The Danish economy found itself in deep disequilibrium in the late 1970s/early 1990s, with high unemployment, inflation, and deficits on public budgets and the current account. A string of reforms starting with the fixed exchange rate policy from the early 1980s, followed by labour market reforms (the flexicurity model) in the 1990s, have radically changed things, eliminating all macroeconomic imbalance problems. Moreover, in a forward perspective, pension and retirement reforms ensure high replacement rates for pensions, and fiscal policy is sustainable. The Danish experience shows that policy choices are possible even in an era of globalization. Overall, the welfare state has been consolidated, and in a comparative perspective, Denmark has attained a high per capita income level and low income inequality. Two points are particularly important. First, while the public sector is large, the private sector is regulated in a market-conform way. Thus, the Danish model is not ‘politics against markets’. Second, welfare arrangements focus on supporting labour market participation and human capital acquisition. Since the financial viability of the welfare model ultimately depends on maintaining high employment levels in the private sector, the conflict between welfare objectives and economic performance is not as stark as it may first appear.