'Holland's Single Most Important Weapon'

‘Holland’s single most important weapon’

A CPE-inspired Common Sense Analysis of the Consensus on Wage Restraint in the Netherlands

Tom van de Haar

10379029

09-07-18

De Deken Abstract

Although wage restraint is often used as an explanans for the Dutch ‘miracle’, it is rarely viewed as an explanandum: that which needs to be explained. This thesis investigates how wage restraint became the ‘go-to’ solution during economic downturns in the Netherlands. Despite the occasional reluctance of trade unions to accept lower wage increases, the consensus of the social partners on wage restraint and its apparent benefits throughout the last few decades has been remarkable. To understand why trade unions have subscribed to a logic that not necessarily seems beneficial for its members it is necessary to adopt a CPE-inspired common sense framework. With the help of this framework, this thesis argues that the consensus of the government and the social partners on wage restraint has been underpinned and shaped by a competitiveness discourse, which over time has been incorporated into common sense. This competitiveness discourse has been propagating an unequivocal positive link between wage restraint and employment. The incorporation of the logic of the competitiveness discourse into the common sense of a variety of actors opened up space for a synthesis of the different perspectives, and subsequently fostered a broad-based consensus on wage restraint.

Table of contents

0: Abstract 2

0: Introduction 4

1: Theoretical Framework 7

1.1: The wage restraint-employment nexus 8

1.2: The consequences of wage restraint 10

1.3: The explanations for the consensus on wage restraint 12

2: Research design 16

2.1: Research objective 16

2.2: Research questions 17

3: Methodology 19

3.1: Research methods 19

3.2: Framework for analysis 20

3.3: Data 23

4: Analysis 24

4.1: The Keynesian crisis and the variety of responses 26

4.2: The selection of the competitiveness discourse 31

4.3: The use & transformation of the competitiveness discourse 38

4.4: The retention of the competitiveness discourse 41

4.4.1: Repetition of the discourse 42

4.4.2: Incorporation into common sense 43

4.5: The role of technology in the selection and retention of the discourse 47

5: Conclusion 50

6: Bibliography 53

6.1: Literature 53

6.2: Analysis 57

Introduction

In 1995 the Netherlands Bureau for Economic Policy Analysis (CPB) claimed that wage restraint has been “Holland’s single most important weapon in international competition (as cited in Hemerijck & Visser, 1997: 26)". The quote perfectly captures the broad-based consensus on the benefits of wage restraint that has dominated the Dutch wage bargaining process in the last 40 years. Wage restraint is, as an economic strategy, strongly embedded in the culture as well as the formal institutions of the Netherlands.

The emphasis on wage restraint has had clear consequences for labour’s share of income. Following the majority of capitalist economies, the Netherlands experienced two interrelated phenomena from the late 1970s onwards: a downward trend in labour’s share of income, and the emergence of a persistent gap between real wage growth and labour productivity growth. Although once regarded as a stylised fact (see Kaldor, 1957; or Keynes, 1939), the alleged stability of the proportion of national income received by labour and capital has in the last few decades been seriously challenged by a vast amount of research (see i.a. OECD, 2012; ILO, 2013). After the post-war period until the 1970s real wages in the Netherlands and similar western capitalist countries typically grew in proportion to labour productivity (van Klaveren, Salverda & Tijdens, 2009: 414). However, after the 1970s labour was no longer able to translate productivity growth into real wage growth (Lavoie & Stockhammer, 2013: 3; Stockhammer, 2013: 1). The extra real income generated as a result of increasing levels of labour productivity has, instead, been largely appropriated by capital, which resulted in big shifts in the national income away from labour and towards profits (Mitchell, 2013: 6- 7; Lapavitsas, 2013: 190).

In the Netherlands the real wage-productivity nexus has deliberately been broken, since supressing real wage growth forms an integral part of the Dutch export-led growth strategy. The signing of the famous Wassenaar Agreement in 1982 heralded the (re)introduction of wage restraint, and marked a turning point in the Dutch political economy. The social partners subscribed to the logic that increasing the profitability of companies and improving the international competitiveness of the Dutch economy was the way out of the turbulent economic times of the early 1980s (Visser & Hemerijck, 1997: 13, 16; Hemerijck & Schludi, 2000: 159). In the subsequent decades wage restraint became an indispensable tool for promoting job growth, and was almost continuously pursued by both the government and the social partners. Wage formation in the Netherlands has since 1982 been characterised by voluntary wage restraint in exchange for jobs, resulting in a real wage growth of around 0% between 1982 and 2015 (de Beer & Keune, 2017: 223; see also Storm & Naastepad, 2013: 101).

However, an increasing number of voices argue either that wage restraint has not been the best strategy for the Netherlands (see i.a. Kleinknecht et al., 2006; Vergeer & Kleinknecht, 2007; Storm & Naastepad, 2013) or that in the current economic climate there is no need to restraint the wages (see i.a. Eggelte et al., 2014). Even the president of the Dutch Central Bank Klaas Knot has in the last few years repeatedly argued for stronger wage increases (de Boer, 2017). These pleas have so far not resulted in a significant rise of real wage growth. The consensus of the social partners on wage restraint and its apparent benefits throughout the last few decades has been remarkable. Wage restraint enjoys an almost unquestionable legitimacy in the Netherlands. The wage bargaining process has been dominated by concerns surrounding the international competitive position of the Netherlands (see i.a. Salverda, 2013: 371; Visser & Hemerijck, 1997: 26, 109; Becker, 2001: 26), which begs the question where these specific concerns originated from, and how these concerns were able to secure a place at the forefront of the Dutch social dialogue.

Different explanations for the Dutch consensus on the wage restraint strategy have been put forward. The majority of these explanations offer either a depoliticised narrative that frame wage restraint as a long-awaited sensible decision, or stress that trade unions simply lacked the power to oppose to the wage restraint wishes of the employers. However, the first type of explanations cannot account for the shaky theoretical and empirical foundation on which the proclaimed benefits of wage restraint are build; while the second type of explanations fall short in explaining why the strategy of wage restraint has been embraced by the social partners in the Netherlands for the last 40 years but not to a similar extent in the other countries.

To understand why trade unions have subscribed to a logic that not necessarily seems beneficial for its members it is crucial to adopt the Gramscian notion of common sense. This thesis argues that the consensus of the government and the social partners on wage restraint has been underpinned and shaped by a competitiveness discourse, which over time has been incorporated into the common sense of the relevant actors. The hegemonic discourse that presents wage restraint as unambiguously beneficial for the general interest gained legitimacy and became throughout the years widely accepted. The discourse has been an essential instrument in producing and sustaining the necessary support for the wage restraint strategy. The Dutch preoccupation with (unit) labour costs and the profitability of firms has been premised on the pervasive beliefs that the competitiveness discourse propagates.

The thesis is structured as follows. The first chapter examines the debates in the literature. The second chapter presents the research objective and the research questions. Chapter three discusses

5 the research methods, and explains the guiding framework for the analysis. The fourth chapter presents the analysis. Lastly, chapter five offers a conclusion.

1: Theoretical Framework

A number of economic shocks, such as the end of the Bretton Woods system (1971), the first (1973) and the second (1979) oil crisis, and the subsequent global economic recession of the early 1980s, left many Western capitalist economies in dire straits. For the Netherlands the period was characterised by economic difficulties and societal conflicts. Because of the severity of the problems, the term ‘Dutch disease’ was coined to describe the political and economic stagnation of the Netherlands during the 1970s and early 1980s (Visser & Hemerijck, 1997: 9). The country experienced a high level of unemployment, a big current account deficit, a declining level of competitiveness, falling growth rates, and a rapidly rising public debt (Hemerijck & Schludi, 2000: 158); while on a societal level fierce labour conflicts dominated the labour relations (Scharpf, 2000: 60; van der Velden, 2009: 84, 143).

To combat the economic deterioration the Dutch reformed their welfare state, and reintroduced their post-war strategy of wage restraint (Visser & Hemerijck, 1997: 9). This strategy included a chain of reasoning that started with wage restraint and ended with job growth. Wage restraint was therefore regarded as the correct medicine to cure the ‘Dutch disease’ of high and sclerotic unemployment, which was over 11% in 1982 (Storm & Naastepad, 2013: 101).

The ‘sick man’ image of the Netherlands changed profoundly in the second half of the 1990s. While the majority of western economies experienced stagnation, the Dutch economy was one of the few that was able to perform comparatively well (Becker, 2001: 19; see also Engelen, 2016: 116). The relative success of the Netherlands had not gone unnoticed. In the end of the 1990s international media praised the Dutch corporatist model for its ability to function as a ‘jobs machine’ (Visser & Hemerijck, 1997: 9; Marx, 2007: 383-384).

The transformation from the Dutch disease of the 1970s to the Dutch miracle in the 1990s, and the international acclaim the Netherlands received for its socio-economic turnaround, grasped the attention of many scholars in the late 1990s and early 2000s. These scholars have begun to offer important theoretical and empirical evidence, insights, and explanations with regard to the importance and consequences of, and the consensus on, the wage restraint formula. This chapter will examine these debates in the literature and develop a framework of analysis that shapes the empirical arguments of the thesis. This literature review is composed of three parts. The first part focuses on the reasoning behind the Dutch strategy to restrain the wages. The second part is concerned with the macroeconomic and social consequences of the wage restraint formula for the

Netherlands. While the third part critically explores different arguments for the Dutch corporatist consensus on wage restraint.

1.1: The wage restraint-employment nexus

Governments have different non-cooperative strategies at their disposal to improve the competitiveness of their economy. To diminish the relative production costs, governments could for instance opt for ‘competitive devaluation’ (or ‘external devaluation’), which entails measures that will cause the exchange rate of their currency to fall relatively to the currency rates of other countries (Dufresne, 2013: 118). Another option is ‘competitive disinflation’ (or ‘internal devaluation’); measures that try to suppress inflation or wages. The idea is, in the case of suppressing wages, to ensure that the nominal wage growth is lower than the productivity growth and preferably lower than the nominal wage growth of the neighbouring countries. This will, as the logic goes, lead to a decrease in the relative unit labour costs, and an increase in the competitiveness of the economy. The increased competitiveness will improve the current account position of the country, and reduce the level of unemployment (Blanchard et al., 1993: 13; Clift, 2003: 182; Blanchard, 2007: 2, 7).

The export-led growth strategy of the Netherlands incorporates the idea of ‘competitive disinflation’. Suppressing wage growth forms a crucial element of the Dutch strategy. The envisioned effects of wage restraint include competitiveness as well as job creation. Wage restraint will, following the underlying logic, foster job creation via three different channels. Firstly, by ensuring that the relative costs of nation’s firms are relatively lower compared to their foreign rivals, the nation’s firms have a comparative advantage, which will lead to higher output and therefore employment. Secondly, wage restraint should induce firms to shift from capital- to labour intensive production. The demand for labour will as a result increase, and the employment level will rise. Thirdly, if the nominal wage growth is lower than the productivity growth, the profitability of the nation’s firms will rise. The more capital friendly climate of the country will ensure that the capital remains within borders, and will be invested in labour intensive production (Naastepad & Kleinknecht, 2004: 138). The policy of wage restraint will in the short run reduce the domestic purchasing power, but is offset by the increased levels of export, and the employment generating effects that comes with it. The Dutch strategy is therefore characterised by a wage restraint-employment nexus; inspired by neo-classical economic theory, a positive causal link between wage restraint, competitiveness, and employment growth is envisioned.

The Dutch strategy to pursuit competitiveness and employment growth via wage restraint contains substantial flaws. The competitive corporatist strategy of the Netherlands to restrain the wages could yield advantages if the domestic wage demands are relatively lower compared to their competitors. This kind of ‘beggar-thy-neighbour’ policy is not particularly useful if a great number of countries employ the same strategy. It could even turn into a collective ‘beggar-thyself-and-thy- neighbour’ situation, with minor competitiveness improvements and major domestic effects (see Lapavitsas et al., 2010). The purchasing power and the domestic demand will drop, while employment in the countries will not increase, since the competitive gains cancel each other out (Blecker, 1989: 407).

There are, however, more fundamental shortcomings. Restraining the wages, or even lowering them, does not necessarily improve the competitiveness of a country. The unit labour costs depend on two factors: the total labour costs and labour productivity. However, labour productivity is not constant, and could possibly be negatively affected by wage restraints. Higher wage growth could potentially have the opposite effect on productivity growth (see i.a. Vergeer & Kleinknecht, 2007; Storm & Naastepad, 2011). Higher wages could, for instance, heighten the pressure for firms to introduce labour-saving techniques (de Beer, 2001: 325-326). Furthermore, they could also serve as what Streeck (1991, as cited in Streeck, 2005: 271) describes as a ‘benevolent constraint’: a situation in which an employer feels more obliged to invest in skills and high-quality products. Because of the intricate interrelationship between labour costs and productivity it seems that a clear outcome is not a given.

