Current issues in related to economy, (responsible) investment, pension and income: every week an APG expert gives a clear answer to the question of the week. This time: chief economist Thijs Knaap on whether a slow formation is good for economic growth. “It's okay to let go of the wheel once in a while, but when a turn comes you want to be able to adjust.”
At the time of this writing, it has been 62 days since the election. That is exactly the number of days it took Prime Minister Lubbers to form his third cabinet. Currently, it does not look like the potential coalition partners in The Hague will be able to reach an agreement quickly and start implementing their policy plans. Is such a slow formation good for the economy?
Eisenhower
To answer that question, Knaap refers to the so-called “Eisenhower matrix”, named after the former U.S. president and general. The matrix consists of two axles, one of which stood for the degree to which something was important, and the other for the degree of urgency. According to Eisenhower, the problem lay in the quadrant of things that were important but not urgent. He wanted to pay attention to those, like he did with the construction of the Interstate Highway System. Knaap: “The risk with an outgoing administration is that there is only attention to the urgent matters. Often that is not so bad. The country keeps going anyway, thanks in part to the decentralized governments. There is a good reason that civil servants are known as the fourth power."
Exceptionally long formations
In the case of radical and unexpected events that require new policies, a caretaker government is clearly a disadvantage. One example is Covid. The system of elected politicians who have a mandate to act and can be removed by the House of Representatives is there for a reason, Knaap says. “That mandate is the foundation for new policies, to manage and address both acute and latent problems.”
With two exceptionally long formations, Belgium serves as a good example of what can happen when the government lacks a mandate. “The first formation lasted a whopping 541 days - a world record. That was in 2010-2011, when many countries were implementing severe austerity measures after the financial crisis to put public finances back in order. However, the caretaker government in Brussels refrained from taking drastic measures, an approach that worked out better for the economy than the austerity policy of the Netherlands and others at the time. Belgium’s economic growth for 2011, for example, came out one percentage point higher than the eurozone average.”
