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Date: Mon, 26 Oct 1998 13:15:45 -0800
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From: Sid Shniad <[EMAIL PROTECTED]>
Subject: Debunking the Dutch Model
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Canadian Dimension September October 1998
THE DUTCH MODEL
Politicians in Europe, like the Social Democratic [SPD] candidate for
German Chancellor, Gerhard Schroeder, have praised it highly, as has U.S.
President Bill Clinton. Trade union magazines dedicate enthusiastic
articles to it because it has managed "to halve the number of unemployed
within the last 15 years. The [now former] president of the German
Bundesbank, Hans Tietmeyer, calls it "an example for the whole of Europe."
What is the object of this fulsome praise? The "Dutch model."
Dietmar Henning and Wolfgang Weber travelled to the Netherlands for the
World Socialist Web site to obtain a clearer picture of the supposed
success story of the Dutch economy, survey its leading figures, examine how
it works and find out who are its winners and who are its losers. They
interviewed politicians, sociologists and members of an unemployed
organization in Amsterdam.
They spoke with members of the Betriebsrat (works council) and employees at
the Netherlands' biggest hospital, and visited striking dockers in=
Rotterdam.
--------------------------------------
What Europe's bankers and politicians are selling as the "Dutch model" for
overcoming mass unemployment is called the "Polder Model" in the
Netherlands itself. Polder =97 "a piece of low-lying reclaimed land: the
first stage in its reclamation." That is what the dictionary says.
"As in the building of a polder, everyone must co operate and make
sacrifices to repel the flood of unemployment and transform Dutch society
into a flourishing, tranquil landscape." This and the like were repeated in
the statements of government ministers, union officials and company
directors when the unions and management in 1982 signed the Wassenaar
agreement, the political birthright of the Polder model.
At first glance the (official unemployment rate is 6 per cent and the
economic growth rate 3 per cent) the model seems to have worked. Fifteen
years ago, the number of unemployed was rising by 10,000 a month. In 1984
the rate stood at 14 per cent and 800,000 were officially registered as
looking for work. According to the Organization for Economic Co operation
and Development (OECD), the real jobless rate then, including the
unemployed in training schemes, early retirement or other social programs,
was 27 per cent.
In the Wassenaar agreement, the trade unions committed themselves to
modest pay demands for years ahead. The employers promised to try harder to
create more jobs.
It soon became clear, however, what the agreement really meant: a
corporatist policy for effecting the greatest redistribution of income in
Holland since World War II!
Income and corporate taxes for employers were sharply lowered, according
to the principle: "the higher the profit, the lower the taxes." Companies
with more than 225,000 German marks in annual profit are required to pay a
35 per cent corporation tax. Those that report lower profits must pay a 40
per cent tax.
The disposable real income of employee households, on the other hand, had
already dropped by 10 per cent in 1982 and 1983 as a result of recession,
while that of unemployed workers and social security recipients had dropped
even more sharply.
In 1984 and 1985, real income dropped a further 9 per cent each year after
the trade unions annulled previous pay agreements that included an
automatic increase in wages in line with the rate of inflation. The legal
minimum wage was reduced and, with it, the level of social security, which
is set at 100 per cent of the minimum wage for a family of four and 70 per
cent for a single person. In 1981 the income from social security for a
single person still stood at 64.4 per cent of the average employee's real
income. By 1990, it was down to 54.4 percent, and it now stands at about 50
per cent.
What has happened to the unemployed? Since 1983, the working population
has increased from 5.5 million people to 6.8 million today. But 75 per cent
of this impressive increase in jobs is attributable to the expansion of
part-time and temporary work at the expense of full time jobs. The net
result has been a growth of poverty among wage earners.
This restructuring of the jobs market has benefited only private and
public employers. Jobs that they considered too expensive and
"unproductive" were replaced by part time jobs demanding greater
productivity and higher qualifications, while providing lower pay. The
Netherlands' statistics for labour productivity rose to the top of world
surveys. From the mid 1980s on, production, trade and profit began to boom.
