Fifteen years after the Global Financial Crisis: Recessions and Business Cycles in the History of Economic Thought

An Austere Nation: Public choice theory and the Dutch position in the Eurocrisis

Oudenampsen Merijn, Université Libre de Bruxelles

International observers have long been puzzled by the strictness of European austerity policy in the wake of the Great Recession. Understandably, attention has focused on Germany, with many scholars pointing to the German ordoliberal tradition as a crucial intellectual influence (Blyth, 2013; Dullien & Guérot, 2012; Hien & Joerges, 2018; Matthijs, 2016). The role of smaller countries such as the Netherlands however, has yet to be considered. The Netherlands has long been a staunch advocate of austerity and structural reform on the European stage. In fact, the Dutch were one of the leading proponents of the 2012 European Fiscal Compact. While intended to discipline others, it soon forced the Dutch government to deepen its own austerity drive and further retrench the Dutch welfare state. Presently, this policy is widely seen by economists as having been counterproductive. Through interviews with leading Dutch policy makers and economists, this paper offers a reconstruction of the ideas informing Dutch austerity. Publications such as the Financial Times and The Economist have described the Netherlands as a ‘prosperous Calvinist country’, ‘committed to austerity’, and ‘a famously thrifty people’ with ‘Calvinist attitudes’. In contrast to these common cultural tropes, this paper traces Dutch austerity policy to the economic policy paradigm of the 1980s, when Keynesianism was resolutely rejected in favor of monetarism, public choice and supply-side reform. In early 2012, during a meeting in Brussels, the Dutch prime minister Mark Rutte described the need for fiscal discipline as ‘the lesson of the 1980s’. Building on institutional theory, this paper gauges whether Dutch policymakers were fighting the last war.

Area: Eshet Conference

Keywords: Austerity; Great Recession; Netherlands; Monetarism; Public choice

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