Introduction

In January 1984, the Dutch Prime Minister Ruud Lubbers visited Washington to discuss economic policy and nuclear missile deployment with Ronald Reagan and his staff. Lubbers was warmly received. Time Magazine (1984, p. 29) portrayed him glowingly as Ruud ‘Shock’, supposedly tougher than the Iron Lady. The weekly stated that Lubbers had ‘transformed the Netherlands from one of Western Europe’s freest-spending welfare states into its leading belt tightener’. The article featured a reverential quip by Margaret Thatcher on an earlier state visit to the Netherlands: ‘Mr. Lubbers, are you really intending to cut the salaries of your public employees by more than 3%? That’s a disaster. I am supposed to be the toughest in Europe. You are going to ruin my reputation as the Iron Lady’.

In reality, Lubbers never attained that though image in the Netherlands. In fact, it would have been more appropriate for Time Magazine to call him Ruud ‘Smog’, due to his reputation for opaque language. Dutch journalists have coined a special word for it: to speak in a ‘Lubberian’ manner is to use ‘woolly, obscure and even deceiving’ language (Blokker 1991). Among many others, future right-wing populist firebrand Pim Fortuyn (1992, p. 111) pointed to Lubbers’ ‘sphinx-like character’ and remarked on his consensual ‘magic formulas’, so ‘Jesuitically unclear’ that ‘all participants left with the impression that they had been proven right’. All in all, Lubbers lacked the ideological drive of Reagan and Thatcher (Oudenampsen 2018). There was no Dutch equivalent to Reagan’s ‘morning in America’ (Blumenthal 2008), neither something akin to the bold aim of Thatcherism to change ‘the heart and soul’ of the nation (Butt 1981). Instead, Lubbers soberly claimed to represent a new era of ‘no-nonsense’ politics.

Hans Daalder, often considered the founding father of Dutch political science, commented on this paradox. He argued that the aim of the Lubbers cabinets to ‘roll back the state’ had an obvious ideological character. In his eyes, it was inspired by a ‘neoliberal or if you will, neoconservative ideal that has also made great strides elsewhere in the Western world’ (Daalder 1990, pp. 249–250). At the same time, however, Daalder observed that Lubbers ushered in a revival of the old Dutch tradition of ‘depoliticizing political choices’. The Dutch neoliberal turn was sold to the public as an apolitical and technocratic fix, with slogans as ‘no-nonsense’ and ‘finishing the job’. ‘Politics was disabled, technocracy enabled’, the Dutch newspaper NRC Handelsblad (2018) wrote in an in memoriam on Lubbers’ legacy.

In so doing, the Dutch experience clashes with the way that the breakthrough of neoliberalism is generally understood. Existing research has highlighted the central role of ideational conflict. The main reference point is the rise of Reagan and Thatcher, who famously forced a political breakthrough amid a polarizing ‘war of ideas’ (Blumenthal 2008; Blundell 2001; Booth 2006; Rodgers 2011). This paradigm shift from Keynesian demand management to neoliberal supply-side policies has been the central object of study of discursive institutionalism, a field of political research developed by scholars such as Peter Hall (1993), Mark Blyth (2002), Vivien Schmidt (2002) and Colin Hay (2001). Building on the work of Thomas Kuhn, these authors conceive of policy-making in terms of a sequence of relative stable paradigms that are overturned and replaced in times of crisis. A key argument in this literature is that a paradigm shift takes place in a context of politicization and conflict, as occurred under Thatcher and Reagan. As Peter Hall (1993, p. 280) contended: ‘the movement from one paradigm to another will ultimately entail a set of judgments that is more political in tone’.

Hall famously used the rise of monetarism under Thatcher as a basis for this argument. According to Hall, a fundamental transformation of economic policy involves a shift in the locus of authority over policy-making away from established policy elites to outside actors. Politicians, journalists and think tanks took the lead in formulating new ideas, while contesting the old Keynesian paradigm in a public battle of ideas. When Thatcher assumed power, the established Keynesian policy elites at the Treasury were gradually replaced by Thatcher’s appointments, all avowed monetarists (Hall 1993). Hall’s proposition that a fundamental shift in economic policy tends to be instigated by a contest over ideas that takes place outside the established policy-making institutions has become a central tenet of a more general theory of institutional transformation, seen as applicable to all advanced liberal democracies.

In the Dutch case, however, there was relatively little heated debate, and no discernible change in the locus of authority over policy-making, while there was a fundamental shift in economic policy. The first Lubbers cabinet (1982–1986) initiated a wide-ranging supply-side programme, consisting of welfare state retrenchment, privatization, deregulation, flexibilization, tax cuts and wage moderation (Knoester 1989; Stellinga 2006). It proved to be a lasting change in political priorities (Fig. 1). Among the wealthy OECD countries, the Netherlands has been identified as the country that has retrenched its welfare state the most (Castles 2001; Green-Pedersen 2001a; Siegel 2001). Whereas the Netherlands is generally classified as somewhere in between a social democratic and conservative welfare state, scholars identify a qualitative shift (Fig. 1) towards a more liberal welfare state regime since the 1980s (Schmidt 2003, p. 132; Touwen 2014, pp. 230–231; Van Oorschot 2006, p. 72; Stellinga 2006, p. 79). How to make sense of this diverging pattern of a depoliticized shift in policy paradigm?

Fig. 1
figure 1

Source: OECD

Public spending in selected OECD countries as percentage of GDP.

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There have been scholarly attempts to distil an alternative, consensual theory of institutional change from the Dutch experience of the 1980s. In their influential study on the reforms of the 1980s, Visser and Hemerijck (1997) have argued that a regained corporatist consensus empowered Dutch policy elites, allowing a fundamental policy shift to be achieved in a neutral, technocratic fashion, without the ideational conflict and political mobilization that is central to the model of Hall, Hay, Schmidt and Blyth (see also: Touwen 2014; Keune 2016). Others have pointed to a party political consensus on economic policy as key to the exceptional extend of Dutch welfare state retrenchment (Cox 2001; Green-Pedersen 2001a). The focus on consensus as a driver of radical transformation has become the staple in the literature on Dutch welfare state reform (Hemerijck and Schludi 2000; Keman 2003; Scharpf and Schmidt 2000; Schmidt 2003). As critics have pointed out, the problem with this account is that there is little evidence for a political or corporatist consensus in the 1980s (Becker 2001a, b, 2005; Salverda 2005; Woldendorp and Keman 2007). While there was some consensus on the need for wage moderation to restore profitability, the larger market-oriented agenda of fiscal constraint, public sector cutbacks and social security reform was highly controversial. Both trade unions and social democrats remained opposed to that agenda throughout the 1980’s, complicating the consensus argument.