Furthermore, the logic behind the Dutch wage restraint strategy reduces international competitiveness, as it is often done, to the growth of relative unit labour costs (Fagerberg, 1988: 355). Despite the lack of an agreed upon definition (Boltho, 1996: 1), the popular measure of relative unit labour costs is too simplistic for two reasons. Firstly, wages are not the only cost component. Import and export respond more strongly to changes in the gross output price, of which unit labour costs only constitute a relatively small part (Storm & Naastepad, 2015: 14). Secondly, and more importantly, export market shares are less dependent on relative costs than often is argued (see ‘Kaldors paradox’ in Kaldor, 1978; Carlin, Glyn, Van Reenen, 2001). Competitiveness seems to consist of several aspects, one of which being the price. One of the main factors determining the international competitiveness of an economy is non-price technological competitiveness; the relative unit labour costs are therefore less important for competitiveness than is often stressed (Faberberg, 1988; Storm & Naastepad, 2016).

So far the point has not been to deny that there may be a positive relationship between wage restraint, competitiveness, and employment growth. Instead, the aim was to show that the underlying logic of The Dutch wage restraint strategy to foster employment growth is far from robust. Although the relationship between the different elements is less straightforward than often is assumed or presented, it is possible that the strategy has had a positive impact. The belief that the wage restraint strategy has been a success or ‘Holland’s single most important weapon’ enjoys widespread popularity among the Dutch society. The focus of the next part will therefore be on the economic and social consequences of the wage restraint strategy for the Netherlands.

1.2: The consequences of wage restraint

Despite the traps and pitfalls of wage restraint, the Netherlands adopted the strategy to overcome the economic problems of the 1970s and early 1980s. The Dutch response and its apparent success attracted much attention, and quickly became the corporatist revelation of the mid-1990s. In a relatively short time span the Dutch reform became known to be a model for effective labour market adjustment. Despite the fact that there is no direct and unambiguous positive relationship between wage restraint, competitiveness, and employment growth, it has been one of the primary concerns in the Dutch wage bargaining process. The signing of the Wassenaar Agreement in 1982 is retrospectively often regarded as the return of the wage restraint strategy. Ever since the agreement, Dutch unions have persistently placed jobs before income (Hemerijck & Schludi, 200: 162). The social and economic consequences of this strategy are widely debated. After the international appraisal of the late 1990s positive studies dominated the scientific debate, though later on a number of scholars started to dispute the importance and benefits of wage restraint.

The Wassenaar Agreement resulted, according to i.a. Hemerijck & Visser (1997), Visser (1998), Hartog (1999), Levy (1999), Nickell & van Ours (2000), and Scharpf (2000), in a relative success. The strategy to restrain the wages clearly succeeded; the unit wage costs in 1996 were at the same level as in 1981. Germany experienced over the same time period an increase of 40%, while within the EU it rose on average 15% (Hartog, 1999, 464-465). Labour’s share of income fell as well; from circa 65% in the early 1980s to 56% during the period 1984-2000 (Storm & Naastepad, 2013: 101; see also Scharpf, 2000: 61) Furthermore, the Dutch unemployment rate fell from almost 15% in the early 1980s to 3.8% in the mid-1990s, the lowest of all the EU countries. In addition, the labour force participation experienced a spectacular surge from 52% in 1983 to 66% in 1996 (Levy, 1999: 258). Hemerijck & Visser (1997: 28, 42, 181) note that the rate of job growth was higher, and the fall in the rate of unemployment was steeper compared to other European countries. The wage restraint

10 strategy restored the profitability of businesses, led to increasing levels of export, and kept a growing number of people on the payroll. Although they concede that labour productivity growth has been low, and that the majority of the newly created jobs are part-time, they see wage restraint as the foundation and as a success story.

Though there have also been critics who claim that the relationship between wage restraint and the Dutch labour market success is less straightforward than often is assumed. Becker (2005: 1085-1089) asserts that wage restraint was not the foundation on which the Dutch ‘employment miracle’ of the 1980s and 1990s was built; the new jobs that emerged were not the result of ‘wage-restraint- induced export’, but were caused by wage dispersion and the rise of (female) part-time work. Furthermore, the new jobs emerged in the service sector, primarily in branches that do not compete on an international level. Salverda (1999: 11, 14) notes that the Dutch export performance after 1982 was mediocre, while consumption and import was strikingly low. The current account surpluses the Netherlands experienced in this period can therefore not be the result of rising net exports, but could be explained by falling imports. In addition, Kleinknecht & Naastepad (2005: 1200- 1201) argue that wage restraint resulted in higher job growth, but was at the expense of productivity growth and innovation. However, in the long run this makes the Dutch economy more vulnerable. While Storm & Naastepad (2013: 102) argue that wage restraint had a negative impact on aggregate demand. The modest economic growth performance of the Dutch economy was not due to wage restraint, but was the result of an increasing reliance on export demand, and a domestic consumption demand fuelled by debts and (housing) wealth increases.

Despite the theoretical and empirical shaky foundation of the wage restraint-employment nexus, the social partners and the government time and time again highlighted the importance of wage restraint and its apparent benefits. Furthermore, it is not only possible to question the dominant positive narrative of the economic impact of the Dutch strategy, but also the social costs it incurred. Delsen (2002: 81) and Marx (2007: 393, 395) point out that the distribution of the consequences of the wage restraint strategy has not been even across the society. People at the lower end of the income distribution immediately felt the income effects of the strategy; while the new jobs that emerged ended up at the middle income households. The two-earner middle income households that emerged as a result experienced an increase in their standard of living. The lower income households fell behind, and even faced the risk of experiencing declining living standards.

1.3: The explanations for the consensus on wage restraint

As we have seen, the Dutch wage restraint export-led growth strategy has serious theoretical shortcomings, while the economic and social consequences of this strategy are widely debated. Both the theoretical and empirical evidence do not unambiguously show positive results for the Netherlands; which begs the question why trade unions subscribed to the wage restraint strategy in the first place. Different explanations for the initial and continued consensus on wage restraint as the solution to overcome economic problems have been put forward.

Several explanations underline the importance of the high level of unemployment that the Netherlands faced during the early 1980s. For instance, De Beer (1997: 328) concludes that the consensus is located in the severe recession that the Netherlands experienced during this time. As a result of the recession a lot of permanent full-time jobs of trade union members were for the very first time at risk. This pushed trade unions to accept wage restraint in exchange for i.a. shorter working hours. A similar explanation is put forward by Green & Pedersen (2001: 146; for another example see Hassel, 2006: 86), who argue that the Wassenaar Agreement is the result of the government’s ability to launch a credible threat by showing its willingness to impose solutions to resolve the dire economic circumstances that neither side preferred. These explanations, however, are only aimed at the consensus of the 1980s, and are difficult to reconcile with the continued reliance on wage restraint in the following decades.

One recurrent theme in the literature is the ‘polder’ explanation, which stresses the importance of the Dutch consensual corporatist tradition. The foundation of the so called Dutch success story is the shift from competitive to cooperative social relations. Both parties realised the importance of wage restraint for the viability of the Dutch economy, which then was exchanged for new jobs in the Wassenaar Agreement. These explanations offer a depoliticised narrative that frame the trade unions acceptance of wage restraint as a long-awaited sensible decision. The most famous example of a ‘polder’ explanation is the often cited work A Dutch Miracle by Visser & Hemerijck (1997). The book was published at the peak of the international appraisal for the Dutch model, and quickly became the dominant storyline. Visser & Hemerijck (1997: 13) put the learning capacity of trade unions at the centre of their explanation. Under pressure of unemployment, the trade unions learned that a higher profitability for capital was required to combat the high levels of unemployment and to restore economic growth. The severe economic crises the Netherlands had experienced changed the mentality of the trade unions, and resulted in the acceptance of the new demands of the world economy (Visser & Hemerijck, 1997:13; Hemerijck & Schludi, 2000: 138). Hemerijck & Visser (2000: 237, 252) note that with high levels of unemployment in the beginning of

12 the 1980s trade unions were in no position to demand real wage growth, and could not afford a wage conflict. Instead, Dutch unions decided from 1982 onwards to place jobs before income. The new insights trade unions gained as a result of the learning process, led to the ‘revitalisation’ of the Dutch consensual corporatist model in the subsequent decades (Hemerijck, Unger & Visser, 1999: 262).

Although implicitly mentioned, the aforementioned explanations do not necessarily stress the importance of power with regard to long-term implementation of wage restraint in the Netherlands. The analysis of Hemerijck & Visser (1997) relies heavily on the idea that trade unions had to learn to accept the correct solution to the economic malaise of the early 1980s, which was wage restraint. Even if we accept that, in hindsight, the solution was correct; to what extent can we ascribe the social consensus on wage restraint to a genuine learning process? According to Hemerijck & Visser (1997: 58) a learning process ensues when the involved actors adjust their policy practices and preferences based on their experiences with previous policy failures. However, they also note that “those who lose power must learn (p. 78)”, which stresses the importance of shifting power relations. A learning process therefore de facto entails a learning curve favouring the dominant actor.

One could argue that the trade unions simply did not have the necessary power to oppose to the wishes of the employer’s organisations. As a result of the high levels of unemployment and the declining membership numbers, Dutch labour relations changed in favour of the employer’s organisations. However, these trends did not only occur in the Netherlands, but have been a striking development in the majority of western capitalist countries (Becker, 2001: 470). Obviously power matters, but power alone is not able to explain why the strategy of wage restraint was embraced by the social partners in the Netherlands, but not to a similar extent in the other countries. Additional factors must therefore be at play.

Becker (2001: 28) notes that the profitability of Dutch firms was not particularly low compared to other countries, and that the unit labour costs of Dutch firms were below average in the late 1970s and early 1980s. Furthermore, he stresses that there is no clear causal link between wage restraint and job creation. He therefore argues that the learning argument of Hemerijck & Visser is weak; instead of a learning process, the trade unions reluctantly accepted the hegemonic interpretation of the benefits of wage restraint. As a result of the consensual nature of the Dutch corporatism, actors will have to follow ‘the rules of the game’, and try to avoid conflict. In case the social partners are not able to agree, the actor in the weaker position will need to submit to the dominant view, either the one supported by science or the government. For the Dutch case this meant that the trade unions had to submit to the hegemonic interpretation of the general interest; a particular view of the

13 general interest that was broadly supported by the government (Becker, 2001: 28; Becker, 2005: 1086). Van Apeldoorn (2009: 214) argues that the main reward trade unions, the weaker party, gained from the Wassenaar Agreement was that it remained one of the key players in the socio- economic governance of the Netherlands. However, one could question what the benefits of a seat at the table are when the consensual corporatist exchanges are skewed towards capital. As Becker (2001: 29) notes, the consensualist culture of Dutch corporatism could turn out to be a mechanism of sustaining hegemony.

To explain the Dutch corporatist tradition and the choice for wage restraint a number of scholars stress the importance of the perceived vulnerability of the Dutch economy. Katzenstein (1985: 191) argues that small European countries tend to resort to democratic corporatism as a response to increasing international pressures. The economies of these small countries tend to be open, and vulnerable. The lack of global economic power, and the export-dependent nature of their economy, creates a sense of vulnerability, which in turn provides a motive for policy coordination. To deal with the harsh economic conditions, wage restraint is therefore more often introduced in these types of countries (Delsen, 2002: 10). However, these explanations do tell us exactly why trade unions accepted the narrative on the benefits of the wage restraint strategy for the last few decades. This is especially puzzling when taking into account that the signing of the Wassenaar Agreement was not necessarily in the interest of the employees that trade unions represent (Bruff, 2010: 628).

Bruff (2010; see also Bruff, 2008) adopts the Gramscian notion of ‘common sense’ to explain why Dutch trade unions have been accepting wage restraint for the last 40 years. He (2010: 622) argues that common sense is the basis for how humans make sense of the world. At the centre of social and political conflicts different social groups struggle to “render their conception of the world common sense and thus the basis for how humans in that society think and act (625)”. In the Netherlands the consensus on wage restraint is rooted in the common understanding of the vulnerability of the Dutch economy. Bruff shows, via interviews with representatives of political parties and trade unions, that the relevant actors assume that the economy is vulnerable to external economic factors. It is this shared understanding of the world that binds the interests of the principal actors. As a result of an overlap in the intersubjective versions of common sense of the different actors, wage restraint is regarded as a logical solution, since nobody would want to jeopardise the foundation upon which the Dutch prosperity is build. The consensus on wage restraint is therefore not solely rooted in power or the institutional environment alone. Instead, we also need to consider the role of culture in the creation of consensus. A certain degree of overlap in the different versions of common sense opens up space for a synthesis of the different perspectives, and subsequently a consensus (Bruff, 2008: 158).

The learning argument of Visser & Hemerijck (1997) cannot adequately explain why wage restraint was regarded as the correct solution, and how the underlying competitiveness-employment nexus was created. Instead, by stressing the economic necessity of wage restraint they take its legitimacy more or less for granted. The power shift that occurred in the Dutch industrial relations in the early 1980s (van Apeldoorn, 2009: 214), and the fact that the signing of the Wassenaar Agreement triggered a process that was predominantly favourable to the wishes of capital (Bruff, 2010: 628), shows the relevancy of the interests and power of the principal actors. However, power alone is not sufficiently able to explain the Dutch wage restraint strategy. We therefore also touched upon alternative explanations that stress the role of hegemony and the Dutch corporatist structure, and the perceived vulnerability of the Dutch economy. Using the Gramscian notion of common sense, Bruff (2008; 2010) shows the continued legitimacy of the dominant narrative that asserts that there is an unequivocal positive link between wage restraint and job growth. However, it does not give us any insights into the creation of this dominant narrative, or how it was sustained by all the relevant actors. The social partners and the government have formally embraced the discourse on the benefits of the wage restraint-employment nexus for the last 40 years. However, it remains unclear how a theoretically and empirically shaky discourse became a stable and recurring element in the Dutch wage bargaining process. Because of this lacuna, more research into the emergence and the reproduction of this ‘competitiveness discourse’ is necessary.

