NCPA - National Center for Policy Analysis

Holland Rises From Europe's Economic Sickbed

December 26, 1996

Some contend that the Netherlands is providing a model for other European countries to follow to revitalize their moribund economies. That country has reformed its economic structure by deregulating enterprise and moderating its welfare state.

As a result:

  • Holland's economic growth for this year is being estimated at 2.7 percent -- among the highest in western Europe.
  • At 6.6 percent, unemployment there is among the continent's lowest.
  • Job creation is reportedly soaring, while social costs under its welfare system are falling.
  • With the blessing of its unions, wage rates are moderating and the competitive position of its industries is improving.

Inflation has been tamed to about 2 percent annually and interest rates are low.

This progress stems, in part, from tightening up the country's lavish disability benefits system -- which at the end of 1993 allowed 14 percent of the Dutch workforce to collect partial or full disability payments. From 985,000 on disability three years ago, the figure is now down by 735,000.

Deregulation and other reforms have led to a boom in small business formations.

  • In 1994, Holland registered 39,600 start-ups -- up from 15,000 in 1984.
  • The corporate income tax on the first $68,500 of profit is being gradually reduced from 40 percent to 35 percent.

Yet reforms have come slowly and critics say Holland still has far to go.

Source: Lawrence Ingrassia, "Dutch Show Neighbors Some Wage to Attack Their Economic Woes," Wall Street Journal, December 26, 1996.

 

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