Dutch Ask, Dutch Tell

Retired US Marine Corps General John Sheehan’s testimony before the Senate Armed Services Committee of March 18 caused quite a stir on both sides of the Atlantic last week.

Sheehan was asked to remark on the proposed repeal of the American military’s infamous “Don’t Ask, Don’t Tell” policy which allows gay men and women to serve their country as long as they keep their sexual preference to themselves. The Netherlands has allowed homosexuals to serve openly for many years. According to Sheehan, that was “part of the problem” when Dutch UNPROFOR forces were overrun by Serbian troops in Srebrenica, Bosnia in July 1995 which resulted in the deaths of some 8,000 Muslims men.

The Srebrenica massacre is a national embarrassment in the Netherlands that prompted many studies, the foremost of which was conducted by the Dutch Institute for War Documentation. It concluded that the mission was ill-conceived from the start and well nigh impossible to execute. Upon its release in 2002, the Dutch government resigned.

Never has the fact that gays are allowed to serve openly in the Dutch military been connected with the failure of Dutchbat’s mission and the genocide that ensued as a consequence. When pressed, General Sheehan referred to a non-existent military officer who supposedly informed him of the connection: one “Hankman Berman.” A Henk van den Breemen does serve with the Dutch Defense Ministry, yet he described Sheehan’s remark as “absolute nonsense.”

Reactions from other Dutch officials have been equally fierce. The defense minister, Eimert van Middelkoop said Sheehan’s claim was “damaging” and unbecoming of a soldier. Even Prime Minister Jan Peter Balkenende weighed in on the issue, denouncing the comments during his weekly press conference as irresponsible and “way off the mark.”

Rachel Maddow gathered all of the official responses on her MSNBC show last Friday. Listening to the different comments leaves one with no alternative but to accept that General Sheehan was lying before the Armed Services Committee the day before; lying, for political purposes.

This should be a shame for any man, for a military man especially. But not only did General Sheehan serve with the Marine Corps for over thirty years, fighting in Vietnam and in Iraq; he acted as NATO’s Supreme Allied Commander Atlantic and Commander-in-Chief of the United States’ Atlantic Command for many years and retired a distinguished officer. That he should lie before the United States Senate, presumably in the hopes of influencing policy, is an outrage.

Political Uncertainty in the Netherlands

Local elections in the Netherlands in March already forecast the tangled political landscape the country now finds itself in facing parliamentary elections in June.

The Labor Party, which pulled out of its coalition with Prime Minister Jan Peter Balkenende’s Christian Democrats because it wouldn’t consider a continued military presence in Afghanistan, did well in the polls but no viable three-party majority has emerged yet. Party leader Wouter Bos announced his resignation on Friday, naming Amsterdam mayor Job Cohen as his successor. Unlike Bos, Cohen is seen as prime ministerial candidate and more of a traditional socialist who can regain the party’s support from low-income voters.

After the election, the participation of the liberal party could be critical. It previously governed with the Christian Democrats in the wake of the murder of right-wing politician Pim Fortuyn in 2002. Their popularity has taken a beating since Geert Wilders left the party in 2004 to run on his own ticket. But it is still difficult to imagine a government without them.

Wilders appeals to a segment of the population with his attacks on Islam and the multicultural society. His Freedom Party blames Labor for the country’s integration problems which would make a coalition between the two problematic.

But Wilders is projected to lead the Netherlands’ second political force. In spite of left-wing attempts to exclude him from power, the Christian Democrats, at least, are willing to work with him.

If Wilders won’t govern, the alternatives include a full left-wing coalition under Labor, a center-right alliance of multiple parties likely dominated by the Christian Democrats and liberals and a centrist goverment of Labor and liberals, possibly joined by the progressive liberal Democrats. Such a three-party “purple” coalition governed the country from 1994 to 2002.

Labor has refused to commit to a “red” accord, wary that a pledge to govern on the left would hurt its chances with moderate voters. It may even prefer a broad coalition with the Christian Democrats and liberals. It has partnered both before, if separately.

One way or another, the liberals will have to be included and they are bound to demand a high price for their kingmaking. The party has been critical of the outgoing government, particularly of its response to the economic downturn. The liberals form the only faction in parliament that has proposed massive and specific budget cuts while they continue to champion free markets. In coalition with the Christian Democrats, they deregulated business and privatized health care. Whether smaller parties in the center, let alone Labor, would go along with such policies is doubtful.

A minority government, deemed undesirable by most parties, may be the only alternative but the country hasn’t had one since the end of World War II.

