Netherlands: Digging Deep Into The Dutch Economy - YouTube

Known for windmills, tulips, tall people,  and stealing the land from the sea…  

the Netherlands is among the top  20 biggest economies in the world,  

and a GDP per capita of over  fifty thousand dollars. 

If you are Dutch, don’t forget to share  your opinions in the comment section below. 

The geographic location of the country is both  its best and worst feature. Best because it  

serves as a European trade hub, worst because a  quarter of the country is below sea levels. But,  

the country’s nonstop battle against water  has made it an expert in water management,  

dredging, and flood protection. It is truly  exceptional to see how the Dutch managed all  

the Delta works, dams, dikes, and polders.  It’s a story of remarkable engineering and  

human resilience from which  the world could learn a lot,  

considering the rising sea levels is  a topic of concern for many countries.

The Dutch are highly individualistic. There is  this topic that individualistic societies are more  

likely to gain economic success collectively. But  it’s debatable. On the other hand, the government  

traditionally had a higher regulatory role in the  economy. The government’s economic interventions  

were significantly reduced back in the 1980s  when 'market economy' was professed worldwide.  

This resulted in considerable privatization as  well as the restructuring of welfare programs.  

Nonetheless, it remains highly  regulated but still a ‘market economy.

In fact, it is arguably often referred to as  the birthplace of modern capitalism. Forget  

about Amazon, Apple, Google, etc., back in the  17th century, The Dutch East India Company,  

also known as the VOC, was the most  valuable company of all times. It did  

commit many atrocities and misused its powers  with colonialism, nonetheless, it formalized  

many modern-day economic principles that serves  as a blueprint for modern era corporations.  

It was not until the late 1700s that they  were replaced by the British as the world's  

leading trading nation. The tradition of  being merchants and traders carries on  

as the country’s economy continues to  be highly dependent on foreign trade.  

But there are many lessons one could learn  from the economic history of the Netherlands. 

Tulips were introduced into Europe from Turkey  after 1550. The vibrantly beautiful flowers  

became immensely popular. Infected by a virus,  some varieties of tulips showed varied patterns.  

As the rich sometimes collect rare items  like paintings for ridiculous prices,  

many wealthy individuals began to collect  and display these rare tulips. The demand  

for mixed-colored tulips exceeded the supply,  and prices of these rare bulbs skyrocketed. 


In early 1600 a single bulb of a new variety was  satisfactory as dowry for a bride, or as a payment  

for a thriving brewery in France. The madness  reached its peak in Holland during 1633–37.  

Many people thought that the whole of Europe and  possibly the whole world would want to own tulips.  

The prices elevated to an extent that a single  flower was priced more than some houses.  

While trades were done as cash for  the bulbs, many bulbs were sold and  

resold as a future contract without  even leaving the ground. Eventually,  

the madness ended in 1637 with a drastic collapse  in prices and many losing their fortunes. 

TulipMania often described as the  first recorded speculative bubble,  

is a perfect example of how people forget how  much of an intrinsic value an asset holds.  

They bought more and more in hopes  to sell them later for profits.  

It may seem silly to buy a tulip bulb for let’s  say 1 million dollars, but if you believe you can  

sell it for 2 million after a certain time,  then it just seems like a very reasonable  

decision as well as a rational investment.  This is known as the "greater fool theory”.


Some people have compared TulipMania with numerous  

economic bubbles including Bitcoin and  cryptocurrencies. While others oppose  

the similarities between the two  with different set of arguments. 


Recently some historians have highlighted  that TulipMania was highly exaggerated  

and not many people were involved in it.  But, these history corrections were only  

meant to emphasize that TulipMania arguably  didn’t impact the rest of the Dutch economy.

Tulipmania is a cautionary tale of  how speculative bubbles are generated.  

It shows our irrational biases. It shows our  tendency to get carried away with anything.  

Then they collapse and we move on to find  a new madness. And the pattern repeats.

In 1959, the discovery of natural gas  in Groningen had a huge positive impact  

on the Dutch economy. This discovery was as  important for the Netherlands as oil for Norway  

or banks for Switzerland. While natural gas  helped the Dutch economy stretch its wings,  

it also negatively impacted the overall  economy. If it sounds like a paradox,  

then you are right. Because that’s what it is. 

