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Urban Research & Practice

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The emerging Danish government reform centralised decentralisation

Hans Thor Andersen
a a

Department of Geography and Geology, University of Copenhagen, Copenhagen, Denmark Published online: 31 Mar 2008.

To cite this article: Hans Thor Andersen (2008) The emerging Danish government reform centralised decentralisation, Urban Research & Practice, 1:1, 3-17, DOI: 10.1080/17535060701795298 To link to this article: http://dx.doi.org/10.1080/17535060701795298

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Urban Research & Practice Vol. 1, No. 1, March 2008, 317

The emerging Danish government reform centralised decentralisation

1753-5077 1753-5069 RURP Urban Research & Practice Practice, Vol. 1, No. 1, Dec 2008: pp. 00

Hans Thor Andersen*

Urban H.T. Andersen Research and Practice

Department of Geography and Geology, University of Copenhagen, Copenhagen, Denmark Across Western Europe, a number of governmental reforms have been implemented and more recently many have been rejected. These reforms are considered to be examples of adaptation to new global conditions; however, not all shifts in governmental systems and organisation are a result of the logic of globalisation. The current implementation of a new local government reform in Denmark can be considered to be one such example. In each case, the specific circumstances and history of a country play a major role; there is no universal model for the transition to neoliberal state reforms. To many observers, the nation state is being hollowed out simply squeezed from both the international and the subnational level as a result of globalisation and related processes. The Danish local government reform does not strengthen the metropolitan Copenhagen vis--vis other North European metropoles. Rather, the reform seems to reduce the room for manoeuvre and in fact dismantles major parts of the citys strategic capacity and institutions. On the other hand, the Danish case of increased pressure for local adaptation to global economic challenges and financial control from central government represents a special version of the neoliberal competitive state. Keywords: local government reform; neoliberalism; rescaling government; Denmark; global challenges

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Introduction Since the early 1990s, the role and function of the state has been a central issue in relation to urban studies. Consequently processes related to globalisation have figured prominently in the agenda of research on cities; globalisation is widely considered to be the main cause for some of the most rapid economic, social and cultural changes experienced since the end of World War II. The division of labour between cities and states has been transformed as a part of a rescaling of state functions. This rescaling is often interpreted as a consequence of the ongoing round of capitalist restructuring that takes place as part of the globalisation process (Brenner 1999). Most attention has been directed towards the economic and social changes attributed to globalisation, although the parallel transformation of the public sector (the state) has taken a prominent position, too. According to many observers we are witnessing a decisive shift in the functions and organisation of the state; state power is transferred upwards to supranational bodies like the European Union (EU), World Trade Organisation (WTO), Organization for Security and Cooperation in Europe (OSCE), International Monetary Fund (IMF), and many others, whilst at the same time the regions are growing in importance relative to the state (that is, a transfer of power to the regional scale). These changes have led several observers to conclude that the nation state is being hollowed out and partly replaced by governments at

*Email: hta@geogr.ku.dk
ISSN 1753-5069 print/ISSN 1753-5077 online 2008 Taylor & Francis DOI: 10.1080/17535060701795298 http://www.informaworld.com

H.T. Andersen

subnational as well as supranational level the national state is simply squeezed from both above and below as a result of globalisation and related processes (Jessop 1994). Perhaps it is too early to declare the death of the national state as a key actor. Insofar as we can distinguish between the form and the functions of the state, the effect of globalisation seems to be a transformation of the state, or, as Brenner (1999) presents it, a rescaling of the state; part of the national state functions are now transferred to supranational level in order to match the global challenges from the market and flows of capital, other parts are transferred to lower tiers of government to promote necessary shifts in strategies and improvement in competitiveness. If the first kind represents a concern for the conditions of economic production and competitiveness, the latter is more concerned about conditions for social reproduction and cohesion (see Ache and Andersen 2008). Denmark is a small North European country with an open economy; consequently, the country has a high dependency on international trade and the global economy. The countrys overall level of international competitiveness has for a century been decisive for domestic social and political concerns. The country has maintained a well-developed welfare state financed by high tax levels, but nevertheless has been able to sustain a high level of competitiveness and an overall welfare level among the best in Europe. However, the welfare state, its priorities and aims, as well as the governmental configuration its organisation and division of labour between various tiers of government and governmental agencies have been through several minor attempts to adapt to changing circumstances, first of all to balance the constant pressure from the population for more welfare services with the need to keep the economy competitive in order to finance the welfare state. While local authorities were primarily welfare providers with the ability to adjust local taxation according to the increasing demand for welfare, the crisis of the late 1970s forced different priorities upon the public sector. Subsequently local government expenditure was decided after negotiations between central and local governments, which put a ceiling on local spending. Central government adjusted many cost-driving welfare policies in order to lower the automatic expansion of public costs. A few years later, the first steps towards a more workfare-oriented policy began with the introduction of an active labour market policy. Related to this was the beginning of a process of reforming and reframing government aims and organisation: during the 1980s the government initiated a series of experiments with the competences of local governments, institutionalisation of user influence at public kindergartens and schools etc. The free municipal reform of the 1980s and several high-profile attempts to reorganise the government structures of metropolitan Copenhagen were part of this attempt to reorganise the public sector in Denmark. Following on from these attempts, a more comprehensive reform has been launched. This reform, the Structural Reform, that has been called the most important reform for a generation by the government, can be regarded as an attempt to enable the structures of local government to address the global challenges to Denmarks welfare state, social cohesion and competitiveness. The reform proposal passed through parliament in early 2005 and has been in operation since 1 January 2007. The reform reduced 275 municipalities to 98 and abolished 14 counties as the functions of the counties were transferred to the enlarged municipalities. This article aims to describe the current round of government reconfiguration and to outline the rationality behind the reform. This rationality will be sought in the debate revolving around the relationship between rescaling and reorganisation in relation to what are considered to be the global challenges facing Denmark. Moreover, the overall principles of the Danish local government reform will be discussed in relation to the search for state reorganisation that can improve national competitiveness.