In sum, the existing literature provides two models of institutional change: one that centres on the public contest over ideas as a driver of fundamental reform, and an alternative theory that centres on consensus. This paper proposes a third, depoliticized model of institutional change. My argument is based on an extensive analysis of the writings of senior economic policy makers from the 1980s, compounded by political biographies, newspaper archives and fifteen in-depth expert interviews with senior economic policy makers. Breaking with the consensus view, I argue that there was ideational conflict in the Netherlands, but it adhered to an opposite logic than in the British trajectory sketched by Hall and Hay. In the Netherlands, it wasn’t the participants in the politicized public debate that initiated the paradigm shift and the public officials that followed suit, but rather the other way around. Senior economic policy makers pushed for extensive socio-economic reforms of a highly political nature at a remarkably early stage, while politicians and journalists played a more secondary role and successfully depoliticized the reforms in the public debate as being ‘realistic’, ‘pragmatic’ and ‘no-nonsense’. This depoliticized model of institutional change may be more widely applicable to other non-majoritarian countries, in which more consensual forms of politics prevail.

The argument is organized in five sections. The first expands on the theory of institutional change as put forward by scholars such as Hall, Blyth, Hay and Schmidt. The second will assess the alternative accounts of consensual institutional change. The third section centres on the Dutch 1980’s and shows how the Lubbers government actively depoliticized the reforms and outsourced initiative to economic policy makers. The fourth section demonstrates the path-breaking and politicized role of economic policy makers. The fifth section concludes.

Institutional analysis and Dutch divergence

In the last two decades, scholars such as Peter Hall, Mark Blyth, Colin Hay and Vivien Schmidt have developed a theory of institutional change that reserves a key role for ideas in times of crisis. In their Kuhnian framework, extensive periods of ‘normal politics’, in which policy-making is predominantly structured through established policy frameworks and institutions, are interrupted by periods of political and administrative crisis, such as in the 1930s and 1970s, which give rise to ‘exceptional politics’ (Hall 1993, p. 279). In these moments of uncertainty, established policy instruments fail to produce the desired effects, and political actors lose confidence in established institutions.

Blyth (2002, p. 9) argues that a situation of economic crisis is a time of ‘Knightean uncertainty’, when agents become uncertain about their interests and the means to best pursue these. In such a context, political entrepreneurs come to the fore that contest the existing policy framework and offer alternative solutions to the crisis. Crucial is that a crisis is not a self-apparent phenomenon but rather something that different camps argue over, in a contest to impose their specific interpretation of the crisis. As a result, there is an enlarged role for ideas in crisis situations, in particular economic ideas, since they determine what a crisis actually is and when a given situation actually constitutes a crisis. The political narration of a crisis, discursive institutionalists argue, decides for an important part what response to the crisis will emerge (Hay 1996).

In the eyes of Hall, the rise of monetarism under Thatcher challenged existing state-centric theories that emphasized the central role of policy elites, who were conceived of as relatively insulated from societal pressure. Hall’s observation that public actors such as politicians, think tanks and journalists (accompanied by key economists, such as Friedrich Hayek and Milton Friedman) played the leading role in the Anglo-American paradigm shift from Keynesianism to neoliberalism in the 1980s became part of a general model of institutional change. As Colin Hay argues, a fundamental paradigm shift is associated with ‘open political contestation’ and ‘highly politicized and public debates’, taking the ‘identification and definition of the problem out of the hands of civil servants and the state elite and into the public arena’:

Paradigm shifts tend not to occur as a result of social or strategic learning on the part of experts, policy makers, bureaucrats, or civil servants. Instead they are generally associated (at least within advanced liberal capitalist democracies) with highly politicized and public debates about the desirability and feasibility of contending political goals. (Hay 2001, p. 200)

Internal learning by policy elites, in contrast, is associated with moderate and gradual change within the framework of the existing paradigm (Fig. 2).

Fig. 2
figure 2

Trajectories of institutional change. Reprinted with permission from: Hay (2004, p. 506)

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Vivien Schmidt uses a similar distinction between an internal ‘coordinative discourse’ primarily focused on reaching agreement among an elite of policy makers and an external ‘communicative discourse’, focused on normatively legitimizing a fundamental policy shift in the eyes of the larger public. This latter communicative discourse, Schmidt (2002, p. 234) argues, is ‘the essential criterion for a shift in policy programme’. In contrast, the coordinative discourse is ‘generally cooperative’, and less suitable for more radical forms of change (Schmidt 2002, p. 244). As we will see, this distinction between a more moderate and depoliticized internal discourse and a more radical and politicized public discourse does not seem to fit the Dutch experience very well.

The Netherlands saw a qualitative shift in economic policy, what Vivien Schmidt (2003, p. 132) describes as a ‘radical move from one of the most conservative of continental welfare states to the most liberal’. But it was a shift that was initiated and led by policy elites, while politicians adopted a more depoliticizing and secondary role. Posited in the terms of Hay’s model of institutional change depicted above, the Dutch case shows that a fundamental change in policy can develop through the internal trajectory (indicated by the numbers 3a, 4a, 5a in Fig. 2) rather than the external one. In other words, it was the ‘coordinative discourse’ that became the most prominent terrain of conflict and renewal, while the ‘communicative discourse’ had a more secondary role in depoliticizing the reforms. Before we expand on this argument however, we first need to assess the existing explanations of Dutch institutional change that focus on consensus.