Right Wing on the Rise in Dutch Elections

Dutch voters went to the polls on Wednesday to elect city councils in almost four hundred municipalities. In the wake of the government’s collapse two weeks ago, the local elections were closely watched as an indicator of which way the country will swing this summer.

Both of the resigning ruling parties, the Christian Democrats and Labor, suffered in the polls although the latter has managed to improve its poll numbers somewhat compared to when it was in government.

The opposition is emerging with vigor. Nationwide, both the anti-immigration Freedom Party of Geert Wilders and his nemesis, Alexander Pechtold, of the center-left Democrats are on the rise. Locally, the right-wing liberal party is expected to come out with most support.

The liberals, in part, have Wilders to thank for their comeback. His party competes in only two major cities. Many of his supporters in other parts of the country opt for the liberals because their immigration and security policy is similar to his, if less Islamophobic.

The progressive Democrats are also indebted to Wilders. Pechtold has positioned himself as the right-wing foreman’s staunchest critic in parliament, emphasizing the Netherlands’ traditionally open and cosmopolitan character as opposed to the nationalism of Wilders and his party.

Since he ran and won on his own ticket in 2006, Wilders has made a series of dramatic proposals to curb what he calls the Islamization of the Netherlands, including banning of the Quran and taxing Muslim women for wearing headscarfs. Wilders is awaiting trail for accusations of hate speech.

According to the polls, the Socialist Party will have to give up over half of its seats. The more moderate Green Party instead would nearly double its support.

Dutch Government Collapses Over Afghanistan

The governing coalition in the Netherlands was brought down Saturday, unable to bridge a divide between Christian Democrats and socialists over whether or not to keep forces in Afghanistan after 2010.

For the fouth time, Prime Minister Jan Peter Balkenende had to announce that a government of his had come to its end prematurely. His previous three cabinets were all formed with the right-wing liberal party. After the general elections of November 2006, the prime minister was forced to come to a coalition with his primary political rival, Labor Party leader Wouter Bos. Repeated disagreements between both partnering factions were often fought out in public; specifically, over the raising of the retirement age and about how to cut on goverment spending after the recession struck the country in 2008.

Wouter Bos promised voters during the 2006 elections that he would bring the Dutch troops home and not extend participation in the ISAF mission beyond 2010. When President Barack Obama called upon NATO allies to pitch in, the Christian Democrats, the majority party, entertained the notion of remaining in Afghanistan, with fewer forces and in another part of the country than the province of Oruzgan where currently, about 1,500 Dutchmen are posted.

The Dutch were deployed to Oruzgan in 2006 and originally supposed to stay for two years. That mandate was extended another two years to August 2010 in spite of mounting public opposition against the mission.

Throughout the past several days, Balkenende tried to find a compromise which would allow the Dutch to extend their presence. The Labor Party, intent on keepings its promise, pulled out of the coalition after a sixteen-hour cabinet meeting Friday night failed to deliver any results. New elections must take place within fewer than twelve weeks.

There are also elections upcoming for local governments, March 3. The Labor Party hasn’t been polling well recently. Generally, voters blame it for compromising too much on traditional left-wing issues, allowing the center-right Christian Democrats to overshadow it. There is speculation that the elections played a part in Labor’s decision to pull out of the government which would allow the party to distance itself from some of the more unpopular policies recently enacted. Whether it will actually perform better soon seems doubtful however.

Losing Iceland

The ravage left by the Icesave debacle still frustrates relations between Iceland and the United Kingdom and the Netherlands. The latter two insist that the island nation repay the four billion euros which they spent compensating consumers who nearly lost all their savings last year when the Iceland bank went under. Although the country’s parliament, the Althing, which is actually the oldest of its kind in the world, decided that the money must be repayed, President Olafur Ragnar Grimsson has vetoed their bill. Four billion euros is a lot of cash for a country of 300,000 people. In fact, it amounts to a third of their yearly GDP. A referendum March 6 will decide the confrontation between president and parliament. Read more “Losing Iceland”

Economic Freedom in 2010

As the global recession took hold of the world last year, free-market capitalism increasingly came under persecution. Much of the industrialized world accepted an expansion of government power over the economy in the form of greater oversight, tightening financial regulation and sharper labor laws. Taxes went on the rise consequently, targeting especially the supposed perpetrators of the meltdown: bankers and big business, although they were hardly to blame for the situation.