2: Research design 2.1: Research objective

Although wage restraint is often used as an explanans for the Dutch ‘miracle’, it is rarely viewed as an explanandum; that which needs to be explained. Despite the occasional reluctance of trade unions to accept lower wage increases, the consensus of the social partners on wage restraint and its apparent benefits throughout the last few decades has been remarkable. The formal basis for this consensus seems to be the mutual understanding that to generate economic growth and foster job creation it is essential for the Dutch export-led economy to be competitive. The dominant narrative asserts that there is a positive causal link between wage restraint, competitiveness, and employment growth. Time and time again it is therefore stressed that rapid nominal wage increases should be avoided, since in order to remain internationally competitive the unit labour costs need to be suppressed. Increasing the competitiveness of the economy without jeopardising the profitability of firms, will, according to this logic, result in higher levels of export and domestic investments, which will enhance the demand for labour. The aforementioned logic is entrenched in the wage formation process of the Netherlands. National competitiveness has become a clear priority, which resulted in a critical shift from productivity bargaining to employment bargaining. Wage-setting was transformed into a function of competitiveness; agreements were aimed at the stimulation or preservation of employment without obstructing the competitiveness of the economy (Leonard, 2001: 37-39).

The theoretical and empirical evidence that supports the competitive-employment nexus has serious shortcomings. Furthermore, it seems that the Dutch wage restraint strategy did not result in the proclaimed miracle; Real GDP growth after 1982 was inferior to the performance in the 1960s and 1970s (Storm & Naastepad, 2013: 102), while the jobs that emerged were low-paid flexible service sector jobs (Becker, 2001: 26; Becker, 2005: 1088). This begs the question why trade unions continuously accepted wage restraint, and adopted the competitiveness discourse that stresses the causal relationship between wage restraint, international competitiveness, and job growth. Because of the firm grip that this specific discourse seems to have, this thesis will investigate how wage restraint became the common sense notion, adopted by both the government and the social partners. To do this, it is necessary to uncover the role of the government and its affiliated organisations, the employer’s organisations, and the trade unions in mobilising and sustaining the view that improving the cost-competitiveness via wage restraint is an economic necessity favouring the national interest. The aim is therefore not to offer an alternative explanation of the proclaimed success story of the Dutch wage restraint strategy. The main subject is the hegemonic character of

16 the underlying competitiveness discourse that for the last 40 years continuously propagated the unequivocal benefits of wage restraint.

2.2: Research questions

Wage restraint was in the post-war period until mid-1960s an important element of the low wage strategy of the Netherlands (Visser & Hemerijck, 1997: 92-93). In the early 1980s this strategy was reintroduced, embedded in a corporatist consensus. To fully understand how wage restraint became the ‘go-to’ solution during economic downturns, it is essential to look at the competitiveness discourse underlying the formal consensus of the social partners on employment. Where did it come from, and how is it possible that the discourse has been so stable for the last 40 years, while its claims are rather shaky?

To accomplish the objective of this thesis the following research question has been formulated: How was the discourse on the wage restraint-employment nexus created and sustained in the Netherlands?

The answer to the research question will be composed of three parts. Firstly, we will focus on how the discourse was created, and what role the relevant institutions played in creating the wage restraint-employment narrative. The real wage-productivity nexus has been replaced by a wage restraint-employment nexus; a causal link between wage restraint, competitiveness, and job creation. However, it remains unclear how wage restraint became equated with competitiveness, and why increasing the cost-competitiveness was regarded as the solution to improve the employment levels in the Netherlands. A socio-historic reconstruction that uncovers the creation of the discourse is therefore necessary. The first sub-question will therefore track the creation of the discourse from the 1970s onwards. Secondly, we will examine the utilisation and transformation of the discourse. How was the theoretical discourse translated into practice, and how did the discourse develop over time? Thirdly, the sustentation of the discourse by the social partners and the government will be studied. The focus will be on the different ways the competitiveness discourse was retained and reinforced after the initial consensus of 1982.

To give a proper answer to the aforementioned parts three sub-questions have been formulated:

1. How was the discourse that places wage restraint at the centre of the competiveness strategy socially constructed? 2. How did the competitiveness discourse evolve over time? 3. How has this competitiveness discourse been sustained?

3: Methodology 3.1: Research methods

To study the creation and sustentation of the competitiveness discourse process tracing will be employed. Process tracing is a qualitative research method that aims to deductively or inductively uncover social causal mechanisms or outcomes in a single-case research design (Beach & Pedersen, 2013: 2). Although it is regarded as a fundamental tool of qualitative analysists, it often is not adequately understood (Collier, 2011: 823). The confusion surrounding the research method is in part because of the different versions that seem to exist. Beach & Pedersen (2013: 9-13, 18) argue that there are three different variants of process-tracing, which all have distinct research purposes. The variant that will be used in this thesis is, what they define as, ‘explaining-outcome process- tracing’. This most commonly used variant is particularly useful when the aim is to account for a puzzling historical outcome. The goal is to build a minimally sufficient explanation of the particular outcome. Compared to the other variants of process-tracing, this variant is neither concerned with theory-testing nor theory-building. The causal mechanisms are therefore not theorised as sufficient causes. Instead, causal mechanisms are understood as relatively simple pathways between two variables; variable x is seen as contributing to producing variable y. However, theories and concepts do play a role as heuristic instruments that have analytical utility. Not the testing or building of theories is the goal, but to show how a particular theory or set of concepts is useful in helping to produce the best possible explanation.

To build a minimal sufficient explanation for the creation and sustentation of the competitiveness discourse this thesis will therefore focus on description and logical inferences. Furthermore, special attention will be paid to the actors that are directly or indirectly involved in the Dutch wage bargaining process, such as the social partners, the government, the Stichting van de Arbeid (Labour Foundation), the SER, the CPB, the WRR, and (scientific) experts. Moreover, there will be a clear focus on critical junctures, such as specific bipartite or tripartite agreements since the 1970s onwards.

Following the distinction of Bonnell (1980) between theoretically informed and conceptually informed historical sociology, this thesis will “rely primarily on concepts to facilitate the selection, organization, and interpretation of empirical material (166)”. The aim of this thesis is therefore to offer a conceptually informed reconstruction of the history of the competitiveness discourse. Instead of theories, a variety of concepts will be used as a heuristic device. The guiding framework for the analysis will be explained in the next part of this chapter.

3.2: Framework for analysis

To interpret the continued reliance on wage restraint the functional ‘polder’ explanations fall short in explaining why trade unions accepted the shaky discourse on the benefits of wage restraint. This continued acceptance is especially puzzling when one takes into account the fact that the consensual corporatist exchanges have been skewed in favour of capital. To explain why trade unions accepted a strategy that is not necessarily beneficial for labour it is necessary to adopt an alternative framework that takes the role of power seriously. However, changing power relations alone is not able to sufficiently explain why the wage restraint strategy was embraced by the key players in the Netherlands and not in the other countries. Bruff’s (2010) use of common sense offers an alternative perspective to understand why trade unions subscribed to the wage restraint strategy. Bruff mainly focusses on demonstrating the continued legitimacy of wage restraint in the Netherlands. This legitimacy is, according to Bruff, anchored in the common sense notion that wage restraint is, as a result of the assumption of economic vulnerability, a necessity. By focussing on the creation, reproduction, and utilisation of the discourse underlying the alleged causal link between wage restraint, competitiveness, and job creation this thesis moves beyond the work of Bruff.

To research how the competitiveness discourse was created, sustained, and became dominant in the Netherlands this thesis will use a framework that incorporates the Gramscian notion of common sense and certain elements of Cultural Political Economy (CPE). Hoare & Nowell-Smith (1971), the translators of the works of Gramsci, note that Gramsci used the term common sense “to mean the uncritical and largely unconscious way of perceiving and understanding the world that has become “common” in any given epoch (322)”. Common sense therefore refers to the incoherent set of assumptions and beliefs that are broadly held by the members of a society (Hoare & Nowell-Smith, 1971: 322). The concept expresses the taken-for-granted, but is “not something rigid and static; rather it changes continuously, enriched by scientific notions and philosophical opinions which have entered into common usage (Hoare & Nowell-Smith, 1971: 326)”.

As an important element in the struggle for hegemony, the notion of common sense helps in explaining why trade unions subscribed to a logic that does not necessarily seem to benefit labour. However, to understand how the competitiveness discourse was created and sustained additional concepts and theoretical insights are necessary. CPE offers the tools necessary to study the mechanisms, processes, and practices through which hegemonies are constituted. CPE is an analytical approach that combines concepts and tools from critical semiotic analysis and from critical political economy (Jessop, 2004: 159). It highlights the importance of the cultural dimension by

20 emphasizing the foundational nature of meaning and the process of meaning-making in social relations (Jessop, 2010: 337).

The aim of this thesis is, however, not to offer a full CPE-account of the competitiveness discourse underlying the consensus on wage restraint. It is therefore not necessary to explain CPE in full detail. Instead, the goal is to explore the diverse processes and mechanisms involved in the production of this particular hegemonic discourse, how it developed over time, and how it constantly is renegotiated within civil society and government institutions. The actors involved in the ongoing reproduction of the competitiveness discourse may have heterogeneous motives and do not necessarily work together to maintain the discourse. The exact motives of the actors that reproduce the Dutch competitiveness discourse are, however, not a concern that will be addressed in this thesis. For this exploration it suffices to use a limited number of concepts that play a central role in CPE. To track the development of a particular discourse it useful to focus on the emergence of a discourse, the privileging of the particular discourse, and the ongoing realisation of the discourse. The evolutionary mechanisms of variation, selection, and retention will be used to study this process. However, before explaining these mechanisms we will first briefly discuss the concept of discourse.

Discourse is a versatile and ambiguous concept that is prone to misunderstandings. In this thesis discourse refers to particular sets of semiotic practices that produce and communicate sense and/or meaning (Jessop & Sum, 2013: 151-153). A discourse could therefore be conceived as a narrative that attributes sense or meaning to particular objects, and envisions certain relationships between these different objects. Because discourses selectively assign meaning to some objects and not to others, it structures and therefore restricts the possible variety of interpretations and solutions. In this thesis we are not concerned with the linguistic features of the discourse, but with its semiotic impact, and its articulation into social practices.

Which discourse prevails not only depends on the persuasiveness of the argumentations, or whether it has a scientifically supported foundation, but also on the extra-semiotic (material) features of social practices, such as power or institutional logics. Most discourses lack the support of actors with the appropriate economic, administrative or legislative resources to create consensus on a particular interpretation and solution. A carefully constructed and powerful narrative without the backing of important actors that help to implement the narrative will be less effective compared to more arbitrary accounts that do have powerful backing (Jessop, 2013: 9). Power therefore clearly matters.

It is in periods of crisis that non-dominant discourses are able to gain footing. Crises are generally characterised by profound disorientation. The shock crises tend to give to prevailing economic wisdom and dominant policy paradigms creates space for alternative economic perspectives (Jessop,

2010: 341). This gives room for the (re)politicisation of the sedimented discourses and practices (Jessop, 2013: 5). Faced with feelings of urgency, the profound disorienting effects of a political and/or economic crisis initially leads to a proliferation of a variety of responses by different social forces. A limited number of discourses are selected for interpreting the crisis and used as legitimation for actions. However, which discourse is privileged is not reducible to its semiotic features. Although it is possible that different plausible discourses emerge, the narrators are not equally effective in conveying their message or gathering support (Jessop, 2004: 167). Different extra-semiotic factors also play a role. In short, the selection of a discourse depends in part on the structure, the agents involved, and technology. Structures favour certain interests or strategies. In the case of the wage restraint strategy, Becker’s explanation of the ‘rules of the game’ of Dutch corporatism could be regarded as a structural factor. Furthermore, the capacities of the agents involved and their abilities also play an important role in the selection of a particular discourse. Lastly, technologies, regarded as knowledge, expertise and apparatuses, construct authority, and have the potential to convey legitimacy and guide action (Jessop & Sum, 2013: 175, 216-222).

If a discourse is able to successfully obtain a privileged position it is not only able to reduce the ways in which a crisis can be interpreted, but also the number of appropriate solutions to overcome the crisis. It therefore offers an imagined recovery that forms the basis for economic strategies and policies. After the selection, some discourses are retained via sedimentation of the discourse and the consolidation of the discourse into social practices. The selected discourses are translated into policy, routines, and new social arrangements (Jessop, 2013: 4, 7). It is the retention of the discourse that helps form the basis of the Gramscian notion of common sense. The institutionalisation of a discourse has a naturalising and path-shaping effect. The incorporation of the discourses into routines, the continued expression of the discourse in economic strategies, and the depoliticising effect of specific technologies, such as statistics and indexes, reinforce the position of the discourse, and foster the translation of the logic of the hegemonic discourse into common sense (Jessop & Sum, 2013: 282-283; Jessop, 2010: 346).