The problem with the consensus view

In their highly influential account of the Dutch reforms of the 1980s, Visser and Hemerijck criticize Peter Hall’s framework and suggest an alternative trajectory of institutional change. In contrast to the model of Hall and Blyth, where a paradigm shift involves a politicized ‘battle of ideas’, Visser and Hemerijck (1997, p. 74) propose that in the Dutch case it is consensus and the relative isolation from political pressures that allowed policy elites to become the drivers of a fundamental shift in economic policy:

A broad consensus over central policy goals, justifying the hierarchy of ends and means, renders policy elites sufficiently autonomous from partisan pressures to enable executive agencies to formulate and implement policies based upon efficiency, expertise, and professional rationality rather than political expediency.

Visser and Hemerijck (1997, p. 61) argue that Hall’s framework is ‘very state centred’ and based on a generalization from the British ‘winner-takes-all’ system, where the incoming government has the ability to enact a radical policy overhaul. In consociational democracies such as the Netherlands they contend, with their coalition governments and corporatist arrangements, change occurs in a more consensual fashion. In the Dutch case, the paradigm shift ‘did not come from outside the relatively closed policy network of the elite of union leaders, employers, government officials, and their advisors’ (Visser and Hemerijck 1997, p. 61). They stress in particular the role of the trade unions, and ‘the possibility that under specific institutional preconditions, comprehensive interest groups might have learned from failure and feel themselves under a sense of urgency “to make things better” and support reforms against the short-term interests of some of their constituency’ (Visser and Hemerijck 1997, p. 62). At the centre of their argument is the 1982 Central Accord or ‘Wassenaar Accord’, where Dutch trade unions agreed with employers’ organizations to accept wage moderation in the market sector as a precondition for economic recovery and job growth. A similar consensus-driven explanation is offered by Green-Pedersen (2001a, b), who identified a party political consensus on economic policy as key to the depth of the Dutch market-oriented reforms. The pivotal position of the Dutch Christian democratic party (CDA) in the centre of Dutch politics forced the Dutch social democratic party to moderate its critique of austerity and to adjust to the priorities of the new policy paradigm. While this is perhaps true for the 1990s, it does not fit very well for the 1980s.

The problem with the consensus argument is that there is little evidence in the 1980s for a ‘broad consensus over central policy goals’, neither in corporatist institutions nor among political parties. One can define consensus in laymen’s terms, as a form of general agreement, or one can consider consensus democracy, following Lijphart (1999, p. 2), as an institutional process of decision-making that ‘aims at broad participation in government and broad agreement on the policies the government should pursue’, as opposed to majoritarian systems where minority opinions can potentially be ignored by vote-winning majorities. In both senses, the controversies over economic policy in the 1980s do not neatly correspond with the idea of consensus. While there was indeed a circumscribed consensus that some degree of wage moderation was needed to restore the competitiveness in the market sector, opinions diverged widely on the fate of the public sector. The larger 1980’s policy shift involving fiscal constraint, public sector cutbacks and social security reform remained fundamentally controversial and was pushed though in a majoritarian fashion. As Steven Wolinetz concluded in the late 1980s on the basis of a series of expert interviews, ‘the government’s commitment to deficit reduction and market-led recovery offered few opportunities for trade unions or the left to influence government policy’ (Wolinetz 1989, pp. 90, 93). In fact, ‘the cabinet [austerity] measures did not emerge from either bipartite or tripartite discussions, but rather were imposed without the consent of either trade unions, who actively objected, or employer’s associations, who heartily approved’ (Wolinetz 1989, p. 79). Meanwhile, the Social and Economic Council, the principal corporatist public policy-making body, remained divided over the reforms of the 1980s and was largely bypassed and ignored (Knoester 1989, p. 167; Van Bavel et al. 2010; Geelhoed 2002).

As Uwe Becker (2001a, b, 2005), Woldendorp and Keman (2007) have shown, the trade unions remained critical of the supply side policy shift and continued to advocate Keynesian solutions to the crisis throughout the 1980s, rather than wage moderation and social security retrenchment. In an illustrative lecture in 1985, trade union leader Wim Kok (1985, pp. 26–27) opposed ‘the ideology of government retrenchment’ and proposed a fiscal stimulus to fight unemployment, instead of ‘an “overkill” of austerity measures’. It wasn’t merely verbal opposition. The austerity policies of the Lubbers cabinets led to large public sector strikes and demonstrations (Krop 2019, pp. 158–174). When in 1983, the first Lubbers cabinet unilaterally decided to cut public sector wages and unemployment benefits by 3,5 per cent, public sector unions responded to this ‘diktat’ by organizing the longest and largest public sector strike in Dutch history (Krop 2019, p. 159).

Understandably, Uwe Becker (2001a) and Jaap Woldendorp (2005) argue that it is more realistic to describe Dutch 1980s labour relations in competitive terms such as dominance and acquiescence, rather than consensus. Leading Dutch politicians from that period tell a similar story. Bert de Vries, parliamentary leader of the Christian democratic party (1982–1989) and minister of Social Affairs (1989–1994), criticizes the consensual ‘mythology’ constructed around the Wassenaar Accord (Bert de Vries 2019, personal communication; see also De Vries 1995). The impression created after the Wassenaar Accord that the economic restructuring was arrived at in the harmony of the polder was decidedly incorrect. ‘Also after Wassenaar, it was war between the trade unions and the government’ (De Vries cited in Van Tijn and Van Weezel 1986, p. 186). Likewise, Frits Bolkestein, the leader of the right-wing liberal party VVD in the 1990s, concluded that ‘the golden formula of austerity and wage moderation was not thanks to the so-called polder model, it was the result of a tough political battle’ (Bolkestein 2008, p. 20).

This period of conflict and fundamental disagreement over the corporatist institutional framework lasted till the mid-1990s. Leading policy makers and politicians, such as the director of the Central Planning Bureau and the Minister of Economic Affairs, took aim against the extension of industrial agreements, a cornerstone of Dutch corporatism, respectively, in 1992 and 1994 (Zalm 1992; Janssen and Tiedemann 1992; Loenen 1994). Only from 1995 onwards, when the economy picked up, did a more consensual period begin. It appears that this belated corporatist consensus has subsequently been projected backwards in time by politicians, journalists and academics, obscuring the more conflictual origins of the Dutch paradigm shift (Woldendorp and Keman 2007, p. 234).

