The Netherlands may be the first country to hit the limits of growth

The other morning I cycled around the Dutch town where I grew up. Behind our old house, the field where I spent half my childhood is now covered with homes. So is my old football club. My high school is now in a built-up area. At the local train station, the bike shed was full on a Saturday afternoon. When I got to Amsterdam, the business-traveller economy appeared to have broken down: endless waits for Ubers, nobody at hotel reception, restaurants closed at lunchtime for want of waiters. 

I know over-construction and understaffing are now global problems, but they are particularly acute in the Netherlands. The country has run out of space and staff. Sure, a recession may temporarily loosen the jobs market, but the problem was acute pre-pandemic and will simply resurface whenever growth resumes. The Netherlands is probably the first country to hit the limits of economic growth.

Other overdeveloped places such as the Bay Area, New York and Singapore may follow, running out of room for new workers and businesses. This raises the question: can a rich place be happy if its economy stops growing? 

With hindsight, the Netherlands was too well-suited to the era of globalisation. The trading nation with Europe’s biggest port experienced 26 years of unbroken economic growth until 2008, then a world record. Now it tops ETH Zurich’s KOF Globalisation Index as the world’s most globalised country.

And so its population mushroomed. When the counter hit 14 million in 1979, Queen Juliana said, “Our country is full.” In 2010, Statistics Netherlands said the population would probably never reach 18 million. Today it’s 17.7 million and rising. The country has 507 people per sq km, nearly five times the EU’s average. Worse, the quantity of liveable land will shrink due to a paradoxical mix of rising seas and droughts damaging the foundations of houses.

But the Dutch economy’s demand for new workers seems insatiable. Eighty-four per cent of employers report labour shortages, one government study found. Recruitment signs are almost standard in shop windows. Employers even offer new recruits free holidays. 

One constraint on growth is that the Dutch enjoy the developed world’s shortest average work week, at just 30.3 hours. Six workers in 10 – predominantly women – are either part-timers or temps. The government is planning a bonus for anyone going full-time, but many people prefer daytime cappuccinos in the local café, assuming they can get served. Why give up your relaxt life and permanent contract to alleviate understaffing in old-age homes? Importing more migrant workers isn’t a popular idea. In June, the far right shouted down the minister who suggested recruiting youths from poor French suburbs.

And so every growth opportunity hits capacity constraints. I recently queued for three hours at Schiphol airport, global aviation’s second-biggest hub, because it cannot find enough security guards. The foreign students flooding Dutch universities cannot find housing. Amidst an energy crisis, the Dutch are closing Europe’s largest natural gas reserve because, in a packed country, drilling-induced earthquakes upset the neighbours.

Or take ASML, the global leader in chipmaking equipment. Based in a small town in the relatively quiet Dutch south-east, it’s a pillar of the western alliance in the budding confrontation with China. ASML hires hundreds of new employees every month, but just try finding them homes and babysitters. And local treehuggers have delayed ASML’s dreamt-of bike path to its headquarters.

Fantastically productive Dutch farms have made this tiny country the world’s second-largest agricultural exporter. But many of its 15 million pigs and cows live next to protected natural areas, so their nitrogen emissions break EU laws. The government is enraging farmers by closing farms. In theory, that frees space for new homes, but who will build them and where would the builders stay? In short, to use Liz Truss’s language, Dutch reality is an anti-growth coalition.

Even automation wouldn’t fix sectors like old-age care and construction. Eventually the country might have to target “stabilisation of population size” by limiting labour migration, advised the head of the Dutch labour inspectorate. The new State Commission Demographic Developments 2050 – and Dutch state commissions shape policy – may agree.

Does a rich country need more carbon-emitting growth? “We focus far too much on purchasing power, but extra purchasing power barely makes us happier,” says Sandra Phlippen, ABN Amro Bank’s chief economist. However, she notes, we’ve seen in recent years how people in stagnant economies “become angry and unsatisfied”. If the limits of growth are in sight, watch out. 

Follow Simon on Twitter @KuperSimon and email him at [email protected]

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