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Small Miracles

Small and medium-sized European countries like the Netherlands play an outsized role protecting international capital and empire.

Eurogroup President and Dutch Finance Minister Jeroen Dijsselbloem at a press conference in 2014. EU Council Eurozone / Flickr

If you live outside Western Europe, you probably only hear about medium-sized European countries like Portugal, Denmark, Belgium, Austria, and the Netherlands if they’re doing well in the World Cup. In the case of the Netherlands, non-Europeans might also have read the occasional references to abortion, euthanasia, sex work, and gay marriage (all legal) and soft drugs (semi-legal). To all this the Netherlands owes its aura of degeneracy or progressiveness, depending on one’s perspective.

What you don’t often read about is the position of the Netherlands in the international financial system. It is — together with Ireland and Luxembourg — a vital European tax heaven. Much more so than even Germany, the Netherlands was the forerunner in a beggar-thy-neighbor race to the bottom and remains the closest American NATO ally in mainland Western Europe.

It’s no surprise, then, that the domestic policies of states like the Netherlands are important to those organizing in other countries — and we should all be hoping for a left-wing breakthrough there. Here are three reasons why.

1. The Netherlands is a tax haven for international capitalists.

In 2009, President Obama called Ireland and the Netherlands tax havens, setting off a panic within the Dutch elite. The mainstream media, economists, and politicians in the country lined up to call this a misunderstanding and scrambled to get the Netherlands off the list.

But it was far from a misunderstanding. Many corporations (including Google and Starbucks) and celebrities (like Bono and Mick Jagger) dodge taxes through the Netherlands. Last year, 48 percent of Fortune 500 companies had a shell company in the Netherlands.

Royalties, in particular, are not taxed. Corporations pay fabricated royalty costs to mailbox companies in the Netherlands, artificially lowering their profits. The royalties are untouched in the Netherlands and, after returning to the mother company, are untaxed in the home country because they were already taxed before (albeit at a zero percent rate).

So while the supposed social democrat Jeroen Dijsselbloem — Dutch minister of finance and head of the Eurogroup — routinely denounces Greece’s “unwillingness” to reform its tax system, the Canadian mining company Gold Eldorado uses the Netherlands to avoid paying taxes in Greece.

In 2013 and 2014, Ukrainian oligarchs were invited to the Dutch embassy by private Dutch law firms for a seminar about how to avoid taxes using the Netherlands. The Dutch Ministry of Finance and multinationals make so-called fiscal deals, the contents of which aren’t even disclosed to members of parliament.

The panic of Dutch elites in 2009 shows just how sensitive they are about their international reputation. Spearheaded politically by the Greens and the Socialist Party, domestic pressure over the tax dodging is growing, and the mainstream media is reporting more and more frankly on the issue.

The extreme center is fiercely resisting this pressure. Take, for instance, the unusual bill passed in 2013 with Labour Party backing that stated that the Netherlands is not a tax haven and asked the government to discourage use of the term.

2. The Netherlands is an unwavering military ally of the US.

Since its liberation in 1945, the Netherlands has been a self-proclaimed “loyal ally” of the United States. However, the country’s long history of neutrality still dominates much of the public discourse, meaning that this elite-level support often has to manifest itself in secret.

Nuclear weapons were placed covertly in the country in the 1980s, after the largest demonstrations in Dutch history made public placement impossible. It’s also in this manner that the country contributed to Russian scaremongering in the 1980s and again today, and why Dutch involvement in Afghanistan was labelled a “police” rather than a “military” action.

The Netherlands plays the role it does because it needs American to protect its multinational interests, from its shipbuilding companies to the oil giant Shell. Although the Netherlands has its own sizable navy — for historical and geographical reasons, as well as to “protect” its overseas Caribbean dominions — it acts mainly as a diplomatic and infrastructural asset for the US.

Edward Snowden, after leaking files showing the mass surveillance programs of the National Security Administration, pointed out that the Dutch secret service, unlike those of Germany and France, provides the CIA unlimited access to all their data.

Unsurprisingly, the Dutch were among the first to pledge troops to Afghanistan. If the United States needs diplomatic support from Europe for military action virtually anywhere, the Netherlands is always willing to supply it, with an eye toward postwar contracts for its multinationals.

3. The Netherlands was a laboratory for suppressed wages in Europe.

It is now the official doctrine in the European Monetary Union (EMU) that the only way out of a recession is internal devaluation — lowering wages to supposedly increase exports. Currency devaluations are impossible, and Keynesian demand management through increases in public spending is blocked by the Growth and Stability Pact.

The first EMU country where wage cuts were institutionalized was the Netherlands.

It has been policy and doctrine since 1982, when the Dutch labor unions, in an infamous agreement with employers, agreed to wage decreases (euphemistically dubbed “wage moderations”) in return for a reduction in working hours meant to boost employment. (Dutch scholar Paul de Beer recently showed that while unions kept their part of the bargain, working hours actually didn’t decrease so much as unpaid overtime increased.) The Dutch central bank then tied the country’s currency to Germany’s Deutschmark — decades before the euro made doing otherwise impossible.

This helped develop an export-led growth model, with low wages and large exporting companies. The strategy works in the sense that there are large current account surpluses, which for exporting multinationals translate into unprecedented profit rates. Of course, employees and small businesses dependent on domestic consumption pay the price.

The Netherlands, along with Austria, has been one of Germany’s closest EMU partners in institutionalizing this export-driven, low-wage, no-inflation model — which the latter committed to when the collapse of Communism in East Germany and Poland gifted it a mass of low-wage workers. The obvious problem is that it cannot work everywhere, since not every country can simultaneously boast large trade surpluses.

Here, as well, only the combination of internal pressure and international denunciation works. When Paul Krugman in 2013 criticized Dutch austerity policy, it was the talk of the country for weeks.

If Greece, Spain, and Portugal are ever to have trade surpluses, Germany and the Netherlands need to spend and import more. The most obvious and fair way to do so is to increase wages. Unions have called for higher wages recently, but are not willing to strike to push for them, as that would jeopardize their institutionalized role in collective bargaining and in the government bureaucracy (unions being part of the country’s main policy-advising organization).

This is reinforced by their close ties with the Labour Party. When that party is in office, large strikes are off the table. This is indeed symptomatic of the position of the Dutch left. Many social movements are institutionalized, with many NGOs financially dependent on the state. Politically, Labour denounces capital in elections but defends its interests tooth-and-nail when in office. Afterwards, ministers are whisked to high places in the financial sector.

The Netherlands has a representative system that makes it possible for left parties to enter government. For example, the Socialist Party (which now has 10 percent of the vote) entered parliament in 1994. But every government contains centrist parties that create a built-in incentive to compromise when the chance to enter office presents itself.

What is true of the Netherlands is not necessarily true of other medium-sized countries in Europe. Belgium is a divided country with a stronger union in the Dutch-speaking north and with the French-speaking south oriented toward the French economy. Denmark and Sweden are geographically isolated and historically more independent. Finland and Ireland are both wary, respectively, of Russian and English domination.

But like the Netherlands, all these countries are too small to play an independent international role and are sensitive to pressure from abroad. International pressure from the Left has a real possibility of shifting their orientation. And the key roles they play for international capital and imperial powers should make that a political priority.