However, as argued, common sense is not something rigid and static. If the incorporation into common sense is successful, the actors share an intersubjective version of common sense; there is an overlap in the assumptions and beliefs of the actors. However, even intersubjective versions of common sense are fragmentary, incoherent and inconsequential (Gramsci, 1971: 419). The common sense notions an actor holds can therefore be contradictory in nature. It is as a result possible that the perspective of an actor is informed by both a hegemonic logic and forms of critical insights (Sum & Jessop, 2013: 222; see also Bruff, 2008: 48-49). Because of these internal contradictions within

22 specific versions of common sense, it is possible that actors who share an overlap in common sense emphasize to a varying degree the policy and institutional changes sought (Bruff, 2010: 626).

A Full CPE-account would focus on the dialectic of path-dependency and path-shaping that emerges as a result of interaction between semiotic and extra-semiotic (material) processes. However, this is beyond the scope of this thesis. Furthermore, some aspects are visible in the arguments of Becker (structure) or widely regarded as having an impact (changing power relations). Instead, the thesis will use the outlined evolutionary mechanisms, and pay close attention to the role of technology in naturalising the competitiveness discourse.

3.3: Data

A variety of data will be used to examine the creation and sustentation of the competitiveness discourse. This data will primarily be qualitative in nature, and comprises i.a. annual reports, research reports, magazines, letters, speeches, minutes and statements of the cabinet, governmental organisations (SER, CPB, WRR), the VNO-NCW and its precursors (the Dutch employer’s federation), the FNV and its precursors (Federation of Dutch Trade Unions), the CNV (National Federation of Christian Trade Unions in the Netherlands) and the Stichting van de Arbeid. In addition, interviews in newspapers with representatives of the government or with the members of the different organisations will also be examined. Moreover, a variety of news articles by the Dutch scientific community will also be consulted.

Some of the reports and statements of the relevant organisations are accessible online, while the physical historical records of a number of other organisations can be consulted via the restricted archives of the International Institute of Social History:

• A digital archive that consists of historical newspapers, books, and magazines: https://www.delpher.nl • The digital archive of the Scientific Council for Government Policy (WRR): https://www.wrr.nl/archief • The digital archive of the Social-Economic Council (SER): https://www.ser.nl/nl/publicaties/ • The archive of CNV: https://search.socialhistory.org/Record/ARCH00296 • The archive of FNV: https://search.socialhistory.org/Record/ARCH00419 • The archive of the Stichting van de Arbeid: https://search.socialhistory.org/Record/ARCH01411

4: Analysis

Discourses on competition or competitiveness have a long history, and have been linked through radically different political and economic interpretations (Sum, 2010: 48). These interpretations are liable to change; one only needs to compare the mercantilist strategies that dominated Europe from the 16th to 18th century to the Schumpeterian notions of innovation and competition to realise that throughout history there has been a lot of disagreement on the relevant units of competition. The diversity of interpretations has also led to a variety of proposed competitive strategies, and the determinants of their success. In the post-war period the indicators that were regarded as relevant for economic competitiveness include, among others, unit labour costs and the real effective exchange rates. Actors may try to improve the competitiveness of a country with the help of these indicators either because of their perceived impact on the overall competitiveness of firms within a country or because of their envisioned effects on alternative economic objectives, such as employment or inflation (Sum & Jessop, 2013: 266-267).

Improving the competitiveness of the Dutch economy to achieve alternative economic objectives has been the primary reason for the Dutch wage restraint strategy. The Netherlands has a long tradition in wage restraint. In order to avoid jeopardising the systematic rebuilding of economic life in the post-war period, the Dutch implemented a centrally directed wage policy. The policy initially served two purposes; it was implemented because of both economic and income-related motives. However, gradually the economic motives became more dominant at the expense of the wage distribution concerns. The centrally directed wage policy was transformed into an important instrument for controlling the business cycle to maintain price stability and, more importantly, improve the competitiveness of the Dutch economy in order to foster economic activity and employment (Fase, 1980: 259; van Zanden, 1998: 464). Restraining the wages was however not without a struggle. Because full employment was virtually achieved in the 1950s, the wage restraint strategy lost part of its legitimacy for the trade unions. Restraining the wages seemed solely intended to reduce wage costs, and lost therefore its appeal to labour (Fase, 1980: 259). This eventually lead to a wage explosion in 1963 and 1964, and heralded the end of the centrally directed wage policy; wage formation became from 1963 onwards characterised by free wage bargaining (De Kam, van Drimmelen, van Hulst, 1995: 11, 23-24). Though, from time to time there was still government interference in the wage bargaining process; even after the formal introduction of the system of free wage formation in the 1970s (van Hulst, 1984, 256-257).

The signing of the famous Wassenaar Agreement in 1982 is widely regarded as the reintroduction of the wage restraint strategy. However, the implementation of the post-1982 wage restraint strategy

24 fundamentally differs from its post-war precursor. The post-1982 wage restraint strategy has been embedded in a corporatist consensus without the formal interference of the government; while in the post-war period wage restraint was actively pursued and imposed by the Dutch government. The lack of formal government interference in the wage bargaining process in the early 1980s and the subsequent decades shows the changing role of the government. The responsibility of wage bargaining has since been the prime concern of the social partners, without the government having an initiating or controlling role in the process (van der Meer, Visser, Wilthagen & van der Heijden, 2003: 62-63). Furthermore, the post-war implementation of wage restraint was meant to help achieve a variety of goals; the post-1982 wage restraint strategy was primarily meant to have a positive impact on employment. Moreover, both were situated in different periods of crisis. Certain elements of the reasoning, such as the relationship between wage restraint and employment, that the competitiveness discourse incorporates, can also be traced back to the post-war wage restraint strategy. However, it seems that during the post-war period a clear causal link between the two variables was never propagated. Notwithstanding that path-dependent influences are important; the competitiveness discourse that underpins the consensus on the wage restraint strategy seems to be primarily situated in the crisis of the post-war mode of growth: Keynesianism. The competitiveness discourse therefore builds upon, but cannot be reduced to the post-war wage restraint logic.

Using the outlined framework for analysis, this chapter will first focus on the Keynesian crisis of the 1970s, and the variety of responses that it triggered. Secondly, we will trace how the competitiveness discourse was able to get selected for interpreting and solving the crisis via wage restraint. Thirdly, we will examine the use and the evolution of the competitiveness discourse. Fourthly, we will explore the mechanisms that rendered the wage restraint strategy so stable throughout the last few decades: the consolidation of the discourse into practices, the repetition of the discourse, and the incorporation of the discourse into the common sense. The last part is concerned with the role of technology in the selection and the retention of the discourse.

4.1: The Keynesian crisis and the variety of responses

The 1970s were characterised by the declining effectiveness of Keynesian economic strategies (Jessop, 2013: 8). The dire economic situation many countries were in led to a crisis and the subsequent displacement of Keynesianism. The most important targets during the post-war period, such as full employment, growth, and price stability, could no longer be delivered via the nation state (Sum & Jessop, 2013: 269). Furthermore, the high levels of unemployment and the rapidly rising public deficit undermined the government’s capacity to maintain the welfare state in a sustainable manner. To overcome the economic crisis of the 1970s a reordering of the Dutch priorities and a redesign of the economic strategies was therefore necessary. The previous economic configuration inspired by the Keynesian school had failed, which gave room to alternative interpretations, strategies, and imagined recoveries.

The social partners and the government reached a consensus on the most salient problems of the Dutch economy rather quickly. Besides the outdated economic structure of the Dutch economy, both the level of the inflation and the level of unemployment were regarded as too high. However, to what extent these issues needed to be reversed, and what the best way would be to achieve this reversal, was still a topic of fierce debate. The discussion in the Netherlands was therefore not necessarily one dominated by rival theoretical interpretations. Instead, it was more concerned with the search for the appropriate policies to resolve the crisis, and how to allocate the costs of the heavy measures that needed to be taken. The problems of the economy in the Netherlands were therefore framed early on.

In the early 1970s one of the most pressing concerns in the Netherlands was the wage-price spiral. Already at, what in hindsight was, the beginning of the crisis there was an agreement on the necessity to contain inflation. In November of 1970 Sieb Bakkenist, the then current chairman of VNO, the largest employer’s organisation of the Netherlands, already warned for the possible negative consequences of a wage-price spiral (VNO, 1970: 13-14). In a joined letter addressed to the trade unions, employer’s organisations VNO and NCW argued that a reduction of the wage increases was necessary to reduce the inflation, to minimise the threats to the competitive position of the Dutch economy, and to ensure the continuity of the level of employment (VNO & NCW, 1971: 1-2). The trade unions regarded themselves of having the difficult job of fighting inflation while at the same time ensuring that the employees did not have to foot the entire bill (Overlegorgaan NVV-NKV- CNV, 1972: 2). They were therefore willing to weaken real wage growth below the increase in productivity to fight i.a. inflation. However, one of the demands was that the lower wage growth had to be translated into lower prices, and was not meant to increase the profitability of firms

(Overlegorgaan NVV-NKV-CNV. 1971: 1-2; 1972: 2). In 1972 the trade unions and the employer’s organisations were able to come to an agreement in the Stichting van de Arbeid (1972: 1, 7). In the Central Agreement for 1973, both parties stressed the necessity of containing the inflationary development. The real wage growth would be limited to 3.5%. Price adjustments on the domestic market would be limited to what is necessary to maintain the average profit per unit. Despite the agreement, it would not lead to the recovery of the Dutch economy.

Although the problem of inflation was regarded as important, the debate became soon to be dominated by concerns surrounding the level of unemployment in the Netherlands. However, inflation and unemployment were by all parties not regarded as separate issues. As we have seen, the VNO and NCW saw a reduction of the wage increases as a way to fight both inflation and job destruction. The trade unions argued in 1972 that there was a clear link between the level of inflation and employment. In addition, they also stressed that the level of employment strongly fluctuates with the level of investments (Overlegorgaan NVV-NKV-CNV, 1972: 8). Jaap Boersma, the Minister of Social Affairs at the time, stated that the main goals of the cabinet in 1974 were to reduce the inflation and the unemployment, between which a significant interaction exists (Ministerie van Sociale Zaken, 1973: 1). While in 1976, the CNV regarded controlling the inflation as one of the most important prerequisites for reducing the level of unemployment (CNV, 1976 C: 1). Because of the rising levels of unemployment, the Dutch trade unions refocused their attention in the mid-1970s from inflation to unemployment, and saw combating the inflation as an instrument to diminish the level of unemployment (NCW: vakbeweging laat inflatie gaan, 1973: 1).

With rapidly rising levels of unemployment during the 1970s, the imagined recovery plans the different parties proposed were predominantly aimed at restoring or improving the level of employment. Concerns surrounding the inflation and ways to overcome this problem were often inherent or incorporated into the proposed solutions. Throughout the 1970s and early 1980s a variety of such measures were put forward. These measures were, however, not always mutually exclusive, and could sometimes be regarded as complimentary. The variety of the solutions proposed by the trade unions and the government will briefly be discussed. The solution of wage restraint which the VNO put forward will be discussed in the next chapter. Here it suffices to note that, besides wage restraint, VNO regarded tax reductions for both capital and labour, and reducing public expenditure also as ways to promote investments, employment, and economic growth.

The Dutch trade unions had throughout the 1970s and early 1980s different plans to prevent additional job destruction and to ensure job creation. In mid-1970s the FNV proposed a capital gains distribution; a plan which combined the trade union’s goal of levelling out the income disparities and

27 to stop further job destruction. In short, the plan was to transfer a part of the profits of the highly profitable companies to the poorly performing businesses. The plan prevented that some people would benefit from extremely favourable conditions in their respective industry, while at the same time other people were being fired (Pen, 1974: 23). 1978 was declared as the year of the ‘arbeidsplaatsenovereenkomst’ (APO; jobs agreement) by The FNV (1978 A: 6; 1978 B: 11; 1978 C: 1- 3). These APO’s were very broad agreements with employers on the development of employment in the Netherlands, both in terms of the quantity and the quality of the jobs. The primary goal was to maintain existing jobs, and where possible create new employment opportunities.

