Denmark, home to Ozempic-maker Novo Nordisk, is now Europe’s third-most prosperous economy

Good morning.

“Something is rotten in the state of Denmark.” It’s the second most famous line in Hamlet, Shakespeare’s play about a Danish prince (behind "To be or not to be,” of course). But with all due respect to The Bard, it's no longer true. Danish multinational businesses have propelled the nation of 6 million to become the third-most prosperous in the European Union.

Bjarne Lykke Sørensen, CEO of Siemens Denmark (and a very proud Dane himself), brought that fact to my attention. Denmark’s GDP per capita, at €52,000, is now the highest in Europe behind the financial and fiscal hubs of Luxembourg and Ireland and ahead of neighbors Germany and Sweden. And, in the Fortune Europe 500, Denmark is overrepresented for its size with 14 companies.

In nearly every industry, Denmark has a homegrown global leader. Ozempic-maker Novo Nordisk is its latest rising star in pharma, but there’s also Maersk and DSV in logistics, Vestas and Orsted in renewable energy, Carlsberg, Danish Crown, and Arla Foods in food and beverages, Danske in banking, and so on. Not to mention Lego, which now makes Hollywood movies as well as children’s toys.

How did the nation achieve that feat, and what can other countries and companies learn from its approach? Lykke Sørensen highlighted three factors:

1. Danish companies built on the country’s agricultural legacy

For Arla Foods, Danish Crown, and Carlsberg, the connection with Denmark’s agricultural sector is an obvious one. But Novo Nordisk, which surpassed many of its European and American rivals to become the second largest pharma company in the world by market capitalization, also has agricultural roots, Lykke Sørensen told me.

"In Denmark, we have a big agricultural sector, and 100 years ago, more than 90% of the population was working in agriculture,” he says. “Out of that grew big companies, like Arla Foods. When you work with that, you get milk, yogurt, then bacteria.” Going from there to the pharmaceutical sector is a natural progression.

The insulin Novo Nordisk produces, good for half of the world’s supply, today is made from yeast cells. But when insulin was invented 100 years ago, it was often made from animal pancreas. Novo Nordisk’s logo, fittingly, is a bull.

2. Danish businesses used the country’s natural capital to their benefit

Similarly, Danish businesses used their country’s natural capital and resources as building blocks for their success. Denmark is not rich in oil and gas, rare earth minerals, or other commodities such as copper or rubber. What it does have is water and wind.

“In the ‘80s and ‘90s, many countries went towards oil and gas, whereas Denmark said, perhaps renewable is the way forward,” Lykke Sørensen said. Vestas and Orsted built out their world-leading windmills businesses; Maersk and DSV capitalized on Denmark’s sea lanes and harbors to become world-leading shipping and logistical companies, respectively.

3. Danish companies appreciate human and social capital—and contribute to it

Denmark’s top income tax rate remains one of the world’s highest at 56%. VAT stands at 25%. And Denmark’s unions are as influential as ever. Rather than bristle at those traits, Danish companies consider them benefits that supply employers with a flexible, highly educated workforce, Lykke Sørensen told me.

“Denmark has super high tax levels," he said. “But it is free to go to universities. It is free to go to hospitals. [A foreigner] told me: 'I pay lower taxes [in my country], but I don’t get anything in return. I only get a road and a military. You get education and health care.'"

In Denmark, "if you add everything up that you get in return, it’s a good balance,” he said.

Is there any downside? Possibly, Lykke Sørensen said. As great as Denmark is doing, he's not sure it's performing as well as it could. “The Laffer tax curve suggests that there is an optimal rate of taxes, after which the performance of the economy goes down,” he said. And then he pondered: "Would Denmark be doing even better if taxes were lower?"

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Peter Vanham
peter.vanham@fortune.com
@petervanham

This story was originally featured on Fortune.com