ECON: Dutch Miracle or Dutch Disease?

Max More (
Thu, 18 Sep 1997 23:32:30 -0700

I think it was Arjen who was claiming that Holland was the best performing
economy in Europe. Well...

>From: "VitaminB"<>
>Date: Thu, 18 Sep 1997 16:39:22 -0700
>Subject: <<Vitamin B>>(September 18, 1997) Dutch Miracle or Dutch Disease?
>Vitamin B:
>Your Daily Dose of Bionomics
>September 18, 1997
>Dutch Miracle or Dutch Disease?
>One of the most important statistics that
>government's publish is the unemployment
>rate. Many in and out of government use it
>to determine how well the government is
>doing, an economic feedback loop of sorts.
>Just like many statistics, however, this statistic
>can be manipulated as easily as play-doh.
>Due to its rather low official unemployment rate,
>Continental European statesmen are looking
>towards the Netherlands for guidance on how
>to achieve social security and economic growth
>at the same time. Hans Tietmeyer, President of
>Bundesbank calls the Netherlands, "the model
>country, the example of the continent."
>Wolfgang Schauble, the parliamentary leader
>of the German Christian Democrats says that,
>"the Dutch appear, after 15 years, to have largely
>succeeded in reforming their economic system
>without forfeiting the solidarity which is
>characteristic of their society."
>Sorry Wolfgang, but appearances are often deceiving.
>The wage bargaining system created 15 years
>ago in the Netherlands has created relative
>labor peace --proportionally the Netherlands
>loses less days each year to strikes than any
>other Western country-- but what it hasn't achieved
>is economic growth. Don't get us wrong, the
>thought of workers and managers holding hands
>and going shoulder to shoulder towards
>economic growth is an appealing idea, especially
>after the major hassles created by the UPS strike.
>The Dutch model, however, simply doesn't work.
>According to the OECD, the broad unemployment
>rate in the Netherlands is 27.1% of the people who
>are of working age. Broad unemployment is defined
>as people of working age who live off welfare benefits
>or receive some subsidized employment. The
>number of people who are officially ill and drawing
>disability benefit or are on sick leave outnumber those
>that are officially unemployed. The Dutch labor
>participation rate is only 62.4%, as compared to
>68.8% in Germany, 73.7% in the UK, and 77.3% in
>the US. Dick Horringa, a Dutch consultant, compares
>this phenomenon with what happened in the former
>Communist states, which also had low official
>unemployment yet high broad unemployment.
>Perhaps Continental policy-makers should stop
>looking for some hybrid "third way" that allows them
>to avoid free-market reforms and simply do what
>needs to be done to promote long-term economic
>growth. Not using fake numbers would be a good start.
>Source: _Financial Times_, September 18, 1997

Max More, Ph.D.
President, Extropy Institute:,