‘The coronavirus pandemic will be disastrous for many households’

A lot of families and companies do not have enough savings to ride out the coronavirus pandemic. Economist Dirk Bezemer is a worried man. ‘Dramatic situations will develop when the government support packages are discontinued. If we don’t change our economy and financial system now, the multinationals will be protected while families on social assistance won’t.’

Text: Riepko Buikema, UG Communication, photographs: Elmer Spaargaren

He’d had a busy spell of teaching and his mind was brimming with good ideas. In February, Bezemer had been planning to throw himself into writing a new academic book for Oxford University Press, when COVID-19 reared its ugly head. Recognising the disastrous social consequences, he decided to write a popular science book instead. A book about the Netherlands in the past ten years. It is entitled Een land van kleine buffers (A country with small buffers).

Sharp focus

‘The coronavirus pandemic has brought all of the topics I wanted to write about sharply into focus: the debt mountain incurred by Dutch households, the financially starved local authorities, our lack of investment in sustainability. The backlog of social problems will only exacerbate this sudden state of emergency. If we want to get out of this crisis in one piece, we need to change our financial system as a matter of urgency. I have no doubt whatsoever about this. The role of the financial system is set to become even more important in the next few years. How does this system shape our society? How does it support our economy? They are subjects I couldn’t ignore.’

Money in the wrong place

Yes, the Netherlands is a wealthy country, confirms Bezemer, but the money is mounting up in the wrong places. Households debts have risen sharply over the past decades. ‘Household debts are a big problem in the Netherlands. Research has shown that a lot of households have little or no hope of coping with acute setbacks. They have a pension to look forward to, but this is not money that they can lay their hands on now. In addition, the huge pension assets accrued in the Netherlands make us highly dependent on international financial markets. If something goes wrong there, we all go into pension meltdown. It’s an unhealthy dependency.’

Profits go to shareholders

Bezemer cites another example of our warped financial relations: the excessive flexibility of the labour market. Millions of Dutch people work as independent professionals or on flex contracts. ‘This is what they call the ‘competitive power’ of our economy. And yes, it allows companies to make higher profits. But most of these profits end up in the pockets of the shareholders. What’s the point of that? Why do we do this? The most important thing is making sure that wages are high enough. A lot of Dutch families think that they have difficulty making ends meet. And many of them are not in financially secure jobs. These are things that you really feel during a crisis.’

Holes in the social safety nets

After careful consideration, Bezemer continues his analysis in a way that contrasts with the harsh tone of the gloomy scenarios he has just sketched. ‘Unemployment will soar as a result of COVID-19. A lot of the safety nets for people on minimum incomes are funded by the municipal authorities. These municipal authorities have been in financial difficulties for years. The problems will aggravate each other, and this will ultimately be disastrous for the poorest households.’

Rebalancing declining wages

So what happens now? ‘This is the question I would like to see on the agenda. It’s up to the policy makers to decide what happens next, but my book presents a few concrete suggestions. For example, there’s already a very sound report about reviewing our tax system. It suggests raising wealth tax and lowering wage tax. And the Borstlap committee made well-considered recommendations on improving the labour market, which would finally rebalance declining wages and restore the small buffers that households have built up.’

‘So the proposals in my book aren’t just empty talk. The solutions are ready and waiting. Politicians can no longer hide behind “We need to think about that”. People have already thought about it. The declining wages, the small buffers, the holes in the municipal finances, shareholder capitalism, tax evasion: we’ve been talking about it for years. Now it’s time to do something about it!’

Crucial years

The coronavirus pandemic is turning up the heat, says Bezemer. Unemployment will soon cause a lot of social pain. ‘How will we spread this pain? If you do nothing, the most vulnerable people will bear the brunt. To put it bluntly, the multinationals will be protected, while those on social assistance won’t.’

As if this wasn’t bad enough, it will also destroy all support for the energy transition and sustainability measures awaiting us. ‘The modifications needed on houses and the higher energy prices will be a very expensive business. If you want to generate support for these changes, you have to think about the ratio between the wages paid to employees and the profits paid to shareholders, and about where to increase the tax burden. The coming years will be decisive.’

No time for complacency

Listening to his analysis, it's difficult not to draw comparisons with a left-wing politician. ‘No!’, he states resolutely. ‘I’m a researcher, and I wrote my book from this perspective. I hope that it will contribute to real dialogue on the question of how we intend to change things. The Cabinet makes the choices. My book might set things in motion. I want to help break down complacency. Do we really want the Netherlands to be a tax haven for multinationals? Isn't it strange that this is happening at the same time as wage taxes for employees are rising?’

Resistance

He says that he is hopeful about the feasibility of the improvements he is advocating, adding in the same breath that he hasn’t actually seen much movement. Increasing wealth tax would meet with resistance from the financial sector. The rapidly increasing national debt is another objection commonly raised by critics. ‘There’s already been a turnaround in this area. The coronavirus pandemic has caused a rift with twenty years of thrifty budgetary policy. The directors of the Netherlands Bureau for Economic Policy Analysis (CPB) and DNB both maintain that the Netherlands can easily handle a higher national debt. But the argument has by no means been settled in this discussion.’

Misleading

It is all patently clear to Bezemer. We would be selling ourselves short if we didn’t raise our national debt to invest in sustainability and limit the damage caused by unemployment. ‘It is misleading to claim that an increasing national debt will be a burden that our children and grandchildren will have to bear. On the contrary. We will be creating a burden if we don’t invest in a sustainable infrastructure. Delaying road-user charges, living in a country with a nitrogen problem; those will be burdens for our children. Just consider the realistic things we could do with that money, such as preserving biodiversity or keeping our libraries open. These could be our gifts to our children.’

More information

• Contact: Dirk Bezemer
• Een land van kleine buffers (A country with small buffers)