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Economic policy in the Netherlands
This is the building of the ministry of economic affairs, renovated in 1993-1994.
Especially the inside architecture is very nice.
You may also like to visite the home page of the Netherlands
Foreign Investment Agency. For the economists the site of the department
of general economic policy of the Ministry of Economic Affairs may be of interest. And for those diehards who even want to visit the Central Statistical office, the following link is available (also to international statistical offices). Some information is already available on-line. A more interesting site is however cijfers.net The Polder model
The Economist of April 5th 1998 published an interesting article with the title "Europe isn't working". It states that back in the days of full employment, the elements of the "caring" European system -minimum wages, job protection, generous sickness and unemployment benefits - were designed to help the poor. Today such policies just help the working. European unemployment has increased in the past 25 years. The long term unemployed, the young and the skillless are the victims. However, there is a small tiny spot in Europe which did not surrender to the mighty emperor "unemployment". Unemployment is only 5,7% in the Netherlands (1998), just over half of what it was in 1983. Dutch reform has not only been persistent and far reaching. It has also occurred with litlle conflict and without sacrificing a national goal of redistributing money from the rich to the poor. Consensus lies at the heart of the Dutch success. Since 1983 the government, with support of employers and unions, has cut public spending as a share of gdp from 60 to 50%. Some of the money saved has been used to reduce employers' social security contributions to only 8% from almost 20% in 1989 to help job-creation. With the same goal, the bottom rate of income tax was halved to 7% in 1994. In the labour market, the Dutch have tried to combine the flexibility of America with the security of Germany. Part-time work was made easier by permitting part-timers to be paid less than full-timers for the same job. This has helped Dutch companies to adjust their workforce to the demand for labour and has helped unemployed to get back into work. At the same time, centralised wage bargaining has helped building a consensus in favour of wage constraint. Dutch wages in manufacturing have been moderate compared to Germany and France, where bargaining occurs sector by sector (note: which however still also occurs in Holland as well). Finally the Dutch have tried to provide incentives to work, because sickness benefits were busting the social security budget. as long ago as 1985 the value of both unemployment insurance and disability insurance were cut to 70% of final pay from 80%. In 1991 and 1995 the government made it harder to qualify for unemployment; in 1995 it removed the coverage for those who chose to become unemployed. In 1996 firms became responsible for the benefits paid during the first year of illness. True the Dutch performance is not as good as it looks. The Financial Times has already debunked the Dutch Myth as a kind of exchange rate depreciation (when adjusted for labour costs). Indeed, employment is only 62% of the economically active population. Many people seem to have dropped out of the workforce altogether. Adding the sick and the disappointed, unemployment may be as high as 25%. But even so, the employment rate is rising which is not the case elsewhere in Europe. The Germans even gave an award to leaders of Dutch trade union and employer organisation in september 1997, for their efforts of wage restraint. The Netherlands is missing one link, when compared to the US, and that's innovation. In the US, thanks to high innovation, a steady productivity increase has gone hand-in-hand with steady employment growth. The Netherlands government has already introduced many measures to stimulate innovation but more is needed to stimulate entrepreneurship in general. Measures such as dismantling barriers to takeovers, establishing free enterprsise zones and boosting investment in infrastructure are among them, but some of these measures hurt those who are in the consensus model. And that is maybe why the Dutch rank second after the US in income, when compensated for working hours (now the Netherlands is ranking 12th, because of low number of working hours). Finally, the Dutch poldermodel is not limited to the labour market only. It is the combination of a quiet and flexible labour market with a solid monetary and fiscal policy and introducing more dynamic markets which is the core of the polder model.
In the context of the globalisation hype in 1994/1995, the ministry of economic affairs
has launched a programme on stimulating markets, deregulation and improved legislation.
The main aim of the programme is to improve competition on product markets and to remove
or adjust out-dated and ineffective legislation. A considerable part of our economic
legislation was checked and where necessary adjusted in close collaboration with other
ministries. Two other main trackes were followed: Topics for review are being selected in cooperation with other ministries,
branche-organisations etc. From 1994 to 1998, 35 topics were selected such as: or for an overview in Dutch
In ESB 30-10-1998 an interesting article by Ad Stokman explains why the Netherlands has
so a large current account surplus (9% expected in 2002) and why this is not necessarily
bad for the economy. He explains that there are several country specific elements such as |
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