The rule of common senseMay 2nd 2002
From The Economist print edition
From public services to social policies, the Dutch are consummate pragmatists
ASK Dutch voters about their most pressing concerns and, besides the inevitable answers of immigration and crime, they are sure to mention public services. Educational standards are not what they were, businessmen grumble. The traffic jams are getting worse. Rail services are deteriorating. And perhaps above all, the country's health-care system is collapsing and there are waiting lists for medical appointments and operations.
The Dutch are famous for complaining. But to an outside visitor, especially one from Britain or America, this catalogue of woes seems astonishing. Schools in the Netherlands look modern and well-run, and the exam results are generally impressive. The traffic is bad, but it is not like London or Los Angeles. Besides, the Netherlands is a small, densely populated country with only limited space for more roads. Trains seem to be well run and reliably on time. As for health care, Dutch hospitals are mostly new and, although there are waiting lists, they are not nearly as long as in Britain or even Sweden.
Even so, complaints about public services have reverberated into Dutch politics. Every political leader talks of the importance of reorganising and improving public services. Economists fret about the tendency for productivity to lag in the public sector, even though wages must keep pace with the private sector. Ad Melkert, the Labour party leader, has laid out an agenda for spending more on education, health and other public services, and wants to relax Mr Zalm's policy of fiscal restraint that has made this harder in the past eight years. Yet Mr Melkert, like Mr Kok, talks also of the importance of reorganising public services.
In fact, the organisation of, and investment in, public services in the Netherlands are among the country's stronger points. In the spirit of their pragmatic traditions, the Dutch have understood and accepted two things that many other Europeans find doctrinally objectionable. One is that it does not matter who delivers public services, so long as the job is well done; the other is that competition, in some form, can help to make that more likely.
For historical reasons, as many as 70% of schools are privately owned, often nominally religion-based, even though they are publicly financed. Partly as a result, Dutch parents find it much easier than their counterparts in most other countries to choose their schools. Management is, in effect, devolved to school heads. This combination of choice and limited competition is entirely consistent with Dutch egalitarianism: there is no equivalent of such British independent schools as Eton.
There should be more scope for using the market in other public services, but the politicians are dithering. The Dutch have invested huge sums in their transport infrastructure in the past, but they are being slow to build new high-speed rail lines. There has been much talk of road-pricing to cut congestion, but so far little action. The railways have been transferred to an independent company but, mindful of Britain's rail troubles, the government has backed away from full-scale privatisation.
But the model that merits most attention from abroad is, paradoxically, the one that seems to be causing the most dissatisfaction at home: health care. The Dutch health-care system is based on the Bismarckian model of universal coverage through compulsory social insurance. But, unusually for Europe, almost three-quarters of Dutch hospitals are private, not-for-profit establishments, and almost all general practitioners are also independent. Even more unusually, the insurance system is also mixed. Two-thirds of the population are compulsorily enrolled in one of the country's health-care funds, but the remaining third, those on higher incomes, are insured privately. The whole population is also covered by insurance for long-term care.
Since the late 1980s, the Netherlands has been at the forefront of international efforts to introduce “managed competition” into health care. Patients are able to switch between insurers or health-care funds once a year, and insurers are not allowed to protect themselves from bad risks by turning anybody down. The insurers are encouraged to contract with doctors and hospitals of their choice. The idea is that there should be enough competition, between both insurers and service providers, gradually to turn the entire health-care system from being supply-driven and subject to central cost control into one that is demand-led and driven by patient choice—but still able to offer universal coverage at relatively low prices.
So why have the results seemed unsatisfactory? One answer is that Dutch consumers may be too demanding. The Netherlands has achieved enviable results in terms of quality of care and health outcomes even though it spends proportionately less than several other OECD countries (see chart 6). Nevertheless, it is also true that tight cost control by the finance ministry, combined with a limited supply of doctors, has contributed to both waiting lists and unsatisfied demand. Spending on health care as a share of GDP has fallen slightly in recent years, and it is probably too low.
Yet the real problem is not that the Dutch have moved too fast towards greater competition in health care, but that they have not moved fast enough. The original Dekker commission blueprint of 1987 has been implemented only in part. In particular, central regulation and cost control have been retained and even increased, rather than following the Dekker philosophy of greater reliance on market forces. Plans to abolish the distinction between health-care funds and private insurers, allowing everybody to make their own choice among all insurers, should improve matters.
Indeed, this next stage of reform, which will also relax central control and fully unleash the competition authorities on hospitals and doctors alike, will be critical. One point of controversy is that the Labour party wants the premiums paid to health insurers to be income-related, to help the poor. But that would negate an essential component of competition, on price. It would be better to help the poor through the tax system than by interfering in the health market.
If the Dutch reforms are pursued with enough vigour, says Professor Wynand van der Ven of Erasmus University, Rotterdam, the Netherlands might get closer than any other OECD country has to solving the world's big health-care conundrum: how to improve service delivery and provide universal coverage,while using the market rather than the government to hold down total health-care spending.
The area of social policy for which the Netherlands is most famous, however, does not involve the public services at all. It is how the country has tackled such problems as drug abuse, prostitution, abortion and euthanasia. Here, too, other countries have much to learn—if only they can overcome their widespread misunderstanding of Dutch policies.
Reuters Just another union member
Consider drugs. Foreigners visiting one of Amsterdam's 228 “coffee shops”, which offer a menu of different kinds and strengths of hashish with all the flourish of a sommelier producing his wine list, assume that the Dutch have legalised soft drugs. Yet it is not so. The growth and sale of all drugs, including cannabis, remain illegal. But in the past 25 years the Dutch have brought in two reforms. The first is to treat drugs as a health, not a criminal-justice matter. Consistent with this, consumption of drugs is not illegal.