The Dutch Disease, a term coined in 1977 by ‘The  Economist’, highlighted a causal relationship  

between the economic growth of one sector,  compared to a decline in other sectors.  

The growing sectors are usually natural  resources but not limited to them,  

while the other sectors could be  manufacturing and agriculture.

The Netherlands began exporting natural gas.  But when the revenues started pouring in,  

the country’s currency Guilder began  to appreciate. It happens due to the  

currency’s higher demand in the international  market. This may sound good but it wasn’t. The  

appreciation made the Netherlands exports became  expensive for other countries to purchase,  

putting pressure on the other sectors. Also,  the appreciated currency made the imports more  

affordable for consumers who started preferring  imported items over domestically made products.  

This resulted in further decline of  the local manufacturing industry. 


The growing sector with tons of revenue  from exports offers better wages which  

pushes the other sectors to pay more to  their workers, who would otherwise flee  

towards the growing sector. But there are only  limited people the growing sector could hire.  

This along with the decline of other  sectors increases unemployment.  

Even investors flee towards the  growing sector for better profits. 

The growing sector also brings more revenue  for governments which results in increased  

government spending that manifests in  public infrastructure, military spending,  

and welfare programs. The welfare programs make  the government look good in front of the voters  

but if this is done carelessly, it could lead to  further issues. For example, if something happens  

to the growing sector, the welfare programs  need to be restructured which people dislike.


The more complex and diverse and economy is,  

the less likely it is to be  impacted by the Dutch disease. 

The Dutch disease is a result  of wealth managed unwisely.  

The resource curse is real. It shows the riches  could be a curse sometimes rather than a blessing.  

It’s a lesson that you shouldn’t  put all the eggs in one basket. 

The only thing that cheers up a Dutch more  than an unexpected discount is if they could  

get something for free. The bicycle-friendly  people are less inclined towards spending money  

on branded products. They would rather choose  a good product that works for little money.  

Squeezing out the most for less is a  preference. But before you call them greedy,  

you should know that the Netherlands is  among the top countries that spend most  

on development aid per capita as well as  a percentage of Gross National Income.

There is this Dutch saying that roughly  translates to: “Just act normal,  

then you're already acting crazy enough!”  Not trying to stand out and being content  

with ‘the normal’ is the key. This also  manifests in people’s financial decisions.  

Also if you brag about your wealth,  the orange-loving people could put  

your in your place with their stereotypical  Dutch straightforwardness and directness.

The Netherlands has one of the highest Employment  Rate, which is a measure of people employed in the  

working age population. But what stands out  is a huge number people who works part-time.  

The country has a flexible working  culture. The Dutch are relatively  

more inclined towards working in  the evenings or on the weekends.

The Netherlands is among the countries  with the lowest income inequality. However,  

wealth inequality is debatable. Although  it does bring quite polarized opinions.  

We do like to add that countries  with a big middle-class population  

usually give an impression of low  wealth inequality. But that does  

not mean there aren’t super-rich people  owning a big chunk of the total wealth.

Countries with the highest levels of social  spending are considered as the welfare states.  

Public social welfare spending  is high in the Netherlands but  

it is not among the highest as one would expect,  

considering they are vocal about their social  security and one of the best pension systems.


Household debt has reached above %230 of the  

net disposable income which is  among the highest in the world.

If there is anything to complain about other  than the rainy-windy weather, that would be the  

high rents in Amsterdam. The Netherlands  ranks high on the cost of living index.

The Netherlands has a combination  of growing elderly population and  

a low fertility rate which is  below the replacement levels.  

But immigration is a touchy topic in the  country. They are less inclined towards  

more open immigration policies to increase the  working-age population like Canada or Australia. 

The world’s oldest professional is fully  regulated and legalized by the government.  

While it provides safety and fixes  many issues, it is also a way for the  

government to tax it instead of letting  it drift away as an underground economy.

