The Netherlands: Leaky Dikes

Hans Brinker, Holland's storybook skating whiz, needn't hock the silver skates — not yet. But the way the Dutch economy is going, the occasion may arise. Holland has a severe balance-of-payments deficit, and with wages up 36.5% in three years and living costs climbing at an annual rate of 5%, the country is suffering worse inflationary strains than any European neighbor.

Much of the difficulty is due to Dutch labor, traditionally docile (a 1959 court, decision actually-made unions liable for losses caused by a strike). Netherlands unions have recently been flexing their muscles in a big way—taking advantage of a situation in which, like many another European nation, Holland is caught between an expanding economy and an inadequate labor force. Unemployment is a negligible one-half of 1%, 70,000 foreign workers have been imported, and the ratio of available jobs to available men presently stands at 5 to 1. Thus, in 1964, Dutch trade unions negotiated an annual 15% wage hike. Last year came another 11%, this year 10.5%, and in negotiations going on for next year, the unions are demanding still another 7% .

Dutch workers have spent their extra pay on high living. Per-capita TV purchases are higher in The Netherlands than almost anywhere else in Europe. Per-capita consumption of jenever, the Dutch gin, and of beer and wine has jumped 50% . AMSTERDAM SWINGS Too, boasted a Dutch newspaper, reporting the Carnaby Street look among the city's towheaded boys and miniskirted girls. Demand for consumer goods has set trade figures whirling like windmills. A Dutch surplus of $14 million in trade with West Germany during the first half of 1965 has turned into a $74 million edge for the Germans this year. The Dutch always run a deficit with the U.S., but this year the red-ink total has nearly doubled, to $327 million. Overall, imports are up 13%, v. only a 7% increase in exports.

Government has taken thumbs-in-thedike measures against inflation. Finance Minister Anne Vondeling's newest budget calls for cutbacks on outlays for housing, defense and the age-old battle against the sea that the Dutch refer to as "water control." The government has also speeded up tax collections, raised gasoline and diesel-fuel taxes, and is keeping on an extra 1% tax on corporation profits initiated by an earlier government. But at the same time, the government, in various welfare programs, is spending more than ever. Next year, expenditures will exceed the current year's budget by at least 11.5%, with a deficit of more than $324 million. And, in a remarkable display of politically motivated economic profligacy, the Dutch government is plunging right ahead with a two-step, personal-income tax cut that can only add to the nation's almost out-of-hand inflationary problems.