How powerful are the Netherlands right now

I. Introduction

The Dutch economy: structures, potentials, problems

The Dutch economy is often described as a “small, open economy”. As a market economy that is strongly oriented towards international trade and export and, despite its comparatively small potential in terms of labor (8.2 million) and natural raw materials, achieves remarkable results: The Netherlands is a rich country. In 2006, according to the Centraal Bureau voor de Statistiek (CBS), the national income per capita was 27,943 euros, making the Netherlands the top European country after Luxembourg and Ireland.

Economic center

What is the basis of this economic success, about which a lot was written and talked about in the 1990s? And even now - after a few years of recession - the Dutch economy is once again considered exemplary. If we take a look at the structure of the Dutch economy, some features become clear which in a certain way have been typical since the 17th century, the “golden century”. The economy of the 17th century was characterized by (1.) strong maritime trade in the Baltic Sea and Asia, (2.) innovative agriculture that specifically used windmills, manure trading and horticulture and, for the first time, stable keeping in the Introduced cattle breeding. The golden century was marked by a (3rd) modern financial and banking system. Remember the Amsterdam exchange bank and the stock exchange. In principle, these structures still apply today. As then, the province of Holland (Randstad) is the economic center and engine of growth, with a strong concentration of people and jobs.

Certainly, the Netherlands has developed from an agricultural and trading state into a modern industrial and service country. The agricultural sector only contributes 1.9 percent to the creation of the gross domestic product (GDP). But Dutch economic growth is still heavily dependent on exports, financial and material services account for a quarter of economic value added and agriculture is still extremely competitive, with high labor productivity and innovation - for example in horticulture. Last but not least, the handling of goods in the port of Rotterdam is an important factor for the Dutch economy.

gross domestic product

Today's gross domestic product is essentially based on the service sector, which has grown strongly in recent years and in which many new jobs have been created. Some parts of industry (especially the food industry) and trade, transport and distribution are also important. “The Netherlands is making a name for itself as a distribution country in Europe,” write the economists Van der Geest and van Sinderen.

Growth in the individual provinces

Economic growth in the Netherlands is evenly distributed across the twelve provinces. The growth in 2006 was driven by some branches of industry, such as natural gas extraction, oil refineries, gasoline and petrochemicals and the construction industry.

Regional products

There are economic focal points within the provinces. Horticulture is concentrated in Westland and around Venlo, the province of Groningen is characterized by natural gas production and the large financial and material service providers are located in the Randstad. The chemical industry is concentrated in the regions of Rijnmond, South Limburg (DSM) and southern Zeeland. The economically strongest regions are the Randstad, the "Knooppunt Arnhem-Nijmegen (KAN)" and the region around Eindhoven. It is also noticeable that the economic structure is shaped by a few global players. Mentioned are: Philips, Shell, Unilever, DSM, AkzoNobel, Ahold, ING or ABN-Amro.

Structural challenges

The Dutch economy faces the same structural challenges as other western welfare states: It faces strong international competition, globalized markets, ongoing industrial change, increasing aging of the population, higher life expectancies, rising health care costs, new family structures and a Individualization of lifestyles. But there are also typical Dutch problems, such as the still high number of people unable to work in the workforce.

The population of the Netherlands is growing steadily. According to the CBS, the number of inhabitants was 16.4 million in 2006. Although the number of births is falling, it remains relatively high. The average number of children of Dutch women is 1.72. Life expectancy is 77.6 years for men and 81.9 years for women. Trend: Dutch society is aging. The number of people over 65 is increasing, in 2006 it was 2.4 million.

In the past five years immigration has been the subject of heated debate in the Netherlands. The restrictive policy of the Balkenende government has resulted in the number of immigrants falling from the record level in 2001 from 133,000 to 101,000 in 2006. Almost a third of the residents of Amsterdam and Rotterdam are still foreigners or have a migrant background. The number of private households is growing faster than the number of residents. More than a third of all households are single-person households. The Netherlands is becoming a highly individualistic country, which has a major impact on the manufacturing economy - such as the food industry, trade and housing.

Institutions play an important role in the Dutch market economy. The parties to the collective bargaining agreement are characterized by their willingness to cooperate and a pragmatic attitude, which ultimately has to be the most important characteristic of the polder model. The Stichting van de Arbeid and the Sociaal Economische Raad are important negotiation forums for employers' associations and trade unions.

The state plays a relatively large role in the economic cycle. On the one hand through pronounced legislation and a strong urge to order and on the other hand through a lush welfare state. In 2006 the tax rate (taxes and social security contributions) was 39.1 percent of the gross domestic product. The national debt amounted to 52.4 percent of GDP.

Author:Andreas Gebbink
Created: January 2009