Look at the headlines - six straight years of economic growth, Europe’s seventh-largest economy, near record-low unemployment - and the Netherlands seems the very picture of strength and stability: a country that has long prioritized steady results over flash and disruption. And that view isn’t wrong, especially when comparing the Netherlands to many of its larger neighbors.
But at the same time, one shouldn’t overlook the steps the Dutch have taken since the 2008 financial crisis to build a more innovative, diversified, and resilient society.
Those efforts are paying off handsomely. The country’s GDP as of Q3 2018 had grown 3.1% year-on-year; government projections for 2019 clock in at 2.6%. Both are well above the European average. Unemployment sits as 3.9%.
Government surveys of consumer confidence in 2017 were the highest ever recorded, putting the country on par with Germany and well above European powerhouses like the UK and France.
None of this was a given as recently as 2012 and 2013, when the Netherlands experienced a “double-dip recession.” But the recovery is real: wages are rising, home sales have finally picked back up, and the number of people in paid employment is higher than ever. Exports continue to outpace imports, with both sides of the trade ledger growing healthily.
Part of this recovery can be traced to advantages that the Netherlands has long enjoyed. The seaport of Rotterdam is Europe’s largest, while Schipol Airport remains a central node in the world’s transportation network. Both hubs are well-served by an array of leading engineering, logistics, and manufacturing firms.
The Netherlands’ population has long been one of Europe’s best-educated and business-ready. Today, English is spoken proficiently by more than 70% of Dutch citizens, while institutions of higher learning like TU Eindhoven remain first-class.
However, these long-standing strengths don’t fully capture what makes the Netherlands recent success unique. One big differentiator of today’s Dutch economy is its relative inclusiveness. According to a recent study by CESifo and Cornell University, The Netherlands enjoys the fairest income distribution in Europe. This means that the Netherlands has managed to incentivize entrepreneurship while maintaining a social safety net that provides equality of opportunity.
Another Dutch differentiator is ease of doing business. Tweaks to the country’s tax regime has lured companies like Netflix and Uber to base their European operations in Amsterdam.
Meanwhile, home-grown talent has been nurtured through programs like the government’s Seed Capital arrangement and Dutch Venture Initiative. The World Economic Forum’s Technology Readiness Index, which measures “the propensity for countries to exploit the opportunities offered by information and communications technology,” recently ranked the Netherlands fourth out of all countries surveyed.
The Netherlands has also enjoyed a strong edge in innovation. Some Dutch startups, like Booking.com and Takeaway.com, are well-known and long-established. Others are newer but are already standouts in their fields. These include Mosa Meat, which cultures slaughter-free beef from cattle cells; file-transferring site site WeTransfer; and Additive Industries, a leader in the 3D printing space.
Many future unicorns are no doubt being hatched at this very moment in incubators like UtrechtInc and the Eindhoven BrainPort, or in co-working spaces in cities across the Netherlands.
In all, four Dutch municipalities (Amsterdam, Utrecht, Eindhoven, and The Hague) recently ranked in the top 40 of the European Commission’s European Digital City Index, which describes how well different cities support digital entrepreneurs (Amsterdam came in the highest, at number six.)
Many of Dutch cities are also at the forefront of green technology, with Rotterdam and Amsterdam recently winning plaudits for their pledges to become circular economies (in which waste is recycled to extract maximum value).
As Dutch upstarts continue to make their presence felt, many of the Netherlands’ biggest companies also embracing surprising strategies of transformation and innovation. Starting in 2016, Shell has made big moves into Liquefied Natural Gas through a series of takeovers and investments. Heineken Inc, meanwhile, recently signed a $3.1 billion partnership deal with China’s largest brewer, as part of an aggressive bid to become the premium beer company of choice in emerging markets.
The Netherlands’ finance industry finds itself at a particularly interesting moment of transformation. Brands like Triodos and ASN have become global leaders in the realm of “sustainable finance.” A series of recent settlements reached between Dutch banks and government regulators have had at least one silver lining: they have enhanced the overall reputation of “Brand Netherlands” as a country that’s committed to order, transparency, and fair play.
It’s no wonder, then, that the Dutch government’s measures of business confidence reached their all-time high at the beginning of 2018. As many European societies struggle with unemployment, many Dutch businesses face the opposite problem: more skilled jobs than there are qualified people to take them.
The traditional solution to this situation would be immigration, which is why many in the Netherlands and Europe breathed a sigh of relief when center-right Prime Minister Mark Rutte defended his seat in last year’s parliamentary elections against challenges from more extreme nationalist politicians. Under Rutte, next year the Netherlands’ budget surplus is set to rise to 1.0 percent of GDP, even as the government increases spending on education, healthcare, the military, and infrastructure.
That said, the uncertainty many felt in the run-up to the 2017 elections suggests that the Dutch “polder model” of consensus-based policy making may be transforming. A recent debate about whether to scrap a corporate “dividend tax” (which was ultimately left in place, but with proceeds directed toward economic and entrepreneurial stimulus) highlighted real disagreements in Dutch society about balancing growth with social provisioning.
Another issue up for grabs is the question of the future of the European Union. The Netherlands has become the leader of an informal group of smaller states that has resisted calls for greater integration, while at the same time defending the existing union. Although much of the Dutch economy’s recent growth has been driven by domestic demand, the country has an obvious stake in the future of Europe’s trade and transit networks.
A further open puzzle is Dutch retail spending. Despite high consumer confidence, rising wages, and six years of positive GDP growth, household consumption has not seen similar acceleration in recent years. A value-added tax hike set to go into effect in 2019 should further complicate this matter.
Ultimately, the stubborn Dutch savings rate can be seen as an opportunity for brands. Dutch consumers have money to spend, and the larger story of the Dutch economy is of a country moving confidently into the future – what’s more, a country where innovation is always undergirded with a larger social purpose. Successful brands are telling stories that translate this wider sense of purpose and innovation into people’s daily lives.