In addition, the FNV as well as the CNV regarded a reduction of working time also as a way to create new jobs. A prerequisite to make such a policy a success was that the reduction of working time had to be translated into new jobs for the unemployed population. Reducing the amount of hours worked was already somewhat incorporated into the Central Agreement of 1973 (Stichting van de Arbeid, 1974: 3). Furthermore, it was in 1975 also put on the agenda of the Stichting van de Arbeid by the employees, who wanted discuss whether, and if so, how a working time reduction could help resolve the structural unemployment problems (Stichting van de Arbeid, 1975: 7). A shorter work week was traditionally a social goal that trade unions pursued. However, because of the dire economic situation in the Netherlands it was also regarded as a weapon against the high levels of unemployment. Wim Kok, the chairman of the FNV at the time, stated that a working time reduction was a way to distribute the limited amount of jobs more fairly across the society (FNV, 1976: 24). Redistribution of work via working time reduction was regarded as a valuable strategy for the FNV. Already in 1978 the FNV showed its willingness to discuss whether employees should contribute to help financing the plan; stating that it is unlikely that a reduction in working time of any significance was possible without a meaningful contribution from the employees themselves (FNV, 1978 C: 5). At the end of the 1970s and in the early 1980s the FNV proposed a three-pronged policy approach: a targeted strengthening of the market sector via investments, a selective expansion of jobs in the collective sector, and working time reduction (FNV, 1978 D: 9-10; 1981 A: 3). The redistribution of work via working time reduction was, however, the main negotiating target of the FNV. In October of 1982 it was regarded as a vital part of the solution to the unemployment problem; the FNV was therefore willing to exchange it for wage restraint (FNV, 1982 B: 5-7, 23).

In the early 1970s the CNV mainly referred to the Keynesian instruments as the way to combat the high level of unemployment (Hazenbosch, 2009: 763). From the mid-1970s onwards the Christian trade union seems to take a different approach. The CNV proposed for 1977 to exchange a part of the wage increase for early retirement schemes, provided that the unemployed would end up with the vacant jobs that would result from early retirement (CNV 1976 B: 4-5). Furthermore, in the early

1980s the CNV repeatedly argued for wage investment schemes, which were arrangements whereby a part of the wages would be used for the financing of investments within the company (CNV, 1981: 8; 1982: 4). Moreover, the CNV also suggested an employment fund, which initially had to invest in projects that could strengthen the international competitiveness of the Dutch economy. The difference with the wage investment scheme is that in such a scheme the raised capital would stay within the firm, and would serve the goal of strengthening the firm itself; while the employment fund would have had a national character (CNV, 1981: 6). Lastly, in 1982 the CNV proposed to its members the idea to exchange the automatic indexation of the wages for the next few years for the guarantee that the tax burden would not increase and additional employment policies would be implemented (Hazenbosch, 1982 A: 13).

Throughout the 1970s and the early 1980s the government proposed and implemented a variety of plans to turn the economic tide and to overcome the unemployment problems. These plans varied widely between the different cabinets. The den Uyl cabinet (1974-1977) actively intervened, and initially relied on Keynesian instruments, such as tax reductions and the targeted stimulation of spending to improve the Dutch employment level (see for instance den Uyl, 1974: 12). In 1976, however, the government, inspired by new economic forecasts made by the CPB, slowly moved away from the Keynesian instruments, and decided to try a different approach (van Zanden, 2005: 166). Ruud Lubbers, Minister of Economic Affairs at the time, published in June of 1976 his report ‘nota inzake de selectieve groei’ in which it was stressed that to solve the unemployment crisis, the structure of the economy had to improve (Lubbers, 1976). This could be achieved by stimulating investments, restraining the total labour costs, and shrinking the collective sector. Following the report, the government shifted its focus to the supply-side of the economy (Hazenbosch, 2009: 373). In the same year the den Uyl cabinet tried to encourage entrepreneurs to invest in business assets via a new instrument: the ‘WIR’ (Wet op de Investeringsrekening). The ‘WIR’ provided financial incentives for companies to invest, which did lead to additional investments. However in the first years after its implementation of the law in 1978 the impact had been limited, according to, among others, the CPB (Hazenbosch, 1982 B: 6).

The changing attitude is even more visible in the strategies put forward by the various cabinets led by Dries van Agt (1977-1982). The van Agt cabinets also actively intervened, but were primarily concerned with wage restraint and budget cuts. This already started in 1978, when the first van Agt cabinet presented the report ‘Bestek ‘81’, in which it announced a new series of changes with the aim of combating the high level of unemployment by improving the structure of the economy. The main features of the proposed policy solutions were i.a. wage restraint, budget cuts, and stabilising the collective spending (Stichting van de Arbeid, 1978; see also FNV, 1981 C: 4). In reality, however,

29 the proposed solutions were hardly implemented. In the early 1980s the government increasingly emphasized the need of wage restraint (see for example Stichting van de Arbeid, 1980: 1-2), and was, for example, willing to exchange wage restraint for tax relief (VNO, 1981: 8). However, because no agreements on wage restraint were reached in the late 1970s and early 1980s, the van Agt cabinets imposed a (partial) wage freeze in 1979, 1980 and 1981.

The Economic crisis opened up space for alternative modes of thinking, which led to a variety of responses. However, over time the proposed solutions were increasingly modelled after the competitiveness discourse. Especially in the plans of the government there is shift visible from Keynesian demand economics to supply-side economics. As we will see in the next chapter, the discourse and its underlying reasoning became more and more noticeable in the government strategies. The proposed solutions of the CNV were also increasingly modelled after the competitiveness discourse. This trend is to a lesser extent visible in the plans of the FNV. But even the FNV became more receptive to wage restraint over time. The Dutch trade unions were increasingly willing to restrain the wages when certain specific conditions were met. Over time the wage bargaining process increasingly became an instrument for political exchange; wage restraint in exchange for the broader socio-economic wishes of the trade unions.

4.2: The selection of the competitiveness discourse

Despite the variety of alternative recovery plans, the social partners and the government would fall back on wage restraint to overcome the crisis of the 1970s and early 1980s. Wage restraint was as a strategy propagated by the competitiveness discourse, of which the origins can at least be traced back to late 1960s when the economic tide started to turn. However, it was not until mid-1970s that VNO regarded wage restraint as the solution to the employment problem of the Netherlands, and started to continuously stress the necessity of wage restraint (see VNO, 1981: 12). The alternative solutions proposed by the trade unions and the government were not supported in a similar way by a clear, coherent, and persuasive rhetoric device that legitimated the policy initiatives. The competitiveness discourse offered a clear agenda over which the social partners and the government actually had an influence. Especially because the Dutch Guilder was (de facto) pegged to the Deutsche Mark from the 1970s onwards, there was limited room for improving the competitiveness of the Dutch economy via non-cooperative strategies, such as external devaluations. Furthermore, the discourse provided a shared task and even a shared enemy: the real wage development in the competing countries. The competitiveness discourse framed the underlying problems of the Dutch economy, a lack of investments and profitability of firms, successfully, which set the stage to resolve it. Especially in the government plans these two elements started to play a central role; while trade unions increasingly showed their willingness to use wage restraint as an instrument to accomplish alternative goals.

Already in 1968 Jan Bosma, the chairman of the VNO at the time, warned in his annual speech that excessive wage increases could immediately endanger the economic recovery of the late 1960s, and may very well lead to a rising level of unemployment. The stark increase of wage costs in the last few years had put Dutch firms internationally in a more difficult position, and gave little to no room for additional wage growth. Furthermore, Bosma stressed that the willingness to invest can only be adequately maintained if a reasonable rate of return is guaranteed. This rate of return, however, had continuously dropped between 1960-1966 (VNO, 1968: 1-7). In subsequent years VNO repeatedly highlighted the unfavourable developments of increasing wage costs and diminishing returns. Sieb Bakkenist, the successor of Bosma, stressed the importance of export for the Dutch wellbeing, stating that 50% of the Dutch GDP had to be exported in order to maintain the current level of employment in the Netherlands. The consequence of the dependence on export was that the Netherlands was, according to Bakkenist, in no position to ignore the wage- and price developments in its neighbouring countries (VNO, 1970: 3, 9). In 1971 the VNO reported that the increase of the wage costs the Netherlands had experienced was twice the size compared to their foreign competitors. To halt the inflation, wage restraint was regarded as necessary. To determine whether

31 employees were willing to accept moderate wage growth, the VNO commissioned a study, of which the preliminary results showed that the employees were indeed willing to make an offer to combat the inflation and avoid rising levels of unemployment (1971: 4-5, 10). In 1973 VNO and NCW argued that the solution to the unemployment problems in the Netherlands greatly depended on ability to bring down inflation, so that level of production and investments could once again assume an acceptable level. To ensure that the increase of the unit labour costs was lower than in other countries there was very limited room for the wage costs to grow (VNO, 1972: 1-2).

The negative consequences of the rapidly rising wage costs, the lack of investments, and the growing level of unemployment was continuously highlighted by the VNO in the early 1970s. This was often accompanied by a comparison of the developments in other countries. However, it was not until 1974 that the competitiveness discourse gained some momentum. Two crucial studies were published in that year. Commissioned by the VNO, Stichting het Nederlands Economisch Instituut (NEI; 1974) put out the report ‘Investeringen en Werkgelegenheid’, which contained an analysis that showed a significant positive correlation between the annual percentage change of gross investments and the annual percentage change of employment in the Netherlands. Furthermore, the NEI study stated that there was a negative relationship between the labour income ratio and the labour intensity of the gross investments. Of crucial importance was the CPB study ‘Investeringen, lonen, prijzen en arbeidsplaatsen’ of den Hartog & Tjan (1974). Using a newly developed macroeconomic model, den Hartog, vice-president of the CPB at the time, & Tjan argued that the high wage costs were primarily to blame for the level of unemployment in the Netherlands. Wage restraint was by the authors regarded as the most suitable policy choice, since it would have the most positive effect on the economy. The positive impact of wage restraint would manifest itself through the firms. The unit labour costs would as a result of wage restraint decrease, which would lead to a gradual increase of export, production, and employment; while inflation would fall. Furthermore, the analysis also showed an increase of business investments and tax reductions would have a more positive impact than government spending; while a devaluation of the Dutch Guilder would have a negative effect (see also Hoffman, 1975).

The CPB study caused quite a stir. It prompted the VNO and NCW to write a letter to the members of the house of representatives, in which they stressed that both employers’ organisations were convinced by both studies that an increase in the investments would lead to the expansion of employment; while improving returns of investments would heighten the chances of additional investments and would limit job destruction. It was therefore stressed that the business environment of the Netherlands and the profitability of firms had to improve. To create the necessary room for improvement the VNO and NVW suggested that the wage growth had to be

32 limited to the automatic wage indexation. To realise a real wage growth for employees the wage- and income tax had to be reduced (Raad van Nederlandse Werkgeversverbonden; RNW, 1974: 1-2).

From 1975 onwards wage restraint became the dominant solution propagated by the employers’ organisations. In the VNO and NCW report ‘Winst, Werk, Welzijn’ the competitiveness discourse was perhaps for the very first time fully visible. The report argues that in the last 10 years the real wage costs have risen 1 percentage point more than productivity, which resulted in declining profits, an acceleration of job loss, diminished level of investments, and as a result an increased level of unemployment. Furthermore, in the last 3 years the unit labour costs grew on average twice as fast compared to abroad, which not only harmed export, but also resulted in a loss of domestic sales to foreign competitors. Wage restraint and tax reductions were therefore regarded as an absolute prerequisite for the preservation of jobs (VNO & NCW, 1975: 3, 7).

In the mid- and late 1970s the competitiveness discourse garnered a lot of support. Jaap Boersma, Minister of Economic Affairs at the time, published in early 1975 the report ‘nota inzake de werkgelegenheid’ (Tweede Kamer, 1975). According to the report an important part of the unemployment in the Netherlands was due to the sharp rise of the real labour costs since 1964. This train of thought was based on a study of the CPB, which in turn was entirely based on the model of Den Hartog & Tjan (Galan, 1975). Although the study did not explicitly propagate wage restraint as the solution, it did note that if the real labour costs would continue to increase with a similar growth rate as it did in the last 10 years, a relatively large amount of jobs would most likely disappear (Tweede Kamer, 1975: 21). In late 1975 the commission of economic experts of the SER published a report in which it was argued that the growth rate of the real wage costs compared to the growth rate of the labour productivity was the most important explanation for the current level of structural unemployment. To preserve jobs and to sustain economic growth the SER commission regarded it necessary to considerably lower the current growth rate of the real wage costs. Wage restraint and a tax reduction should ensure that the profitability of firms, and have a positive impact on both the level of investments and employment (Social and Economic Council; 1975). Moreover, in the aforementioned report ‘nota inzake de selectieve groei’ of the Minister of Economic Affairs Ruud Lubbers (1976) the increased wage costs and the ascending labour’s share of income were also blamed for the lack of investments and the unemployment situation in the Netherlands.

The reasoning that the competitiveness discourse propagates did not only slowly become commonplace in the SER and the government, but was also increasingly being propagated by employers, experts, and government-affiliated organisations. Even before the publication of the report of Lubbers, a group of 9 Dutch business leaders wrote an open letter to the Council of

Ministers and the parliament, in which they expressed their concerns about the economic situation of the Netherlands. The business leaders, led by Wagner, CEO of Shell at the time, stated that drastic policy changes were necessary to solve the economic- and employment crisis. Considering that the Netherlands is a small and densely populated country that like virtually no other country is dependent on international trade, the deteriorating competitiveness of the Dutch economy and the downward trend in the profitability of Dutch firms could have severe negative consequences argued the ‘group of nine’. The business climate and the profitability needed to be radically changed by i.a. lowering the taxes and restraining the wages; while new export opportunities had to be created in order to combat the structural unemployment issues (van den Brink et al., 1976: 9).