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Urban Research and Practice Rescaling and reterritorialisation of government

Analyses of the transformation of government and distribution of state functions have from the start of the 1990s formed part of a general understanding which claims that the national state is being weakened or hollowed out (Jessop 1994); nation states are losing control of what was known as the national economy, which created the framework for key social areas such as employment and economic policies, once core issues of Keynesian state regulation. Another key area of change is (balanced) regional development where employment, economic progress and equality at the regional scale across the national space can no longer be guaranteed in the same ways as prior to the late 1970s. Globalisation has become the overall explanation; its impact is easy to understand. Thus, individuals, firms and states have to adapt to the dictates of the global agenda. Moreover, neoliberal rhetoric argued that existing redistributive arrangements were counterproductive and in many cases unnecessary. Thus, the economic restructuring that led to severe unemployment in many industrial regions, the difficulties of the Keynesian welfare state (its revenue stagnated while the demands for aid and services continued to grow), and the rise of the European Single Market, together with globalisation, triggered a need to find new ways of coping with social transformations. On the one hand, these changes meant that the instruments of the Keynesian period have lost their effectiveness over the last three decades; the end of a truly national economy and the continuous reduction of barriers to investment and trade have created new preconditions for social and economic policy. On the other hand, they removed important policy instruments from nation states, which in turn began to develop and implement new ones. National states began to search for a transformation of their form to adapt to the new, globalised conditions. The changes involved rescaling of state functions to supranational as well as subnational levels of government. While state power was typically decentralised (transferred to local governments) in the 1970s, the movement was directed upwards to supranational institutions (EU, IMF, WTO) during the 1980s as part of an attempt to regain influence over macro social processes (the enlarged national economy). A more recent trend is to transfer state functions and competences to nongovernmental organisations at all levels of government. This upward, downward and sideways movement of power has had profound effects on how cities and regions are governed (MacLeod and Goodwin 1999). This transformation of state form represents an attempt to regain a better hold on, if not control over, the macro economy. The methods deployed have attempted to increase institutional capacity through the strengthening of institutions at all tiers of government as well as beyond the government sector. Multilevel governance thus becomes a key issue in relation to the restructuring of public institutional objectives and capacities; though often conceptualised as an attack on the existing institutions of the municipal welfare system, the outcome is seldom less state or government but a different form of government that is, a rescaled, transformed state (entrepreneurial initiatives, workfare, quangos, etc.) in the search for increased local and regional competitiveness. The specific form this takes depends, of course, on the local context. This institutional restructuring and associated new forms of crisis management, which aim to improve the efficiency of state policies as well as to enable new forms of capital mobility on the supranational scale to raise the competitiveness of major regional growth poles (metropoles), is often driven by national governmental initiatives. The processes of rescaling institutions also include new forms of regional cooperation within the

