Is the World Going Dutch?
A C-Suite Quick Take
The Netherlands is defined almost entirely by cliches: a quaint country, allegedly somewhere in Scandinavia, with its wooden shoes and windmills, bikes and dikes, prostitutes and lots of pot. A famously tolerant place where just about anything goes. Yet, these same liberal socialists just handed Geert Wilders - a far-right demagogue known primarily for his anti-Islam radicalism and Trumpian hairdo - an overwhelming electoral victory. Wilders’ PVV (“Party for Freedom”) has overnight become the dominant force in Dutch politics and Wilders himself the presumptive prime minister.
Does the unexpected outcome signal a fundamental change in Dutch politics and society? Will the impact be felt elsewhere as well? Does any of this matter to senior business executives? The answer is yes, Yes, and YES.
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The Dutch political firestorm was long in the making and both broader and deeper than last week’s surprising election results alone. It was less about the re-emergence of fascism than a decades-long erosion of public trust in the traditional political system, and even democracy itself, that drove the emergence of a series of far-right and anti-establishment parties, which may now have a chance to reshape policy across a wide range of issues, including labor, innovation, and climate change.
The political chaos in The Netherlands will likely persist for some time, as it may take as long as 8-12 months to form a new coalition government, which will almost certainly be inherently unstable. In addition, the new government will inevitably be EU-sceptic, perhaps even EU-hostile. The resulting regulatory paralysis and investment uncertainty will be felt not just in The Netherlands itself, but elsewhere as well; the proposed EU enlargement, free movement of labor, investment and incentives for climate change initiatives, as well as political and military support for Ukraine, may all come under pressure. In addition, the new government is unlikely to support much-needed structural reforms, thereby undermining the long-term viability of the EU itself.
The Dutch experience is not unique and an important warning for political and business leaders everywhere that the socio-political tensions of the recent past are here to stay and may even get a lot worse – a general distrust of institutions and expertise in general, the political collapse of the left and corresponding rise in far-right and anti-establishment parties, the polarization of the electorate and coarsening of political discourse, as well as the scapegoating of immigrants and other vulnerable minorities. Some governments have effectively already given up on governing altogether in favor of tribal warfare with their political opponents.
If they haven’t already, C-Suite executives should prepare their organizations for an extended period of volatility, uncertainty, complexity, ambiguity, and risk: regulatory policies will be vulnerable and reversible after each election cycle, geopolitical relations will become more uncertain and volatile, and international commerce and trade more complex and riskier.
Broader, Deeper, Longer
At first blush, Wilders’ victory may seem accidental; an anomaly that in a vibrant democracy will be corrected soon enough. And it is indeed true that Wilders’ surprise victory was enabled by an inexplicable series of “own goals” from the incumbent conservative party, the VVD, who first brought down their own government over a relatively minor issue (family reunification rules for asylum holders) before making immigration their main platform for the subsequent election, while simultaneously indicating a willingness to collaborate with the previously ostracized Wilders. They did not realize that legitimizing Wilders and focusing the election on immigration would inadvertently create a stalking horse that Wilders then gleefully rode to his historic victory.
In reality, Wilders’ stunning victory represents merely the latest salvo in a broader and deeper anti-establishment protest movement that started more than two decades ago with another electoral surprise: that of right-wing populist Pim Fortuyn, whose LPF party briefly broke through with an anti-immigration platform (“The Netherlands is Full”). More recently, Dutch voters were briefly enamored with the FvD party (“Forum for Democracy”), led by Thierry Baudet, a far-right pseudo-intellectual, who claims the world is secretly run by a cabal of reptilian extraterrestrials. Earlier this year, it was the turn of the newly formed BBB (Farmers-Citizens Movement), which won the provincial elections on its first try. And last week, it wasn’t just the PVV that wiped the floor with the traditional establishment parties. Another new party, Pieter Omtzigt’s NSC (“New Social Contract”), also cleaned house with a more centrist technocrat appeal to better governance and social justice.