A further sharp change came at the end of the 1980s in reaction to the
increasing globalization of production and the demands of transnational
corporations like Unilever, Akzo, Philips and Shell. The Wassenaar
agreement had itself been shaped by the economic demands of a national
commission headed by Gerrit Wagner, the chairman of Royal Dutch Shell.
By 1989 90 the employers' associations were demanding not only cuts in
social benefits, but a fundamental "restructuring of the welfare state."
Those on social security had to be made available as cheap labour. The
ability of workers to claim Work Incapacity Insurance Benefit (WAO) until
retirement age on the strength of a doctor's certificate had to be ended.
Similar to early retirement schemes in Germany, WAO, with some 900,000
beneficiaries, had become a cheap way for companies to cut back on jobs.
SOCIAL DEMOCRACY AND TRADE UNIONS TO=20
THE RESCUE ... OF THE CORPORATE AGENDA
Although it had won the elections of 1989, the ruling coalition of
Christian Democrats (CDA) and Liberals proved incapable of pushing this
through. The social democratic Partij van de Arbeid (PvdA) took the
Liberals' place in the government to tackle this task, working together
with the trade unions.
The PvdA's chairman was Wim Kok who, as head of the trade union umbrella
organization FNV, had signed the Wassenaar agreement in 1982. Now he took
over the Treasury, the key ministry for shaping economic and social policy.
The businessman Ruud Lubbers (CDA) remained Prime Minister.
The CDA/PvdA coalition dealt the first big blow in the summer of 1991 by
sharply limiting WAO. All those receiving this benefit were now required to
have a new medical examination each year. New criteria were imposed,
according to which thousands of recipients were reclassified as completely
or partly able to work. Once again they found themselves at the
unemployment office, and soon after were forced to apply for social=
security.
The trade unions took over the task of containing and dissipating the
growing anger in the working class. They organized a 250,000 strong protest
demonstration in Den Haag, the biggest demonstration against the government
since World War II. This, they declared, was all they could do. The issues
would have to be resolved in the parliament by their social democratic
friends in the government.
Faced with continuing widespread resistance, the PvdA resorted to a
political gimmick. Together with the Liberals, they pushed a measure
through Parliament, establishing an all party commission under the
chairmanship of the social democratic politician Flip Buurmeijer.
SMEARING THE WELFARE STATE
In televised hearings, the commission stage managed a smear campaign
against the welfare state. Those claiming benefits were derided as
parasites, the administrators of various institutions were labelled
charlatans and reformist politicians of the past dubbed "irresponsible."
The Buurmeijer commission concluded that radical and immediate cutbacks in
social spending were necessary.
One year later, entitlement to social security for youths up to 23 years
of age, after the end of their formal education, was reduced to six months.
Those not finding a job within these six months are assigned a job by the
local council. Such jobs would pay no more than the rate of social security
plus 20 per cent, and the rate was to decline as the age of the recipient
rose.
A series of training and job schemes for older long term unemployed were
introduced or expanded, including a wage subsidy scheme to hire jobless
people. Employers can make use of this program to hire workers nearly free
of charge for a time and, once the subsidies have ended, send them back to
the unemployment office.
The number of unemployed removed from the official jobless count by means
of such programs increased from 75,000 in 1983 to 120,000 a decade later.
Today it stands at around 170,000. For public institutions and local
councils so called "job pools" have been created, in which 25,000 long term
unemployed do the work of public sector employees at a fraction of their
wage rate. The job pool workers receive the legal minimum wage.
The next major step came in the beginning of 1994, with the
"restructuring" of health insurance to make it a voluntary system based
purely on employees' contributions. Employers' contributions to health
insurance were virtually abolished.
According to calculations by the Amsterdam based political scientist Ruud
Vlek, "Since these reforms, employees have to contribute 80 per cent of all
social insurance contributions and employers just 20 per cent."
