First, a disclaimer: I am not an economist. But I can sure complain about the economy.
We are all too well aware that the U.S. is not the only country facing an economic crisis, an economic meltdown some say. It is truly a global crisis.
But I was still very surprised to read this morning in the Dutch NRC Handelsblad:
A perfect storm is bearing down on the Dutch economy. On Tuesday the Netherlands bureau for economic policy analysis CPB published a surprisingly bleak scenario for 2009 and 2010. The predicted economic shrinkage of 3.5 percent promises to be the greatest drop since 1931, on the eve of what became a lost decade.
Perhaps I was surprised because, in “modern history,” with the exception of the Great Depression that had devastating effects on the Dutch economy—effects which lasted longer than in many other European countries—and with the exception of periods of economic slowdown, stagnation and downturns such as in the mid 70s, early 80s and perhaps even in 2001 and 2002, I was under the impression the the Dutch economy had been and continued to be one of the healthiest in Europe. (Of course, when I say modern history, I am skipping over the World War II period, when the Netherlands was occupied by Germany, although the Dutch post-war economic recovery was very rapid—more rapid than most other European countries).
I was also surprised, perhaps naively so, because I still remember vividly my history lessons in the Netherlands, when we proudly learned of the period starting at the end of the 16th century and lasting through most of the 17th century, when “tiny Holland” experienced an unprecedented period of explosive economic growth and became the premier economic, industrial, military/naval, trade and colonial power in Europe. Such prosperity and success also brought the cultural “Golden Age” to the Netherlands.
As a matter of fact, some economists refer to that emerging Dutch economy as the first “modern economy.”
Economically, such “golden years” would be repeated from 1950 until 1973 in the Netherlands.
And, finally, surprised because as late as January 31, 2008, the “Organization for Economic Cooperation and Development” (OECD) in its “Economic survey of the Netherlands 2008,” reported:.
The Netherlands is well out of its economic stagnation in the first half of the 2000s and is now once again in good shape. The recovery of the past years has been robust, helping to maintain GDP per capita in the OECD’s top league. The very open Dutch economy has benefited from the supportive international environment and investors have continued to be attracted by its business-friendly environment. The country has also benefitted from past structural reforms, notably reforms of pension systems, health care and disability benefits, which have contributed to putting public finances on a sounder footing and have encouraged labour market participation.
The report does go on to mention some clouds on the horizon: Productivity growth remaining sluggish; employers running into increasing difficulties in hiring workers (working-age population has virtually stopped growing; large groups of baby-boomers are reaching retirement ages; net migration flows have turned negative); labor utilization being reduced by the relatively short working week and the high incidence of part-time employment.
And a warning:
If unaddressed, these hurdles will impose a constraint on growth in the medium-term. Hence, the present coalition government has decided to encourage labor market participation. The 2008 budget introduces several welcome measures in the tax-and-benefit system for this purpose. Nevertheless, more ambitious and broad-based reforms will be needed to keep growth on a strong trend in the medium-term.
Alas, it seems that even the great Dutch economic history and the the Dutch government’s measures described and recommended by the OECD, are no match for the economic/financial epidemic that seems to be spreading across the globe like the recent, tragic Australian wildfires.
As the Handelsblad continues in “Perfect storm in the Dutch economy, “The recession at the beginning of the 1980s is no longer the reference point, nor that in 1974 and 1975. The comparison with the crisis in the 1930s is getting more real.
The Handelsblad recommends continued lowering of interest rates, better support for banks, allowing the deficit to rise, etc.
But it also recognizes that the Netherlands must have international support and coordination:
Full support of the banks can exceed the state’s wealth…We thus need a strategy that balances means and ends and that is linked with the international playing field in which the Netherlands operates. It has been a long time since the government was faced with an emergency like this. Time is running out for an integral, comprehensive and powerful plan.
Truer words were never spoken—in the Netherlands or in the U.S. Perhaps time for a well-planned, well-coordinated “Global Stimulus Plan”?
But, reality check: Given it is an almost insurmountable task for us in the U.S. to come together on an economic stimulus plan to rescue our own economy, good luck on a plan for the global economy…
The author is a retired U.S. Air Force officer and a writer.