such strategic importance cannot possibly fail to attract the attention of the Soviet high command. As a matter of fact, the Russians showed their interest in Denmark in World War II. In 1940-41 they tried without success to talk their German friends into giving them control over the Danish straits, and they attempted, also in vain, to race their armies into the Danish peninsula before the British could arrive.

The territory of Denmark, consisting of a peninsular projection from the North German plain and a host of islands of varying size, is devoid of natural defenses. Her shallow inland waters, formerly an asset for defense, today offer an ideal road of approach for amphibious forces in landing craft. If war ever again comes to Denmark, the Danes can hope at best to carry on holding operations until friendly forces can come to their succor. Fear of the fate of Czechoslovakia, and the hope that participation in an enterprise for common defense with strong friends would avert it, decided the Danes to join the North Atlantic Powers in 1949.

The price for protection by NATO was a vigorous defense effort by the Danes themselves--something this unmilitaristic and pacifistic nation had not known for generations. And they had to start from scratch. The German occupiers in World War II had not only dissolved the modest Danish forces, but had also cleared out the military equipment down to the last blanket in the barracks. Assistance was soon forthcoming from Britain, Canada and, in particular, the United States under the Mutual Assistance program. But defense expenditure is very heavy by Danish standards: 14 times as high as in 1938 and three times as much as when the Danes signed the North Atlantic pact in 1949. It swallows up 40 percent of the state budget, an all-time high in recent Danish history. Also, defense means nothing but expense in a country like Denmark. There is hardly any defense industry that could profit from rearmament.

What seems a great sum to this traditionally neutral nation is not necessarily overwhelmingly much by NATO standards. The nearly one billion kroner spent yearly for defense corresponds to 4.1 percent of the national income--about the lowest percentage among NATO member countries. For this billion a year, Denmark has still not been able to buy anything approaching national security. NATO headquarters figure that effective command of the air above Denmark would demand a minimum force of 14 fighter and fighter-bomber squadrons stationed on Danish soil. Today there are only eight. According to NATO, the security problem could be solved by stationing two Allied wings in Denmark until sufficient Danish pilots and ground crews could be trained to take over the 150 planes and equipment. But for the time being Denmark, like her sister country Norway, has declined NATO's offer to garrison foreign personnel on her territory.

The reasons for this are political and psychological rather than military, as Defense Minister Rasmus Hansen has admitted. One reason is concern lest stationing of American troops--and those are the only ones in question--might be considered a provocation by the Russians. Little Denmark, while remaining a member of NATO, still wants to maintain as friendly relations as possible with the nearby colossus. Another consideration is the lesson of the experience of other countries that garrisons of foreign troops--by comparison tremendously well paid--create strained relations between the soldiers and the civilian population. This is undesirable locally, and also creates bad feelings with allies. As long as any acute danger of war in Europe seems remote the Danes tend to put such considerations ahead of the military requirements for complete coördination with foreign forces in advance of an emergency. On the other hand, the Danish Government has repeatedly announced that it may change its mind about the stationing of foreign troops on its soil if there is increased tension in Europe. So far it is content with keeping Danish bases ready to accommodate considerably larger forces on very short notice--a policy undoubtedly in accord with popular feeling.

Eyebrows were therefore raised in NATO headquarters in September 1954 when the Danish Parliament, summoned to an emergency session, accepted a government proposal to cut down defense expenditure, reducing appropriations for the coming financial year from 1.19 billion kroner to 890,000,000, and at the same time shortening the period of ordinary military training from 18 to 16 months.

