Dutch Welfare State: “the Times” Praises; The Dutch Flee

In the recent New York Times Magazine, writer Russell Shorto painted a view of the Dutch welfare state that was worthy of Vermeer. Indeed, he used this metaphor himself, romantically describing “the pale yellow light” that suffuses his 17^th-century apartment—and in similar brushstrokes, the system that taxes 52% of his annual income.

But Shorto does not describe in detail issues that are well worth talking about: welfare state overreach, the Dutch approach towards multiculturalism and the Dutch approach towards crime. All three are highly relevant to understanding a growing sense of disillusionment in Dutch society and a rising enthusiasm for emigration.

Let’s start with the generous welfare state. One would not think it from reading Shorto’s piece, but the Dutch welfare state brought the Netherlands to the brink of economic disaster in the 1980s. One can describe this, in effect, as an unintended overreach: when Dutch policymakers expanded entitlement programs in the 1960s, they did not expect these programs to grow as fast as they did in the 1970s and 1980s. Policymakers interviewed in their retirement years have expressed remorse for the ballooning of the Dutch welfare state, emphasizing that if they had known at the time what they know now they would have acted rather differently in formulating policy.

Exhibit A is the disability insurance program that led the Netherlands to become, in the memorable words of former Prime Minister Ruud Lubbers, “an ill country.” Policymakers decided to dramatically expand the scope and generosity of the disability insurance program in 1967. Dutch employees who suffered from short-term disability for a period of more than one year were eligible for a benefit of 80% of one’s previous wages for a period of unlimited duration. The definition of ‘disability’ in the new program was broad, giving the Dutch disability scheme a low-access threshold: common symptoms included back aches and mental fatigue related to stress at work. Disabled workers were entitled to 80% of their last-earned wages until the age of 65, when like all Dutchmen they became eligible for the general Dutch old age pension, the AOW.

As a result of the changes, the number of “disabled” workers soared from under 250,000 in 1965 to more than 750,000 in the 1980s and nearly 1 million in the early 1990s. The program functioned not only as a disability insurance program, but also as a program that suffered from frivolous claimants and rampant abuse, serving as a dumping ground for older workers who were laid off in the waves of re-structurings that altered the Dutch corporate landscape in the 1970s and 80s.

As the golden age of post-war economic growth abated, Dutch public finances deteriorated rapidly. Matters worsened further under the Prime Ministership of Joop den Uyl (1973-1977), whose sincerely held view was that the great society in the Netherlands would be realized through “the spreading of income, knowledge, and power”. By the early 1980s, exhausted by ever-increasing government spending and ever higher rates of unemployment, the Netherlands found itself in a deep economic crisis. Reformist Prime Minister Ruud Lubbers implemented a stark austerity package of spending cuts in order to get the Netherlands out of its rut. The Netherlands had become, as Lubbers would say in 1990, “an ill country”, enfeebled by its dependence on state programs and the abuse of the disability insurance system.

Shorto’s article describes the “consensual” Dutch culture in mostly positive terms, and Dutch interviewees in his article present their system as a model to emulate. I would argue that the economic consensus model in the Netherlands is quite recent in historical terms, and that even today, it contains a fair amount of conflict.

There is little that was inevitable about the Wassenaar Accord of 1982: at that time, today’s famed Dutch consensus model was almost unimaginable. Lodewijk de Waal, one of the most influential Dutch trade union leaders in recent years, advised European trade unions in 1997 to strike a more consensual pose towards national governments, but admitted: “in 1982, I was not in favor of the deal at all, I was of the opinion that the rich should pay for the crisis.”

In 1982 the Dutch state, under the leadership of Lubbers, took matters into its own hands and forced labor unions and employers’ federations to craft and agree upon an austerity package. Eventually, the social partners reached an agreement (the famed Wassenaar agreement), but it was reached only under the figurative barrel of a gun.

