Re: ECON: Dutch Miracle or Dutch Disease?

Joost de Lyser (
Fri, 19 Sep 1997 22:22:59 +0200

At 11:32 PM 9/18/97 -0700, you wrote:
>I think it was Arjen who was claiming that Holland was the best performing
>economy in Europe. Well...

>> rather low official unemployment rate,

It's also the western european country where the gov't spends the highest
percentage of the GNP (53% in 1994, US: 23% in 1994), and it's probably the
country with the highest percentage of gov't jobs.

To understand why the Netherlands can never be the model for any European
country looking to do what the Netherlands have done, you have to know that
Rotterdam is Europes top harbor (282 mln tons in 1991), and one of the
worlds largest. The countries economy depends highly on transport & sales
of imported goods to other european countries.

For a country who's economy depends so much on it's neigbours,
the purchasing-power of its own population becomes less of a priority to
its economy, which is why in western Europe only spain, portugal, greece
and ireland have a lower purchasing-power, all countries with a
substantially lower (40% or more) gnp/head of the population.

So if you take the 3-10% more that the gov't spends of the gnp, add the 10%
more taken away in the planned economy in purchasing-power, and add the
fact that the economy gets extra stimulation anyway because of the
countries position as transit route for most of western europes imports,
you have the explanation why the Netherlands doesn't have to finance its
social excesses through measures that scare away investments, and still be
able compete very well economically with neighbouring countries.

>>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."

Seeing his position, he would have said this more with economic policies
than social policies in mind, as the economic and monetary policies of the
Netherlands are based on the German ones much more than those of other
european countries. As for european monetary & economic integration, the
Netherlands have always been one of the first to adapt to Germany's. Which
isn't so strange regarding the 60%/15% interdependence of the economies.
(old data, don't know what it is today) Rotterdam is Germany's harbor more
than it is the Dutch...

>>The Dutch model, however, simply doesn't work.

It does, but at a cost most Dutch people do not realize.
The point is that the Netherlands are in a unique situation because of its
strategic geographical position in Europe, any country hoping to model
after the Dutch social-economical example will need a comparable
stimulating economical factor.
(i don't think there's a single European country with one that compares)

The Dutch simply do not need to reform, unless its neighbours do, and still
maintain the average standard of living level, while being able to keep up
one of the highest levels of social security in Europe.

Ofcourse if they instead maintained an average social security level, their
standard of living might rise to being the highest in Europe.

Just my observation.

Joost de Lyser.