The NATO command feels that Denmark's defenses should be expanded, not reduced. The Danish Government, however, keeps telling NATO that the curtailment of the defense program is not nearly so bad as it looks on paper. True, the armed forces are going to induct 3,000 men fewer a year, but the Danes have been scraping the bottom of the barrel; one class plus one-fourth of a class have been called every year, and many unfit men have been inducted who had to be weeded out later--a costly and inefficient procedure. The smaller number of men called up is supposed to remedy that situation; from now on the psychologically unfit will be rejected before enlistment and not after they have had a chance to impair morale in their units. Also, the government says, the reduced training period will hamper the forces less than NATO fears. The men discharged after 16 months will be called back later for two additional months, and the Defense Ministry claims that this too makes for better efficiency. One of the main weaknesses of the Danish armed forces is the lack of well-trained officers and noncoms, a condition resulting partly from the smallness of the forces prior to 1939 and partly from the fact that training was suspended during the German occupation. On prodding by NATO, Denmark lengthened the training period from 12 to 18 months, but the inducted men could not be given proper training for lack of instructors. Finally, even the cut in appropriations is not supposed to reduce actual combat strength. It is said to touch mainly the construction and expansion of barracks and other facilities less urgently needed when fewer soldiers are called.

II

Even so, it is admitted that the cuts impaired military preparedness. The reasons for them were economic and political.

Last summer, Denmark suddenly found herself in the midst of an acute foreign exchange crisis. Her control of foreign currency is very tight; holders of foreign assets are bound to sell them to the National Bank within a limited period of time, and anybody who needs to make payments abroad has to obtain a permit to buy the necessary dollars or sterling from the National Bank. In this way, the National Bank has become the sole legal owner of foreign currency. Usually it holds a modest portfolio of several hundred million kroner in foreign currency drafts and exchange. This holding was reduced from the equivalent of 390,000,000 kroner (about $55,700,000) on September 30, 1953, to a deficit of 164,000,000 kroner a year later, and by October 31, 1954, the deficit had reached 257,000,000 kroner.

Early in September the Danish Government felt that extraordinary measures were necessary to reverse this trend. An emergency session of parliament enacted many bills aimed at reducing the expenditure of foreign currency. Excise taxes on beer, liquor, cigars and cigarettes were increased; instalment purchases of what are considered luxury items in Denmark, such as motor vehicles, radios and refrigerators, were limited; government support for housing and other civilian construction purposes such as schools were reduced; fares on the state railroads were increased; credit facilities for exporters were expanded; and certain taxes were reduced as a premium for personal savings.

For political reasons explained below it was not felt possible to exempt the defense establishment from the general curtailment in expenditure. Appropriations for the armed forces therefore were cut and the training period was reduced as part of the comprehensive economy program.

A foreign exchange crisis like this is nothing out of the ordinary in Denmark, although the situation seldom deteriorates quite as rapidly. Ever since liberation, Denmark has had a precariously narrow edge of foreign currency reserves--the result of a much tighter export situation than before World War II. In the twenties and thirties the country's agricultural products were very much in demand by its two big neighbors, Britain taking about three-quarters of the agricultural export and Germany most of the rest. Denmark could normally expect to sell what it was able to produce of butter, bacon and eggs and could demand and get good prices in a seller's market.

Today the situation is quite different. The Germans have sharply reduced their imports of food so as to benefit the German farmers, and the impoverished British middle class, formerly main customers of Denmark's products, have gotten used to a more frugal breakfast table. Still, 90 percent of the bacon, 75 percent of the butter and 70 percent of the eggs go to the United Kingdom, while Western Germany absorbs 80 percent of Denmark's export of live cattle. The rest is spread among a number of lesser markets. This means that in four main food items Denmark is dependent on the good graces of one big customer, and must take what that customer is willing to pay.

However, sell the Danes must. The whole economy of the country is based on foreign trade. Denmark is practically devoid of any raw material; her chief asset is the traditionally high skill of her inhabitants. Not only must her imports satisfy the demands of a population used to the Scandinavian high standard of living, but in addition Denmark must purchase abroad whatever feed, fertilizer, fuel, agricultural machinery, tools, raw materials and semi-finished products her agriculture and industry need. And in order to pay for its imports the country must export.

