Last month, think tanks predicted black scenarios for most economies. This year, we are experiencing global shrinking economies and rising unemployment. Although there is prospect of an economic recovery before 2021, these think tanks assume that many countries will continue to suffer from low economic growth, high unemployment and rising government debt in the coming years.
This week, the International Monetary Fund (IMF) made the most bleak forecast to date. As a result of the corona crisis, the global economy will shrink by almost 5% in 2020, the worst blow since the 1930s. The IMF estimates the global damage from this crisis at $ 12 billion, while global trade will decline by nearly 12% by 2020. This think tank is also worried that the sharp rise in corporate and household debts will become prohibitive and could lead to a financial crisis.
Affected our trade
The eurozone will shrink by about 10% in 2020 and the US economy by about 8%. The Chinese economy is doing better with a low growth of over 1%. The IMF does assume that the global contraction in 2020 will be followed by a rapid economic recovery in 2021. But this growth is insufficient to make up for the blow of 2020. The IMF expects a contraction of almost 8% for the Netherlands this year. As a trading country, our country is particularly hard hit by the sharp fall in world trade.
In most countries, including the Netherlands, governments are trying to keep business and employment afloat as much as possible with the help of tens of billions of financial support operations and contingency plans that support companies, self-employed workers and treasury workers with special financial arrangements. But these operations do not offer any prospects for future economic growth and employment.
The disadvantage is also that within some companies the urgency to regain full independence is diminishing. That is why we see that more and more governments, in combination with the relaxation of the so-called lockdown measures, have already started to boost their economies. In an earlier column, we gave Germany as an example, where the government, in collaboration with the business community, invests tens of billions in digitization, new technologies, infrastructure and climate.
The Netherlands misses the boat
Our economy is in danger of falling into the European rear for a number of reasons. In the first place because political The Hague has not yet taken any concrete measures to boost the Dutch economy and prepare it for tomorrow’s challenges. In addition, The Hague underestimates the consequences of the global trend of de-globalization and anti-free trade. This trend has been further reinforced by the corona crisis.
We see that every country chooses for itself and that everywhere there is an advance of national interests and protectionist measures to protect its own business and its citizens from abroad. Because we as a trading country earn an important part of our growth, employment and prosperity abroad, we must in any case adjust our earnings model. That is why it is high time that the politicians in The Hague work with tomorrow’s economic future in collaboration with employers and employees (our polder model).
Business location climate
In addition, the international business climate in the Netherlands, which has deteriorated in recent years due to various developments, is in danger of being hit again by flaring tax competition. A good climate is very important for our economy and employment. It promotes the arrival of new companies and investors, but also the growth of existing companies in the Netherlands. Other countries have overtaken the Netherlands here and a possible tax war continues to work to our disadvantage.
In recent years, work has been done within the OECD and at EU level on a worldwide agreement on the distribution of the profit tax of multinationals. This would be a good solution for our country, which is under attack internationally as a profit tax haven. Last week, the US joined
withdrawn from these negotiations. The Americans believe that the EU, but also other participating countries, are out to impose additional taxes on their tech companies such as Google, Facebook and Apple.
Chances are that this American move will lead to an international tax war. More and more countries no longer want to cooperate in this area, but opt for their own national tax measures, whereby low rates are a calling card. We also see this in international climate policy. Governments also choose national interests there. In addition, low burdens for citizens and businesses and less restrictive climate rules are paramount.
Economy of tomorrow
Politics could at least look at the frontrunners in international business in this area. There we see that digitization, robotization and the use of new technologies, such as artificial intelligence, are accelerated, which is also necessary in healthcare and education. In addition, an increasing number of companies are putting sustainable business operations first: climate neutrality is becoming must. In addition, working from home will receive a boost and more digital meetings will take place. Some companies also strive to restrict suppliers so that they become less dependent on third parties.
Not only companies, but also countries want to become less dependent on one country or supplier and have essential facilities in various areas, such as healthcare and innovative technologies. We are already seeing an increase in state participations and legal measures against hostile takeovers of crucial and strategically important companies within their own country.
It must be remembered that European cooperation in this area is often more effective and cheaper. From a healthy economic self-interest, the Netherlands has an interest in good cooperation within the EU and also in the need for more political and economic friends within the Union.
Although political opponents have been predicting the demise of the EU for decades, we see that within the EU countries a large political majority is still in favor of the Union. These advocates want less Brussels and more sovereignty!