How many times have I joked that about each European Minister of Finance who would suddenly and miraculously wake up if the Dutch Minister of Finance would wake up in heaven? A well-functioning economy, a low national debt, what a party! Try that in Germany, the United Kingdom or France.
The only problem, I wrote earlier, is that we have too much economy for one Netherlands. We are reaching limits. Political wishes and plans of companies fail due to a lack of workers, space, electricity and water.
My view of the economy is now becoming less sunny. The graceful boxer, once light on his feet, quick off the ground after a blow, begins to show signs of stiffness and age.
In a fit economy, ailing, outdated companies are constantly replaced by innovative newcomers. This creative destruction is essential for innovation and productivity, but it is declining in the Netherlands, the Central Planning Bureau notes. Old companies go bankrupt less often. Fewer new companies are emerging. The Dutch economy is less dynamic than it used to be.
Foundations
There’s more that worries me. We are neglecting the foundations of our economy.
The Dutch workforce is still one of the most skilled in the world, this is how the OECD measures. Smart and knowledgeable. But our future workforce is not. The skills of our fifteen year olds are deteriorating. Dutch fifteen-year-olds are still the best in Europe in arithmetic, but when it comes to reading they are now among the worst group.
And then we also neglect our infrastructure. Many of the bridges, roads, locks and waterworks that we built in the decades after the Second World War need to be replaced. But cabinets do not release enough money for this.
We talk a lot about resilience in a world that is more aggressive and where shocks come our way more often, for example due to climate change. But these are the ingredients of an economy that adapts less quickly, that has to spend a lot of time shoring up the foundation instead of renovating the house.
How do we become light-footed and fit again?
Former ASML CEO Peter Wennink wrote an advice about it. His answer: give companies more space and invest more, including as a government, in productive and strategically important industries. So: scrap rules, issue permits more quickly, make energy cheaper, provide more technical staff, solve the nitrogen problem, strengthen the power grid. Then that innovative economy will come naturally. This line of thought also ended up in the coalition agreement.
It is completely unclear for which companies a grid connection is really important
It sounds logical, but it is the view of the CEO of a company, says Marcel Timmerprofessor and deputy director of the CPB. And that won’t get you there because that view is too narrow. There will always be scarcity, even if the power grid becomes much heavier. “There is an endless demand from companies yet to be established.”
Look at the municipality of Middenmeer, says Timmer. There was more wind energy. But also a new data center from Microsoft. “The result: the scarcity became greater.” The data center not only took up the new electricity, but also space and water. “Scarcity cannot be eliminated. There will always be companies that feel squeezed. The key question is how best to distribute that scarcity.”
An excellent way, but not mentioned by Wennink: via the market. Timmer: “Price the new scarcities: connection to the power grid, water, nitrogen emissions. Now that is not happening and there is chaos.”
Because it is completely unclear for which companies a grid connection is really important. “Because they cannot offer a price, companies are just going to claim more space on the power grid than they need.” This is called laying down towels. A new crisis also appears to be in the making regarding clean water.
Lighter
Such price incentives are not a punishment for companies, although it is often seen that way, for example when economists argue for a tax on nitrogen emissions. It actually gives companies control, says Timmer. Now all companies are in an endless queue. They can’t do anything. If they can offer a price, companies can start charging. The company that can create the most added value with a grid connection will pay the most. Other companies are looking for a different solution. The economy can move forward.
And of course the government does not leave the distribution completely to the market, says Timmer. Giving hospitals priority for a power connection makes sense. “But whether a flower grower or a data center can best use that power? Whichever company is willing to pay the most for it, a good selection mechanism is needed. This also allows us to use resources more efficiently.”
Seen in this way, the scarcity of technical personnel is not a problem that the government must solve. “Apparently companies are not prepared to pay higher wages to attract those people. Then they are apparently more productive in other companies.”
So how do we become more light-footed and future-proof? Promote competition, improve education, put more money into infrastructure. And don’t be afraid to ask companies a price for what is scarce. Because not everything is possible.
Business people often emphasize the importance of more agile employees, a more agile government and the welfare state. But the business community itself can become a lot more agile. Pretending that the government can remove all obstacles for companies – that is precisely what makes our boxer stiff.