Denmark was able to resume commercial ties immediately after the war, when there was a tremendous demand for food all over war-ravaged Europe. The Nazis had exploited Denmark's resources for their own purposes, but they left the production machinery nearly intact. Denmark's recovery was a spectacular success. Some $300,000,000 in Marshall Aid enabled the Danes to import scarce raw materials available only for dollars, and also made possible much larger importation of feed and fertilizer. Production soared. The number of pigs, for instance, which averaged 3,100,000 in the late thirties and was down to 1,500,000 in early 1948, now exceeds 5,000,000. Export earnings from all farm products were tripled between 1947 and 1951; in 1954 they increased to over four billion kroner.

However, in 1949-50 Denmark's economy was rocked by a double calamity. The pound was devalued almost immediately after Denmark had entered a long-term agreement with Britain which bound the Danes to deliver huge quantities of butter, bacon and eggs at fixed prices--in sterling. The other adverse factor was the international commodity crisis after the outbreak of the war in Korea. So Denmark had to cope with a reduction of income from devaluated pounds, and had at the same time to pay more for the necessary raw material at sharply rising prices. The effects of this price scissors were particularly painful because the Danes had abolished many direct controls on production and imports just before the international inflation. It has been estimated that the total cost of all this amounted to just about as much as the total of the Marshall Aid received.

The benefits of the Marshall Plan were not wiped out, however. Denmark had been enabled to double the volume of exports between 1946 and 1950; and from 1951 on, she again increased agricultural exports and offset her losses. When Marshall Aid ended in 1953, Denmark no longer had a dollar shortage. Indeed, she had a surplus, partly because it had become possible to shift many imports like coal, oil, grain and feed away from the dollar countries, partly because of the increase in exports to the dollar area. Of great importance was the fact that Denmark was able to furnish large quantities of eggs and milk to the United States Army in Germany.

But even today the bulk of Denmark's foreign trade is with her traditional trade partners. The O.E.E.C. area accounts for four-fifths of her imports and three-fourths of her exports. The United Kingdom alone buys about half of what she has to sell and sells her half of what she has to buy. She has a considerable yearly surplus in her trade dealings with Western Germany, Sweden, Benelux and France. This situation, which has prevailed since the last war, has prevented Denmark from building up a substantial reserve of foreign exchange. It has also made her exceptionally vulnerable to irregularities in the movement of foreign currencies.

Many different explanations have been offered for the exchange crisis of 1954. Among other things, it is stated that Danish leaders shared the general European view that a depression was imminent in the United States. So the government applied measures to soften its expected repercussions that never came. When no depression occurred, these measures added to the difficulties. Another contributing factor was a substantial decrease in the foreign earnings of the Danish merchant marine in the early part of the year. But the main cause undoubtedly was a considerable buying spree by the Danish public. The government has been severely criticized in business circles as well as by the political opposition for not having realized the dangers of the situation earlier and for not having taken steps to counteract it before it was too late.

Many more consumer goods were imported during the first five months in 1954 than in previous years, in particular automobiles and motor bikes. Increased income during prosperous years had enabled the Danes to spend more, and a great part of this additional spending was used for long-desired commodities from foreign countries. During the first eight months of the year imports soared by 600,000,000 kroner (about $86,000,000) compared to 1953, while exports rose only by 250,000,000 kroner. When foreign exchange balances dwindled accordingly, emergency legislation became necessary.

III

The reduction of the defense appropriation was the result of a deal between the ruling Social Democratic Party and a much smaller middle-class party called the "Radical Left," although it is neither radical nor Left in the American sense. These two parties had shared the government during most of the period between the world wars, and were responsible for reducing the national defense almost to zero. Both parties felt that an efficient defense establishment was a costly pipedream for a small isolated and open country. Their slogan--"What's the use?"--reflected the opinion of most Danes in those days.

But having experienced an enemy occupation, the Social Democratic Party changed its views when a new danger arose in the East: the lesson of the last war seemed to be that a weak and exposed country could not hope to be neutral. Under Social Democratic leadership the Danish workers had achieved a high standard of living and developed a strong union movement. They had a lot to lose from Soviet overlordship, as the case of Czechoslovakia proved, and the only realistic protection in the postwar world seemed to be an alliance with powerful nations that might discourage future aggressions by possessing overwhelming force. When such an alliance was offered, Denmark joined. Adherence to the Atlantic Pact was ratified with the votes of the Social Democrats along with those of the other two major parties.

