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Monday, 5 November 2012

Five issues that a new cabinet should solve revisited: What does the new government agreement state about it? (Part II)

Yesterday, I wrote the first part of this article. Here is the follow-up.

Stalling Dutch economy

I wrote earlier:

The Dutch consumer confidence is almost historically low currently, due to a number of causes (unemployment, the housing market etc.) and this consumer confidence will further deteriorate if the economy stalls further, due to dropping exports and the rising unemployment that is a consequence of this development. This process is happening currently and it leads to strongly diminished purchases of durables and consumption goods and consumption in general.

What the new cabinet should do is not firing up the intra-European exports again, for reasons that I described earlier. The cabinet should try to stimulate the Dutch internal economy and consumer confidence. Not through a brainless Keynesian stimulus-package that fills potholes and builds bridges to nowhere, but by stimulating education, development of skills and craftsmanship,  innovation and creativity. And maybe even through developing an old-fashioned industrial policy: it worked for the Germans during the last decade. Hell, did it!

The new government agreement states: 

The innovation of trade and industry, the educational science centers and the government will be aimed at the transition to a durable economy and green growth, especially aimed at reinforcement of the competitiveness of the Dutch economy.

The successful cooperation between trade and industry, educational science centers, regions and government, known as the top industry policy, will be continued within the new financial framework.

The Netherlands will put energy in a very ambitious international climate policy. New international targets for the coming decades must provoke technological progress and create an ecological balance for the future.

The agricultural industry is an important economic motor. Farmers and horticulturists deserve the room for entrepreneurship and a decent reward for their contribution to the landscape and nature.

A healthy financial industry is inadmissable for the viability of our economy. However, when banks take too much risk, this could bring damage to our economy. Therefore we continue the fundamental reform of the banking sector, in order to let banks make a positive contribution to the restoration of the real economy. 

The cabinet stimulates the development of the mainports Schiphol and Rotterdam, due to their enormous importance for the Dutch economy

We create room in the existing Innovation fund MKB+ (Small and Medium Enterprise) to hand over more risk-bearing capital to young, innovative companies.

Dutch people and companies have large interests abroad. The foreign policy is therefore aimed at taking care off and protecting of these interests and it promotes the human rights and international legal order.

A minister for foreign trade and third world development will be established at the ministery of foreign affairs. This is to confirm the interest of cooperation between both policy areas.

My comments:

The whole government agreement is very schizophrenic on the Dutch economy.

The PvdA aims at green, green, green. This is hardly surprising, as Diederik Samson has been heavily involved with Greenpeace in the not too distant past. Topics as durability, green energy and electric vehicles are omnipresent in the lines that have clearly been written by Diederik Samsom. Also the lines upon the banking industry are clearly from his hand.

The VVD is strongly into entrepreneurship of especially the Small and Medium Enterprises and sees Schiphol and Rotterdam as the answer to every economic question. Foreign policy seems exclusively aimed to protect the interests of Dutch people and companies abroad. The platitudes on promoting human rights and the international legal order seem very out of place here.

Third world development is not seen as a ‘biblical’ duty to help the people in need, but rather as a means to help Dutch companies over the head of the poorest people. Foreign trade and third world development are combined in one minister and – on top of that – this minister receives €1 bln less budget for third world development.

Non of the aforementioned lines carry a real sense of urgency on the Dutch economy, except for the fact that (to put it simply in my own words): ‘austerity is necessary to get the state budget in order. When the state budget is finally in order the economy will start to grow by itself’. Hallelujah!

The top industry policy is OK and it might help for certain industries to reach the world top or to continue this top position. However, this policy was already developed by former minister Maxime Verhagen of Economic Affairs (CDA).

Also the cooperation between trade and industry, educational science centers and the government is not a bad idea, but it is also not a new idea.

Besides that, this cooperation could lead to narrowmindedness at universities and research centers, as practical research often outranks fundamental research under financial pressure from companies that act as sponsors.

More important is the danger of (fraudulent) clientelism that is lurking when companies don’t ‘like’ the results of research by universities and science centers. If you wonder how far the influence of sponsoring companies on research and test results goes, you should read this important article coming from The Times on stiffled clinical trial results (unfortunately paid content).

The Cabinet offers €150 mln extra for fundamental research, but €50 mln of this amount is withdrawn from other budgets and subsidy arrangements. This is something that the new cabinet does a lot: robbing Peter to pay Paul. All in all it is quite disappointing.

Also disappointing is the fact that the word industry is only mentioned once (!) in the document. No “German” industrial policy whatsoever, not a single word on the manufacturing industry, heavy industry, metal processing, the automotive industry, the chemical industry or the assembly industry. 

The financial industry is almost solely mentioned in a negative context and not as an enormous driver for jobs. 

ICT is mentioned in a line on ten "breakthrough projects" that should help the top industries, small and medium enterprise, education and healthcare to improve the usage of ICT. The ICT industry itself, very important in The Netherlands, is mentioned nowhere.

And what those ten breakthrough projects might be?! Nobody knows, as this isn't disclosed in the government agreement. 

The whole government agreement talks of entrepreneurship, but lacks a masterplan and a panoramic view on the future of the different Dutch industries. One exception: the lines on the development of a green industry. 

It is exactly this green industry that has still a very doubtful future: green might be the next biggest thing on this earth, but it also might not be.

Also prominently missing in this document is the Dutch consumption and lack of consumer confidence in The Netherlands.

I consider these two missing subjects (an industrial policy and domestic consumption) as a missed opportunity and a testimony of a missing grand vision at especially the VVD.

This series will continue tomorrow.


  1. Hi Ernst,
    Thanks for your blog and such great articles.

    Could you please bring some light on the proposed increments in the healthcare bill? There is no much information in English about this worrying subject. I look forward to reading you about it.

    Thanks again.

  2. Dear Reader,

    Thankx for your comments.

    I hope to come to healthcare in the remaining episode(s) of this article, in the part on the aging process in The Netherlands.

    I will do my best to shed some light with the data and remarks that I can determine in the government agreement.

    However, this is a very delicate and difficult matter, as even the Dutch politians (who ought to know) don't to agree on this matter. The data and figures are flying around currently and nobody (including the PM) can give the definitive answer.

    Please stay with me, as I hope to write more interesting stories in English