Dutch Postwar Economic Performance Compared to the U.S.

U.S. Dutch Gross Domestic Product comparison

Graph one shows the developments for both the U.S. and The Netherlands in GDPpc and they show a

similar trend throughout the years (1947-2010). However the U.S. seems to widen a gap from the

late 70s.

Graph 1 Comparison of GDP (1990 int. GK$) Developments between The Netherlands and the Unites States after WWII (source: Maddison

Project Database)

When looking at the absolute difference between the GDPpc of both countries in the second graph

the slight slowdown of the Dutch GDPpc compared to the U.S. during the end of the 70s becomes

clearer. Till the end of the 70s the difference between the countries stays at a range of roughly 3000-

4000 $ pc, but after this the difference increased in the 80 to stabilize at a range between the 5000

and 8000 pc.

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Comparison of GDP (1990 int. GK$) Developments between The Netherlands and the United States after

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Graph 2 Absolute Differences between the U.S. and Dutch GDP per capita per year (source: Maddison Project Database)1

The third graph shows the size of the Dutch GDPpc compared to the U.S. GDPpc (U.S. GDPpc is 1,0 at

the vertical axis). This graph shows us that the Dutch GDPpc has been between the 70 and 80 % of the

U.S. GDPpc since the end of the 50s.

Graph 3 Relative size of the Dutch GDPpc compared to the U.S. (U.S. is 1,0) (source: Maddison Project Database)

1 http://www.worldeconomics.com/Data/MadisonHistoricalGDP/Madison%20Historical%20GDP%20Data.efp

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Relative size of the Dutch GDPpc compared to the U.S. (U.S. is 1,0)

Gross National Income per capita

In 2008 both countries showed a similar GNIpc, but while the U.S. managed to boost its GNIpc up to

$ 53,308 in 2011 the Dutch did not show any progress since 2008 and remained at $ 42,397 for 2011.2

Beyond the Gross National Income per capita

Both the U.S. and the Netherlands can be regarded as rich countries so no surprise they both end up

at the top of the charts in the Human Development Index (Netherlands 4th with a 0.915 score and the

U.S. 0,914 ranking 5th). The Dutch and the U.S. were attributed a similar score on many indicators.

However on some indicators the score between the countries differ much making them interesting for

a cross country comparison. The selected indicators are income Gini coefficient3, gender inequality

index4 and expenditure on health, total (% of GDP)5.

Income Gini coeffiencient

The Income Gini coeffiencient is a Measure of the deviation of the distribution of income among

individuals or households within a country from a perfectly equal distribution. A value of 0 represents

absolute equality, a value of 100 absolute inequality.6 As we can see the data suggest the U.S. to be a

very unequal country compared to the other countries ranked on top of the HDI index. The first country

being more unequal is Qatar at rank 31.

Income Gini coefficient HDI overall rank Country Score

1 Norway 25.8

2 Australia no data

3 Switzerland 33.7

4 Netherlands 30.9

5 United States 40.8

6 Germany 28.3

7 New Zealand no data

8 Canada 32.6

9 Singapore no data

10 Denmark no data Table 1 Income Gini coefficient (source United Nations Human Development Index 2014)

Gender inequality index

Regarding the Gender Inequality index (based on reproductive health, empowerment and the labor

market) the U.S. is also lacking behind compared to their overall score and the Netherlands.

2 United Nations Human Development Index 2014 p 160 3 http://hdr.undp.org/en/content/income-gini-coefficient 4 http://hdr.undp.org/en/content/gender-inequality-index 5 http://hdr.undp.org/en/content/expenditure-health-total-gdp 6 http://hdr.undp.org/en/content/income-gini-coefficient

Gender Inequality Index HDI overall rank Country Score

1 Norway 0.068

2 Australia 0.113

3 Switzerland 0.030

4 Netherlands 0.057

5 United States 0.262

6 Germany 0.046

7 New Zealand 0.185

8 Canada 0.136

9 Singapore 0.090

10 Denmark 0.056 Table 2 Gender Inequality Index (source United Nations Human Development Index 2014)

Expenditure on health, total (% of GDP)

When looking at the expenditure on health The Netherlands spends slightly more than the average

among the top ten countries, but when looking at the U.S. only Liberia (19,5 %) and Sierra Leone

(18,8 %) spend more as a percentage of their GDP.