But many members of the "Radical Left" have never changed their neutralist views. They alone voted with the Communists against the Pact, and though later they accepted it as an established fact, they still do not like the idea of spending huge sums for armaments which can be only a contributing factor toward the defense of the country. Their attitude on this point is quite in tune with popular feeling. The idea of coöperation for mutual benefit--the basic principle of the social insurance so extensively developed in Denmark--seems perfectly natural to them. They look upon defense expenditure as a sort of insurance premium which has to be paid. But as with other insurance premiums, they just cannot help wishing that it did not have to be quite so high. There also is a feeling that a small country like Denmark can do extremely little to implement NATO's primary purpose: to discourage aggression by facing a potential aggressor with overwhelming force.

IV

The measures enacted in September 1954 were expected to add revenue of 400,000,000 kroner in income and excise taxes over the next 18 months and to reduce government spending by 200,000,000 kroner. The great question, of course, is whether this is sufficient to remedy the situation or whether further measures will become necessary.

Nobody is able to answer this question for sure. The result will depend largely on developments over which the government has no control, like price movements abroad or a bad harvest which would make it necessary to earmark large sums of foreign assets for emergency purchases of grain for human consumption as well as for feeding livestock. By the first part of 1955 the problem had become the main bone of contention on the political battlefield. The opposition maintains that the emergency legislation was too little and too late, and that it is necessary to spread the burden over the whole of the population, which the Social Democrat government had tried to shield, rather than to hamper economically active groups by the too stringent curtailment of credit. At the turn of the year, the foreign currency deficit had been reduced to 172,000,000 kroner; but this, of course, was still a far cry from the customary surplus. On the other hand, it is generally agreed that the situation is far from desperate. The crisis arose while Denmark was in the midst of a period of general prosperity, with high production (particularly in industry) and very slight unemployment.

What is really serious is that the Danes see no solution for their long-range economic problem. Through generations agricultural exports have been the mainstay of the nation's economy. As long as these exports could be expanded, the country's wealth and well-being seemed secure; but now a point has been reached where no further substantial growth can be expected.

There is only very slim hope that Denmark will be able to expand her exports of butter, bacon and eggs to England in the future. She is not the only country that sells these products on the British market. So far, Denmark has been able to maintain her position because of the exceptional quality of Danish products and her ability to fit them exactly to the particular taste of the public to which she caters. But the British use the sharp competition to press the Danes hard for lower prices.

The German market also looks less and less promising. The Germans use protectionist measures to try to keep out Danish products, while continuing to be Denmark's second largest provider of industrial goods. Danish exports of food to Germany have declined sharply since the war with the exception of beef-on-the-hoof, and they threaten to decline even further. Food exports have taken the same course in several other Western European countries which welcomed Danish products during the lean first postwar years but now tend to become self-supporting. And the likelihood of large-scale expansion of agricultural products to overseas areas seems small in view of the agricultural surplus in the United States and elsewhere.

At the same time Denmark does badly need to expand her foreign trade. As a result of the low birth rate in the twenties and thirties, the growth of the active population decreased to about 3 percent for each five-year period between 1940 and 1955. But many more children were born in the forties, and soon these will begin to appear on the labor market. The active population is expected to grow by about 1 percent annually, or almost twice as fast as before. This situation will be further aggravated by diminishing employment in agriculture, because farming is becoming more and more mechanized.

Some relief has been found in increased export of farm products to countries behind the Iron Curtain, but the Danes have found it hard to rely on any kind of regularity from these customers. In 1953 the Soviet Union suddenly became Denmark's second best customer for butter and bacon, purchasing 6,000 tons of butter and 5,000 tons of bacon, and the third largest for beef and veal, with purchases of 6,000 tons. But when negotiations for a new trade agreement were almost concluded last summer, Moscow threw in a demand for two tankers to be built by Danish shipyards. When the Danes declined, the Russians refused to sign. Negotiations were broken off and have not been resumed.

