Ever since unveiling my 20th Theorem of Government, I’ve mostly shared bad news about jurisdictions with profligate politicians (France, Brazil, Colombia, Maryland, Washington, Australia, Germany, and Canada).
My only positive example has been Greece, though I was being somewhat charitable since I was highlighting a five-year period where spending grew by more than 4 percent annually (which was progress since nominal GDP grew more than 8 percent annually over the same years).
Today, I’m going to cite a much more impressive example of spending restraint.
Here’s a chart – based on IMF data – showing that the Netherlands had a seven-year period last decade where spending grew by an average of less than 1 percent annually.
The chart shows the two big consequences on Dutch fiscal discipline.
- The burden of government spending declined by more than 6-percentage points of GDP.
- Spending restraint turned a large budget deficit into a small budget surplus.
The Netherlands is a rare positive case study for my 20th Theorem.
But it’s more than that.
Any nation that has a multi-year period with spending growth averaging less than 2 percent annually also qualifies for my Golden Rule Club.
That’s the good news. The bad news is that fiscal policy has deteriorated a bit since the 2010-2017 period.
Government is now consuming 44.7 percent of GDP. That may not seem like an enormous shift, but keep in mind that the Netherlands has some long-term fiscal challenges.
So any slippage is bad news.
P.S. One bright spot is that the Netherlands has a well-regarded system of personal retirement accounts, which I’ve ranked as 4th-best in the world.
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