The Netherlands is among the countries  with high tax revenue to GDP ratio,  

which is a share of a country's output that  is collected by the government through taxes. 

The Dutch residents and companies are among  the biggest investors in foreign countries.  

The country is also home to some  of the world's biggest companies,  

including Royal Dutch Shell,  Heineken, Philips, etc.

People have high trust in the government.  The Netherlands ranks among the least  

corrupt countries. However, it also ranks  among the top ten list on the Financial  

Secrecy Index that ranks countries  based on their financial secrecy,  

offshore financial activities,  and illegal financial flows.  

Which are sophisticated terms for saying it’s  a tax haven. The country also ranks high on the  

Corporate Tax Haven Index helping multinational  companies to underpay income taxes. It would be  

interesting to see if the recent EU harmonization  tax plan could influence this whole matter.

While the country acts like  its virtuous and on the high  

moral grounds with the clean energy initiatives,  

the unusual earthquakes are the real reason behind  the discontinuation of natural gas extraction.

The Netherlands has a vital position in Europe’s  distribution network with Schiphol Airport,  

Rotterdam and Amsterdam ports as well  as a connection to the Euro-corridors.  

With warehouses and distribution centers,  the Netherlands offers its services to big  

international corporations to supply their  goods to Europe. Rotterdam port is also  

called the largest German port due to its  significance for the economy of Germany.


Being part of the Euro Zone, the country’s  monetary policy is controlled by the  

European Central Bank. The Dutch economy is more  strongly tied to the European Union than the UK,  

so it has more to lose if it goes towards  the same path that the United Kingdom took.  

You can share your opinion on the possibility  of Nexit in the comment section below. 

The Netherlands' inclination to adopt  technology for agriculture is impressive  

but also natural considering it  has a high population density.  

The Dutch agricultural sector is highly mechanized  with greenhouses and associated technology, geared  

towards automation, and employing the smallest  workforce for the maximum output possible.  

Wageningen University is like the Stanford of  Agriculture and consistently ranks as number one.

The Netherlands is the second biggest EXPORTER  of agricultural products in the world. But if you  

see rankings of the biggest food PRODUCERS from  different sources, you will notice the Netherlands  

is nowhere among the top. Many sources on the  internet are linking the value of exports with the  

innovation happening in the agricultural sector  in the Netherlands. This is false advertising.  

Because many of the exported agricultural  products are first imported from other countries,  

including some countries with low wages,  where all kinds of farming techniques are  

used instead of the high tech methods used in the  Netherlands. Subsidies, as well as high tariffs on  

cheap foods from developing countries, keeps the  European Union agricultural sector profitable.  

A big chunk of agricultural exports include  inedible products such as flowers which are also  

partly imported from other countries and traded  through the Netherlands. However, the country is  

the European Union’s largest meat exporter with  veal and beef exports to Germany, poultry to the  

United Kingdom, and pork to China. The Dutch can  produce more inexpensive pork for China than the  

Chinese could produce in their own country. Other  important exports are dairy and some vegetables. 

The Dutch high agricultural exports are  based on the value and not by volume.  

They have access to high-paying countries where  quality premium-priced products could be sold.  

There are many other contributing factors that  leads to the the agricultural success such as  

the logistics, warehouses & distribution network,  

an ideal port at the crossroads of  Europe with access to large markets.  

Bulk transport is also comparatively inexpensive  and a homogenous trade bloc also helps. If you  

don’t have all these benefits, you can’t be as  successful as the Netherlands even if you try to  

adopt all the fancy equipment and techniques  the Dutch agricultural sector is utilizing.

The Netherlands is playing with a new theory  named “Doughnut Economics” by Kate Raworth,  

who suggests thinking beyond the traditional  economics of infinite growth. The theory is  

advocating to rise everyone to sufficiency  while lowering unsustainable consumption.  

It sounds more like a proposition for a better  management system than a new economic theory  

which it is desperately trying to become,  packaged into fancy catchwords and morality. 

We are off to hit some coffee shops.  Bedankt (Dutch word for thank you) for  

watching the video. We will try to reply  to everyone in the comment section below.  

Please like, subscribe, and  share to support the channel.