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H.T. Andersen

metropoles, cooperation that cuts across existing lines of social and political division. Globalisation and the associated strategy to reorganise state institutions create the need for a grounded solidarity that involves leading politicians at various levels, business leaders, unions, various organisations and civil groups working together in order to enhance and promote the competitiveness of their locality (see Mayer 1994). The outcome was budget cuts, lower taxation (for the affluent), privatisation, attacks on labour rights and the public sector in general and welfare services in particular. Yet, such a strategy to establish competitive preconditions for a locality is not done without substantial resistance from existing institutions and social groups attached to them. In particularly, place- and scale-specific interests form a powerful competitor to the rescaling and restructuring strategy at local and regional level. As a consequence of globalisation, governments were forced into more vigorous competition with each other. At present, urban and regional development seems to be contradictory: the more globalised they become, the more local preconditions seem to count. However, a further analysis uncovers an apparent paradox. What we are experiencing at the moment are the contradictions of capitalism in the form of processes of deterritorialisation, the steady drive to annihilate distance through time, and reterritorialisation, the production of relatively fixed structures to maintain existing forms of spatial organisation and its competitive advantages (Harvey 1989a). The basic assumption behind locational policies is that territorial units compete with each other in order to maximise profits and growth (Begg 1999). The compulsion deriving from economic restructuring, the crisis of the welfare state, and the reduction of national barriers to trade and investment, have together pushed national states to adjust their institutional frameworks, their inherited regulative systems and governmental division of work. This shift marks the rise of the competitive state (Dicken 2003), a state that acts partly as a private firm in the sense that it strives to identify and utilise its competitive advantages. While the Keynesian welfare state aimed for general national progress and regional equalisation, the competition state searches for an economic strategy that promotes the competitiveness of its territory. Insofar as the term regional policy is used, it covers general infrastructural investments not only hard infrastructure such as motorways, rail lines and communication systems, but also soft infrastructure like educational systems and cultural institutions. Yet the aim of this is to support localities lagging behind national standards to catch up and become competitive, not to compensate for unsuccessful economic performance. The attempt to adjust to the conditions of globalisation and implement new institutional structures produces a systematic destabilisation of inherited national political geography (Brenner 2004a). In this sense, the instability of the spatial framework is not simply an outcome of globalisation, but an intended consequence of the developing competition state. The loss of a stable scaffold or framework for the economy as existed during the Fordist era has made nation states eager to search for a spatial fix a new magic spatial scale, which can serve as a stabiliser of the economy and efficiently link social reproduction and economic competitiveness. One consequence of this striving for global competitiveness is an accelerated deterritorialisation as the national state shifts its strategy from spatial Keynesianism towards a location policy, which intends to promote, through large-scale investments and reconcentration of socioeconomic assets, the competitive success of strategic cities and regions. This implies a development of customized, place-specific regulatory capacities in major cities, city-regions, and industrial districts and, more generally, to decentralize key

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aspects of economic regulation to subnational (regional or local) institutional levels (Brenner 2004a, p. 176). The aim of spatial policy is no longer to reduce uneven geographical development, but to actively intensify it through urban locational policies designed to enhance the growth of strategic locations like large cities and city-regions (Brenner 2004a). This reterritorialisation not only undermines the existing division of labour and stability at regional level, but also forces subnational governments to prioritise economic growth over basic welfarist, redistributive policies. It is through such mechanisms that the national state manages to implement the entrepreneurial, competitivenessdriven agenda at local level (Peck 2002). Neoliberalism has evolved considerably since the late 1970s, from an abstract and aggressive economic policy, which intended to roll back or dismantle the state, and in particular the welfare state and its redistributive elements, to a more pragmatic form during the 1990s that has had more serious, long-term effects as it transforms the discourse of the state and its purpose without reducing it (Peck and Tickell 2002). As neoliberalism has rolled out, it has become the natural point of departure for policy formulation, just as it is now also the basis for reforms of the state and its policies. Neoliberalism-lite has been taken on board not just in countries led by ideological fundamentalist or conservative governments, but even in countries with more Social Democratic or Social-Christian Democratic governments like The Netherlands, Belgium, France, Denmark, Sweden and Spain (Brenner 2004b). However, there are still some differences between the means chosen to implement competitiveness strategies. The former type of governments do focus more on removal or limitation of barriers to the market, just as they strive for reduced public spending, lower taxation and less dependency on welfare programmes. The latter type has tried to generate stronger competitiveness through improved social, technological and institutional preconditions more research, education and job training. While both strategies aim to increase the competitiveness of their territory, the means clearly differ and have been labelled, respectively, the low road and the high road to competitiveness. Rescaled state institutions can be seen as crucial elements of a reterritorialisation strategy for raising the efficiency of localities. Their role is thus to function as the necessary territorialisation for capital (Brenner 1999). Due to an enormous investment in fixed and mostly immobile infrastructure (highways, airports, high-speed trains, pipelines, communication networks and so on) in the attempt to compress time-space relations, urban agglomerations maintain their dominant position as centres of production, distribution and consumption. Thus, it is at the urban scale that productive factors are mobilised, alliances created and coalitions built. More than anywhere else entrepreneurialism has been visible in the larger cities, where public-private partnerships have emerged as the expression of the new solidarity and instigated the large-scale projects aimed at developing strategic locations (Harvey 1989b, Mayer 1994). Cities have regained the position as nodes of territorialised capital; they are now considered as dynamos of the national economy and vital to the competitiveness of national states (Parkinson and Boddy 2004). But this has not occurred without cost: urban regions are transformed through the twin processes of deterritorialisation and reterritorialisation; i.e. a constant pressure to remove or abolish existing barriers to the free flow of capital, commodities and labour on the one hand, while on the other hand efforts are sustained to produce new, localised advantages. In this way urban regions are transformed in a double logic as cities try to market their assets to external customers (inside-out) as a method to improve their overall competitiveness. Yet, at the same time, they attempt to reconstruct their central spaces to adjust to what is considered to be the interests of global capital.