An Erosion of Trust
The underlying cause of the Dutch malaise is the massive loss of trust in government institutions during the last thirteen years under the previous neoliberal government, led by the country’s longest-serving prime minister, Mark Rutte. In fairness, much of voters’ discontent stems from the familiar challenges democratic governments face when trying to solve systemic problems, such as climate change, energy, and immigration for an increasingly polarized electorate that self-selects in mutually exclusive ideological echo chambers and votes based on algorithm-generated memes, tweets, and Tik-Tok videos.
Nevertheless, Rutte doesn’t escape blame entirely. He has overseen a series of painful blunders that were avoidable, or at least addressable, including the failure to suspend lucrative natural gas extraction and exportation activities, despite significant damage to local homes (“aardgas-gate”); the grossly inept handling of a childcare benefit scandal that ruined the lives of thousands of innocent families (“toeslagen affaire”); and a nitrogen emission crisis that has paralyzed, for example, the country’s construction sector for several years now (“stikstof crisis”). In each of these cases, the government’s slow and callous response outraged the entire nation and led directly to the creation of new protest parties, such as BBB and NSC. More importantly, Rutte’s steadfastly refused to articulate a clear vision and long-term strategy for an electorate that demanded real solutions for real problems (“that vision thing”) in favor of tending to his daily administrative tasks and undoubted talents in smoothing over political tensions in and outside of The Netherlands.
It is unclear where things will go from here and to what extent the flapping wings of a Dutch butterfly will affect the socio-political and economic weather elsewhere.
The Netherlands itself will likely see months, even years, of political chaos and instability. It took 299 days to form the previous government, even though the political waters were far less treacherous. Ominously, things are not off to a good start, with the appointed negotiations scout (“verkenner”) having already resigned within a few days, due to his alleged involvement in an unrelated corruption scandal.
Currently, the most likely scenario is for Wilders to eventually form a new right-of-center government with himself as prime minister and the BBB, NSC, and VVD as coalition partners. However, such a coalition would be inherently unstable, as the parties have relatively little in common. In fact, the VVD and NSC are reluctant to even discuss forming a coalition with Wilders and the PVV. In addition, only the VVD has meaningful governing experience and the ability to deliver capable cabinet ministers. Indeed, it is conceivable that Wilders will be forced to abandon his prime ministerial ambitions altogether to entice the VVD to join the coalition, which would then become even more unstable. Alternatively, it is possible that, after months of fruitless negotiations, there will simply be new elections sometime next year. Either way, meaningful progress on important dossiers may be difficult, if not impossible, to achieve for quite some time to come.
The impact in the EU and elsewhere could be significant. A Wilders government would have a clear affinity with other far-right EU leaders, such as Victor Orban (Hungary), Georgia Meloni (Italy), and, just maybe, after next year’s elections, Marine LePen (France). It would surely be reluctant to provide financial and military support to Ukraine. Similarly, it would likely oppose the proposed EU enlargement as well as additional funding in climate change, immigration, and NATO. And the urgently needed discussion on further EU integration would be off the table altogether. There is even a real possibility that a Wilders government would initiate a binding Nexit referendum on a potential Dutch exit from the EU, as part of a compromise between Wilders’ desire for a popular vote on the EU and Omtzigt’s technocrat perspective of wanting to improve governance through binding referenda.
In retrospect, the Dutch election results aren’t all that surprising, and certainly not a temporary aberration, but a disaster that had been long in the making and came about as the direct result of a twin crisis in political leadership and democracy itself. They are representative of similar trends elsewhere and a harbinger of things to come in other Western democracies, including the US.
C-Suite executives should anticipate an extended period of political and regulatory uncertainty around the world, including major policy reversals in, for example, climate change initiatives and subsidies. They can no longer treat the political environment as merely the exogenous context in which their companies operate. They will have to think in terms of scenarios instead of forecasts, where scenarios are defined as plausible futures under which their companies would make materially different strategic, financial, and operational decisions. They will have to be decisive, but thoughtful, about if, when, where, and how to make high-commitment investments under one scenario versus another. And many will have to become far more agile and adept at anticipating, mitigating, and even taking advantage of the various political crises and policy reversals that will be with us for quite some time to come.
The world is indeed going Dutch.
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