A different kind of socialist.

Photographer: Emmanuel Dunand/AFP/Getty Images

It's Easy for the Dutch to Go Hard on Greece

Justin Fox is a Bloomberg View columnist. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
Read More.
a | A

Jeroen Dijsselbloem, a curly-haired, fresh-faced 48-year-old with a degree in agricultural economics,  has spent his entire career working in government jobs with the Dutch Labor Party. For the parliamentary election of 2003, he and two other young socialists (that’s what Labor Party members call themselves) who had graduated from technical universities campaigned as “the red engineers,” touring the country in red coveralls and pledging to fix stuff. They were elected amid big Labor gains. Other notable Dijsselbloem accomplishments include winning the National News Quiz on TV in 2008 (one of his fellow red engineers won in 2005 and 2006), receiving the 2013 Clear-Language Prize for having such a big English-language vocabulary and using it so well, and pushing his party somewhat to the right on immigration, education and crime. He’s also a part-time pig farmer.

So, a smart, charmingly nerdy guy, with an interesting hobby. No background in finance, though, and not really the sort to strike fear into anybody. During the negotiations that led to Dijsselbloem’s appointment as Finance Minister in 2012, one Dutch political journalist quipped that “the Pampers generation is seizing power in The Hague.”

Since then, though, Dijsselbloem has built a reputation within his own country as a budget hawk and in Europe, where he has been chairman of the eurogroup of euro-zone finance ministers since February 2013, as a plain-spoken (perhaps overly plain-spoken) hard-liner. Not the hardest of hard-liners -- he was to a certain extent the middleman between Germany and Greece in the negotiations of the past few weeks -- but a consistent advocate of sticking to the rules.

“With a socialist like Mr. Dijsselbloem, who needs conservatives?” one Green Party member of the European Parliament complained last year. When the Dutch satirical TV news show "Cojones" (yes, that's Spanish, although the host pronounces it Co-yo-nus) aired a rap battle last Saturday between actors portraying Dijsselbloem and his Greek counterpart Yanis Varoufakis, the Dijsselbloem stand-in chanted, “You can tell that I’m an expert by the frown-line on my forehead and my penny-pinching look.” (In Dutch that rhymes.)

Americans may find it hard to get their heads around this idea of a penny-pinching socialist. In the Netherlands it’s pretty normal. Yes, Labor Party politicians generally like spending money more than those in the right-wing People’s Party for Freedom and Democracy (currently the senior partner in a governing coalition with Labor) do. When it comes to deficits, though, the two parties are on a continuum that in U.S. terms would run from about Alan Simpson to Erskine Bowles. It’s true that Dutch politics has during the past decade seen the rise of two populist parties -- the Socialist Party on the left and the Party for Freedom on the right -- that complain a lot about austerity. But neither has actually been part of a government; one has to think they’d change their tune if they were.

It’s tempting to attribute this to the Dutch character. A joke told by Belgians: “How can you tell when you’ve crossed the border into the Netherlands? You can see the toilet paper hanging out to dry.” But while there’s something to the cliché of Dutch thrift, the country ran sustained big budget deficits in the 1970s and 1980s. In comparison with several other, even smaller northern European countries, it isn't even all that fiscally responsible now.

In the post-Bretton Woods era of free-floating currencies that began in the 1970s, every affluent small country on the planet at some point faced an economic crisis that underscored the limits of its ability to set its own macroeconomic policies. In the Netherlands this came in the early 1980s. In the Nordic countries it was a bit later. In Eastern Europe it came after the wall fell.

What officials in all these countries learned was that in a world of currency markets and free capital flows, their monetary and fiscal maneuvering room was limited. They simply didn't have the same freedom to use deficits and interest rates to achieve economic goals that the U.S. or even France or Germany did.

What the leaders of the most successful small nations also discovered, though, was that by virtue of their countries’ size and cohesion they could fine-tune microeconomic policies in ways that bigger countries could not. With well-crafted tax laws, flexible labor markets and investment in R&D and infrastructure small countries such as Finland, the Netherlands and Denmark have been able to stay near the top of global competitiveness rankings. Consultant David Skilling, a New Zealander now based in Singapore who has done a lot of thinking about the small-country advantage, sums it up thusly:

Small countries tend to have high levels of social capital and trust, well-functioning political institutions, and a well-developed sense of external orientation. These factors make it easier to sustain a deliberate strategy and to change course when appropriate.

Small countries that fail to craft and adjust such strategies thus don’t get a lot of sympathy in The Hague or Helsinki. It isn't just strange German hangups or populist anti-bailout sentiment among voters that has pushed a tough line on Greece -- smart politicians in a lot of small euro-zone countries have taken the lesson from the past few decades that Keynesian macroeconomic tools don’t help much and “structural reforms,” to use the term of art, are the only way to go.

This may well be the wrong lesson to have learned. The euro zone is now exactly the kind of giant economy with unwieldy politics that is better equipped to pursue macro policies than micro ones. But for now, Dijsselbloem and many of his peers in European financial policy-making circles inevitably still view the world through a small-country lens that plays down animal spirits and emphasizes sober good government.

  1. The United Nations says that "Northern Europe" stops at Denmark (it puts Germany and the Netherlands in "Western Europe"). But in European economic-policy discussions the north-south line clearly belongs well south of that. 

  2. I left off Belgium, which is small, arguably northern European, and inarguably a high-debt country (2013 gross-government-debt/GDP ratio, 101 percent), because I didn't want to spend several paragraphs attempting to explain its anomalous position. 

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Justin Fox at justinfox@bloomberg.net

To contact the editor on this story:
James Greiff at jgreiff@bloomberg.net