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This is the outside-in perspective, which in turn increases the porosity of cities to external institutions such as the EU, WTO, various European cooperative organisations, transnational firms and so on, which now all have an impact on the regulation and restructuring of the internal spaces of cities (Keil and Ronneberger 1994). The remarkable shift in the understanding of cities from economic failures to national assets of vital importance is a consequence of this rescaling of state functions triggered by globalisation. There is a general agreement that cities and regions have gained a stronger position during the last few decades. Jessop (1994) has described this as the denationalisation of the state, as subnational governments establish direct relations with other cities and regions. Furthermore, Jessop connects this to two other processes: that of destatisation of the political system, as nonofficial bodies are involved in policy formulation (cf. the debate over the shift from government to governance) and implementation, and the internationalisation of policy regimes as an expression of the rising importance of globality, international policy networks and communities as well as a means of the rapid transfer of ideology. The rise of urban politics and urban regions as key localities is no coincidence: they have a central position in the temporary transformation and rescaling of the national state. Moreover, the national state continues to play a major role in the formulation, implementation, coordination and supervision of urban political initiatives. While the capitalist economy is seeking to level out the conditions for accumulation across space, localities are simultaneously doing their best to find ways to differentiate themselves from one other. One outcome is a sudden increase in interest in the political economy of place. For right-wing politicians, decentralisation has become a means to introduce market principles into the public sector, while left-wing politicians have stressed the democratic and welfare aspects. Another outcome is an advanced discussion of the challenges of the modern state, its dependency on national economic performance and strategies to maintain competitiveness without marginalising the established welfare regime. The political economy of place has remained high on the agenda ever since the collapse of the Keynesian-Fordist welfarestate regime. The conditions for balancing growth and welfare and maintaining social balance, while simultaneously maintaining competitiveness and promoting global competitiveness under extremely fast-changing conditions, have become much more difficult than perhaps expected, and have led to a reconfiguration of the state itself rather than an eradication of it. These attempts to restructure the state at central, regional and local level in order to promote industrial restructuring at subnational level may appear to be examples of neoliberal deregulation strategies, but could also be understood in relation to re-regulation (Brenner 1999) and as part of a strategy to construct new institutional capacities for economic regeneration in regional growth poles. A transformation of the national state and its organisational structure should not lead to the conclusion that national states are in decline. Rather, they are undergoing transformation, seeking to reconfigure their functional structures and division of labour to match post-Keynesian conditions. It is a myth that the state is shrinking; it is just restructuring in the search of a new spatial fix. Most of the key projects in Western Europe, which are bearers of neoliberal urban policy, are financed by the state. Despite the passionate promotion of market solutions and private business as main actors, the reality is that the state has taken a more dominant role in economic development. The state formulates the grand projects, although often in cooperation with private investors; it mostly carries the lions share of the financial burdens, and will end up bearing the bulk of the risks (Swyngedouw et al. 2002).