The 2010 Index of Economic Freedom published by the Washington-based Heritage Foundation and The Wall Street Journal reflects these changes as countries formerly steeped in the free-market tradition have fallen on the scale, the Netherlands, the United Kingdom and the United States foremost among them.

The Netherlands, fifteenth on the list, dropped two points from its rating of last year as business, financial, labor and monetary freedom all declined. Particularly burdensome is the Dutch tax regimes. The country’s overall economic freedom “is restricted,” notes the Index, “by a high level of government spending and the lack of fiscal competitiveness.”

“As a participant in the EU’s Common Agricultural Policy,” agriculture is heavily subsidized in the Netherlands, “distorting the prices of agricultural products.” The costs of energy and pharmaceuticals as well as housing rents are also regulated while policies introduced last years that distort domestic prices amounted to a deduction of so much as ten points from the country’s monetary freedom ranking.

In the wake of action taken in Britain and the United States, the Dutch government too nationalized banks in October 2008 and invested heavily in several other financial institutions. The country’s labor market is “relatively rigid” and subject to increased government measures to fight unemployment. “The non-salary cost of employing a worker is high, and dismissing an employee is relatively costly and difficult.” A situation made all the worse by the current government. In terms of labor freedom, the Netherlands scores similar to countries as Algeria, Ethiopia, Russia and the Ukraine.

Japan, nineteenth on the list, actually improved its standing in terms of economic freedom last year, if only slightly. “The export-oriented Japanese economy has long benefited from global trade,” according to the Index, “although non-tariff barriers linger, hurting overall trade freedom.” The country scores above average in many regards, including business freedom, the protection of property rights and lack of corruption. “The regulatory environment,” moreover, “is efficient and facilitates overall entrepreneurial activity.”

Nevertheless, the Japanese economy is stagnant. Deflationary pressure and a mounting public debt are hurting the country’s chances of recovery while the financial sector, although “modern and well developed”, remains subject to government interference and “a host of restrictions.”

A “high-income tax rate and a moderate corporate tax rate” have decreased Japan’s fiscal freedom while government expenditure, “including consumption and transfer payments,” is high, equaling 36 percent of GDP. “Efforts to reinvigorate the economy and the rising cost of social welfare for an aging population have put government spending on an upward trend.” Foreign investment is hampered by “overregulation” and discouraged by Japan’s growing public debt.

France receives a ranking that a Western country ought to be ashamed of, between Saudi Arabia and Romania at place #64, leaving the country just “moderately free”. It actually improved its score last year, but “France’s economic freedom remains curtailed by the pervasive presence of the state in economic activity.” Government is responsible for spending more than half of GDP, owning or controlling major industries as postal services, electricity and railways. Taxes are high while the state’s expenditure ranks among the highest in the world with only Eritrea, the Seychelles and Sweden performing worse.

The country’s investment climate also ranks poorly. While regulation is transparent, “officials have wide discretion to impose ‘unwritten’ performance requirements.” Investments in “sensitive sectors” as agriculture, aircraft, defense, insurance and maritime transport all require government approval.

Lastly, “burdensome regulations hamper productivity and job growth” on the French labor market. “The non-salary cost of employing a worker is very high, and dismissing an employee can be difficult.” Worth mentioning is that an unusually large segment of the French population is employed by the state: about one in every five workers draws a government salary.

The United Kingdom took quite a fall in this year’s listing, dropping to the rank of eleventh economically free country in the world. Monetary and financial freedoms decreased while “a dramatic expansion of state ownership has taken place since late 2008” with the government nationalizing or seizing considerable ownership in several major banks.

“Deterioration in public finances is worse than in other leading economies,” notes the Index. “Welfare benefits, the biggest component of government spending, have been rising. The government deficit is widening rapidly,” while the country’s public debt has climbed to about 60 percent of GDP.

Business freedom in the United Kingdom is still among the highest in the world. One is able to start a business within two weeks in the country whereas the world average stands at 35 days. “Bankruptcy is easy and straightforward.” Moreover, investment remains free and flexible with few restrictions against foreign capital. “The investment code and bureaucracy are generally transparent and efficient.”

The British financial system, although “efficient and competitive” with prudent supervision and transparent regulation, has been subject to unusual government interference throughout the past year. Banks were nationalized with calls for greater oversight producing additional regulation. Corruption increased slightly.

Eighth on the list is the United States which witnessed “notable decreases” in financial and monetary freedom as well as the protection of property rights. “Government interventions in financial markets and the automotive sector have raised concerns about expropriation and violation of the contractual rights of shareholders and bondholders,” warns the Index.

