In between continental Europe and the Anglo-Saxon world (the U.S. and U.K.), the Netherlands tries to occupy a middle ground between these two sociopolitical models. Given its history of free trade and exchange, the Netherlands can position itself as the leader of smaller states that together form a counterweight against Europe’s largest states.
Observations
- The Netherlands, Denmark, Austria and Sweden are considered the EU’s budget hawks, dubbed the ‘frugal four’. They share a common view that the next EU seven-year budget for 2021-2027 should be capped at 1% of the continent’s GNI (implying that the EU’s budget will shrink after Brexit) and call for more realism in EU spending (i.e. less on agricultural and EU structural funds).
- Finance ministers from Denmark, Estonia, Finland, Ireland, Latvia, Lithuania, and Sweden all recently signed a position paper written by Dutch Finance Minister Wopke Hoekstra, on the future of the Eurozone. They speak out against further Eurozone reforms, and call for more budgetary discipline from member states by their respecting the Stabilization and Growth Pact.
- In 2017, Germany, France and Italy and Spain – Europe’s Big Four – were the largest EU economies, accounting for over half of the EU’s GDP. The Netherlands is the fifth biggest EU economy with a GDP of €733 billion, just in between Spain (€1.2 trillion) and Sweden ($478 billion). However, the Netherlands is richer than most large economies: it has a higher (nominal) GDP per capita and after Luxembourg, it has the highest average annual salary of the EU.
- The Netherlands is very dependent on global trade: trade is more than 1.5% of the Dutch GDP. Furthermore, the Dutch economy is strongly connected to the global economy.
- The book ‘Mare Liberum’ by the Dutch jurist and philosopher Hugo Grotius is considered the foundation of global maritime law. Grotius stressed that the sea is, in principle, international territory and that every country has the right of free seafaring on these waters. The Dutch have always been proponents of free trade and exchange, as we have written elsewhere.
- This year, we have seen several sweeping proposals for further European integration, e.g. establishing a European banking union along with Eurozone fiscal reform, reforms in the European and labor and capital markets, and further military cooperation
Analysis
Brexit and the election of Donald Trump have put pressure on the transatlantic alliance. As a result, the European continent is refocusing on itself, while an increasingly assertive Russia and Turkey and a rising East make European member states ever more dependent on each other. Furthermore, after years of sluggish growth in the aftermath of the European sovereign debt crisis, growth is finally rebounding in many European economies. In this play of geopolitical forces, last year’s formation of Macron’s and Merkel’s pro-European governments gives 2018 pro-European momentum, as a strong Franco-German axis has historically been the driver for European reforms and integration. Traditionally, the U.K. was the counterweight against too much integration-enthusiasm from France and Germany, as they perceived Europe primarily as a means to spur trade and reduce transaction costs. The Netherlands generally sided with the U.K. in its unwillingness to transfer sovereignty from the national to the European level, and its opposition to the idea of forging an “ever closer union”.
A network of ‘neutral countries’ that collaborates and brokers international disputes can be led by the Netherlands
In the vacuum of Brexit and the reconfiguration of European geopolitics, the Netherlands should moot itself as the leader of small states, as we have written elsewhere. In doing so, the Netherlands already increasingly partners with Scandinavian countries (Denmark, Finland, Norway and Sweden) in European issues. Some factors unite these countries. First of all, they’re sea-based economies, and with their small domestic consumer markets and maritime hubs, they are strongly dependent on global trade in and to Europe. As they rely heavily on free shipping lanes and trade routes, these countries prefer rule-bound politics so that all members abide by the rules (as they don’t have the resources to enforce larger states), and to institutionalize their economic interests in multilateral free-trade agreements instead of ambitious political projects (i.e. establishing a European army). As such, their focus is on prudent monetary policy instead of fiscal intervention, and decentral and federal decision making instead of centralized supranational politics, on budgetary discipline instead of European education programs.
Besides this political realism by being a small state, the Netherlands occupies a middle position between the continent and the Anglo-Saxon world: it is egalitarian and social-democratic (continental) but averse to state intervention and central control (Anglo-Saxon). As such, their markets are a combination of tough regulations (a focus on social goals and establishing cooperative business ecosystems) and free exchange (competition), making the Dutch economy highly competitive and a strong proponent of free trade. In this way, the Netherlands resembles Scandinavian states in a whole range of socioeconomic and sociocultural indices, like their wealth, Human Development Index, Social Progress Index, Global Innovation Index (socio-economic) and their society’s degree of trust, citizenship and social capital (socio-cultural). On Inglehart and Welzel’s cultural map of the world, the Netherlands is also closely related to Scandinavian countries.
Furthermore, as we are moving towards a multipolar world order, there are other small states that risk being absorbed into the sphere of influence of a larger states or the geopolitical orbit between larger superpowers. The Netherlands might forge an alliance with other small and liberal countries with competitive and open economies that benefit from multilateral free trade agreements and institutions, like Baltic states come to mind, as do Uruguay, Costa Rica, South Korea, Singapore and Oman.
Implications
- In a multipolar world, neutrality and trustworthiness become important strategic assets for countries. Countries that convincingly play by the international (political, economic, juridical) rules of the game, while having no direct (military) stake in regional or hegemonic power play, can obtain this position. A network of ‘neutral countries’ that collaborates and brokers international disputes can be led by the Netherlands. Dutch leadership comes naturally given its history of free trade and exchange, and its neutral and liberal tradition. As such, the pragmatist Dutch multi-stakeholder governance model (‘poldermodel’) can become a blueprint for other small states across the world.
- Before Brexit, foreign companies often chose the U.K. as their first European investment place, because of their business climate and proximity to the European hinterland. If the Netherlands replaces the U.K. as the main proponent of free trade and open and liberal economies of the European Union, this might stimulate the Dutch investment position for foreign companies.