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Urban Research and Practice The Danish local government reform: the Structural Reform

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Denmark is one of the smallest countries in Western Europe, with only 5.4 million inhabitants. This makes the country strongly dependent on international relations and trade, and Denmark has long attempted to participate in international organisations, of which the EU has become the most important. Since 1973, when Denmark joined the EEC, more competences have been transferred to multinational or supranational forms of cooperation at the European scale. Although not a full member of the Euro currency zone, Denmark cooperates with other member countries with regard to the macro economy of Europe. However, within Denmark over the last decade there has been growing pressure to reorganise the state itself, and the Structural Reform of 2007 represents a major change in government structure and distribution of competences. The government set up a commission on local governmental structure in 2003 to analyse the existing system of governance. The remit of the commission was:
The public sector must support a modern and democratic knowledge-based society. It must be open-minded, simply organised and efficient. The citizens must have quality for money and a real choice between different alternatives. The organization of the public sector must insure that the obligations are solved close to the citizens and as a result of a dialogue between citizens and politicians. Decentralised solutions offer opportunities for meeting local demands and differences and to create a broad democratic basis for the solution of public obligations. (White paper 2004, p. 5)

It followed from the remit of the commission that the distribution of roles and responsibilities between municipalities, counties and state should be considered along with the proper size of municipalities, but also the advantages and disadvantages of reducing the number of government tiers from two to three. The commission presented three main models to solve this order of government (White paper 2004, p. 11): (1) This includes three levels of directly elected governments. Solution a) proposed no changes in the existing distribution of responsibilities, but different sizes of municipalities and counties; solution b) involved an extended version of the countys existing responsibilities through decentralisation of central government responsibilities; and solution c) involves reduced central government and county responsibilities in favour of extended responsibilities for the municipalities. (2) This involves two levels of direct elected governments, in this model all public obligations are either carried out by the state or by the municipalities. (3) This includes two directly elected level of government plus one or more indirectly elected levels of government. This model includes two versions: 1) Regional municipalities, i.e. municipalities receive new responsibilities while the regional level has restricted responsibilities and operates under the control of indirectly elected members and 2) Party regional model; municipalities receive new responsibilities while the regional tasks are carried out by indirectly elected members selected from municipal council members. However, the commission did not come to any clear conclusion over which model was the preferred one. This choice was left to ministers and MPs; as the government is dependent on stable support from a right-wing party (the Danish Folk Party), this party has had a noticable impact on the final decisions in the reform process. A general agreement was achieved between the minority government and its supporting party by the summer of

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2004. After that, other parties were invited into the process to see if they would support the, by then, almost completed reform process. Three elements of the reform attracted particular attention. First, that the government would initiate a further decentralisation process to force local governments at the municipal level to amalgamate into larger units. The argument was simply that by taking on more roles and responsibilities, requiring a larger hinterland, the general size of municipalities had to be enlarged substantially to operate in an economically efficient way. The commission suggested a general minimum of 30,000 inhabitants, but under specific circumstances populations as low as 20,000 could be accepted where municipalities established a partnership with other local governments. The principle of decentralisation transfers a number of obligations currently at county level to the municipal level. Second, that most of the new municipal obligations will come from the county level, which will be left more or less only with the hospital sector. The existing 14 counties have been abolished and replaced by five regions, which cut across existing administrative boundaries. An important part of the countys current obligations are, however, transferred to central government. This has led to observers claiming that we are witnessing a recentralisation of government. A third element is the abolition of a traditional principle of a clear link between roles, responsibility and the electorate. The proposed county level, now called regions, have no taxation powers, but will be financed by grants and subventions from central as well as local government. The regional boards will have the operation of the hospital system as their primary role. Labour market policy and local economic policy will be brought together at municipal level. Thus, local governments will take responsibility for employment policy, job training and activation, and also for local industrial initiatives and policies. More than anything this demonstrates a clear will to accept growing differences between localities regarding services and employment conditions. In the first place, much more power and responsibility is transferred to local governments. The present 275 municipalities will be reduced to only 98 in order to raise their average size to create a rational local economy underpinning the more specialised functions assigned to local governments. Local governments will in future also be responsible for health and labour market policies. The responsibility for employment and labour supply is transferred from national government to municipalities in order to link social policies with labour market policies. Part of the educational system becomes independent institutions; local government must provide education for youngsters aged 1619 (pre-university level), and their income depends on the number of successful students. Secondly, by the end of 2006 the counties were abolished, with most of their functions transferred to local governments. They have been replaced by five regions, whose obligations are organisation of public transport, hospital services, and producing a regional plan for local economic development. An appointed committee for regional development, which represents local business, local government, labour unions and employer organisations, formulates this plan. The intended use of nonelected committees to formulate and to prioritise regional economic strategies is not accidental: over the last decade, the participation of private business became a requirement or at least a recommended approach in relation to labour market policy, social issues, integration plans, and neighbourhood improvement schemes. Another example is that recently, the national government set up a commission (The Globalisation Council), whose role is to advise government on policies and interventions

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1970 reform State Security, police, foreign policy, legislation. Guidelines for education, social and health services, environmental concern. Check on local governments. Counties Regional functions, education, health services, labour market policy, local economic policy and coordination. Physical planning and environmental issues in relation to rural districts. 2007 reform State Security, police, foreign policy, legislation. Guidelines and policy goals for local governments servicescheck on local government performances. Regions Hospital services, public transport and environmental planning coordination.