In 1976, the professors of economics van den Doel, de Galan & Tinbergen (1976) advocated the reintroduction of the centrally directed wage policy, which they regarded as an indispensable instrument for an effective national employment policy. Wage restraint was considered necessary to combat the high level of structural unemployment. Using game theory, the authors argued that a voluntary consensus on wage restraint would be unlikely. ‘Democratic coercion’ to implement wage restraint was therefore regarded as necessary. The centrally directed wage policy became as a result once again a point of contention in Dutch politics (De Beus, 1978: 132).

The growing support for wage restraint and the acceptance of the competitiveness discourse was for VNO (1977, 1-6) reason to publish a special edition of their magazine in which they highlighted and demonstrated the unanimity of the experts on the solution to the economic crisis the Netherlands endured. By compiling quotes of a variety of professors, ministers, high-ranking employees of the CPB and the Ministry of Social Affairs, the VNO stressed that all the experts came to the same conclusion: the profitability of the Dutch firms had to improve. In 1978 this was also emphasized by Zijlstra, the president of the Dutch Central Bank at the time, who deemed wage restraint as an absolute necessity to improve the weak level of profitability of firms (De Jong, 1978: 688). And once again by Wil Albeda, Minister of Social Affairs at the time, who argued that wage restraint as medium of exchange was an absurd idea; the preservation of jobs would be the reward for wage restraint (van de Braak, 1980: 325).

In the early 1980s the competitiveness discourse garnered even more support. In July of 1980 the commission of economic experts argued in a new report that the competitiveness of the Dutch economy had to improve via i.a. a substantial wage offer (SER, 1980). The reports ‘plaats en toekomst van de Nederlandse industrie’ issued by the WRR in 1980 and the report ‘een nieuw industrieel elan’ published by the Wagner Commission in 1981 were, in hindsight regarded as a breakthrough in improving the Dutch business climate (VNO, 1993: 6). The WRR (1980) report of May

1980 argued that in order to achieve the main objectives of the Dutch policy on i.a. employment and economic growth, it was of crucial importance that the business sector and the Dutch industry would be strengthened. The WRR report was reason for the Minister of Economic Affairs to install a new commission led by Wagner, who was part of the ‘group of 9’ business leaders that wrote the urgent letter in 1976. The Wagner Commission, consisting of a wide variety of members, wrote a unanimous report on the necessary measures that needed to be taken in order to strengthen the industry and the economy. The report argued i.a. in favour of wage restraint, tax reductions, and free decentralised wage bargaining without the interference of the government, as was repeatedly the case in the late 1970s and early 1980s (Adviescommissie inzake het industriebeleid, 1981). Even before the report was formally offered to the Minister of Economic Affairs, Prime Minister Dries van Agt had already embraced its recommendations (van Zweeden, 1982: 726). The report was also received with enthusiasm by the VNO, and would eventually form an integral part of the policy initiatives of the new Lubbers cabinet (VNO, 1982: 8).

The competitiveness discourse became over time entrenched in the Dutch analyses and solutions. The alternative solutions to the employment problem proposed by the government and, primarily, the trade unions were during the 1970s and early 1980s systematically refuted by the employer’s organisations. In 1979, for instance, the VNO published, once again, a special edition of their magazine, in which it was argued that there was unanimity among experts that a shorter work week would result in a higher level of unemployment. The trade union’s argument was that a shorter work week would result in an increase in the amount of jobs. However, without a wage cut a 35-hour work week would, according to the CPB, result in an additional 35.000 unemployed persons in 1983. A shorter work week without a substantial reduction of wage costs would lead to higher costs, and therefore substantially damage the competitiveness of the Dutch economy (VNO, 1979).

Over time the trade unions showed their willingness to use wage restraint as an instrument to accomplish broader socio-economic goals. In April of 1975 the CNV criticised the CPB paper of den Hartog & Tjan, arguing i.a. that a drop in the real labour costs would be offset by the appreciation of the Dutch Guilder (CNV, 1975). Nonetheless, in the late 1970s and early 1980s the CNV was increasingly prepared to use an important part of the automatic wage indexation for employment purposes, such as working time reduction, or additional investments (see for instance CNV, 1982: 1- 5). The CNV was also increasingly willing to accept wage restraint if a number of specific conditions were met, among which was that rising profits had to be translated into job growth (see for example CNV, 1976 A: 4). In 1978 the Christian union acknowledged that a policy aimed at restraining the development of i.a the wage costs was required. Restraining these costs was regarded as necessary to improve the Dutch competitiveness, the profitability of firms, and to ensure new investments

(CNV, 1978: 4). However, the government assumed too easily that an increase in the profitability of firms would automatically lead to an increase of employment (Hazenbosch, 2009: 374). Instead, additional measures in conjunction with wage restraint were regarded as necessary to combat the unemployment problems. Furthermore, in the early 1980s the CNV noted that stagnation in the exporting sector would have severe consequences for the Dutch employment level. Wage restraint became over time regarded as unavoidable and necessary by the CNV; they were during the 1980s therefore increasingly concerned with the allocation of the costs of wage restraint (see CNV, 1981 A: 3; 1981 B: 3).

The FNV was even more sceptical about the idea that an increase of the profitability of firms would automatically lead to employment (see also De Klerk, van der Laan & Thio, 1975). In 1976 Kok, chairman of the FNV at the time, stated that without denying that the wage development played a role in the high level of unemployment, this macroeconomic link should not be exaggerated. Decreasing level of investments was an international phenomenon that was only partly due to the wage costs (FNV, 1976 B: 16-17). The structural increase in the unemployment was therefore too one-sided explained by the rise in real labour costs. Too little attention was instead paid to other autonomous developments that had led to changes in the nature of the investments (FNV, 1976 A: 5). Just like the CNV, the FNV did not blindly believe in the causal relationship between profitability of firms and job creation without additional employment policies. In 1978 the recovery of the profitability of firms would therefore only be an option if it was demonstrated that wage restraint would actually lead to the preservation and creation of jobs (FNV, 1978 D: 9). An appeal for wage restraint would only be regarded as a credible solution if it was accompanied by policies that would make a serious effort to translate profits into jobs (FNV, 1979: 5). However, at the end of the 1970s the limited confidence of the FNV in wage restraint and the employers was waning. After a few years of wage restraint under the van Agt cabinet, the FNV once again refuted the idea that wage restraint would automatically lead to higher profits, higher level of investments, and job creation (FNV, 1981 A: 4). The competitiveness discourse was entrenched in the policies of the van Agt cabinet. However, the end of the 1970s showed the FNV that the logic is untenable. The competitiveness of the Dutch economy had improved, but export did not increase sufficiently to offset the falling domestic demands. Kok stated in 1981 therefore that certain unquestionable causal links had proven to be less valid in practice. However, Kok stressed that this not necessarily implied that there was no link at all between both variables. Even if that would be the case, there would, according to Kok, be other important reasons to keep the development of labour costs within acceptable limits (FNV, 1981 B: 5- 8). In October of 1982 Kok stated that austerity measures and cost reductions were unavoidable to protect the Dutch welfare state. However, austerity alone would not lead to an economic recovery.

The FNV was therefore willing to negotiate multi-year agreements, which would bind the government, the employers, and the employees on a number of topics, such as an exchange between wage restraint and working time reduction (FNV, 1982 B: 5-7, 23).

The competitiveness discourse quickly became dominant in the Netherlands. It garnered support from a variety of actors with economic and political power. A broad based consensus on the benefits and the necessity of wage restraint was established in the early 1980s. The competitiveness discourse framed the underlying problems of the Dutch economy, a lack of investments and profitability of firms, early on. Once both variables were deemed relevant by the majority of actors, it could be targeted for action. Both the employer’s organisations and the trade unions expressed their willingness to come to an agreement. In November 1982, pressured by the newly installed Lubbers cabinet, a compromise was reached between the employer’s organisations and the trade unions, in which wage restraint was exchanged for working time reduction (de Beer & Keune, 2017: 221; Stichting van de Arbeid, 1982). Although the solution that the competitiveness discourse propagated became dominant, it was, in order to come to an agreement, harmonised with the trade union’s solution to the crisis. However, the successes of working time reduction would turn out to be limited. Already in October 1982 the FNV realised that working time reduction was more complicated than they had anticipated (FNV, 1982 A: 3). Hans Pont, chairman of the FNV at the time, stated in 1986 that the results of labour time reduction had so far been disappointing (FNV, 1986: 4). The process of working time reduction would halt already at the end of the 1980s (Tijdens, 1998: 13; de Beer & Keune, 2017: 223). Despite the limited success in terms of working time reduction, and considering the low level of unemployment during the 1990s (de Beer & Keune, 2017: 223), the consensus on wage restraint would turn out to be remarkably stable throughout the last few decades. The mechanisms that helped in rendering the stability of the consensus will be discussed below. However, first we will briefly focus on the evolution of the competitiveness discourse.

4.3: The use & transformation of the competitiveness discourse

After the signing of the Wassenaar Agreement in November of 1982, a multi-year consensus on wage restraint would be reached another three times: ‘een nieuwe koers’ (a new course) in 1993, ‘het najaarsakkoord’ (the autumn pact) in 2003, and ‘het loonmatigingsakkoord’ (the wage restraint pact) in 2009 (Fransman, 2010: 710). The competitiveness discourse was a recurring element in the creation of the consensus underlying the agreements. However, a closer look reveals that the discourse, as propagated by the employer’s organisations, has evolved remarkably over time.

The competitiveness discourse has always equated cost-competitiveness with employment. However, what was emphasized changed over time. Initially the VNO primarily stressed the necessity of wage restraint in order to avoid job destruction. In 1968, for example, Jan Bosma already warned for higher levels of unemployment as a result of the wage increases; in 1975 the VNO regarded wage restraint as an absolute prerequisite for the preservation of jobs; while in 1981 the VNO stated that more wage restraint would result in a fewer amount of jobs getting destructed (VNO, 1968: 6; 1976: 23-24; 1981: 19). However, over time the causal relationship between wage restraint and job creation was increasingly emphasized. This was especially during the mid-1980s when the employment situation started to improve (see for example VNO, 1985 A; VNO, 1986 A). It seems that in the early 1990s the VNO started to propagate a somewhat different relationship between wage restraint and employment. In 1991 Alexander Rinnooy Kan, at the time the chairman of the VNO, stated that controlling the wage costs continued to be a necessity for the Dutch economy. However, although necessary, it was not enough (VNO, 1991: 5). The VNO increasingly argued that strengthening the profitability of Dutch firms via wage restraint would result in a solid basis, but would on its own not be able to preserve and create jobs. This shift is closely related to ‘globalisation’ narrative with which the competitiveness discourse was increasingly knit together (see below). In the mid-1990s it was therefore argued that the Netherlands, as a result of the increased competitiveness, had to fight multiple battles at once. What this second battle entailed changed over time. In 1993, for example, the VNO regarded both wage restraint and policies focussing on knowledge and innovation as necessities; in 1996 the VNO-NCW argued that for job creation both wage restraint and a good balance between flexibility and security in labour law were important; while in 1998 wage restraint, tax cuts and flexibilisation were stressed (VNO, 1994: 43; VNO-NCW, 1997 B: 43; 1998: 14).

Over time the competitiveness discourse was increasingly linked to a ‘globalisation’ narrative, which in turn was linked to, and supported by the idea of the vulnerability of the Dutch economy and its dependence on trade. The importance of export for the Dutch wellbeing was already stressed in the

38 early 1970s, while comparisons between the Dutch wage development and its competitors have been made at least since the late 1960s. Already in 1971 Bakkenist, chairman of the VNO at the time, argued that foreign competition was increasingly getting stronger (VNO, 1971: 3). The increasing international competition as a result of globalisation was by the employer’s organisations translated into the need of wage restraint; since the vulnerability of the Dutch economy it was especially important to prioritise wage restraint. In 1975 Chris van Veen, chairman of the VNO at the time, stated that “the market, technology and international competition are compelling factors. Especially in the Netherlands, which has to travel along on the luggage carrier of the large industrialised countries (VNO, 1976: 10)”. Throughout the 1970s and 1980s it was persistently argued that the Netherlands had to be able to compete with its products and services abroad. In the 1990s the fierce competition as a result of globalisation was even more highlighted. In 1992 the VNO stated that the economic race within Europe, but also beyond, became increasingly fierce. In 1995 the VNO asserted that new competitors, open markets, and demanding consumers were making the international competition increasingly intense. While in 1997, the VNO-NCW expected that the competitive pressures would increase even more as a result of the economic and monetary integration of the EU. The possibility to translate higher unit labour costs into the final price would as a result be diminished (VNO, 1993: 22-23; 1995: 16; VNO-NCW, 1997 A: 14).

Depending on the economic situation of the Netherlands, the necessity of wage restraint was also framed differently by the employer’s organisations. Two variants of this framing can be discerned: ‘catch up’ competitiveness and ‘stay ahead’ competitiveness. During an economic downturn, the VNO argued that wage restraint was necessary in order to restore the competitiveness of the Dutch economy, to catch up to the foreign competitors, and therefore resolve the problems. In 1996 the VNO-NCW stated that the Dutch economy since the 1970s increasingly fell behind the rest. In the past 2 years the Netherlands was able to prevent falling even further behind. However, now it was time to catch up according to the VNO-NCW. A broad set of policies, including wage restraint, was therefore considered imperative. While in 2005 it was argued that the Dutch economy was doing much worse than the other EU countries. The sharp deterioration of the Dutch competitiveness led to job destruction. To promote the economic recovery and to restore the competitiveness wage restraint was of utmost importance (VNO-NCW, 1996: 25-26; VNO-NCW & AWVN, 2005: 9-15).

