What lessons can we learn from the Dutch Election?

Chloe Lok Yi Lam // 14 March 2017

Waves of populism have swept the globe, and the Dutch parliamentary election, to be held on 15 March, has received a lot of attention, especially from European counterparts. After Trump’s populist victory and Brexit, will the Dutch join the party?


The less than satisfactory economic performance of Mark Rutte’s administration in the past 5 years could shed some lights on the electoral shift in the Netherlands. According to OECD data from 2012 to 2015, the Dutch economy has maintained an average of GDP growth rate of around 2 per cent, which was 1 percentage point lower than the EU-average. The unemployment record in the Netherlands was not very promising either. Although it constantly undercut its European counterparts by around 3.5 percentage points on average, the Dutch did not seem to beat the trend. When the European unemployment rate showed an upward trend, the Dutch rate rose at a faster pace. While the European unemployment rate fell, the Dutch did not follow suit. For instance, unemployment in the EU decreased by 0.8% from 2014 to 2015, whereas in the Netherlands, it only decreased by 0.5% in the same period. As for the debt to GDP ratio and public spending, they were 78.4 and 46.2 per cent on average respectively in the past 5 years. The economic problems in recent years gives us some insights into public dissatisfaction about Rutte’s administration.


Apart from economic problems, Rutte’s inability to address people’s fear on migrants and Islam is a more critical reason for the increased volatility of the Dutch election this year. Since the terrorist attacks of 9/11 and the assassination of Pim Fortuyn in 2002, the Dutch have worried about their safety and polarisation in society. However, Rutte failed to address people’s concerns and the Dutch have been angry about his unfulfilled promises. The tension in the community allowed the rise of the far-right populist, Geert Wilders, who appeared to offer a hope to the people in making changes. His advocacies of Netherlands-first and Euroscepticism gave people the impression that their voices are heard and concerns are addressed. As reflected by the countrywide referendum held in April 2016, where Dutch voters voted against approving a EU-Ukraine Association agreement, the nature and tone of the election has changed.


If Geert Wilders’ populist PVV manages to become the country’s largest party on 15 March, what are the implications for the Dutch and their Euro-counterparts?


Polarised party system increases difficulties in policy implementation


If Wilders’ PVV becomes the largest party, a deadlock will be created, increasing resistance in implementing policies that are beneficial to the Dutch economy. As the division among parties is no longer about right or left wing in the political spectrum, but rather a conflict over border openness or closure, there will be increasing difficulties in policy implementation.


Wilders’ radical approach in handling the issues of immigration and Islam has demonstrated his non-cooperative attitude, minimising room for compromise and consensus. The Dutch prime minister has repeatedly confirmed that there will be zero chance of a coalition with Wilders’ PVV. Even if the PVV becomes the largest party, Wilders will have trouble in forming a coalition government. A minority government might be able to pass some bills, but it will be dependent on temporary coalitions. The other outcome might be a very broad coalition of four or five parties, with or without Wilders’ PVV. Either way, the political dissatisfaction and party fragmentation will definitely give the Dutch a hard time in passing beneficial bills.


In face of economic instability and widespread concerns about globalisation and international cooperation, Netherland’s internal polarisation will dampen its economic development, decreasing Dutch competitiveness.


Wilders’ border closure proposal decreases economic freedom in the Netherlands


If Wilders manages to make his PVV the country’s largest party and form a coalition government, his border closure proposal will have severe impact on the trade freedom, which is critical to the Dutch economy. Even if there is a low probability of Wilders becoming the majority, it still creates a lot of resistance to promoting trade as a large opposition party.


The Netherlands has long benefitted from its economic and trade freedom. Ranked as the 15th freest country by the 2017 Index of Economic Freedom, trade is extremely important to the economy of the Netherlands. Also being the second-largest exporter of agricultural products worldwide after the United States, the value of exports and imports taken together equals 154 per cent of GDP. Its openness to trade and investments has contributed much of the success to the economic growth, taking up a significant part in the Netherlands’ income. According to research carried out by the Netherlands Bureau for Economic Policy Analysis, the Netherlands earns 33% of its national income from the export of goods and services. Almost 79% of Dutch exports remain within Europe, especially Western Europe. Therefore, if the openness of borders is constantly questioned or attacked, the economy will suffer a hard hit.


The spread of the populism wave further undermines the stability of Eurozone


The outcome of the Dutch election will set stage for the upcoming key elections in Europe, including the French presidential election on 23 April, and the German federal election on 24 September. If PVV manages to become the largest party, it will strengthen the populist waves in other European countries considerably. Although it is quite unlikely that the Netherlands will quit the European Union as a result of the Dutch election, its Eurosceptic implication can be far-reaching. Apart from the United Kingdom, Germany, Belgium and France are several significant trading partners of the Netherlands. The victory of PVV will set another example for other countries to question the advantages of cooperation, further undermining the stability of the single market. As the spiral effect goes on, France, Germany, Italy and other European countries will eventually go through the same thing as the Netherlands is experiencing now.


Undoubtedly, Wilders might not be an ideal choice to be the next prime minister, even the Dutch are aware of that. However, the leading poll of Wilders suggested that the Dutch would still like to rely on Wilders to make a change, so that their voices can be heard and fear can be addressed. What truly frightens them is not only about the mediocre economic performance of the country, but also the polarisation within society and their missing voices in policy implementation. Populism happens for a reason. Do the traditional elites really understand what people want and address their concerns effectively? To put populism waves to a stop, it is time for the elites to reflect on themselves.

EPICENTER publications and contributions from our member think tanks are designed to promote the discussion of economic issues and the role of markets in solving economic and social problems. As with all EPICENTER publications, the views expressed here are those of the author and not EPICENTER or its member think tanks (which have no corporate view).


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