There was also no political consensus. The social democratic party can hardly be described as partaking in a consensus on economic policy in the 1980s. Although the party achieved some of its best electoral results in this period, it was bypassed by the centre-right parties in the formation of government in 1977, 1982 and 1986, due to its opposition to fiscal consolidation and social security retrenchment (Wolinetz 1993, p. 100). In an extensive essay published in the run up to the 1982 elections, social democratic leader Den Uyl (1982, p. 5) described the Dutch shift towards austerity as part of ‘a worldwide revolt’ against the welfare state. The economic crisis was ‘being used to do away with government intervention and the power that the trade unions have attained’. His successor Wim Kok (1987, p. 373) argued that the reforms of the 1980s reflected a development in which ‘the free play of [market] forces triumphs over the striving towards social consensus’. While the social democrats agreed that some degree of wage moderation and social security cutbacks were necessary, they continued to favour expansive fiscal policies and working hours reduction to combat unemployment (Wolinetz 1989, p. 90). The 1987 report Shifting Panels, generally cited as a turn to the market, argued that supply-side policies had proved unsuccessful in generating investment, and pleaded for more ‘state spending’ and more attention ‘to the demand side rather than the supply side of the economy’, ‘especially the purchasing power of the lowest incomes’ (PvdA, 1987, p. 86). Only at the very end of the eighties, when the third Lubbers cabinet entered power (1989–1994)—a coalition of CDA and PvdA—was there ‘a return of the politics of compromise’ (Wolinetz 1990, p. 280).

The consensus view seems to follow the logic of post hoc, ergo propter hoc: what comes after explains that what comes before. The Dutch political consensus and policy outcomes at the end of the 1990s have been projected backwards in time, to the beginning of the 1980s. In his work, Mark Blyth (2002, p. 8) criticizes the tendency to identify agent’s intentions with observed outcomes, because ‘the mechanism of institutional change remains at best underspecified and at worst circular’. In times of crisis, a large degree of uncertainty prevails regarding the expected outcomes of policy decisions. Positive demonstration effects occur far too late to be able to explain decisions as a simple ambition to ‘make things better’.

In fact, the writings of Dutch policy makers in the 1980s seem to corroborate the notion of ‘Knightean’ insecurity and ideational conflict, rather than the ‘broad consensus’ and self-evident ‘professional rationality’ mentioned by Visser and Hemerijck. Perhaps needless to say, the Keynesian and supply-side paradigms have different conceptions of how the economy functions, resulting in different notions of what ‘efficiency, expertise and professional rationality’ concretely entail. An illustrative example of this clash of paradigms is given by Frans Rutten, as the head of the Ministry of Economic Affairs (1973–1990) often described as the single most influential economic policy maker in the country at the time. Rutten (1993, 96) described the situation in the 1980s as a ‘deadlock’, rather than a ‘consensus’. Since the erosion of the dominant Keynesian paradigm in the mid-seventies, the field of economic policy-making had devolved into a constant skirmish between rivalling schools of new classicals and neo-Keynesians. The intensity of their continuing disagreement, Rutten (1995, p. 26) suggested, was due to the clear political implications of the debate: ‘the opposition between new classicals and neo-Keynesians can run parallel to that of liberal champions of the free market and socialist advocates of detailed government regulation’.

Frank den Butter, president of the Tinbergen Institute and head of the Dutch Economics Association, described the field as ‘an endless debate between the adherents of different schools’, resulting not only in ‘differing explanations’ but also, at times, in ‘diametrically opposed policy advice’ (Den Butter cited in Rutten 1995, p. 30). In fact, in a 1982 public lecture at Twente University, Christian democratic leader Ruud Lubbers (1991, p. 212) himself described economic policy-making at that time as divided in two antagonistic camps:

Roughly speaking there are two schools in combatting the economic crisis. […] The proponents of fiscal stimulus, neo-Keynesians, want to expand the deficit. The public sector will keep demand from falling. […] The proponents of fiscal retrenchment, often neoliberals, tend to appear mostly under the guise of monetarism. Enact a reduction of government spending, adapt the money supply to stagnation, enforce higher savings and lower spending through a higher interest rate if needed, and restructure the economy.

Returning to our main argument, the state of Dutch economic policy-making in the 1970s and 1980s seems to closely resemble the politicized uncertainty of a paradigmatic crisis as described by institutionalist theory. What is peculiar to the Dutch paradigm shift of the 1980s is not the ‘broad consensus over central policy goals’, but rather the fact that this politicized debate on economic policy did not take place in the political sphere, but instead in the technocratic arena of economic policy-making.

At this point, it becomes necessary to clarify what we mean by ‘politicization’ and ‘depoliticization’. In the broadest sense, depoliticization means that a political issue subject to ‘contingency and deliberation’ is framed in terms of fate and necessity (Hay 2007, p. 79; see also Wood 2016). In a more specific sense, it involves displacing a contentious issue from the political sphere where it was subject to formal political deliberation, to ‘quasi-public bodies and to officials who can present them as purely technical matters’ (Hay 2007, p. 83). This is clearly what the Lubbers cabinet has sought to do, as we will see shortly. But this process of displacement can also lead to renewed politicization in the sphere that the controversy is displaced to. Hay (2007, p. 84) mentions the example of a government displacing responsibility for climate change to consumers: ‘depoliticization in the formal governmental arena here translates into politicization in the public realm’. A similar process seems to have happened under Lubbers, with the field of economic policy-making becoming a realm of debate and controversy. In the sections that follow, I will expand on the secondary, depoliticizing role of politicians and the path-breaking, politicized role of policy makers.

A depoliticized shift

The Dutch counterpart to Thatcher and Reagan was formed by the coalitions led by Ruud Lubbers (1982–1994) and his Minister of Finance Onno Ruding (1982–1989). The rapidly deteriorating condition of Dutch public finance and the declining rate of corporate profitability in the late 1970s led to increasingly anxious attempts to reach a compromise with the trade unions to lower wages and cut back on social security. The problem was that the corporatist institutions, where Dutch trade unions and employers traditionally deliberated over socio-economic policy, were in a state of political deadlock. At the same time, the all-important Christian democratic party was internally divided over the austerity measures proposed in 1977 under the title Bestek ‘81. After several failed attempts under the cabinets of Van Agt (1977–1982) to implement this agenda, the first Lubbers cabinet of 1982 made a forceful break. The new government comprised of Christian democrats (CDA) and right-wing liberals (VVD) enacted far-reaching austerity measures and cut public sector wages and unemployment benefits. This is generally seen as the major political turning point by both policy makers themselves and by academic observers (Rutten 1993, p 27; Visser and Hemerijck 1997, p. 100). As Knoester (1989, p. 159) wrote, it was ‘the first government in the post-war period to make a wholesale break with the Keynesian ideas that have long been such an important influence on economic policy’.

