Bruce Katz is the director of the Nowak Metro Finance Lab at Drexel University and the co-author of The New Localism: How Cities Can Thrive in the Age of Populism.
As the Democratic Party in the U.S. swings left, much has been written about its flirtation with “socialism” as a new source of intellectual and political energy. Among self-identified democratic socialists like Representative Alexandria Ocasio-Cortez in Congress and new waves of young elected officials in cities like Chicago, aggressive efforts to tax the wealthy, strengthen the social safety net, and regulate the financial and corporate sector are seen as essential steps towards fixing America’s vast economic, social, and spatial disparities.
These initiatives would look familiar to Northern Europe’s social democrats, particularly those in Denmark, Germany, and Sweden. But the European parties go deeper—they have a multi-level playbook that balances markets and society, public and private, industry and inclusion, and national and local power. The Danish, German, and Swedish models of socialism are more sophisticated than the cartoon versions we hear about in U.S. political debates and advertisements. They offer broader solutions that, coupled with traditional interventions like the ones described above, are likely to channel market forces in ways that drive inclusive growth and create long-term public benefit.
Three things stand out.
First, the Northern Europeans are focused on building strong national and local institutions that can make markets and drive societal benefits, not just change policy. Cities like Copenhagen and Hamburg, for example, have created public asset corporations that dispose of publicly owned lands and buildings in ways that spur large-scale urban transformation, particularly around historic harbors and downtowns. The revenue from such regeneration is then used to fund infrastructure, affordable housing, and other societal benefits. These regeneration efforts show a mature balance between public- and private-sector interests—a stark contrast to the tax-break scramble over landing Amazon’s HQ2, or New York City’s Hudson Yards private megaproject.
What has emerged in Northern Europe is a new kind of public-private institution that both creates value through smart revitalization and then captures value for large-scale impact. While the U.S. continues to be saddled with mid-20th century public authorities that are often sclerotic and beholden to political interests (the Port Authority of New York & New Jersey being the best case in point), Denmark and Germany have pioneered publicly owned and professionally managed corporations that are self-governed and self-financed and act in the interest of the broader public rather than a small group of private shareholders. The Danish National Building Fund (which uses a portion of tenant rents across the entire social and affordable housing sector to capitalize construction and rehabilitation) and Sweden’s KommunInvest (which aggregates the collective power of municipalities to drive favorable financial instruments and terms) are other examples of how this approach works for affordable housing and municipal finance respectively.
Second, the Northern Europeans are devolutionists—they use the nation-state to provide a platform for local market realities, political priorities, and social needs. Denmark, for example, has a decentralized government system, enabling municipalities to operate as strong partners with the national government. According to a 2009 OECD review, local governments in Denmark account for over 60 percent of government spending, the highest level among OECD peers. Copenhagen’s ambition to be the first major global city to generate zero carbon emissions is enabled by a strong fiscal foundation, coupled with mechanisms that give local officials input in national policy that would be unprecedented in the United States.
Along with that local power and legitimacy comes more voter participation: While the U.S. suffers from voter turnout of 20 percent or less in local elections, Copenhagen has consistently experienced turnout of 70 percent. Accordingly, local capacity is likewise strong. The knowledge and decision-making capacity of the public sector is robust, with a steady supply of highly educated public servants across technical, environmental, social, and business fields. The supply stems from the free tuition public sector educational system (which also greatly benefits the private sector).
Finally, the Northern Europeans have created large cooperative institutions that have the capital heft to organize critical sectors of the economy and the social commitment to share risk and benefits among members. In Denmark, for example, labor cooperatives have fueled some of the largest pensions in the world. That country’s mortgage finance cooperatives have likewise created the world’s largest philanthropy focused on the built environment, and agriculture cooperatives continue to play outsized roles in the marketplace.
The United States has its own history of cooperatives, stemming from the late 19th century burst of populist activism, but support for this institutional model has either waned over the decades or, in sectors like housing, operated only at the project level. The growing local interest in cooperative ownership and funding models is a positive (although nascent) trend, one that, if scaled, has the potential to use market dynamics to generate rather than extract wealth in hot real estate markets.
The emergence of a Democratic left should not come not as a surprise given the confluence of economic insecurity, persistent racial and ethnic divisions, and the hostility of the Trump administration and (many) state governments. But the primary focus on national governmental solutions in an age of cities and networks is too narrowly drawn. There are structural bottom-up solutions that can leverage local assets and market dynamics in ways that serve local residents in a consistent and sustained way. It is time to look anew at the Northern European model.