By Charlotte Plaskwa
Novo Nordisk’s remarkable growth has made it Europe’s most valuable company, with a market capitalisation surpassing Denmark’s annual GDP. Yet, as the pharmaceutical giant expands, its dominance is exposing Denmark to economic vulnerabilities reminiscent of Finland’s painful dependence on Nokia two decades ago.
The success of Novo’s diabetes and weight-loss drugs, Ozempic and Wegovy, has turbocharged Denmark’s economy, contributing nearly half of GDP growth in 2023. Pharmaceutical exports now account for 6.7% of GDP, and Novo has added 32,000 employees in Denmark—a 75% increase since 2020. While this growth has positioned the country as a global pharmaceutical hub, it has also intensified labour shortages across other sectors and amplified concerns about economic over-reliance on a single company.
The echoes of Finland’s Nokia saga are hard to ignore. In the early 2000s, Nokia’s dominance in telecommunications drove nearly a fifth of Finnish exports. Nokia’s dominance was built on decades of innovation, beginning as a paper mill in 1865 before pivoting into rubber, cables, and eventually mobile networks. By the 1990s, Nokia was the undisputed leader in mobile technology, capturing a staggering 30% market share worldwide and cementing its legacy with iconic devices like the Nokia 3310.
But then came 2007, and with it, Apple’s iPhone. Nokia, slow to adopt touchscreen technology and hesitant to move away from its own Symbian operating system, fell behind as Android and iOS surged ahead. While competitors used premium materials like metal bodies and capacitive touchscreens, Nokia continued to rely on plastic for both its body and screens. Internal turmoil in the company exacerbated the crisis; top executives, out of touch with shifting consumer trends, overestimated brand loyalty while a culture of fear within the company prevented honest assessments of strategic missteps. Even a last-ditch partnership with Microsoft failed to revive its fortunes.
By 2014, Nokia’s mobile division was sold off, marking the end of an era. The company became a cautionary tale of complacency, disruption, and the perils of underestimating a technological shift.
Denmark now finds itself in a similar bind with Novo Nordisk. The pharmaceutical powerhouse accounts for half of the country’s annual GDP growth, making it a pillar of the Danish economy. Yet, such dependence is a precarious proposition. Should a competitor break through or market conditions shift, Novo’s dominance, and Denmark’s reliance on it, could unravel. In a world of relentless technological innovation, disruption seems not just a possibility but an inevitability.
Novo’s hiring spree has already created challenges for Denmark’s labour market. Small businesses in towns like Kalundborg, where Novo has its largest manufacturing plant, have been forced to close as workers leave for higher pay. Hospitals report losing skilled medical staff to the company, leading to critical shortages and delays in services. In construction and manufacturing, firms struggle to fill roles, delaying projects and prompting some to move operations abroad.
Novo’s dominance is not limited to its workforce. Insulin alone has contributed 7% of Danish goods exports since 2002, showcasing how concentrated the country’s trade profile has become. As the pharmaceutical industry dominates, other sectors fear being crowded out, prompting us to question whether Denmark’s broader economy can sustain balanced growth. In essence, the situation bears a striking resemblance to Nokia’s (and carries the same sense of fragility).
The Danish government isn’t blind to the risks. It has taken steps to tackle labour shortages, including easing immigration rules to draw in international talent. Last year, the Danish Aliens Act was amended, allowing foreign nationals with a residence permit under the Authorisation Scheme to work without the need for a separate work permit. This applies to healthcare professionals trained outside of Europe, who can now apply for a residence permit that enables them to learn Danish and pass necessary professional tests to obtain Danish authorisation. Furthermore, the Positive Lists have been updated, which outline professions facing shortages in Denmark. These include 141 job titles for those with higher education and 61 for skilled work. The new rules provide a streamlined process for workers in these fields to secure a residence and work permit.
Yet, in a country with some of Europe’s toughest immigration policies, these measures face stiff political headwinds. As debates around immigration grew more polarised in the 1990s, the country began tightening its policies. By 2015, the government shifted from prioritising settlement and integration to focusing on deterrence and deportation. Over three years, Denmark amended its immigration policies seventy times, fuelled by the rising influence of far-right parties like the Danish People’s Party (DPP), which stoked fears of immigrants undermining Denmark’s welfare system and cultural values. This shift is reflected in the 2016 policy that allowed the government to seize refugees’ assets and in efforts to make the country as unwelcoming as possible for asylum seekers, including harsh conditions in detention centres. A Danish survey revealed the disconnect between perception and reality, with far-right supporters estimating that 30% of young male immigrants had been convicted of a felony by 2019—actual rate had dropped to 3.5%. Despite these prevailing narratives, there is increasing recognition that immigration is crucial for filling labour shortages in Denmark.
Whilst Novo has signalled plans to scale back domestic hiring and expand abroad, its outsized role in Denmark’s economy makes any significant contraction a potential shock to national GDP. These tensions highlight a broader concern: is Denmark’s economy resilient and diversified enough to weather a potential downturn in its pharmaceutical sector?
As Denmark doubles down on its pharmaceutical industry to fuel future growth, the stakes couldn’t be higher. Without a deliberate push to diversify and lessen its dependence on a single corporate titan, Denmark may find itself learning the hard way that no success story is immune to a sudden plot twist.
The views expressed in this article are the author’s own, and may not reflect the opinions of The St Andrews Economist.
Image Rights: MedWatch