Instead of all-out confrontation, however, Lubbers consciously chose to depoliticize the reforms. There was obvious political polarization: the austerity measures of the Lubbers cabinets provoked large demonstrations and strikes. But the ideological nature of the political turn was carefully downplayed and the policies of the subsequent Lubbers cabinets were depoliticized and framed using the technocratic label of ‘no-nonsense’ politics (Daalder 1990, pp. 98–99). Important here is that Christian democratic politics traditionally has a focus on reconciling class conflict and establishing organic harmony in society (Van Kersbergen 1995). Following this tradition, the 1982 election platform of the Dutch Christian democratic party identified as its ‘core issue’, the ‘realization of harmonious and healthy socio-economic relations’. And it pledged to remedy ‘the distrust between government and social partners’ (CDA 1982, p. 5).

Dutch Christian democrats were partly confronting their own Christian trade union, the progressive wing of their own party, Christian civil society organizations, and a considerable part of their voter base, so they had little incentive to aim for open confrontation. When the Lubbers cabinet first presented its programme in parliament, there was no grand vision or soaring rhetoric but rather a sober and dry enumeration of proposed policy measures (Handelingen II 1982/83, pp. 635–648). ‘A small miracle’ had occurred, according to the influential journalist and commentator Willem Breedveld (1982). Parliament had debated 4 days on the programme without ‘political rhetoric’, ‘the tone was strictly matter of fact’. The Dutch press welcomed this terse and business-like political style as ‘de nieuwe zakelijkheid’ (literally ‘the new business-mindedness’, or more in keeping with its double meaning as a term for modernist architecture: ‘the new objectivity’), and proclaimed it to be the central characteristic of a new era of Dutch politics, in opposition to the more ideological political style of the 1970s (Van Zweeden 1983). Hans van der Voet, as head of the Government Information Service (Rijksvoorlichtingsdienst, RVD) responsible for the communication strategy of the Lubbers cabinets, described Lubbers’ lack of ideological profile as a conscious political strategy:

If you take away three per cent of people’s wages, it is better to refrain from grand narratives. Then you will certainly fall flat on your face. You can proselytize on television with a blackboard on your side, but that does not work. All the viewers can count for themselves. Lubbers understands this. This is a frugal policy, and it is better to present it in a business-like and depoliticized manner. It will seem somewhat corporate, but you shouldn’t loudly proclaim that it is your holy mission to fire so many teachers and care workers. The guideline is: be reserved, if need be a bit boring, don’t react too quickly, and leave your opponents their dignity. (Hans van der Voet cited in Van Tijn and Van Weezel 1986, p. 245)

A similar approach of de-escalation is ascribed by Visser and Hemerijck (1997, p. 135) to Jan de Koning, the Minister of Social Affairs under the first Lubbers cabinet:

His realism held the government on a solid course of austerity and welfare retrenchments in which the salami-principle of small slices was relentlessly applied. Large and brusque steps were to be avoided, since they were likely to provoke conflicts which might halt or, worse, reverse the policy of retrenchment. The risk of a major social conflict would have been too large; with small steps ‘the pattern is rather that this year’s anger is replaced by next year’s anger’. At the same time the door to the unions was always kept open, but they always went out empty-handed.

The result of this strategy of depoliticization and conflict containment is that the Lubbers cabinets were generally associated with a wholesale lack of political vision, and reproached by critics on both the left and the right for replacing politics with accounting. The influential Christian democrat and Rabobank CEO Herman Wijffels (Van Tijn and Van Weezel 1986, p. 74) criticized the government from the right: ‘Conception? I cannot see any’. ‘If your central argument for austerity is “people, it is a shame, but the money has run out”, you are on dangerous territory. Then, the implication is that when there is money again, we can reverse all the austerity measures’. When asked by journalists about the ideas behind the budget cuts, Pieter Winsemius, Minister of Housing and Infrastructure, said that ‘there was an agreement within the government to not expand too much on these ideas’ (Van Tijn and Van Weezel 1986, p. 59). Elco Brinkman, Minister of Culture and Education, described by some as a ‘hardliner’ on austerity, responded in a similar fashion: ‘Our philosophy is as follows: the bureaucrats have come up with solutions, and then it is our turn [to implement the decisions]’ (Van Tijn and Van Weezel 1986, p. 161; Brinkman 2019, personal communication).

Politicians seem to have deliberately relegated the initiative to senior policymakers. On the one hand, this can be seen as a way of dealing with the internal controversy in the Christian democratic party (Voerman 2011; Brinkman 2019, personal communication; De Vries 2019, personal communication; Ruding 2019, personal communication). On the other hand, it can serve as a ‘blame avoidance strategy’, which minimizes the electoral risks of austerity policies (Green-Pedersen 2001a, p. 137, Pierson 1994). The ambitious programme drily presented by Lubbers on assuming power detailed extensive cutbacks, privatization and deregulation. It was largely based on the advice of senior public officials, rather than on the election platforms of the governing parties, which were more ambiguous on policy, especially that of the CDA. The Christian democratic platform stated that ‘employment, housing, urban renewal, development aid and the fundamental safeguarding of social security needed to be actively promoted’, and promised a ‘solidary social policy’ (CDA 1982, p. 5).

