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A Dutch Cure for the Dutch Disease

STANFORD – Far too few governments rein in their countries’ bloated welfare states before disaster strikes. As a result, some citizens eventually suffer the economic equivalent of a heart attack: wrenching declines in living standards as they are victimized by unsustainable programs’ endgame. Greece and the city of Detroit are only the most recent grim examples.

Many more suffer from the meager growth and barely rising incomes that result from the toxic combination of government overspending, burdensome regulations, and corrosive taxation. Much of Europe fits this category of economic stagnation.

Occasionally, however, governments stage successful retreats from welfare-state dysfunction. Canada reduced spending by over 8% of GDP in the 1990’s, and the United States reduced non-military spending by 5% of GDP beginning in the mid-1980’s – a trend sustained by center-right and center-left governments alike.

So, when a European country reverses course to reduce welfare dependency and restore work incentives, it is worth noting – especially when that country is the Netherlands, which built one of the world’s most expansive welfare states in the 1960’s and 1970’s.