How two drugs change the entire economy of Denmark

Written by Tyler Quinn

From a biomedical and economic perspective, the success of the new class of weight loss drugs is something to note. Not only is this a remarkable scientific achievement, but in the case of Ozempic and Wegovy, both made by Novo Nordisk, they are a huge boon to the Danish economy. The Danish pharmaceutical industry prevented Denmark from falling into recession last year.

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The dependence of some medium-sized economies on a single commodity, often associated with oil or natural gas, is a familiar story. A new development, which may become more common, is the dependence of the national economy on a single company – not on natural resources. This would lead to some fundamentally new economic and political dynamics.

An early example of this phenomenon is Nokia in Finland. Finland is a small country, and Nokia's global mobile phone sales were so large that by 2000, the company accounted for about 4% of GDP and nearly 70% of the value of the Finnish stock market. In 2013, after failing to keep up with new technology, Microsoft acquired Nokia.

Will there be more stories like Nokia and Novo Nordisk? Absolutely. Many of the best-governed countries in the world, which create the legal and financial stability necessary for business success, have populations between 5 and 20 million people. The more globalization advances (international trade continues to expand in most economic sectors), the larger these companies become.

To be sure, national dependence on a single commodity can have serious drawbacks. However, relying on a service-based company is different. First, commodity prices are often determined by global markets, and the producing country can do little to influence income except choose how much it wants to produce and how much it wants to sell. A service-based company is primarily responsible for its own destiny, making regular decisions about product quality, marketing, and expansion into new business areas. The company's management ability is crucial.

For related reasons, commodity production is usually easier to nationalize: natural resources are literally part of the national landscape, and it is not very difficult to extract things from the ground. Copper in Chile is owned by the country's government, and even market-oriented reforms under Pinochet did not succeed in privatizing the industry. Oil and gas resources in the Middle East are usually owned by national governments. Inefficient production practices still exist, but these processes are commercially successful.

By analogy, government efforts to run a biomedical company or a large AI company probably won't succeed. Thus, private sector management has become increasingly important for the economic development of these small and medium-sized countries.

Insurances

Although it is better for a country to have a large, successful company than not, such a company – like Nokia in Finland – puts the local economy in a somewhat precarious position. Also politically, this company will have great influence in local decisions. Notably, Novo Nordisk has a very large philanthropic fund, worth more than $100 billion, according to at least one estimate. Simply choosing to spend some of this money in Denmark gives the company more influence in politics and public opinion.

The result may be the emergence of more “oligarchy capitalism” – which is clearly better than socialism – in medium-sized countries.

Overseas, as demand for specific weight-loss drugs continues to grow, people may begin to associate Denmark with pharmaceuticals – just as many people associate France with wine or cheese. In the long term, Denmark's image may change at the local level as well, perhaps in a way that encourages greater success in the biomedical sector.

There are other small and medium-sized countries that have the potential to “produce” dominant firms: Sweden, the Netherlands, Ireland, Singapore, and Israel, among others. Uruguay may be able to achieve such a position through a successful company in Latin America. At the state level, the United States has a long history of powerful corporations. Walmart, for example, plays a large role in Arkansas' economy, especially in the area surrounding its headquarters in Bentonville.

Does the rise of a dominant company necessarily mean a decline in the power of the nation-state? It is too early to tell. What is clear is that the governance landscape has become more “crowded” and more difficult to manage. The long-standing fear was that globalization would make managing, taxing and regulating national economies more difficult. The new reality is that even great domestic successes can eventually lead to similar problems.

Performance – Editing – Text Selection (2019-2024): J.D. Pavlopoulos