During periods of economic growth the VNO often stressed that the economic situation was less prosperous than it seemed. To avoid future problems, and to ensure the competitiveness advantage of the Dutch economy, it was therefore regarded as absolutely necessary to restrain the wages. In 1986 the VNO wrote that for the continuation of the economic and employment recovery, a favourable investment climate would be required. In 1995 the VNO stated that it seemed like the

Netherlands experienced a powerful recovery of the profitability. However, it was not enough to bring firms to a structurally healthy level. It was therefore of great importance not to undermine the recovery by wage increases. While in 2001 the VNO-NCW argued that, despite the economic growth the Netherlands experienced, the competitiveness advantage of the Dutch economy was waning. The profitability of Dutch firms was under pressure. To avoid further deterioration of the profitability, wage restraint was regarded necessary (VNO, 1986 B: 9; 1995: 25-26; VNO-NCW, 2001: 4-16).

How the discourse was propagated by the employer’s organisations changed over time. The three variables incorporated into the discourse; wage restraint, competitiveness, and employment; remained the central elements. However, it seems that the envisioned relationship between the three changed somewhat. After the consensus on wage restraint, the employers increasingly linked a range of alternative economic variables to the competitiveness discourse. Furthermore, the competitiveness discourse has over time been increasingly linked to, and supported by a ‘globalisation’ narrative, which was used as a way to translate competitive pressures into prioritising wage restraint. Lastly, depending on the economic situation of the Dutch economy, the employer’s organisation either transformed the competitiveness discourse into ‘catch up’ competitiveness or ‘stay ahead’ competitiveness. The discourse evolved therefore over time. This was made possible by the mechanisms that rendered it so stable. Some of these mechanisms will be discussed in the next chapter.

4.4: The retention of the competitiveness discourse

The competitiveness discourse was able to successfully obtain a privileged position. The discourse was selected for interpreting and solving the economic and employment crisis of the Netherlands. The signing of the Wassenaar Agreement in November of 1982 was the formal acceptance of the logic that the competitiveness discourse propagates. In the subsequent decades the discourse has been retained via the institutionalisation and sedimentation of the discourse. The competitiveness discourse has been translated into the recurring economic strategy of wage restraint, each time embedded in a new consensus. A multi-year consensus on wage restraint was reached in 1982, 1993, 2003, and 2009. These pacts were often reconfirmed in other agreements that were established in the Stichting van de Arbeid. In 1997, for example, the employees and the employers published ‘Agenda 2002’, the successor of ‘een nieuwe koers’, in which both parties i.a. stressed the necessity of maintaining the trend of a responsible wage development (Stichting van de Arbeid, 1997; VNO, 1998: 17).

The competitiveness discourse has also been visible in the actions and the adopted strategies of the Dutch government, especially during the cabinets led by Ruud Lubbers. Both the consensus on wage restraint in 1982 and 1993 were fostered by the Lubbers cabinets. In both cases the installed cabinet was able to launch a credible threat to intervene in the wage bargaining process (Green & Pedersen, 2001: 146; Camphuis, 2009: 472). But also in subsequent cabinets the discourse was noticeable. For example in the first cabinet led by Wim Kok, which adopted the motto ‘work, work, and more work’.

The logic underlying the competitiveness discourse has over time not only become regularised and sedimented via the incorporation of wage restraint in economic strategies, but also by the constant repetition of the discourse. The continued expression and institutionalisation of the discourse has a naturalising effect, and fosters the translation of the underlying logic of the competitiveness discourse into common sense. This translation is also supported by a range of specific technologies, which have a depoliticising and legitimising effect. However, the role of technology in the selection and retention will be explored in the next chapter. In this chapter the focus will be on the different actors that throughout the last few decades repeated the competitiveness discourse, and refuted alternative solutions. Furthermore, we will also trace the incorporation of the competitiveness discourse into the common sense of a variety of actors.

4.4.1: Repetition of the discourse

The employer’s organisations, the government, and government-affiliated organisations constantly repeated the competitiveness discourse after the post-1982 consensus on wage restraint. This repetition was often accompanied and supported by ideas of the vulnerability of the Dutch economy, and the dependence on trade for its wellbeing. In the previous chapter we have seen already some examples of the persistent repetition of the discourse by the VNO. Besides the need of wage restraint, the successes of the wage restraint strategy were also actively shared. Already in the mid- 1980s the VNO argued that the improvement of the employment situation was closely related to the strengthened competitive position of the Dutch economy (VNO, 1985 B: 34). Furthermore, the VNO often reminded actors of the ‘lessons of the 1970s’, which was that without a positive business climate no solid level of employment and responsible financing of the social services could be guaranteed (VNO, 1986 B: 10). Moreover, alternative solutions to turn the economic tide and to foster employment growth, such as the idea of working time reduction were systematically refuted (see for example VNO, 1986 B, 1987).

The government and the different political parties also regularly stressed the necessity and the successes of wage restraint. Bert de Vries, Minister of social affairs in 1993, stated in an interview that “wage restraint was ultimately the best recipe for employment growth (Kerkstra, 1993: 4)”. Too often politicians argue, according to de Vries, that they have the ability to create jobs. However, that is something only employers can do. It is the government’s role to create the conditions so that firms can make a profit, and employ people again (Kerkstra, 1993: 4-5). 2 years later Ad Melkert, the successor of de Vries, argued that a continuation of wage restraint would undeniable be an “unprecedented investment (Hoek & Jansen, 1995: 8)”. Data on the 1980s and early 1990s shows, according to Melkert, that wage restraint combined with a global economic boom has a huge positive impact on employment (Hoek & Jansen, 1995, 8-9). The repetition of the competitiveness discourse was, however, not limited to the 1990s. In 2008, for example, Prime Minister Jan Peter Balkenende and Deputy Prime Minister Wouter Bos emphasized that wage restraint was of great importance for the Dutch competitive position (‘Kabinet biedt lastenverlichting voor loonmatiging’, 2008).

The employee- and employer members of the Stichting van de Arbeid also repeatedly underlined the importance of wage restraint. Especially during the heyday of the Dutch miracle, the Stichting van de Arbeid repeated the successes of the Dutch wage restraint strategy. In September of 1997 the Stichting van de Arbeid published a brochure in which it argued that the effectiveness of wage restraint was no myth, but simply a reality. The wage restraint strategy had contributed to the stabilisation of the development of the unit labour costs; while the unit labour costs in Germany

42 increased on average 2.5% in the last 15 years. Wage restraint in exchange for the redistribution of work resulted, according to the Stichting van de Arbeid, in the restoration of the profitability of firms, the improvement of the international competitive position of the Dutch economy, and labour- intensive economic growth (van Empel, 1997: 15-16). However, not only during economic booms, but also during economic downturns the Stichting van de Arbeid regularly stressed the importance of wage restraint for the development of the Dutch economy, and the dangers of an excessive wage cost development (Stichting van de Arbeid, 2001: 1, 4-5).

Government-affiliated organisations also played an important role in the repetition of the competitiveness discourse (see for instance: SER, 1993; or VNO, 1987: 7). For example, in 1993 Gerrit Zalm, at the time the director of the CPB, strongly insisted on continued wage restraint, and stated that the wage development since 1990 “had been disastrous for the economy (Bomhoff, 1993)”. However, the influence of the CBP reaches far beyond the simple repetition of the discourse. The depoliticising and legitimising impact of the CPB will be discussed below. First we will, however, trace the incorporation of the discourse into common sense.

4.4.2: Incorporation into common sense

The incorporation into economic strategies and the constant repetition of the discourse by a great range of actors helped in creating a common sense understanding of the competitiveness discourse. The reasoning that the discourse propagates became part of the uncritical and generalised way of thinking of a variety of actors. This opened up space for the broad-based consensus on wage restraint, and subsequently reinforced the discourse. For some of the relevant actors, such as the government and the CNV, the incorporation of the competitiveness discourse into their versions of common sense was rather quickly; while the process was much slower for the FNV.

It seems that the government already accepted the logic of the competitiveness discourse in the mid- 1970s. Not only the strategies proposed and implemented by the different governments, but also their public statements increasingly matched the logic of the competitiveness discourse. The first changes were already visible during the cabinet led by Joop den Uyl. Minister Jaap Boersma, at the time the Minister of Social Affairs, concluded in 1976, for instance, that there was a causal relationship between the wage development and the level of employment (Ministerie van Sociale Zaken, 1976: 7). It was, however, not until the cabinets led by Dries van Agt and subsequently the ones led by Ruud Lubbers before the competitiveness discourse was firmly entrenched in the government strategies. It was therefore Prime Minister van Agt who during a meeting of the

Stichting van de Arbeid stated that it is difficult to make the relationship between wage restraint and employment visible. However, “without wage restraint more jobs will definitely be destructed (Stichting van de Arbeid, 1980: 2)”. As we have seen, the government would eventually turn out to be one of the main propagators of the competitiveness discourse.

The CNV accepted the logic of the competitiveness discourse relatively early compared to the FNV. Although the CNV initially critiqued the important paper of den Hartog & Tjan (1974), it did not take long before the CNV realised the importance of wage restraint, and showed its willingness to come to an agreement (see CNV, 1975; CNV, 1982: 1-5). During the 1980s the CNV repeatedly stated that international trade, which is riddled with uncertainties, was of great importance for the Dutch economy. The Netherlands was therefore, even more so than other countries, dependent on trade for its wellbeing (CNV, 1984 A: 1; CNV, 1988: 4). Furthermore, CNV acknowledged the success of wage restraint already early on. In December of 1982 the CNV stated that wage restraint had contributed to an improvement in exports (Kroon, 1982: 10-11). In 1984 the CNV argued that wage restraint had resulted in the improvement of the Dutch competitiveness. Furthermore, the profitability of Dutch firms had increased, which would be favourable for the level of investments in the Netherlands (CNV, 1984 A: 1-2; CNV, 1984 B: 1-2). In 1988 the CNV claimed that the favourable development of the employment could largely be contributed to the wage restraint strategy (CNV, 1988: 11). In the 1990s the CNV regarded wage demands as something from the past and preferred the continuation of wage restraint in exchange for alternative demands, such as employment- and environment measures (‘Heilig huisje krijgt scheuren’, 1994; ‘CNV bepleit loonmatiging voor werkgelegenheid en milieu’, 1992). In the early 2000s Doekle Terpstra, former chairman of the CNV, showed his willingness to restrain the wages, and stated that the Netherlands was rapidly losing its international competitive advantage (Staal, 2002). Furthermore, in November of 2003 the CNV was, with ‘massive’ support of its members, the first trade union to accept the new social pact (‘Massale steun CNV’ers voor sociaal akkoord’, 2003).

The FNV reluctantly signed the Wassenaar Agreement. Although a consensus was reached, the FNV did not uncritically accept the benefits of wage restraint in the early 1980s. Although, the FNV did slowly start to argue that wage restraint would only work if it was accompanied by additional policy measures. After the signing of the agreement in 1982 the FNV hardly discussed wage restraint; instead, the focus was more on opposing the government cutbacks of the Lubbers cabinets. However, in the 1980s the FNV did openly subscribe to the idea of the vulnerability of the Dutch economy and its dependence on trade. In 1984, for instance, the FNV argued that developments in the Netherlands were partly dictated by foreign countries. The intensive international competition made it for the Netherlands impossible to chart its own course (FNV, 1984: 3-5). In the early 1990s

44 this was stressed again by former chairman Johan Stekelenburg, who argued that international competition was increasing; it was therefore important that the Dutch economy would be made more resilient. The Dutch trade unions had, according to Stekelenburg, a lot to offer in this regard; most importantly a responsible wage development. However, Stekelenburg was not willing to continuously propagate wage restraint if the FNV did not get anything in return (1992, 5-6, 13).

Over time the ideas that supported the competiveness discourse, such as the ‘globalisation’ narrative, the vulnerability of the Dutch economy, and the Dutch dependence on export, became increasingly visible in the statements of the FNV. In March of 1993 the FNV stressed once again that the Netherlands had a fairly open economy, which was strongly affected by economic developments in other countries. The Netherlands had made the greatest progress in terms of the unit labour costs, a factor that, according to the FNV, was of great importance for the competitiveness of the economy. Wage restraint was because of the relatively low unit labour costs not necessary for competitive reasons, but could be important for alternative reasons (FNV, 1993 B: 23). One of the most striking examples of the incorporation of the competiveness discourse into common sense of the FNV is perhaps the draft version of the opening speech of Stekelenburg for the triennial FNV congress of June 1993. Although it is unclear whether Stekelenburg actually delivered the speech, it argued that the Dutch economy was in a relatively favourable position as a result of the wage restraint strategy. Continuation of wage restraint, at the level of purchasing power, would secure this favourable position for the future (FNV, 1993 A: 5). A few years later, during the heyday of the Dutch miracle, Stekelenburg compared in an interview the negative growth of the unit labour costs in the Netherlands to the stark increases in other countries, and argued that employment in the past 13 years rose ten times more compared to France and 4 times more compared to Germany. Furthermore, he also repeated the conclusions of a paper of the CPB, which argued that wage restraint in the 1980s created jobs for 265.000 people (van Empel, 1997: 12). In the early 2000s both the FNV and CNV once again showed their willingness to restrain the wages. To avoid further deterioration of the Dutch competitiveness, the Dutch trade union movement stated that they had to take their responsibility by restraining the wages (‘Vakcentrale FNV: Sociaal akkoord nodig’, 2002; see also APA, 2002; ‘Meerderheid FNV steunt Najaarsakkoord’, 2003).

