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Once-Struggling Dutch Economy No Longer in the Nether Land

January 26, 1997|CHARLES TRUEHEART | WASHINGTON POST

AMSTERDAM — Fifteen years ago, the Netherlands was a European economic basket case. Heavy public spending burdened its economy. Unemployment registered 12%. Generous government checks supported a million work-disabled people, many of them only nominally so.

Today, the old Dutch trading nation has shaken the welfare-state doldrums and created--or re-created--a niche for itself as a low-cost, high-productivity, outward-looking player in a global-minded Europe.

In Paris and Berlin, among international financial institutions and Wall Street brokerages, the Netherlands is being compared to other economic success stories: Singapore, Chile, New Zealand.

"What Hong Kong is to China, we are to Germany. Everyone understands that," Dutch economist Eduard Bomhoff said, referring to the emergence of "three global supertraders"--Hong Kong, Singapore and Benelux, as the Netherlands and its neighbors Belgium and Luxembourg are called.

The grounds for such ambition have seldom looked better.

Last year, the Netherlands had the strongest economic growth in Europe except for Ireland, and the lowest unemployment rate except for Luxembourg. The government is delivering on its 1994 election promise to create 100,000 jobs a year.

Rotterdam is the world's busiest port, and Amsterdam's Schiphol airport is a major European gateway. International Business Machines Corp., Nissan Motor Co., B.F. Goodrich Co. and Arco Chemical Co. are among the wave of foreign firms that have found the Netherlands--where much of the work force speaks English--a good place to stage and supply their European operations. Most of last year's record number of foreign investment projects here--about $1.3 billion worth--were American.

The Netherlands' economy continues to depend heavily on consumer demand next door in Germany, Europe's giant, and Dutch interest rates track German ones closely. But Thomas Mayer, an economist in the Frankfurt office of Goldman, Sachs & Co., said the Netherlands is "two or three years ahead of Germany in its economic restructuring," and the Dutch stock market "is relatively competitive with the German market."

The recent Dutch economic trend, Mayer said, "runs counter to the prevailing notion that smaller European countries are not masters of their own fate. The Netherlands has proved there is life independent of the heavyweights when you do things right."

With the Dutch at center stage for the next six months as holders of the rotating European presidency, the exposure may remind other countries of what the Netherlands has done right. One Dutch Cabinet member says the strategy is simple: "consistency and consensus," to which might be added fear and circumstance.

After a meeting of the minds in 1982 among government, employers and unions, the three major partners to the Dutch "social contract" prescribed the tough economic medicine many European countries are still resisting. The most important piece of fiscal discipline was an agreement from unions on wage restraints that have checked inflation and driven job creation.

Then came the consistency. Unlike governments that announce tough fiscal discipline and then blink at the first protest, a recent pattern in France, the Netherlands' leaders have been unblinking. They laid out and have stuck to four-year budgets that have weathered changes in government and the stresses of the recession of the early 1990s.

"It's not because we all love each other that we're doing this," Bomhoff said. "It's self-interest. We had a major scare here 15 years ago--a severe recession. Unemployment shot up. We came out cautious. We learned big lessons."

Far from looking cautious, the Netherlands gives an impression of new dynamism. The government set off a consumer spending boom last year by deregulating shop hours. The postal system and, soon, telecommunications are being privatized. Social Security is under quasi-private administration. More than 200,000 people have been cut from the rolls of the work-disabled. But at 738,000, said Ad Melkert, the social affairs minister, the number is still too high.

In other European countries, employers and workers are constant adversaries. Here, they do a good imitation of being partners. Strikes are rarer in the Netherlands these days than in any industrialized country except Japan. And at the helm of the Dutch government today is a symbol of the consensus: Wim Kok, a former head of the country's biggest union, whose approval ratings as prime minister are among the highest of any European government leader.

Kok's "violet coalition" of left, center and right parties took power in 1994 and has stuck to the Dutch program of the previous government--and will probably succeed in adding 300,000 jobs by the end of next year. In equivalent terms, as one official in The Hague pointed out, that would be 6 million new jobs in a single U.S. presidential administration.

Consensus is easier too, and maybe more necessary, in such a small country. The work force of 6 million is small even relative to the Netherlands' population of 15 million. The Netherlands has some of the highest labor productivity on the continent, but the average worker here puts in some of the shortest hours: 1,442 a year, compared with the European average of more than 1,700.

What has put the country back to work is another Dutch distinction, a virtual asterisk on the unemployment rate, but one to which skeptical attention is drawn by debunkers of the Dutch-miracle theory: More than a third of employees in the Netherlands work part time.

That is due to historical circumstance--the slender participation of women in the Dutch labor force.

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