The political economy of a consensus society: experience from behind the dykes

Abstract

The Dutch economy shows that capitalism with a friendly face can work. Job growth has been spurred by an investment and export boom and a move towards more labour intensive methods of production. The combination of anchoring the guilder to the D-mark and a policy of sustained wage moderation has been the motor for the job growth. It has led to a boost in profits and competitiveness and held back labour productivity. Wage moderation, a strong currency and social cohesion do not come like manna from heaven. They require consensus, trust and corporatism as well as tax cuts, training and child care programmes to support it. The challenge for the Dutch is to boost labour market participation, particularly of older workers and partially handicapped. This requires specific tax incentives as well as further reform of social security.