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Municipalities Citizen-related services: education, social and health. Urban planning and development

Municipalities Citizen-related services: Education, culture, social and health. Urban and rural planning and development, labour market policy and local economic policy.

Figure 1. A brief outline of the 1970 and 2007 local government reform in Denmark. The figure may give the impression that the changes have been of minor importance; however, along with the reform, the regions have no right to tax the citizens, but receive their income through negotiations with local governments. This has reduced the power of the regions. On the other hand, municipalities have become key actors in almost all public matters and wield more power due to their size and functions.

in relation to the global challenge currently facing Denmark; the commission is dominated by government ministers and leaders from private business. This brief presentation demonstrates that a rescaling or displacement of power and competences is in full swing. However, the obvious move towards business interests is difficult to observe thanks to the dominance of neoliberal discourse, the debate has transformed from a conflict over interests to a debate on local mobilisation of all citizens to defend and improve competitiveness. However, the devil is in the detail: an increasing number of performance checks, benchmarking and the use of new public management techniques has initiated a transformation of municipalities so that they have become primarily deliverers of national services without much independent room for local political decisions. The enforced central government control of performance, costs and standards formulated as a quality reform has made competitiveness the central guideline for state action. Whose interests this represents remain disguised behind the threats of globalisation. In a sense, such changes in the political agenda and style represent a step into post-political conditions. In brief, the dominant discourse claims that we have no choice other than to adjust to the needs of the market that are formed on the basis of global transformations. As a consequence, politics become a question of candidates performance and trustworthiness. In addition to these general issues, two related concerns emerged. There were concerns over the possible effects of the reform in relation to the more peripheral parts of the country and to the capital. The former consist of areas with low population densities, low incomes, low educational levels, high unemployment and a large share of the

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economically active population parked in various social programmes outside the labour market. By contrast, the capital has managed to recover after two decades of economic stagnation, rising unemployment and steady outmigration of middle class families. The expected effects of the reform in the peripheral areas of the country are that there will be additional job losses and a further relocation of public institutions such as hospitals, secondary schools, administration and associated functions as a result of the attempts to exploit the potential benefits of large-scale operations. At the same time, a labour market dominated by relatively low skills cannot attract private investors in order to achieve the scale required for efficiency purposes. This vulnerable position is already experienced by many small- to medium-sized towns outside the influential sphere of the larger cities. The reform will only accelerate the process of the abandonment of certain areas and districts that already have significant employment problems.

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Urban landscapes replace cities and towns: reterritorialisation and the preconditions for a local government reform The social democratic welfare state regime included, at least in the Nordic countries, a strong element of social as well as regional equalisation (or spatial Keynesianism, Brenner 2004a). Although a whole raft of legislation was concerned with the issue of regional equality, the most important policy component in this respect was the marked decentralisation of state functions. In Denmark the municipal reform of 1970 was the centrepiece; it gave a substantial boost to welfare services in less urbanised parts of the country and managed to raise overall living standards in those areas to, and sometimes above, the national average. Yet the price was a considerable expansion of public sector employment and the overall tax level. The present reform of the government system finalises the shift from a welfarist equalisation strategy (equal welfare and public services in all parts of the country) to a more differentiated, growth-oriented policy that in reality ignores questions of regional difference and inequality. Yet this shift, which can be understood as a necessary change of governmental style in order to complete a shift from a demand- to a supply-led economy, has not been accepted by provincial politicians in general, and in particular those from the peripheral regions. The right-wing government that took office in December 2001 tried to strengthen the responsibility of local authorities and the business community. The government declaration of January 2002 stressed, among other things, the importance of giving all parts of the country a fair share of economic growth. Among several options, the government suggested a relocation of central government institutions to the provinces. One such attempt was made soon after, when the Minister of Culture dismissed the result of an architectural competition for the national archive. Yet, this attempt failed due to strong resistance from both government- and nongovernment-related groups. At the same time, more peripheral parts of the country could demonstrate a worsening position vis--vis the main urban areas, especially relative to Copenhagen. One of the challenges the claim for regional equality had to face was the deterritorialisation of existing regional functionality; while the 1970s and 1980s were dominated by local labour markets linked to semi-independent local or regional industries, the effects of the European Single Market and the rise of economic globalisation, together with increasing welfare and mobility, erased many of the local ties of the economy. Instead, former independent labour markets melted together and, particularly near larger cities, the functional regions increased considerably in size, creating an urban landscape of large, but loosely functionally connected, areas. This rescaling of functional regions reflects not only globalisation and an