Expenditure on health, total (% of GDP) 2011 HDI overall rank Country Score

1 Norway 9,10%

2 Australia 9,00%

3 Switzerland 10,90%

4 Netherlands 12%

5 United States 17,90%

6 Germany 11,10%

7 New Zealand 10,10%

8 Canada 11,20%

9 Singapore 4,60%

10 Denmark 11,20% Table 3 Expenditure on health, total (% of GDP) 2011 (source United Nations Human Development Index 2014)

Graph 4 GDP per capita developments for the mayor West European economies and the U.S. after WWII (source: Maddison Project

Database)

From the Dutch disease to the Dutch miracle

As graph 3 shows the Dutch economy started to improve relatively compared to the U.S. from the late

80s up to 2010. When we looking at the GDPpc performance of other main Western European

economies (graph 4) during this period we see that the Dutch (accompanies by the U.K.) started to

outperform its European peers. Among scholar this economic development is often referred to as the

‘Dutch miracle’. (Visser, 1999).

In the period 1982-2000 the Dutch saw a remarkable boost in GDPpc, unemployment falling from 14 %

to 2,5 %, a government deficit of 9 % turning into a surplus and labor market participation went up

from 52 % to 65 %.

The set of measures making up the Dutch miracle answered the economic problems during the 70s

(often referred to as the Dutch disease) with a vast increase in prices and wages and a vanishing

competitive advantage due to a strong guilder.

The famous Wassenaar agreement in 1982 between labor unions and employers introduces a policy

of wage restraint to restore profits and decrease unemployment. In 1982 the new government also

started to cut public spending dramatically by decreasing public wages and employment and a

decrease in social security spending which was an important cause of the increase in wages during the

70s (den Butter & Mosch, 2001)

During the early 90s wages again tend to increase, Dutch GDPpc stated to lose relatively to the U.S.

and employment growth came close to zero making the situation similar to the early 80s. Again a labor

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GDP per capita developments for the mayor West European economies and the U.S. after WWII

Germany Netherlands France UK Spain Italy US

compact was negotiated in 1993 and again labor costs declined boosting both GDP and employment

(McMahon, 2000).

Fundamental determinants for the Dutch economic developments after WWII

Multiple determinants has shaped the Dutch economic developments and shaped the Dutch golden

century in the 17th century. Good governance, geographical benefits and a strong entrepreneurship all

contributed to the Dutch economy being in the top range for more than four centuries.

However, after the Second World War economic problems were faced with policies typically for the

Dutch economic culture as we can see from the examples above in the 80s and 90s, but also during

the current economic turmoil. Therefore the Dutch culture is one of the leading determinants directing

the post war economic developments. The typical Dutch ‘Polder model’ is the way in which the Dutch

have carried out their economic policy for decades.

The polder model (a polder is a low part of land typical for the Dutch landscape) means that many

societal partners are involved in the policy making process. Labor Unions, employers, government,

scholars and interest groups are all involved. The name refers to the old commitment model the Dutch

had to deal with for centuries. People from various backgrounds and societal classes had to agree on

policy measures in order to project the ‘polder’ from the water. Therefore the Dutch economy is

sometimes called a consultation economy.7

Typical poldermodel organizations are the STAR8 founded in 1945 (foundation for labour) and the SER9

founded in 1950 (Social and Economic council) in which many interest groups have a seat and negotiate

about policy measures. This leads to policy measures enjoying a large amount of public support. The

Dutch policy making is characterized by a large amount of formal and informal contact between the

ministries, academic researchers, staff of social partners and the government’s Bureau for Economic

Policy Analysis10 (Butter den 2006).

References

Butter, F. A. G. den (2006). The Industrial Organization of Economic Policy Preparation in the

Netherlands. Version 23th January 2006.

Butter, F. A. G. & R. H. J. Mosch (2001). The Dutch Miracle: Institutions, Networks and Trust. Research

Memorandum 2001-18, Alert Vrije Universiteit Amsterdam.

McMahon, F. (2000). Road to Growth: How Lagging Economies Become Prosperous. Atlantic Institute

for Market Studies. p 97-141

Visser, J. (1999). A Dutch Miracle. Job Growth: Welfare Reform and Corporatism in the Netherlands.

Amsterdam University Press.

7 http://www.parlement.com/id/vhnnmt7jpb00/poldermodel 8 http://www.stvda.nl/en/home.aspx 9 http://www.ser.nl/en/ 10 http://www.cpb.nl/en/node/