An important inspiration for government policy was the confidential report The Bitter Pill (De Zure Appel) that appeared in September 1982, the same month the elections were being held. It was written by four senior economic policy makers, including the heads of the Ministry of Finance and the Ministry of Economic Affairs. The authors introduced the report in no uncertain terms as ‘an honest response to the question what is desired from all members of the new government and the new parliament’ to deal with the economic crisis (Van Griensven 2009, p. 62). After a detailed comparison with the coalition agreement of the first Lubbers cabinet, Van Griensven concludes that the overwhelming majority of the measures proposed in the report were adopted by the new government, while some passages were even included verbatim. This was in no small part due to the fact that policy makers sat in on the meetings where the coalition parties drafted the agreement (Verkuil 1992, pp. 233–234). In this way, the formation of the first Lubbers cabinet is illustrative of the trailblazing role of policy makers.

The politicized role of policy elites

While the government carefully depoliticized its policies under the ‘no-nonsense’ label, the more politicized role of brokering new ideas and contesting the established Keynesian paradigm was taken up by senior economic policy makers. Internationally, the shift from Keynesian demand management to a neoliberal supply side framework is often traced back to the rise of a new set of economic ideas in the 1970s (Blyth 2002; Hall 1993; Hay 2001). These complementary currents of economic thought—monetarism, new classical economics (or rational expectations), supply-side economics, and public choice theory—all contributed to the discrediting of the established Keynesian framework and pointed to a restoration of the free market, rather than state intervention, as the path towards economic recovery. What these ascendant schools of economic had in common was an explicit political character and an activist stance in limiting government. Their rise formed part of a broader politicization of the field of economics in the 1970s and 1980s. The administrations of Ronald Reagan and Margaret Thatcher were instrumental in the breakthrough of these currents, amid a polarizing war of ideas with the advocates of Keynesianism (King 1987; Gamble 1994; Prasad 2006). The Netherlands was no exception to this international trend.

Compared to the USA and the UK, Keynesian ideas had always had a rather weak hold on the Dutch policy-making field, as the Netherlands has an old and respectable tradition of wage restraint, monetarism and neoclassical supply-side thinking that underpinned the economic recovery of the 1950s (Becker 2001a, p. 473; Mellink 2020). While it’s true that Keynesian ideas prevailed politically in the decade from 1963 till 1973, these ideas never fully came to dominate economics faculties and policy-making institutions. Already in the beginning of the 1970s, an influential circle of senior economic policy makers came to the fore that was highly critical of Keynesian demand management. They saw themselves as engaged in a long-term campaign to transform Dutch economic policy-making, inspired by the international revival of monetarist, supply-side, public choice and new classical ideas. They were called ‘supply-side economists’ (aanbodeconomen), a Dutch container term for economists critical of Keynesian demand management. In particular, the Ministry of Finance, the Ministry of Economic Affairs and the Dutch Central Bank were early bulwarks of principled opposition to Keynesianism. From the mid-1970 s onwards, these policy makers actively pushed for welfare state retrenchment and wage moderation as a solution to Dutch economic ills, long before politicians and political parties came to embrace that course.

In October 1973, the economist Lense Koopmans held his inaugural lecture at the economics faculty of the University of Rotterdam. He began his lecture by pointing out that doubts had arisen in the 1960s concerning the rationality with which the Dutch government decided on its expenditures. He pointed to the growth in government spending, the rising tax burden and the ‘continuous pressure of interest groups’ to further increase spending (Koopmans 1973, p. 5). He dedicated his lecture to the emergence of public choice thinking in the USA and advised a series of interventions in the Netherlands, based on that political philosophy. In particular, he proposed to centralize economic decision-making and to definitely fix the government budget in the coalition agreement, so as to prevent further claims from arising during the coalition’s term. He ended his lecture by paraphrasing Jean Baptiste Say—a classical economist and name giver of Say’s law stipulating that supply creates its own demand—that ‘the best budget is a smaller budget’ (Koopmans 1973, p. 17). The timing of the inaugural lecture of Lense Koopmans, before the Den Uyl cabinet had properly started, before the onset of the 1973 oil crisis, is indicative of the early ascendance of anti-Keynesian thinking in the Netherlands. It is also illustrative of the influential policy-making positions such critics were able to obtain at this early stage: in 1975, on the initiative of Finance Minister Pieter Duisenberg, Lense Koopmans was appointed Adjunct Director General at the Ministry of Finance, where he presided over the preparation of the yearly government budget (de Haas and Lotringen 2003, p. 44).

Koopmans was not exceptional in that sense. Conrad Oort, the Accountant General at the Ministry of Finance (1971–1977), had been trained at the Chicago School of Economics. He was described in his Festschrift as an economist who never denied ‘his Chicago background’ (Kool et al. 1996, p. x). Pieter Korteweg, an avowed monetarist and public advocate of the ideas of Milton Friedman, became Accountant General at the Ministry of Finance from 1981 till 1986. The Dutch press called him ‘the Dutch Milton Friedman’, and ‘one of the most important men behind Lubbers’ structural reforms’ (Korteweg 1981). Korteweg had worked under the influential monetarists and Reagan advisers Brunner and Meltzer in the USA. He had integrated the ideas of monetarism and rational expectations in a new economic model, which he presented at the yearly congress of the Dutch economics association in 1978 (Korteweg 1982).

Similar views could be found among policy makers at the Ministry of Economic Affairs. Frans Rutten, the head of the Ministry of Economic Affairs from 1973 and 1990, was a well-known critic of Keynesian ideas and based his influential policy recommendations on new classical economics and supply-side economics (Rutten 1993). He later identified his economic policies with the ideas of Milton Friedman (Rutten 1995, p. 37). Rutten had a crucial position in the policy-making process, because he presided because he presided over the Directorate General of Economic Policy (AEP), the influential policymaking unit of the Ministry Economic Affairs, and the Central Economic Council (CEC), a powerful intraministerial policymaking body overseeing macro-economic policy. He also headed a ministerial think tank, staffed by economists who expounded monetarist, new classical and supply-side ideas (Raes et al. 2002; Van Sinderen 2019, personal communication). Among the staffers was Anton Knoester, who had written his Ph.D. (Knoester 1980) under Korteweg and Rutten on monetarist macroeconomic modelling, Jarig van Sinderen, a prominent advocate of Reaganomics and supply-side economics (van Sinderen and Ravenstein 1986), and the later CPB director and Finance Minister Gerrit Zalm, who wrote papers with illustrative titles such as the ‘myth of government investments’ (Zalm 1985, 2009).