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increased division of labour, but also the replacement of distinct cities and rural areas with a single urban landscape, a new form of urbanisation. Thus in Denmark, as elsewhere in Western Europe, a large landscape of shifting densities and functions emerged (Andersen and Engelstoft 2003, Siverts 2003, Andersen 2004, Priebs 2004). This is the urban form associated with globalisation, an urban landscape stretching across whole regions and integrating and excluding various groups, functions and elements in a complex manner (Ascher 2002). The National Planning Report (Ministry of the Environment 2003) stated that the government intended to improve regional and local balances in Denmark by developing closer cooperation between various sectors of the economy. Moreover, the government requested cooperation and coordination of urban, social, economic and environmental policies at the regional level. The government further claimed that its primarily goal was to secure balanced growth; not equal conditions, but equal opportunities (Ministry of the Environment 2003, p. 23). The then new government initiated two major studies of Danish cities: one on the state of Danish cities and the challenges they faced (Nellemann 2003) and one on the factors that determine regional competitiveness, in particular the possibilities for the creation of economic growth in the peripheral regions (Thelle and Nyholm 2004). The former concluded that the engine behind future growth is, in reality, confined to major urban centres (the report identifies four or five such regions), which thus must have more support from national policies. The latter concluded that those factors which drive economic growth have shifted from the more traditional to the level of education, innovation and entrepreneurship factors that are clearly concentrated in large urban units (agglomeration effects). As the reports concluded, size matters. Both reports presented arguments that support the point stressed by Jonas and Ward (2007), namely that the resurgence of the city-region is closely related to the rescaling of the economy around global agglomerations and the profound reterritorialisation of the state. Scott and Storper (2003) have developed this argument, proposing that the resurgence of city regions constitutes a new phase in capitalist territorial development. However, one should not ignore the material changes behind this new territorial order: cities and regions are dynamic entities that develop according to underlying social changes. In the Danish case, two national centres of growth have appeared. One formed as a band comprising larger provincial towns in Eastern Jutland and the other constituted by the Metropolitan region of Copenhagen. These are according to the reports referred to the only internationally competitive regions of the country; the rest of the larger and smaller towns form part of a division of labour within these globalised regions. Thus, a new form of regional and urban development emerges where the fortunes of localities depend on their connections to the national globalised regions. Efficient transport and communications links with these centres are decisive for the localities in their hinterland. Further improvements in transport networks have enlarged the hinterland of these centres. For instance, a National Planning Report (Ministry of the Environment 2003) identified 46 commuting regions in 1992 in Denmark; several of these were quite small and located in isolated places (islands, peninsulas). That number decreased to 34 in 2000 and was reduced further to 27 in 2004. The overall tendency is a marked expansion of the commuting regions belonging to the capital and four largest cities. However, smaller regions also coalesced into larger ones. The most visible expansion is the stretching of the Copenhagen commuting region to encompass almost the whole of Zealand and some of its neighbouring islands (see Ministry of the Environment 2003, p. 25). A further study of the Copenhagen region shows that to a substantial degree, commuting to the capital is now taking place

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from localities more than 100 km from the central parts of the city (Ministry of the Environment 2006, p. 51). Thus, this regional economic transformation has eroded the foundations of the existing administrative order based on national equality. Instead, a new and concentrated system of local governments geared to an entrepreneurial approach for public services via privatisation, outsourcing and new public management formed the backbone of the local governments reform. The enlarged municipalities, and the service they deliver, depend more on their own resources and capacities and less on central government financing. At the time when the national planning report was published, other reports demonstrated rising economic and social differences (Andersen and Hansen 2001, Arbejderbevgelsens Erhvervsrd 2003, BRFkredit 2003, Ingerslev and Pedersen 1996, Andersen et al. 2000). The hitherto spatial Keynesianism seems to have vanished and as a reaction to this, a new coalition of smaller and peripheral municipalities emerged under the name of Poor Denmark. They sought to promote their interests as many of these municipalities struggled with structural problems such as weak employment, rising costs and declining incomes. During the spring and summer of 2002, still more demands for a new scheme for financial support to weak local governments were heard. A commission was set up on 1 October 2002 and presented its proposal in January 2004 the main solution for the weakest and smallest municipalities was simply to abolish them through amalgamation into larger units. This did not remove the problems, but merely internalised them in the new municipalities and thus concealed them in a different context. At the other end of the scale, metropolitan Copenhagen has long been a problem for the national local government system. The key issue is that the city is disproportionately large compared to all other cities in the country. While the three-tier government system was further refined by the 1970 reform, a special arrangement was set up for the capital, an arrangement that has been modified several times (see Andersen et al. 2002) before finally being abolished at the end of 1989. A renewed attempt at reform failed in the middle of the 1990s despite major support from the then Minister of the Interior and Prime Minister. Despite the evident need for a coherent government structure for the Copenhagen metropolitan region, the local government reform implies only a minor reduction of the number of local governments (from 50 to 36), while the existing five counties are merged into two regions with a minimum of competences. The reform appears to lack a clear logic; the counties are abolished as most of their functions are transferred to municipalities, which then have to increase in size to be able to act in an efficient way. What first appeared to be a further decentralisation of state functions can now be seen to include strong elements of recentralisation in relation to control functions and a new body of appointed business leaders to develop regional economic strategy. As such, the reform carries embedded within it several neoliberal policies such as a rejection of spatial Keynesianism, the organising of new policies in networks inhabited by nonelected government officers, business leaders and others, by adding industrial policy to the obligations of local government and by forcing local governments to give entrepreneurial strategies a dominant position. Conclusion A remarkable number of governmental reforms have been implemented, and many more have been rejected, over the last decade or so in Western Europe. The interpretation that these reforms are a consequence of local adaptation to global conditions has become