In fact, the country’s scores lowered on almost all fronts with only freedom of trade improving last year. The government’s “interventionist responses to the financial and economic crisis” are to blame. “Uncertainties caused by ongoing regulatory changes and politically influenced stimulus spending have discouraged entrepreneurship and job creation, slowing recovery.”

“Tax rates are increasingly uncompetitive,” and have become “burdensome” to the American economy. Government expenditure is on the rise with “massive stimulus spending […] creating unprecedented deficits.”

Financial freedom, unsurprisingly, has dropped as “the government has intruded on firms’ management in unprecedented ways.” The financial market is still dynamic and developed although the absence of transparency and accountability in the operation of the Troubled Asset Relief Program (TARP) and similar injections of capital have “increased concerns about the potential for government corruption.”

Topping the list are Hong Kong, Singapore, Australia and New Zealand, with Canada coming in seventh. The global turndown did affect these countries and sometimes, regulation did increase but on the whole, their open markets coupled with competitive tax regimes, a solid protection of property rights and flexible labor laws have proved sufficient to bring about a quick and steady recovery.

In Hong Kong, government spending is among the lowest in the world, equaling 14.5 percent of GDP. “Disciplined fiscal management” has helped the city weather the recession as “government has made efforts to maintain a balanced budget.”

Singapore spends even less, with low tax rates and high business activity as a result. “Commercial operations are handled with transparency and speed, and corruption is perceived to be almost nonexistent.”

In Australia, the financial sector, as much of business in general, is subject to a minimum of regulation. “Relatively low leverage and a high ratio of capital adequacy, coupled with banks’ limited exposure to securitized assets, helped to avert a sharp credit contraction during the global financial crisis.” No banks were nationalized. No corporations had to be bailed out with billions of dollars of taxpayers’ money.

New Zealand has even gone against the current, recently cutting corporate tax rates. Setting up a business takes no more than a single day there. The country can boast “an impressive record of market reforms and benefits from its openness to global trade and investment.”

Time and again, as this year’s Index of Economic Freedom also shows, we are reminded that in countries where regulation low and government is far from pervasive in the economic sphere, growth is the norm. Freedom breeds prosperity whereas forced attempts to model society according to political notions of justice and progress are doomed to fail. Rather they will produce the very opposite of their intentions for free-market capitalism refuses to function under restriction.

Europe’s Egg Shortage

It’s difficult to get about some eggs in the eastern parts of the Netherlands these days. Supermarkets are experiencing serious shortages there because large supplies of eggs have been bought up by German wholesalers. The Netherlands has always been one of the world’s greatest exportors of eggs but usually not at a disadvantage to the country’s own market. So many more eggs are finding their way to Germany now because that country is set to ban battery hen cages next January 1 which has severaly damaged its own production already.

The European Parliament voted to ban battery cages in 1999 when so much as 93 percent of eggs in what was then the European Community came from battery hens. By 2012 all member states must have the battery system abolished but Germany has chosen to take the lead by outlawing the practice in 2010 already.

Of course, when parliament forced farmers to turn back the clock half a century it provided adequate protection against the import of cheap eggs from abroad by imposing extensive border and subsidy measures. To control imports and boost exports, the European Union uses sluice-gate prices, basic and variable import levies and export refunds on all shell eggs and products.

The sluice-gate price is a theoretical, calculated price at which poultry imports to Europe should be priced given world grain costs. The import levy is fixed at a level to protect European egg producers against imports from countries that benefit from market cereal prices considerably below the European average. The simple purpose of the measure is to prevent the import of eggs that are priced lower than their European counterparts.

A safeguard clause allows Brussels to suspend imports if the European market is threatened with serious disturbances such as a flood of low priced imports. Refunds are paid to European exporters from the Common Agricultural Policy budget to help them compete outside Europe where producer costs can be lower due to lower feed grain prices, for example.

Understandably, this is upsetting developing countries which are currently stalling negotiations within the World Trade Organization for one thing, precisely because the West, the European Union in particular, is increasingly protecting its own market, making it near impossible for Third World farmer to compete. Yet, with subsidies, European producers are able to penetrate their markets. (So next time you hear someone denounce “free trade” for destroying Third World agriculture, you know better than to nod in approval.)

The only ones not complaining right now are Dutch poultry farmers who are able to sell their eggs in Germany at prices unprecedented in recent history. Within the next two years however, they too will be forced to give up their battery cages. Inevitably, the supply of eggs will shrink throughout Europe, driving prices up only further.