PARLIAMENTARY MANOEUVRING
This barrage of social attacks shook the government parties. A third of
the PvdA's 90,000 members turned their back on the party during the next
three years, and in the parliamentary elections of 1994 its vote declined
by 25 per cent. Its share of the total vote sank from 32 per cent to 24 per
cent. The PvdA's coalition partner, the CDA, fared even worse. It lost a
third of its votes, sinking from over 35 per cent to 22 per cent of the
total ballots cast. Together, the two "people's parties" lost 32 of their
former 103 seats, and gave up their absolute majority in the 150-member
parliament.
The elections registered popular opposition to the previous government's
pro business austerity policies. Nevertheless a new government came to
power under Prime Minister Wim Kok, which carried out exactly the same
policies, only even more vigorously and ruthlessly.
The liberal parties, Volkspartij voor Vrijheid en Democratie (VVD)
(People's Party for Freedom and Democracy) and Democraten 66 (D66)
(Democrats 66) were able to increase their share of the vote from 22 to 35
per cent and joined the government.
LABOUR'S "NEW COURSE"
Under the new coalition, implementation of the Polder Model has been
accelerated, and the trade unions have remained an important lever for
carrying out the process. As early as December 1993, they had concluded
another pact with the employers' associations, bearing the designation "new
course." This encompassed further steps for reducing wages, making pay
scales more flexible and expanding temporary and part time work.
The agreement also stipulated that future negotiations on wages, jobs,
part-time work, privatizations and other matters would not be conducted
centrally. Rather, to the greatest extent possible, they would be conducted
on a branch and company level. Accordingly, members of the works councils
were granted extensive "co determination rights," following the German
example of Milbestimmung to facilitate the drawing up and pushing through
of concrete solutions on the ground."
In discussion with the government, new agreements were introduced in all
wage contracts for a "starter wage" for first time employees, as well as
"target group standard rates" for the long term unemployed. The wage level
of the latter hardly differs from the legal minimum wage or social security
provisions.
The employers quickly realized the benefits of this "new course."
According to the most recent surveys, between 8 and 10 per cent of all
employees are paid in accordance with these low wage standards. Overall,
nominal wage levels have stagnated and real incomes have declined.
Flexible working hours have provided the biggest boon to the employers. Of
the 300,000 new jobs created between 1994 and 1996, half were based on
flexible contracts with temporary work firms, 40 per cent were part time
jobs and only 10 per cent were full time positions. Some 3 per cent of
total work capacity (the figure for Germany is 0.6 per cent) is on the
basis of temporary contracts.
Nearly 37 per cent of jobs are part-time: 2.5 million out of 6.8 million,
the highest rate of part time employment in Europe And of these, 300,000
are only 'minijobs' (less than 12 hours a week) with "mini wages."
The unions concluded a further agreement in 1996 for "flexibility and
security" They agreed, among other things, to relax the protection against
unlawful dismissal and extend the trial period for full time employees They
also agreed to the abolition of fixed opening hours in retail outlets and
an end to bonus pay for work on weekends and national holidays.
HOLLAND'S REAL RATE OF UNEMPLOYMENT IS 27%, NOT 6%
These agreements have not only been passed into law in Parliament, they
have become the basis for carrying out mass layoffs. The so-called
''Keks-Pakt'' (Biscuit Agreement) is a prime example. When several biscuit
and cake factories announced the dismissal of 11,000 employees last year,
the unions signed an agreement that directly transferred the sacked workers
to the largest temporary work corporation, Ranstad (annual turnover: 4.5
billion marks), which offered temporary contracts for a period of up to two
years.
Over the past several years, temporary work companies have been springing
up like mushrooms throughout Holland. With their countless branches in
Amsterdam, Rotterdam, Utrecht and other towns, they are now part of the
townscape =97 like the newspaper kiosk and the bakery. They not only provide
temps for work that traditionally relies on casual employment (secretaries,
switchboard operators, fitters, building workers), but they also farm out
nurses, dental assistants, computer specialists, technicians and even
business managers.