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generally accepted. However, not all shifts in governmental systems and organisation should be ascribed to an outcome of the logic of globalisation, and the present processes for implementation of the new local government reform in Denmark can be considered to belong to this group. As Brenner (2004a) notes, the specific circumstances and history in each case play a major role in determining the outcomes of reform; there is no universal model for the transition to neoliberal state forms. The reform of Danish local government is clearly aimed at strengthening local state levels, particularly in relation to location policy, economic and employment policies and competitiveness; but it also ensures that a good deal of influence remains in the hands of central government. The existing government structures were constructed at the height of Keynesian welfare society; the emerging reform process is shaped by a neoliberal mould. Nevertheless, it is not a clean neoliberal reform; the existence of a well-developed and strongly supported welfare state gives the reform a particular statist stamp. The national state is the dominant reformer; it initiates the rescaling of statehood as well as the involvement of governance networks in relation to economic and labour market policies. The particular Danish emphasis on the importance of social cohesion should not be ignored in the recent trial-and-error implementation of urban political experiments. Neighbourhood improvement programmes can be seen as a major component in a strategy of both maintaining social cohesion and enhancing competitiveness through a new entrepreneurial strategy, which brings with it a strong element of renewed concentration of capital and labour. It is clearly not a reform that primarily seeks to strengthen the metropolitan Copenhagen vis--vis other North European metropoles. Indeed, the reform seems to have reduced the citys room for manoeuvre and in fact dismantles major parts of the citys strategic capacity and institutions. The city will gain a large number of administrative obligations, but lose control of the strategic fields of government. Ironically it is these policy fields that can influence the position of a metropole within a global economy. Thus, a Europe of regions does not seem to be around the corner. The subtitle of the article, centralised decentralisation, refers to a contradictory interpretation of the process of local government reform. Central government is clearly gaining a more influential position in relation to the strategic field of the economy while leaving the more mundane obligations of administration and service delivery to the lower tier of government. In this light, the overall outcome appears to be an attempt to secure a stronger position for the national state, not the large urban region, as the key actor on the global and European scene. The last one or two decades have witnessed the emergence of new patterns of regionalisation, reflecting substantial shifts in the industrial structure of Denmark. Traditional factors such as labour, wage levels and accessibility have declined in importance compared to factors such as educational levels, entrepreneurial spirit, innovation, creativity and culture. The local government reform, although still in the making, does not even reflect these considerations. The reform does not recognise the existence of rising dissimilarities and inequalities between different types of regions in Denmark, nor does it seem to care. Neither the capital nor the peripheral regions can expect central government support in the form of a reconfiguration of the institutional system. Rather, it seems, central government prefers to (re)organise the lower tiers of government according to the strategic interests of the state. As still more service roles and responsibilities are transferred to the lower level of government, central government can focus on strategic issues and surveillance of the national system of governmental institutions in order to promote

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new forms of cooperation, organisation and management that can enable the development of improved regional competitiveness. This strategic objective implies a reconfiguration of the government and its priorities. The Danish case demonstrates how neoliberalism rolls out its policy even in the strongholds of social democratic welfarism. However, it also points to the fact that the sharp clash between the welfare state and neoliberal competitiveness may be more nuanced in reality; in fact, countries with a welfare state that is similarly developed to that of Denmark (Norway, Sweden, The Netherlands) all belong to the most competitive countries at the global scale. References
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