Labor unions promised wage restraint in exchange for a softening of certain austerity measures: the result, years later, was a sharp rise in employment and an improvement in public finance. Yet it was the Dutch state, fed up with the “social partners” that forced these social partners to come to an agreement: social “consensus” was pushed aside because its economic costs had become simply too great to bear for the public sphere.

Well into the 1980s, political economists doubted that the Netherlands would be able to reform its welfare state: as recently as 1986 the high dependency on entitlement spending and high rate of unemployment led Swedish sociologist Göran Therborn to call the country where he worked, the Netherlands, “perhaps the most spectacular employment failure in the advanced capitalist world” (Visser and Hemerijck 1997).

Today, the Dutch welfare state has been significantly pared back: the number of disability insurance recipients has dropped substantially, and even the state’s role in the healthcare sector has been greatly pared back. A healthcare system that formerly relied on central government planning is being transformed into a system that relies on consumer choice, competition among insurance companies and individual responsibility. These changes are worth noting, but they came about only after extremely difficult struggles that took decades.

Unfortunately, the welfare state has helped decimate Dutch civil society: again, this has been an unintended consequence of government growth. It is not yet possible to know if the Netherlands’ civil society will re-cover from the blows it has incurred. In 2003, Theo Schuyt, Professor of Philanthropy at the Free University of Amsterdam, wrote:

The pumping of money over the courses of many years into employment opportunity projects, in anti-poverty policies and urban policy has made societal organizations entirely dependent on government financing. With the making available of government funds, the involvement of citizens, companies, funds, and churches has crumbled. The many billions invested had—probably for that reason—no clear effect, according to the verdict of the General Accounting Office on the anti-poverty- and urban policies that have been implemented. The coalition cabinets of the 1990s have helped kill the famed ‘civil society’ of which their leaders spoke and speak so much… the Netherlands has the largest subsidized non-profit sector in the world, but is at the bottom where philanthropic revenues are concerned…

The fiscal price tag of the Dutch welfare state remains high, even now that it has been pared back: Shorto mentions the 52% income tax rate, but the Dutch taxman lurks in unexpected places. New vehicles sold in the Netherlands, for example, are hit with a 40% “vehicle tax” in addition to the 19% value added tax that is added to cars as well as many consumer goods sold in the country. Dutch gasoline costs more than $6 a gallon, of which roughly 70% goes to the government in the form of various taxes including the VAT. The highest estate tax rate (that some people really do pay) is 68%: for the sake of reason this rate will be reduced to 50% in the years ahead.

Increasingly, however, cultural issues, not economic ones, are salient in Dutch politics. In his article, Shorto mentions issues surrounding the multi-cultural society fairly briefly. Dutch society is historically segmented, or divided into “pillars”: Protestants, Catholics, socialists and liberals have historically lived side by side, but in their own separate sphere, with each group having its own newspapers, TV broadcasting corporation, labor unions, schools, etc. with relatively little interaction with other groups. “Toleration” may be better described as “peacefully living apart.”

The immigration of large numbers of persons adhering to different cultural norms and values has posed a challenge that Dutch policymakers have not yet successfully tackled. Torn between permissive multiculturalism and universalist values, between respect for women’s rights and religious freedom, Dutch policymakers have too often sacrificed the tolerant ideals of their country and culture in the name of multiculturalism. Dissident voices are ruled out of order and successfully demonized (Pim Fortuyn), killed (Theo van Gogh) or face such severe threats to their security that they are forced to emigrate, as in the case of Somali-born politician Ayaan Hirsi Ali, who violated the Dutch norms of “consensus” by insisting on publicly discussing female genital mutilation; honor violence; honor killings; and forced marriages.

Shorto hints too briefly at the problems involved in “politics of consensus”: all too often in the Netherlands, this means that the most aggressive elements in society win. Those who speak up—such as Hirsi Ali—are blamed for stirring up discontent. Blame is often attributed to them, not to those who commit the criminal acts.

This brings us to the third issue, the Dutch approach towards crime. The Dutch approach towards crime is not often discussed abroad (except for lenient Dutch laws concerning marijuana possession) but it illustrates the perils of viewing men as being inherently good-hearted.

