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 in which I spent half of my childhood is now full of houses. So is my old soccer 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 arrived in Amsterdam, the business traveler’s economy seemed to have collapsed: endless waiting times for Ubers, no one at the hotel reception, restaurants closed at lunchtime due to a shortage of waiters.

I know that overbuilding and understaffing are now global problems, but they are particularly acute in the Netherlands. The country has run out of space and personnel. Sure, a recession may relax the labor market temporarily, but the problem was acute in the pre-pandemic period and will re-emerge once growth resumes. The Netherlands is perhaps the first country to reach the limits of economic growth.

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

In hindsight, Holland was well suited to the era of globalization. The trading country with Europe’s largest port experienced 26 years of continuous economic growth until 2008, when it set a world record. It now tops ETH’s KOF Globalization Index in Zurich as the most globalized country in the world.

Thus, its population multiplied. When the counter hit 14 million in 1979, Queen Juliana said: “Our country is full.” In 2010, Statistics Netherlands said the population will probably never reach 18 million. Today it is 17.7 million and is rising. The country has a population of 507 people per square kilometer, nearly five times the European Union average. Even worse, the amount of livable land will shrink due to a paradoxical combination of rising seas and droughts that damage the foundations of homes.

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But the Dutch economy’s demand for new workers appears insatiable. A government study found that 84% of employers reported an underemployment. Recruitment signs are almost typical of shop windows. Employers even offer new employees free holidays.

One impediment to growth is that the Dutch have the shortest average working week in the developed world, at just 30.3 hours. Six out of 10 workers – most of them women – are either part-time or temporary. The government plans to reward anyone who works full time, but many people prefer their daytime cappuccino at their local coffee shop, assuming they can get it. Why do you give up Relax Life and permanent contract to alleviate labor shortages in nursing homes? Importing more migrant workers is not a popular idea. In June, the far-right shouted out a minister who suggested recruiting young men from poor French suburbs.

Thus every opportunity for growth faces capacity constraints. I recently queued for three hours at Schiphol Airport, the world’s second largest aviation hub, because it couldn’t find enough security guards. International students who flock to Dutch universities cannot find accommodation. Amid an energy crisis, the Dutch are shutting down Europe’s largest natural gas reserve because earthquakes from drilling, in a crowded country, are disturbing neighbours.

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Or take ASML, the world leader in chipmaking equipment. Headquartered in a small town in the relatively quiet Dutch southeast, it is one of the pillars of the Western alliance in the emerging confrontation with China. ASML hires hundreds of new employees every month, but just try to find them homes and babysitters. Local loggers have delayed ASML’s dream bike path to its headquarters.

The exquisitely productive Dutch farms have made this small country the second largest agricultural exporter in the world. But many of the 15 million pigs and cows live next to protected natural areas, so their nitrogen emissions violate EU laws. The government angers farmers by closing farms. In theory, this makes room for new homes, but who will build them and where will the builders stay? In short, using the language of Lise Truss, Dutch reality is an anti-growth alliance.

Even automation won’t fix sectors like aged care and construction. Ultimately, the country may have to target “the stabilization of population size” by limiting labor migration, the head of the Dutch labor inspectorate advised. The new government commission on demographic developments for 2050 – and the Dutch state commissions may agree to shape the policy.

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

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