Catching up Twice: The Nature of Dutch Industrial Growth during the Twentieth Century in a Comparative Perspective

Published by EH.NET (May 2004)

Herman J. de Jong, Catching up Twice: The Nature of Dutch Industrial Growth during the Twentieth Century in a Comparative Perspective. Berlin: Akademie Verlag, 2003. 274 pp. ?79.80 (cloth), ISBN: 3-05-003697-4.

Reviewed for EH.NET by Hein A.M. Klemann, Department of History, Utrecht University.

Herman de Jong has written an informative, interesting book about the development of labor productivity in Dutch industry (mining and building excluded). However, the suggestion from its title, that it is about the twentieth century, is only true to a limited extent. The book concentrates on the years 1913-1965. After the opening chapter about statistical problems and the structure of the book, a chapter follows in which industrial labor productivity in the Netherlands is compared with that in Belgium, Britain and Germany in the late 1930s and 1950s. This immediately raises important methodological problems. In the first place it is impossible to find any “normal” year in the late 1930s. Until September 1936, The Hague tried to defend the Gold Standard, while the British and Belgian currencies had already left gold in 1931 and 1935, and Germany used its exchange control system to isolate its economy. This makes it hard to calculate labor productivity in international currency. Just using the official exchange rate is no option and purchasing power parity also results in undesired influences of import prices on the outcomes. Therefore de Jong uses price information from each separate industry and calculates per industry a unit value ratio — a usable exchange rate. According to these calculations in 1935 the relative labor productivity in Dutch industry was 5% higher than in Britain. In reaching this conclusion, de Jong first compares the productivity in twenty-nine sectors, then he calculates two series of sectoral productivity based on employment weights in the U.K. and the Netherlands, respectively. After calculating the totals of these two series he finds that if employment in the U.K. is used as a weight the Dutch labor productivity advantage is 3%, if Dutch employment is used this is 8%. The average of these outcomes is taken as the final estimate. The unit value ratio is then 7.70 Dutch guilders (Dfl.) to the pound, while the pound was actually Dfl. 7.27, a difference just enough to compensate Britain for its productivity disadvantage.

The conclusion of these very useful calculations is that differences in productivity were small, to my opinion too small to make much of a conclusion. Nevertheless it is clear that during and after the Great War Dutch industry was erasing the disadvantage it had at the start of the century. The same conclusion can be reached by comparing industrial labor productivity in the late 1930 between the Netherlands and both Germany and Belgium. By comparing the 1930s with the late 1950s, it becomes clear that compared to Britain, Dutch labor productivity slumped during and immediately after the war years, but compared with Belgium little seemed to have changed. A comparison with Germany is not made for these years.

In the next chapter the long-run comparison of labor productivity is worked out. De Jong’s conclusion is that trends in Dutch labor productivity can be divided in three periods. During the First World War labor productivity in industry caught up quickly. In the years 1925-1935 growth was enormous and industrial labor productivity reached levels far above those in the surrounding countries. In a third period, after the Second World War, Dutch industrial labor productivity was below that in the surrounding countries. Actually, I see three different periods in de Jong’s series. The years 1913-1936 are one period of fast growing industrial labor productivity. After the Great War, when economic isolation resulted in new industries, the shortening of working hours in the 1920s resulted in a wave of mechanization. During the Depression, the high exchange rate of the guilder — resulting from the Gold Standard policy — further increased the capital intensity. 1936 to 1952 was a period of stagnating and — especially during the war years — decreasing labor productivity, but from 1953 onward labor productivity grew faster than ever before. After 1960 industrial labor productivity was higher than in British or Belgian industry, and was growing on a slightly lower absolute level, but with the same speed as in Germany.

De Jong’s makes clear that for Dutch industrial development the First World War and the years of the Great Depression of the 1930s, were years of quickly increasing productivity. We knew already that the Great War and the years immediately after it were a period in which industrial capacity was growing fast as a result of the economic isolation of this neutral country. That the 1930s also were a period of rapidly increasing labor productivity is new. It makes it easy to understand why Dutch industry in those years could survive the guilder’s extremely low international price levels, without systematic protection of Dutch industrial markets. Already during the 1920s industry concentrated more and more on the home market, as a result of protectionism in foreign markets and growing home demand. During the years when the Netherlands maintained the gold standard policy while almost every competitor devaluated (1931-1936), De Jong finds an enormous increase in labor productivity. “Most industries had already recovered from the downturn in sales after 1930, long before the gold standard was abandoned. Adjustments were made by introducing new products and production methods. This process of adjustment was characterised by a marked decrease in employment.” … “Employment only began to grow significantly in 1936” (p. 195) — i.e., after the devaluation of the guilder. What de Jong suggests is that devaluation was not really necessary. I strongly disagree. In this period the great problem of The Netherlands was growing unemployment with an enormous population growth. Of course it was important that industry was vital enough to adapt to the high guilder exchange rate, but that did not mean that the resulting productivity growth was a solution in itself. Adaptation to a more acceptable exchange rate was a necessity, not because industry could not survive, but because Dutch society needed jobs.

De Jong’s book is a technical book written for specialists. That is a pity, because it gives new information about Dutch development during the twentieth century that is also important for historians in other sub-disciplines. Once again an economic historian has written an important book that will only circulate among other economic historians, without impact outside this limited circle. Since the technical information has already been published in articles in specialized journals, the book could have been written in a more accessible style, which would have given it greater importance to Dutch historiography.

Hein A.M. Klemann studied history and economics in both Amsterdam universities and is author of Tussen Reich en Empire (Between Reich and Empire) about Dutch international trade in the 1930s, and of Nederland 1938-1948, a book containing recalculations of Dutch national accounts for the war time period.