James Q. Wilson, America’s pre-eminent criminologist, recently wrote a piece in the Los Angeles Times titled “Do the Time, Lower the Crime.” In the Netherlands, a similar piece by a pre-eminent Dutch criminologist would be almost unthinkable. Guided by experts, Dutch public policy remains almost entirely geared towards the full rehabilitation of criminals, even the clinically insane. The belief remains strong that men are inherently good and can be rehabilitated. The few voices in the political arena calling for tougher sentencing guidelines are often accused of being vindictive souls, vacuous simpletons or plain demagogues.

Even against a growing tide of public dissatisfaction, Dutch judges remain reluctant to sentence those guilty of crimes to hard time. According to the Dutch Prosecutor’s Office, in 2006, 10 defendants found guilty of murder were sentenced to mandatory community service with no hard time, while 54 defendants found guilty of rape were sentenced to mandatory community service with no hard time. Such sentences give pause to think: they raise questions of judicial fairness and of common sense on the part of Dutch judges.

Similarly, in 183 cases of attempted manslaughter, defendants were sentenced to mandatory community service (and no hard time). Many cases involving common violence and aggression in the streets involve culprits who laugh at the low sentences handed to them by judges: they wear the jail-free penalties as a badge of pride, and do not view them as a deterrent of any kind.

Dutch judges remain far more lenient in their sentencing than official guidelines instruct them to be: when criticized for excessive leniency, Dutch judges respond with irritation that the independence of their profession is under attack. This cultural remoteness is a reminder of the perils of elites standing too far removed from the society in which they wield influence. In my view it is time for Dutch judges to consider that they are at risk of becoming the weakest link in the increasingly difficult fight against crime in the Netherlands.

Indicative of the Dutch approach towards crime is the treatment of clinically insane criminals. These criminals are often sentenced to stays in psychiatric hospitals where the goal, with only rare exceptions, is their full re-integration into normal society. As part of this, psychiatric patients often go on accompanied visits, where some succeed in escaping from their guards. When these psychiatric patients escape their guards, they often stop taking their medication and can become extremely dangerous.

In 2005, 73 such psychiatric patients escaped: in 2004, 100 did. One patient who escaped in July of 2005 killed a man during his escape (an anecdote, to be true, but an important one). Recently, a 22-year-old man in psychiatric detention succeeded in escaping twice. After not returning to the psychiatric clinic from an unsupervised trial visit, he was arrested by police in Amsterdam-West when he was about to commit a robbery. The judge that saw him following the incident ruled there was insufficient evidence to keep him in jail, at which point police were supposed to return him to the psychiatric clinic, but let him go free because of an administrative error. He has not yet been found.

What is one to make of policies and cases such as these? It is my fear that the faith in the goodness of man that began to dominate Dutch public policy in the late 1960s and 1970s has led to extreme difficulties in combating crime in the present. The gentle approach towards criminals who have been found guilty contributes to a growing belief among Dutch citizens that the public sphere is simply “out of touch” with normal society and incapable of successfully tackling crime.

Dutch policy is often un-orthodox: the permissive liberties of Amsterdam contrast with the conservative Calvinist Dutch countryside that retains its own “Bible Belt” and high rates of Church attendance. A thorough commitment to secular values in the public sphere belies the full public funding of Christian (and now Islamic) schools on an equal footing with secular public schools. Permissive laws regarding marijuana possession belie a relatively low rate of marijuana consumption. A vibrant feminist movement contrasts with the rising number of cases involving honor violence and forced marriages in the Netherlands.

Whatever the precise circumstances, the realities of Dutch society and the Dutch welfare state are considerably more complex, in my view, than the excessively optimistic portrayal offered by Mr. Shorto. Precisely because the Netherlands remains so distinctive and complex, however, it is a country well-worth researching. In so doing we are likely to find both lessons and warnings that can be applied to U.S. public policy.