It seems that both the CNV and the FNV over time incorporated the competitiveness discourse into their versions of common sense, including the ideas that are closely linked to the discourse, such as the vulnerability of the Dutch economy and the Dutch dependence on export. This was, however, not a one-sided and uniform process. As argued in the framework for analysis, the common sense notions an actor holds are fragmentary, incoherent and inconsequential, and can therefore be contradictory in nature. This tension was for instance visible in the early months of 2002, when the

45 trade union movement was divided over the desirability of an agreement on wage restraint (‘Loonmatiging verdeelt vakbonden’, 2002). Furthermore, in the middle of 2008 the FNV claimed to be fiercely against wage restraint; while the CNV stated in early 2009 that wage restraint was not the correct recipe to overcome the economic crisis (‘FNV-vakbond is fel tegen loonmatiging’, 2008; ANP, 2009). However, the trade union movement would in both cases, in 2003 and 2009, come to an agreement on wage restraint.

4.5: The role of technology in the selection and retention of the discourse

It is difficult to overstate the importance of technologies in the selection and subsequent retention of the competitiveness discourse. Technologies, regarded as knowledge, expertise and apparatuses, have the potential to construct authority, convey legitimacy, marginalise alternative accounts, and guide action. Furthermore, the technical rationality these different types of technologies convey has a depoliticising effect, and could potentially discipline the behaviour of actors. A number of technologies that have been involved in the selection and retention of the competitiveness discourse will be discussed in this chapter.

By appearing rational, technologies have the ability to shape and limit the number of appropriate responses to a crisis. Technologies, most notably experts, played an important role in the selection of the competitiveness discourse. A variety of experts, such as professors, ministers, and high-ranking employees, underlined the importance of wage restraint during the 1970s and early 1980s. One example is the commission of economic experts of the SER, who published a report in late 1975 and in early 1980, which in both cases supported the discourse (SER, 1975; SER, 1980). The broad-based support from experts was used by the VNO as an instrument to increase the legitimacy of the proposed solution of wage restraint. The VNO-claimed consensus among experts added to the persuasiveness of the arguments of the competitiveness discourse, and as a result its selection for interpreting and solving the crisis.

However, the CPB played the most important role in the selection, and eventually also the retention of the competiveness discourse. The competitiveness discourse gained momentum after the publications of 2 scientific studies, of which the CPB study of den Hartog & Tjan was of crucial importance (den Hartog & Tjan, 1974). In the study the CPB introduced its so called VINTAF model, which included a new production function. With the help of the new VINTAF model it was possible to present wage restraint as an unique instrument of economic policy, since it showed that a lower nominal wage growth would result in a higher level of profitability, lower level of unemployment, and a reduced inflation rate (Driehuis, 1980: 201). The study of den Hartog & Tjan and the newly developed model would eventually turn out to be of great significance for the creation of consensus on the necessity to combat the high levels of unemployment with wage restraint.

The introduction of the new model was part of a gradual shift within the CPB from a focus on econometrics and empiricism to economic theory. An increasing amount of attention would as a result be paid to the supply side of the economy (Don & Verbruggen, 2006: 24-25; see also Driehuis & van der Zwan, 1977). The VINTAF model gained widespread popularity and would form the basis for many newly developed models (den Butter, 1991: 51). A 1991 study of den Butter demonstrates

47 that all of the 11 macroeconomic models that were developed for the Dutch economy between the 1970s and early 1990s show a negative relationship between wage costs and the level of employment (den Butter, 1991). It seems that the unanimity among models has not changed much over the years; even more recent developed macroeconomic models of the CPB show the positive results of wage restraint (CPB, 2010).

The macroeconomic models of the CPB play an important role in the development of economic policy in the Netherlands (Driehuis & van der Zwan, 1977; den Butter, 1989). The CPB not only publishes economic projections and forecasts, but also evaluates the effects of proposed and implemented policy measures. Furthermore, during elections and government formations, the CPB analyses the effects of the different policy proposals of the political parties. The government and the social partners often have been using the yearly publications of the CPB, such as the Central Economic Plan, as a starting point for discussions and proposed policy measures. Moreover, the publications are also used as a disciplinary tool by the government and the employer’s organisations. Every time Dutch trade unions announced their intention to deviate from the preferred wage development, or when the demands of the trade unions were regarded as too high, the government and the employers referred to the economic forecasts of the CPB, and stated that there was simply no room for excessive wage demands. Furthermore, from time to time the CPB also publishes papers which shows the effectiveness of the wage restraint strategy (see for example Keizer, 1991; CPB, 1993; Huizinga & Broer, 2004)

Concepts, such as the AIQ (arbeidsinkomensquote; labour share of income), have also played an important role in promoting the competitiveness discourse. Introduced by the CPB and the SER in 1966, the AIQ shows the part of the national income that is allocated to labour (van Bavel, 2016: 698). The AIQ is often seen as the mirror image of the profitability of firms. The development of the AIQ is therefore regarded as an important indicator of the economic situation in the Netherlands and has, especially during the 1970s, been used to legitimise wage restraint (de Kam, van Drimmelen, & van Hulst, 1995: 56-60). Furthermore, benchmarking has also fostered the selection and retention of the competitiveness discourse. Comparisons between the Dutch wage development and its competitors have been used to prioritise the need of wage restraint. Proposed by the VNO-NCW, the Ministry of Economic Affairs developed in 1997 a test to compare the competitiveness of the Dutch economy to its competitors, which subsequently has been actively promoted by the employer’s organisation and used to legitimise the wage restraint strategy (VNO-NCW, 1996: 6).

Technologies were therefore not only important in the privileging of the discourse, but have also been an indispensable tool in the retention of the discourse by sustaining and reconfirming the competitiveness discourse via, primarily, model-based research. Especially the CBP has been playing a crucial role, which reaches far beyond the simple repetition of the discourse. The apparent consensus among experts and macroeconomic models fosters the incorporation into common sense, and subsequently opens up space for a synthesis of the different perspectives, which in turn supports a consensus on wage restraint.

5: Conclusion

This thesis examined the broad-based consensus on the benefits of wage restraint that has dominated the Dutch wage bargaining process since 1982. Supressing real wage growth forms an integral part of the Dutch export-led growth strategy, and is strongly embedded in the culture and the formal institutions of the Netherlands. The consensus of the social partners on wage restraint seems to be rooted in the mutual understanding that to generate economic growth and foster employment it is essential for the Dutch export-led economy to be competitive. Time and time again it is therefore stressed that rapid wage increases should be avoided, since in order to remain internationally competitive the unit labour costs need to be suppressed. The Dutch strategy is therefore characterised by a wage restraint-employment nexus; a positive causal link between wage restraint, cost-competitiveness, and employment is envisioned. However, both the theoretical and empirical evidence do not unambiguously show positive results; which begs the question why the government, the employer’s organisations, and most notably, trade unions have been relying on wage restraint for the last few decades. The continued acceptance of wage restraint by trade unions is especially puzzling when one takes into account the fact that the consensual corporatist exchanges since 1982 have been skewed in favour of capital.

Despite the theoretical and empirical shaky foundation of the wage restraint-employment nexus, the social partners and the government repeatedly highlighted the importance of wage restraint and its apparent benefits. Different explanations for the initial and continued consensus on wage restraint as the solution to overcome economic problems have been put forward. However, what these explanations tend to overlook is the role of culture in the creation and sustentation of consensus. To explain why trade unions accepted a strategy that is not necessarily beneficial for labour, this thesis adopted a framework that combines elements of Cultural Political Economy and the Gramscian notion of common sense.

This thesis argued that the consensus of the government and the social partners on wage restraint has been underpinned and shaped by a competitiveness discourse, which over time has been incorporated into the common sense understandings of the relevant actors. This competitiveness discourse has been propagating an unequivocal positive link between wage restraint and job growth. The origins of this discourse can at least be traced back to the early 1970s, when the Dutch employer’s organisation VNO started to advocate the policy of wage restraint. The competitiveness discourse, as pushed by the VNO, was one of the various interpretations of, and proposed solutions to the Keynesian economic and employment crisis of the 1970s and early 1980s. The competitiveness

50 discourse garnered support from a variety of actors with the appropriate economic, administrative and legislative resources, and was as a result able to successfully obtain a privileged position.

The competitiveness discourse was selected to interpret and solve the Dutch crisis via wage restraint. The discourse was able to retain its position via the sedimentation of the discourse and the consolidation of the discourse into social practices. The constant repetition of the discourse by, primarily the employer’s organisations and the government, and the institutionalisation of the discourse into recurring economic strategies fostered the translation of the underlying logic of the competitiveness discourse into common sense. This translation was also supported by a range of specific technologies, most notably the CPB and its macroeconomic models, which had a depoliticising and legitimising effect. The reasoning that the discourse propagates became part of the uncritical and generalised way of thinking of a variety of actors. The government already accepted the logic of the competitiveness discourse in the mid-1970s; while it seems that the CNV realised the importance of wage restraint at the end of the 1970s. The FNV initially did not uncritically accept the propagated benefits of wage restraint. However, over time, and especially during the 1990s the logic of the competitiveness discourse became increasingly visible in the statements of the FNV. The incorporation of the logic of the competitiveness discourse into the common sense of a variety of actors opened up space for a synthesis of different perspectives and subsequently a broad-based consensus on wage restraint, which in turn reinforced the discourse.

A closer look reveals that the discourse, as propagated by the VNO, has evolved remarkably over time. Most notably, the competitiveness discourse has throughout the years been increasingly linked to, and supported by a ‘globalisation’ narrative, which in turn was supported by concerns surrounding the vulnerability of the Dutch economy and the dependence on trade for its wellbeing. These pressures were used by the employer’s organisations to prioritise the need of wage restraint. Furthermore, the causal relationship that the competitiveness discourse propagates seems to have changed somewhat over time. After the consensus on wage restraint, the employers increasingly linked a range of alternative economic variables to the competitiveness discourse, arguing that wage restraint alone would not be enough to avoid job destruction.

It is important to note that that common sense is not something rigid and static; it is therefore liable to change. The incorporation of the logic of the competitiveness discourse into common sense was not a one-sided and uniform process. Even after the incorporation tensions could arise because of the contradictory nature of common sense. These tensions were for example visible in the period before the consensus on wage restraint in 2003 and 2009. However, the last couple of years an increasing amount of voices, also within trade unions, but perhaps most surprisingly within the Dutch

Central Bank, have started to question the benefits and the necessity of the continuation of the Dutch wage restraint strategy. For now it is unclear whether these tensions are the result of the contradictory nature of the common sense understandings of some of the actors, or that it is an indication of the re-politicisation of the competitiveness discourse. However, because of the path- shaping effects of the institutionalisation of the discourse, it will be difficult to move into a different direction. This is even made more challenging because of the firmly entrenched ideas of the vulnerability of the Dutch economy and its dependence on international trade, which potentially have the ability to foster a consensus even when the uncritical acceptance of wage restraint has diminished. More research that focusses on the new tensions surrounding the consensus on wage restraint is therefore necessary.

The goal of this thesis was not to give an alternative account of the proclaimed ‘Dutch miracle’, nor was it to dispute that there may have been legitimate reasons for the wage restraint strategy. Instead, the aim was to offer an alternative explanation for the continued consensus on wage restraint and its apparent benefits. As argued, according to this thesis the competitiveness discourse and the subsequent incorporation of the discourse into common sense played a significant role in creating and sustaining this consensus. However, it is important to note that this thesis was fully dependent on the material it was able to consult. It can therefore not be guaranteed that some important elements have been overlooked. Moreover, this thesis did not offer a full CPE-account, and neglected important structural factors as well as the capacities of the agents involved. A full CPE- account would incorporate all the elements, and focus on the interaction between the factors. Despite the lack of certain factors, the use of the Gramscian notion of common sense and the CPE- framework has yielded additional insights into the consensus on wage restraint. However, one could argue that the explanation put forward by this thesis relied too heavily on the alleged passive and uncritical attitude of the Dutch trade unions. Furthermore, the thesis did not take into account international developments that may have influenced the cost-benefit analysis of the relevant actors. Lastly, it is important to realise that the wage restraint story as presented in this thesis has been disconnected from other important circumstances, discussions, proposed plans, and policies. These are all valid points; this thesis therefore recognises that the common sense analysis and the competitiveness discourse are only pieces of the puzzle.

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