Internationally, Dutch policymakers were ahead of the curve with their early anti-Keynesian stance. At the OECD and the IMF, economists still worked within a largely Keynesian framework in the 1970s. After the oil crisis of 1973 and the subsequent economic downturn, the OESO called on the Netherlands and Germany to expand, in order to stimulate demand. According to the OESO locomotive theory, stronger countries had to compensate for countries that could not afford to do so (Clifton and Díaz-Fuentes 2011; Leimgruber and Schmelzer 2017). But the expansionary policies of the leftist Den Uyl government (1973–1977) soon became the object of serious internal opposition from the Ministries of Finance and Economic Affairs. This internal controversy eventually became so heated that the coordination of economic policy at meetings such as the CEC stopped functioning. Hans Weitenberg, the assistant director of the Bureau for Economic Policy Analysis (CPB), later stated that Den Uyl stopped having these meetings, to try ‘to keep the senior officials of the Ministry of Finance and Economic Affairs out of it’ (Van Tijn and Van Weezel 1986, p. 77). As the aforementioned monetarist Anton Knoester (1989, p. 120) would later write in an overview of Dutch economic policy, the Den Uyl-cabinet formed the beginning of the turn to market-oriented thinking in the Netherlands, despite Den Uyl’s opposition.

In the mid-1970s, the economic forecasting models developed by the Bureau for Economic Policy Analysis became central to this controversy. Economists at the CPB had developed a new economic model, called VINTAF, that would play an important role in the turn to supply-side policies. It was used as the basis for a series of reports from the CEC and the CPB in the years that followed. The new model shifted emphasis to the supply side of the economy and claimed a causal link between high wages and growing unemployment (Kayzel 2019; Den Butter 1989). Consequently, the reports based on the model leaned in the direction of wage moderation in order to restore profitability and employment. The CPB soon found itself challenged by both the Keynesian and supply-side camps.

A group of neo-Keynesian economists (advisors of Den Uyl) initiated a prominent debate at the leading Dutch economics journal ESB, later dubbed the ‘Economics Debate’ (Lansbergen 1980; Driehuis and Van der Zwan 1978). According to the neo-Keynesian critics, the VINTAF model was not based on empirics but on a set of new classical a priori assumptions about the relationship between supply side factors and employment. They argued that the new model, in the way that it was used by the CEC to plead for wage moderation and austerity, was the expression of a political preference for a supply-side approach rather than grounded in empirical analysis. The neo-Keynesian camp expressed their discontent in a public letter published in 1977, where they called on the public to vote for the social democratic party and the progressive liberal party D66, to continue the expansionary policies of Den Uyl, and ‘not one-sidedly blame the tax burden or wages for unemployment’ (Trouw 1977). The signatories were 24 economics professors including Tinbergen, De Galan, Halberstadt, Van der Zwan, Driehuis, Heertje and Pen. These critics, however, lost the argument and became marginalized when Den Uyl failed to form a government in 1977 and 1982. Den Uyl later acknowledged that ‘monetarists, new classicals and supply siders have conquered the battlefield’ (Van der Zwan 1985, p. 311).

From the other end, the monetarists Korteweg and Bomhoff blamed the CPB in a series of widely read opinion pieces for structurally underestimating inflation (NRC Handelsblad 1976; De Volkskrant 1977). They argued that the models of the CPB served a political agenda, this time to underplay the seriousness of the crisis. In their view, the models of the CPB lacked attention for the monetary dimension of the economy. A strict monetary policy, inspired on Germany and Switzerland, was offered as a solution (Bomhoff 2019, personal communication). At the same time, Rutten and other economists at the Ministry of Economic Affairs complained that the CPB was not supportive of market-oriented reform, due to the Keynesian elements in its model (Rutten 1998). In fact, a major problem for Rutten was that the austerity policies of the first Lubbers cabinet scored worse results in the economic model of the CPB than the more Keynesian policy proposals from the social democrats and trade unions (Van Sinderen 2019, personal communication; Zalm 2019, personal communication). Through the publications of its think tank, the Ministry of Economic Affairs actively tried to convince the CPB to change its models. As part of this effort, it organized visits to new classical economists in the USA with CPB economists. (Zalm 2009, pp. 52–53; Van Sinderen, 2019, personal communication; Zalm, 2019, personal communication)

Rutten in particular became the driving force behind a series of reports and policy papers aimed at wage moderation and government retrenchment (Rutten 1993, 1995). In 1978, he had co-authored the austerity agenda Bestek’81, which was put forward by the centre-right government Van Agt I. At that time, the Christian democratic Party was divided over the reforms, however, and the Van Agt cabinet failed to implement the agenda of economic reforms. But it did appoint a powerful extra-parliamentary committee of policy makers and business leaders to further elaborate on the shift from Keynesian demand management to a supply side policy (van Dellen 1984; Varisli 2018). The committee was named after its chairman, the former CEO of Shell, Gerrit Wagner, also a prominent Christian democrat. As the head of Economic Affairs, Frans Rutten had selected and screened the members of the Wagner committee, and was in charge of the secretariat that wrote the minutes of the meetings (Zalm, 2019, personal communication). The Wagner committee was widely seen as paving the way for the policy shift under Lubbers. According to economic historian Jeroen Touwen, the ‘turning point was the Wagner Report rather than the Wassenaar Agreement’ (Touwen 2008, p. 460; see also Touwen 2014, p. 271). It was the Wagner Report that ‘supplied the ideological basis for replacing government intervention with the market mechanism’ (Touwen 2008, p. 454). The policy shift was further facilitated by the aforementioned confidential report The Bitter Pill, which build on the Wagner Report and provided the basis for the economic section of the coalition agreement of the first Lubbers cabinet (Van Griensven 2009, p. 66). Understandably, Rutten took full credit for the policies of the Lubbers cabinets in an interview in the newspaper Trouw (Rutten 1999) at his retirement:

When I became head of Economic Affairs, a colleague at the Finance Ministry said: ‘Frans, the only thing you need, is a secretary who types for you; beyond that, you and I will make the financial and economic policy of the Netherlands, we don’t need anyone else for that.’ That was excessive self-confidence, but that is how it went at first. In the beginning of the 1980s, the Dutch economy was in a deep recession. The Social Economic Council (SER) stopped functioning, the labour movement was obstructing and politicians would not come to their senses. On the initiative of two senior officials of the Finance Ministry and Economic Affairs, an informal club was created with business leaders and civil servants. That group set out a new economic course. When at the end of 1982, the first Lubbers cabinet entered power, the case had already been thought out.