State funded cheap wage schemes have been expanded. Various types of "job
creation" schemes have been established, targeted at the long term
unemployed, including many immigrants from countries like Suriname, Turkey
and Morocco, as well as high school dropouts and other youths. Recipients
must work hard for near poverty wages, and their labour, subsidized by the
government, costs the employers very little.
According to Ruud Vleks' calculations, some 220,000 people are employed
through such public schemes.
Other sources put the figure at 300,000. A mere 10 per cent of these
workers obtain a steady job at the end of the program.
Adding together the 400,000 jobless who are officially registered for
work, the 100,000 unemployed who are not recorded statistically and
approximately 800,000 people still on WAO benefits, the army of unemployed
in the Netherlands comprises in reality about 1.5 million. The OECD's
latest calculations put the figure at 1.7 million.
This figure does not square with the much lauded official unemployment
rate of 6 per cent. Rather it represents 27 per cent of those capable of
work, the same figure that was recorded 15 years ago.
The mass of new jobs paying a pittance has not only helped improve the
official unemployment statistics, they have been a boon to the employers'
business accounts and balance sheets. While the profits, share values and
dividends of the big corporations have climbed to record highs, and the
number of millionaires has increased to over 150,000, one million of the
6.6 million households in Holland must manage with an income at or below
the poverty level.
Thus the Dutch model turns out to be a "model": for the systematic
enrichment of the privileged few at the expense of workers and poor people.
It has created a social powder keg that threatens to explode at any time.
In this respect, it is not so much a Dutch model as a European model.
Over the past several years, strikes and protest movements have broken out
time and again: the 1991 mass demonstration against the government in Den
Haag, protests against the closure of the Fokker works, a building workers'
strike in 1995 and the recent strikes among Rotterdam dockers.
As in many other countries of Europe, the swing to the right of social
democracy in the Netherlands has led to a growth of the neo fascist party,
the so called Centrumsdemokraten (Centre Democrats). They have obtained
increased votes in social democratic strongholds like Rotterdam. In 1994
they resumed not one, as previously, but three deputies to the national
parliament.
LEFT OPPOSITION
On the left wing of the parliamentary spectrum, opposition to the Polder
Model expresses itself in support for the GroenLinks (Green Left) and the
Socialist Party (SP). GroenLinks emerged from the extinct Stalinist
Communist Party and layers of the radical movement left over from the
1970s. It is comparable to the Greens in Germany. It has five seats in
Parliament, but plays its main role on a municipal level, where it
endeavours to "take responsibility" and keep areas of high social tension
under control.
The SP, founded as a Maoist organization in 1972, opposes the government,
mass unemployment and social cuts with radical words and demagogic slogans.
Opinion polls predicted that it could double or triple its two seats in
parliament in the parliamentary elections in May. Already in the local
elections earlier this year, the SP increased its share of votes nation
wide to 6 per cent, and its representation in local parliaments from 145 to
190. In four towns it has become the strongest party. In the old industrial
town of Oss (65,000 inhabitants) in North Brabant, it has formed the city
government in coalition with the Social Democrats.
Asked what was the biggest difference between the SP and the PvdA or
GroenLinks, the SP's chairman in Amsterdam, Wim Paquay, answered: "In our
policy towards foreigners. We are for a strict application of the existing
laws against illegal immigration. On the other hand, left wing PvdA and
GroenLinks politicians often want a sort of amnesty or exemption for
problem cases. But such a procedure would attract even more foreigners,
many more than could be naturally integrated into Dutch society."
Just as they call upon the police to keep domestic problems under control,
the SP supports trade war measures abroad such as a punitive customs duty
"if competitors threaten to undermine the social and ecological standards
of the Netherlands and Europe." Like GroenLinks, the SP wants to strengthen
the nation state in response to globalization and its social consequences.=
=20
--
Michael Perelman
Economics Department
California State University
Chico, CA 95929
Tel. 530-898-5321
E-Mail [EMAIL PROTECTED]
