Denmark has a small, open, and flexible economy. With very few natural resources, the economy of Denmark relies almost entirely on human resources. The service sector makes up the vast amount of the employment and economy. Its industrialized market economy depends on imported raw materials and foreign trade. Within the European Union, Denmark advocates a liberal trade policy. Its standard of living is average among the Western European countries - and for many years the most equally distributed as shown by the Gini coefficient - in the world, and the Danes devote 0.8% of Gross National Income (GNI) to foreign aid. It is a society based on consensus (dialogue and compromise) with the Danish Confederation of Trade Unions and the Confederation of Danish Employers in 1899 in September forliget (The September Settlement) recognizing each others' right to organize and thus negotiate. The employers' right to hire and fire their employees whenever they find it necessary is recognized.
Denmark is self-sufficient in energy - producing oil, natural gas, wind- and bio-energy. Its principal exports are machinery, instruments and food products. The U.S. is Denmark's largest non-European trading partner, accounting for around 5% of total Danish merchandise trade. Aircraft, computers, machinery, and instruments are among the major U.S. exports to Denmark. There are several hundred U.S.-owned companies in Denmark, some of them just registered for tax purposes, which is beneficial for holding companies. Among major Danish exports to the U.S. are industrial machinery, chemical products, furniture, pharmaceuticals, and canned ham and pork.
From 1982, a center-right government corrected accumulated economic imbalances, mainly inflation and balance-of-payments deficits, but lost power in 1993 to a Social Democratic coalition government led by Poul Nyrup Rasmussen, which remained in office following the March 1998 election. During the governments of Poul Nyrup Rasmussen, there was a drastic fall in official unemployment, which peaked at 12.4% (1993)- and at 13.8% in January 1994 (386,186 persons) - was 5.2% in 2001 and is (October 2008) 1.7%, an increase from 1,6% (July, August and September 2008). That level (1,6%) was the lowest level since the end of the 1960s, making up around 44,000 persons. Inflation fell from 1.9% in 2006 to 1.7% in 2007 and was 4.4% in July 2008. Average annual growth rates were less than 2% in 2007. In November 2001, a center-right government led by Anders Fogh Rasmussen won the election by introducing a moratorium on tax rates (skattestop) and thus avoiding an increase in the tax level (the world's highest), improving efficiency in the public administration and decreasing the number of immigrants and asylum seekers.
This thoroughly modern market economy features high-tech agriculture, up-to-date small-scale and corporate industry, extensive government welfare measures, comfortable living standards, and high dependence on foreign trade. Denmark is a net exporter of food. The center-left coalition government (1993-2001) concentrated on reducing the unemployment rate and turning the budget deficit into a surplus, as well as following the previous government's policies of maintaining low inflation and a current account surplus. The coalition also committed itself to maintaining a stable currency. The coalition lowered marginal income tax rates while maintaining overall tax revenues; boosted industrial competitiveness through labor market and tax reforms, increased research and development funds. The availability and duration of arbejdsløshedsdagpenge (unemployment benefit) has been restricted to four years and because of rapidly rising prices on housing this has led to an increase in poverty from below 4% in 1995 to 5% in 2006 according to the Danish Economic Council. Despite these cuts, the part of the public sector in Denmark which buys goods and services from the private sector and provides the public sector administration and direct service to the public - nursing institutions for the young or old, hospitals, schools, police, etc. - has risen from 25.5% of GDP during the former government to 26% today and is projected to be at 26.5% in 2015 if current policies continue.
Denmark chose not to join the 11 other European Union members who launched the euro on 1 January 1999. Especially from 2006, economists and political pundits have expressed concern that the lack of skilled labor will result in higher pay increases and an overheating of the economy, which would repeat the boom-and-bust cycle in 1986, when government introduced a tax reform and restricted the private loan market because of a record balance-of-payments deficit. As a consequence, the trade balance showed a surplus in 1987, and the balance-of-payments in 1990 (first surplus since 1963). They have remained in surplus since, except for the balance of payments in 1998.