The Dutch Cure

The Dutch Cure

The Dutch seem to have pulled off a miraculous solution to the conundrum of the aging welfare state.

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“A French View of the ‘Dutch Miracle” by Dominique Schnapper, in Society (March–April 2005), Rutgers—The State University, 35 Berrue Cir., Piscataway, N.J. 08854.

Unlike many other countries in Europe, the Netherlands has faced head-on the challenge that slow economic growth and an aging population pose to the welfare state. That the Dutch have achieved significant reform is a “miracle,” says Schnapper, a professor of sociology at the École des Hautes Études en Sciences Sociales, in Paris, especially when compared with her own country’s failure to do so.

By the early 1990s, the Netherlands had become almost a caricature of a welfare state, sustaining a rapidly growing population of idlers. The number of officially “disabled” persons (who receive a full slate of welfare benefits) had mushroomed from 164,000 in 1968 to 921,000, and many more people were unemployed. More than a quarter of the work force was jobless or officially unfit to work. Early retirement was also on the upswing.

The “Dutch illness” soon elicited a Dutch cure. Legislation enacted in 1993, for example, tightened qualifications for disabled status, discouraged early retirement, and promoted work. As a result, the size of the disabled cohort shrank to the current level of about 500,000, and before long the early-retirement trend was reversed.

Why were the Dutch so successful? One reason is that there were few draconian cuts. Disability claims, for example, were reduced in part by requiring employers to bear some of the cost of benefits, thus giving them an incentive to rehabilitate their employees. And the Dutch were helped by their consensual traditions—close cooperation among members of a small national elite, a strong political culture of consensus building, and the trade unions’ role as “comanagers” of the economy and society.  

Dutch unions got their members to accept wage caps, freezes on the minimum wage, and part-time work and flextime. These concessions in the private sector allowed the government to trim the salaries of unionized government workers in the name of equality—something that would be unthinkable in Schnapper’s homeland.

The Dutch welfare state combines features from the three basic types of welfare states—the liberal (Britain, the United States), continental (France, Germany, Belgium), and, in particular, social democratic (the Scandinavian countries). The continental welfare states, long in place, rigid, and sacrosanct, have been especially resistant to reform. In France, the ideological approaches growing out of a revolutionary tradition work against political cooperation, not only among the state, unions, and the private sector, but in the political world. “All reform, even limited, seems like a fundamental challenge to the social contract.” The Dutch, by contrast, debated reform in the practical language of economic necessity and tradeoffs.

Schnapper adds that the upheavals in the  Dutch welfare system have contributed to anti–European Union sentiment in the country. The EU has required the Dutch to make certain changes in their social welfare system, she writes, but it has acted by administrative fiat rather than through a democratic process. That may help explain why consensus-minded Dutch voters overwhelmingly rejected the new EU constitution a few months after Schnapper’s article appeared. 

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