Europe Knowledge is power and The Netherlands is losing power
The economic crisis has hit the world, and hit it hard. The euro-crisis is one which particularly focuses on debt and debt reduction. Governments have to enforce massive budget cuts to comply with the maximum 3% deficit rule imposed by Brussels. Continuing on an earlier post on this website about the Dutch educational system, which suggested that the Dutch education system was a social failure, this article will focus more on the failures due to long-term economic effects on the Dutch economy as a whole, resulting from the current budget cuts in this sector.
The Netherlands is an open economy and as it has little to no natural resources, export is one of the main economic drivers, serving as a gateway into Europe for international trade through the port of Rotterdam and highly integrated transportation infrastructure including modern roadways and railroads. Human capital is also one of the primary export ‘products’ of the country, thanks to its highly regarded educational system. The Netherlands is a ‘knowledge economy’ and there are numerous examples of Dutch expertise all around the world. For example, they are using their knowledge to design a water-management strategy around the New Orleans area to prevent further disasters and maintain control, there are many famous Dutch architects, fashion designers and artists, and the country has a major service industry, including ING, one of the biggest banking, financial services, & insurance conglomerates in the world according to Fortune 500. It is therefore no surprise that the aim of the Dutch government is to be in the top 5 of the leading knowledge economies in the world in 2016.
However, it is exactly this knowledge-based economy that the Dutch government is, unintentionally, planning to destroy. The economic crisis has had its effect on this country, and the Dutch need to reduce and control their budget deficits. In order to do so, they are planning to cut costs in many areas, including education. In total more than 1.3 billion euros are scheduled to be cut in this sector, by means of reductions on innovation resources, government finance for students, and fines for students who study longer than the preset 3 years allocated for a bachelor’s and 1 year for a master’s degree. These budget cuts will impoverish the educational system for years, and seriously harm the economic potential of this country for many years to come.
Let’s see how disinvesting in education will have a detrimental effect on the future of The Netherlands as a knowledge economy. A clear hierarchy is present in any educational system, starting with the students, and ending with what these students have achieved at the end of their working lives. The three major parties involved in this hierarchy are: Students, companies and society as a whole.
Directly affected are the students, the first group to take a hit. There are several mechanisms through which the budget cuts and fines affect students, and the quality of education. Firstly, and most obviously, if less money is available for education, quality will decrease. The very quality that is so important for the Dutch knowledge economy to thrive. Secondly, students are discouraged to develop themselves outside of their study domain. With incentives like a fine for studying an extra year will hurt personal development and the freedom of students. No one will be motivated to perform extracurricular activities during their university years, like serving on a board or taking part in committee participation, studying abroad and such other personal development possibilities. Exactly those qualities, like life and board experience, which make Dutch students valuable assets to any company, are being destroyed for the sake of short-term budget cuts.
At the same time, studying becomes increasingly more expensive, becoming something only financially secure parents can afford for their children. This will result in the exclusion of a big group of less financially fortunate yet potentially very talented young people. Gaps between rich and poor will grow, hurting an important group of people and their future opportunities for wealth and self-expression.
Finally, should the government realize their mistake; it might well be too late. Reversing the effects of only a few years of such a financial stranglehold on the educational system will take many more years to reverse. The damaging effects will be noticeable long after the government has started efforts to fix it.
Directly resulting from the above, companies will start to leave the country. They immediately have fewer choices in terms of potential of employees. In addition, the quality of the potential will be lower, since there is less diversity and only the more financially endowed will be able to pay their way through university. Companies preferring high quality students are hampered in their ability to attract them, and will need to find alternative ways to find the high level employees needed. Subsequently, companies will choose not to open offices or R&D centers in The Netherlands since quality and choice is restricted, and plenty opportunities can be found elsewhere. Knowledgeable industries vital to the country’s national and international position will decrease or disappear. Employment opportunities for young people will deteriorate as they move to other countries to fulfill their working ambitions. Fewer taxes will be received by the government, as companies transfer business to other countries and a downwards spiral is then set in motion. This will seriously diminish the competitive advantage of The Netherlands and will upset social stability in the country.
Yet, in the end, it is society as a whole which suffers most from this loss of knowledge. The intellectual level of the country will decrease, posing all sorts of problems. The youth will not have the educational capabilities required by companies and unemployment in this age group will rise. Disgruntled youths will either move to other countries, or when they do not have this opportunity, are stuck in a lagging country. The result is lower tax income from revenues, but also from labor as high quality laborers earn more and thus pay more taxes. This exposes government budgets again to big deficits. Social stability will be weakened. Prosperity and welfare are pressured, just when the country needs these, in combination with its youthful workers, to battle its aging population and keep its international competitive position intact.
However, the long terms societal effects might not be as extreme as described here, as one can assume that the economic downturn will slow down and flow into economic growth, and spending on education will increase again. However, the negative effects cannot easily and readily be undone, as upping the educational level of a generation will take substantially more time and money. It is therefore imperative for the future society of the Netherlands to keep investment levels in education as high as possible.
So what has to be done to avoid this negative trend, and to keep and improve the international position of The Netherlands? The obvious answer would be not to proceed with the proposed budget cuts and imposed fines. In fact, Gerard Kleisterlee, previous CEO of Philips and current member of The Platform for Innovation in The Netherlands, argued for an increased spending of 1.5 billion euros to at least not let the current position of the country deteriorate. This money should however not be spend on maintaining the current position, argued Kleisterlee, but instead invested to bring the country in a higher innovative gear. Innovation is more important for a country’s stability and growth than keeping old factories running. New ones will automatically provide the employment possibilities needed with the creation of other jobs, and entirely new jobs that previously did not exist, simply because the technology was not there. This will improve the international knowledge position of the country, as it is active in the newest industries, and the country will be able to develop expertise it can later export to earn returns, and increase country image.
Secondly, better collaboration is needed between educational institutes to improve efficiency and output of education. Output need not necessarily be measured in number of students, but also published articles in well-established journals, patents obtained as a result of research, and relative position of the level of education in Europe. Improve this, and one can improve the entire base of a country, namely the educational level of the youth, the future of every country.
Surely, money will be needed to achieve this, lots of money. It is however not unthinkable to achieve this goal, as long as one dares to think big. It already happens in business, so why not in countries themselves: Hedge funds. Hedge fund investors are calculated risk takers who demand a certain level of output in order to return value to their investment. Involving these hedge funds in the education financing debate might open whole new perspectives and possibilities. As hedge funds are known to buy slacking companies, and streamline them in a very short time to turn them around, why not use the same methodology here? These funds can bring the heavy educational system in The Netherlands to a turning point, making it far more effective, efficient and leaner than it was ever before. The resulting educational institutes will have such high levels of collaboration and education that no country will come close to the knowledge level of The Netherlands.
Presented above are sturdy assumptions, heavy consequences and bold solutions to the problem of slacking knowledge levels in The Netherlands. Bold indeed, but given the characteristics of the country, it just might be the way to superior knowledge worldwide. For these reasons, and many others not listed, the governments of the Netherlands, and countries just like the Netherlands based on knowledge to drive their economy, should not squander the gifts of knowledge, but cherish them and nurse them to keep them healthy and growing, ever becoming better and stronger, giving the country the decisive edge and competitive advantage it will so desperately need in an increasingly global and competitive world.