In a journalistic retrospective on the influence of the Ministry of Economic Affairs, Cees Oudshoorn, president of the Dutch Employers Organisation (VNO-NCW), hailed Rutten as the man that has ‘made the case for Reaganomics in the Netherlands’:

‘The policy of economic recovery that was initiated in the 1980s by the Lubbers cabinets, was largely suggested by the head of Economic Affairs,’ says Cees Oudshoorn, director of economic policy at the Dutch employers organisation VNO-NCW, who worked at the department in the past. ‘In those years, there was an intense factional struggle between the Keynesians, who wanted to use the wage instrument to combat the economic recession with a spending spree, and the supply-side economists that were inspired by Reagan’s politics, and saw more benefits in tax relief, budget cuts, wage moderation and the encouragement of investment. ‘With his New Year editorials [in the leading Dutch economics journal ESB] Rutten made the case for Reaganomics in the Netherlands’, Oudshoorn says. (Jorritsma and De Waard 2009)

Both adversaries and sympathizers shared this perspective on Dutch economic policy elites, as politicized actors who initiated the paradigm shift of the 1980s, while politicians followed suit. Jan Pen (1999), a leading Keynesian economist and a previous director of the AEP in the 1950s, tells a similar story with somewhat opposite appreciation:

This bureaucratic power (‘fourth branch of government’) flexed its muscles between 1973 and 1990, the time of Rutten. There was a certain struggle going on between Social Affairs, where they wanted a slightly more leftist policy, and the Ministry of Finance, that decided on the budget. As much as possible, they ignored the Ministers that happened to be there. The battle became more and more ideological, because Rutten wanted more market and less government.

In a famous article in Dutch economics journal ESB in 1987, Rutten expanded on the political vision behind the 1980s reforms that he referred to as De Nieuwe Zakelijkheid (The New Objectivity), after the business-like style of the Lubbers cabinet. The core of this vision, according to Rutten (1993, p. 55), was that the ‘government needs to concentrate on its primary tasks (such as justice, education, roads, defence) and should limit its less essential tasks (all sorts of subsidies and other interventions in the market economy)’. In the long run, the government should stop taking care of ‘quasi-public goods (social security, healthcare, education)’ altogether and transform these terrains into markets through vouchers—an approach famously advocated by Milton Friedman. Not surprisingly, Rutten (1995, p. 37) later wrote that Dutch economic policy was in need of a long-term vision and that he had based that vision on the writings of Adam Smith and Milton Friedman.

Ad Geelhoed, Rutten’s successor at Economic Affairs mentioned Rutten’s article on the New Objectivity in a retrospective paper on the influential role of the AEP in the 1980s and 1990s. He noted how significant it was that the ideas behind the new course ‘could only be mentioned in public when the policy changes had already been implemented’ (Geelhoed 2002, p. 66). According to Geelhoed, ‘the shift from a Keynesian policy to a supply-side policy was implemented with stealth’ on purpose:

With regards to the four so-called big operations – deregulation, privatisation, decentralisation and the restructuring of the civil service – that the first Lubbers cabinet initiated, it has been said that they lacked a scientific theory. That was in fact not the case, but it was seen as more prudent to not make it – too – explicit. (Geelhoed 2002, p. 66)

In a retrospective on Dutch economic policy, Wil Albeda, the economist and former Christian democratic Minister of Social Affairs, cited Rutten’s above-mentioned interview in Trouw. He thought that Rutten should have been a bit more modest: ‘That seems too much honour. A small group like this could draw on the neoliberal arsenal, as it had been thought out in the USA’. Referring to Hayek and Friedman, Albeda (1999, p. 424) noted that the Dutch economic reforms inspired on their views implied something more than mere pragmatism. Rather, it was a ‘sea change in the ideological thinking of economists’.

Conclusion

The Dutch reforms of the 1980s serve as a prominent counterpoint to the Anglo-American trajectory of institutional change under Thatcher and Reagan. Following the Anglo-American experience of the 1980s, it is often assumed in the literature that a fundamental change in economic policy entails a public battle of ideas and a shift in the locus of authority over policy-making, away from established policy elites. In the Dutch case, the very opposite seems to have happened: there was a fundamental shift in economic policy, but that transformation occurred with a depoliticizing rhetoric, and no obvious change in the locus of authority over policy-making. In fact, it was established economic policy makers who were seen by many as taking the lead in the Dutch reforms of the 1980s. A range of authors has pointed to this discrepancy and argued that the Netherlands represents an alternative trajectory of institutional change, in which a broad consensus on economic policy allows for a fundamental shift. The problem, however, is that there is little evidence of an economic policy consensus in the 1980s.

In addition to these two explanations of institutional change—one that centres on the public contest over ideas and one that centres on consensus—this paper puts forward a third, depoliticized model of institutional change. In this model, there is ideational conflict, but it takes place internally, within the policy-making field, while politicians have a more secondary role and depoliticize the reforms as ‘business-like’ and ‘no-nonsense’. Even though Dutch politicians often refer to ‘the primacy of politics’, the analysis in this paper shows there is some degree of role reversal possible between the agenda-setting and decision-making roles of politicians and the executive role of policy elites. This depoliticized model of institutional change could be more widely applicable to other countries with non-majoritarian political systems in which more consensual forms of politics prevail.

Why did Dutch politicians embrace supply-side ideas? The discursive institutionalist perspective posits that a moment of crisis is a moment when different camps argue with one another in a contest to impose their interpretation of the crisis. As this paper contends, the supply-side camp largely won the argument in the Dutch debate and was able to convince politicians of the correctness of their diagnosis and their remedies. On the other hand, that victory was always only partial and the issue continued to be debated over for the larger part of the 1980s. There remained large disagreements within the Christian democratic party over the type and depth of the reforms needed.