The Russian action obviously had the political aim of stirring up trouble between Denmark and her allies, and was not quite without success. A couple of years ago the Danes had built two tankers for the Russians over the protest of the United States Government, which pointed out that tankers were on a list of strategic goods that the NATO members had agreed to deny Iron Curtain countries. However, the Danes held themselves bound to deliver the ships, because they had been ordered before there was such a list. Now the situation is different. As subscribers to the agreement, the Danes feel unable to build more tankers for the Russians, although it means trouble with a potential customer and Denmark needs all the customers she can get. But there is also another side to the incident. The NATO list has recently been revised and the export of many oil products to the East is no longer barred. Tankers, however, stayed on the list. This created bad feeling in Denmark. It does not make sense to the Danes to permit the sale to the Soviets of petroleum products, which can after all be used for aggressive purposes, while forbidding the building of tankers which are mainly used to carry Russian oil away from Russia.

Denmark's foreign-trade balance might possibly be improved by an effort to increase industrial exports. Success in that would ease the strain on foreign exchange, since the prices for industrial commodities fluctuate considerably less than those of farm products. This way out, which has been taken by the Netherlands and Switzerland, for example, has been widely discussed in Denmark. It is also strongly recommended by American observers like George Alexander Marshall, former E.C.A. administrator there.

During the last hundred years Denmark has managed to build up a considerable industrial plant, in spite of an almost complete lack of raw materials. This was made possible by Denmark's ability to take advantage of the cheapest of all means of transportation, the sea. For a long time her industry catered mainly to the domestic market, furnishing it with all kinds of consumer goods fabricated with Danish skill from imported raw materials and semi-finished products. But during the last 50 years many Danish manufacturers turned more and more to foreign markets, and Denmark became a leading exporter in certain specialized fields where quality counts. Her industrial exports include a wide variety of products--ships, Diesel engines, machine tools, agricultural, dairy and slaughterhouse machinery, electrical appliances, cement, pharmaceutical products, canned goods, fine textiles and furniture.

Britain takes one-fifth of the industrial exports, and the Scandinavian sister nations, Western Germany, France, Belgium and the Netherlands are also important buyers. The United States market has expanded rapidly in recent years. In 1954 this country became Denmark's third best customer, buying Danish products to the tune of almost half a billion kroner (about $63,900,000) against only 22,000,000 kroner as recently as 1948. Trade with Canada and with Argentina, Brazil and other Latin American countries is also developing very favorably. Almost half the sales to the continental United States (in contrast with sales to the U.S. Army in Germany) are canned food, mostly ham and fish, while about one-fourth are iron and such things as office machines. Exporters are particularly hopeful about expanding the American market. Most Danish products are goods of high quality particularly suitable for a public willing to pay a little more for a better product. Such a public is primarily to be found in the United States.

It was with a feeling of uncertainty that the Danes greeted the new year of 1955. On one hand, there was a general feeling of relief that the nadir had been passed in the foreign exchange crisis. On the other hand, no solution of the deeper causes was in sight, and even the government said that further emergency measures would soon become necessary to cope with the economic situation. Yet neither the government nor the opposition seemed to have any clear conception of how to tackle the roots of the creeping emergency. As so often before, the Danes felt rather helpless amid rapidly changing world conditions on which a small country like theirs could exert only a slight influence.

You are reading a free article.

Subscribe to Foreign Affairs to get unlimited access.

  • Paywall-free reading of new articles and a century of archives
  • Unlock access to iOS/Android apps to save editions for offline reading
  • Six issues a year in print, online, and audio editions
Subscribe Now
  • GUNNAR LEISTIKOW, Danish newspaperman, New York correspondent of the Oslo Verdens Gang and several Danish newspapers
  • More By Gunnar Leistikow