The Netherlands Offers Political Lessons for U.S.

03.09.15

The Netherlands Offers Political Lessons for U.S.

03.09.15
Netherlands

By Kevin Amirehsani for Global Risk Insights

By any measure, the US is a remarkably divided nation. Stagnant real wages for the average worker, increasing wealth accumulation for the top 5%, social tension, and competitive elections have all contributed to what many view as one of the most polarized periods in recent American memory.

With gerrymandering, the 24-hour news cycle, the lack of campaign finance restrictions, and a host of other potential explanatory variables, ascribing the blame for this development is not easy. Measuring its toll, however, is.

The deteriorating political climate led to the National Journal last year ranking Congress as the most divided since it began its ratings in 1982. FiveThirtyEight has gone even further, grading Congressional partisanship as the highest since World War I.

Most depressingly, a seminal 2011 study by McCarty, Poole, and Rosenthal found that the House and Senate were at levels of ideological disunity not seen since the end of Reconstruction. And that was written before the political acrimony caused by the “fiscal cliff” negotiations.

Increases in political polarization have been linked to actual reductions in investment, output, and employment, according to the Philadelphia Fed. Additionally, polarization not only means less meaningful bipartisan laws passed on Capitol Hill, but fewer laws passed in general. Last year’s batch of legislators passed the second lowest number of non-ceremonial bills since mid-century. The least productive assembly? The 112th Congress the year before.

But there’s an alternative to the hyper-partisan political trajectory.

Across the Atlantic, with a couple notable exceptions aside, the Dutch have largely perfected the politics of compromise. Known as the “Polder Model,” their system of economic cooperation between business, labor, and the state has spawned a political culture of consensus building in the Netherlands for the good part of the last three decades.

From the early 1980s, Dutch institutions such as the Social and Economic Council (SEC) and the Central Planning Bureau (CPB) served as venues for dialogue involving representatives from government, the trade unions, and employers’ associations, as well as independent experts. In this “consultation economy,” negotiating and bargaining, particularly when it comes to industrial relations, take place all the way from the shop floor to the policymaking halls of The Hague.

“Effectively, the only game in town was negotiation between minorities to get some sort of majority compromise decision on the national (or local) level,” says Jaap Woldendorp, a political science professor at VU University Amsterdam.

The result has seen Dutch unions relent a bit from their wage demands and consent to a slight scaling back of the welfare state, Dutch businesses agreeing to reduce working hours and increase part-time employment, shockingly low unemployment for periods, a series of relatively long-lasting coalition governments, and ultimately, sustained economic success.

Are the Dutch simply more culturally inclined to reach across the aisle and work together in typical “Third Way” political fashion? Perhaps. The word “polder” refers to land enclosed by dikes, which historically had to be maintained by all members of a coastal community in order to stave off flooding. This forced people from different classes in the Low Countries to work together (the “democracy of dry feet”), a process which many speculate continues to this day.

What is more, the Netherlands has for centuries been a nation of religious and ideological diversity. Maybe this has necessitated a sizable amount of dialogue between different Dutch groups over the years. Indeed, you would never hear a mainstream American lawmaker referring to opposition parties as “most beloved.”

Regardless, there are more than a few takeaways which US policymakers would be wise to note.

For one, both encouraging corporatist structures among the “social partners” (i.e. labor and employers’ associations) yet also promoting competition between them is key to forging political consensus. Unlike in the United States, Dutch law does not impose significant barriers to entry for new unions, which fosters a healthy dose of labor competition that makes a collective bargaining agreement more easily achieved. At the same time, such agreements generally forbid any sort of industrial action by the union(s) involved, which means it is in the interests of capital owners to negotiate with as many unions as possible.

But union membership has been trending downwards in both the Netherlands and the US. Perhaps more important is the creation of self-sustaining institutions that promote political dialogue. Even during times of relatively deep mistrust between Dutch employers and unions, they were still forced to sit across the table from each other during SEC and CPB meetings twice or more a year. This “repeated game” allowed grievances to be aired in a healthier manner and gradually built mutual trust.

Finally, US politicians can do a better job of convincing their organizational constituencies that piecemeal reform accomplished through negotiation hurts Labor and Capital less than farther-reaching legislation crafted without much of their input. Dutch governments have not been afraid to threaten unilateral action such as wage freezes and sweeping market reforms if negotiation between labor and business groups failed.

This was much of the idea behind the 2013 Dutch Sociaal Akkoord, a set of pension and labor market reforms negotiated by the social partners. It was agreed after more than a bit of implicit government pressure, as well as popular resentment at a lingering recession. Agreements like these which seem skewed towards business interests have in the past often been cushioned by reductions in employees’ payroll taxes, another tool in the Dutch conciliatory arsenal.

It would be a bit hasty, however, not to acknowledge the structural constraints that make all of the above difficult to achieve in the US.

“Honestly, the US is not the Netherlands. And the environment, challenges, institutions, and historical context are totally different,” according to Paulette Kurzer, a political science professor at the University of Arizona who specializes in Dutch politics.

She is right. The US lacks elections based on proportional representation and thus more than two major parties, meaning high-level compromise via coalition politics is unnecessary. It is a far cry from the welfare states of northern Europe that can cushion workers who might occasionally receive the short end of the stick in a labor deal. And it is a country where the ethos of individualism, in many ways antagonistic to corporatism, has reached near-mythic proportions.

Nevertheless, if Americans grow weary of the obdurate politics of polarization, they should know where to look.

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