Second, and more controversially, the Dutch authorities have applied what they call the “expediency principle”. This means that public prosecutors are advised not to take action against coffee shops selling cannabis, subject to certain restrictions. These include a maximum sale of five grams per person, no sale of hard drugs, no advertising, no sales to minors and no nuisance to neighbours. In addition, the stock held by any one coffee shop must not exceed 500 grams. The buying of cannabis by coffee-shop owners remains illegal, but is tolerated in accordance with the practice of gedogen. The idea is to separate and regulate the sale and use of soft drugs, to keep mild drug abusers out of the criminal-justice system and thus to minimise the risk that cannabis might become a gateway to harder drugs such as heroin.
Over the years many other countries, notably America, Britain, France and Sweden, have condemned this Dutch regime wholesale. Yet by its own lights it has been remarkably successful. Cannabis use has admittedly risen a little, but surveys show that it is still less widespread in the Netherlands than it is in Britain and America, and about the same as in France and Germany. Among schoolchildren, cannabis use in the Netherlands has actually been going down over the past few years. And the regime has been tightened up: the amount that each person was allowed to buy was reduced from 30 grams to the current five grams five years ago, and the number of coffee shops cut back, especially in border regions where they were encouraging drug tourism.
As for hard drugs, notably heroin and cocaine, the evidence supports the Dutch approach of looking on their use as health problems. Treatment is available through methadone and even medical prescription of heroin, together with clean needles. Yet heroin abuse is now much less prevalent in the Netherlands than it is in Britain and most other European countries (see chart 7). Indeed, the population of hard-drug addicts as a whole has barely grown in the past ten years, and it is ageing fast, suggesting that younger people are not joining in. The lesson is clear: partial decriminalisation, and treating drugs in general as a health rather than a justice problem, seems to work.
Dutch tolerance extends to sex. Prostitution is legal, and in 2000 brothels also became legal for the first time since 1912. The intention of the new law is to turn “sex work” into just another job, complete with employment rights and even a trade union. There is no evidence that prostitution has increased as a result: indeed the famous red-light district in Amsterdam is, if anything, smaller than it once was.
Most prostitutes seem to dislike their new legal status, because it has forced them to pay taxes, and it has made it easier for the police to drive illegal immigrants out of the business. The legalisation of brothels has also encouraged sex tourism, which is good business but not always pleasant when the visitors are drunk and rowdy. Amsterdam prostitutes say they quickly felt the effects when easyJet introduced cheap flights from Britain. But they also admit that the Netherlands has done more than most to separate organised crime from sex work.
Gay rights, too, have advanced further than in other countries. After a long campaign, marriage between gays became legal last year in the Netherlands, for the first time anywhere. Henk Krol, editor of Gay Krant, who led the campaign, is careful to insist that this is not “gay marriage”. It is, rather, the application of the normal civil marriage code to gay couples. It is hard to imagine any other country in which the sexual orientation of such a controversial figure as Mr Fortuyn would be so little discussed by the press.
And then there are abortion and euthanasia. The Netherlands was one of the first countries in the world to legalise abortion in the 1960s. Yet at the same time it has sought to discourage the practice, not least through sex education for minors. For some years now, it has boasted the lowest abortion rate in the world.
In euthanasia, too, the Dutch have been pioneers. Their policy started, as usual, with the simple recognition that assisted suicide was taking place. Rather than ignore it, policymakers devised a way of regulating it instead. Under the new act, which came into full force only this year, doctors who assist a suicide are exempt from prosecution provided they can satisfy the authorities that they have followed a strict code of conduct. This includes a requirement to consult a second doctor, and to offer and discuss alternatives of palliative care. Relatives have only a limited role, and “living wills” are generally recognised.
The result has not, as critics feared, been a mass outbreak of euthanasia. Controls are rigorous, and two-thirds of requests are refused. The health ministry estimates that euthanasia plays a part in about 2.4% of all deaths—not much more, probably, than it did before being legalised.
There is a common thread to all of these policies; and it is not, as is often assumed, that the Dutch are unusually tolerant. They are respectful of others' privacy, certainly. But the dominant Calvinist religion of the Dutch reformed church has never been noted for tolerance. Although the country is now largely secular, there is still a powerful “bible belt” across the south and north-west. Outside Amsterdam, the Dutch are strongly family-oriented, and neither particularly tolerant nor especially liberal.
Indeed, many politicians and business leaders today bemoan a culture that they feel has come to put too much emphasis on rights and not enough on obligations. The practice of gedogen got an especially bad press after two huge accidents, including an explosion at a fireworks factory in Enschede in 2000 that killed 22 nearby residents, revealed wholesale flouting of health-and-safety rules.
What the country's social policies show is not that the Dutch are soft-pink libertarians, but that they are thoroughly pragmatic in their approach to social problems. In particular, experience has taught them that legalising and then regulating an undesirable practice is often the best way of controlling and even curbing it.
It is entirely consistent with the polder model that, on the whole, most of these Dutch social policies command a political consensus (although the Christian Democrats say that they want to reverse both the tolerance of coffee shops and the legalisation of euthanasia). But Dutch pragmatism and the polder model alike are about to undergo perhaps their stiffest examination, with the elections that are to take place on May 15th. The arrival of Pim Fortuyn on the political scene will test both to the limit.
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