Competitiveness and German-Dutch Monetary Relations, 1871–1931

Abstract

In the Netherlands post-1945, strengthening the country’s international competitiveness by keeping wages low became an accepted strategy. The goal was to improve national competitiveness and keep employment high. This tradition of keeping prices low by freezing wages was the result of the dependency on international economic relationships that is characteristic of small, open economies. Wages were not only relatively low after 1945; they were also low when compared with neighbouring countries, particularly Germany, from at least the 1890s when the two nations became more dependent on each other. In the pre-1914 period, Germany had relatively high prices as a result of its well-developed social security legislation, the cartelization of industry, and its agrarian protection policy in particular. German prices rose between 1870 and 1913, while those of all of its Western neighbours were, with fluctuations, more or less stable. Dutch prices became relatively low even when compared with those in other Western continental countries. This is an article on both the notion that this small, open country needed low wages to keep its industry competitive and the consequences thereof in the period 1870-1931.