The government should justify our faith, and be proactive instead of reactive

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“Like most people in the Netherlands, I have a great deal of faith in the government. That’s what makes the measures so very effective compared with neighbouring countries.”

These times demand that the economy is kept going, to make it possible to provide the necessary care. Sandra Phlippen Chief Economist ABN AMRO

 
The Prime Minister of the Netherlands has announced a series of measures that are both necessary and appropriate. Still, those measures are not enough to deal with the rapidly evolving situation. Clearly, economic growth must take second place to our health for a while – it always should, but in times like these the potential for interference is much greater, and then public health should always come first. Nevertheless, these times also demand that the economy is kept going, to make it possible to provide the necessary care.
 
Firstly, a large portion of our expenditure derives from human interaction. That expenditure should be halted in an orchestrated fashion, to prevent contagion. It’s strange that the government still allows gatherings of less than a hundred people. Where 99 people are gathered in a single space now, even if no-one feels sick, the risk is still considerable that 3 of them might actually be sick. Assuming an infection rate of 3, on average this means that 9 more of them will become infected, and in turn will infect a further 81 people. Before you know it, all 99 of them will be sick, with a strong likelihood that one of them will die. Is that really necessary?
 
Secondly, the government should focus all its efforts on increasing capacity in key sectors: not only healthcare, and foodstuffs and delivery, but also the communication infrastructure, which might seem less relevant but is actually very important. The Netherlands has a good digital infrastructure, and the 40 percent of the working population who occasionally work from home can continue to do so now. That is important in order to maintain the economic output at the highest level possible.
 
It’s also important to keep the public space as empty as possible: some people have no other option but to leave their homes, and this will minimise the risk that they will encounter other people and become infected.
The digital infrastructure mentioned above is also a key factor in stopping the slump in spending. The digital infrastructure  in the Netherlands is excellent, and fortunately people are already very accustomed to online spending. That’s probably why we have not experienced the extremely long queues for supermarkets that are plaguing Italy – although with shelves emptying rapidly I wonder when the government will introduce rationing.
 
So far, the government has arranged short-time working, payment warranties and tax deferrals for self-employed workers. Dutch Finance Minister Hoekstra has shown that he is willing to draw on all of his considerable reserves. So how should he use them? Well, he could protect vulnerable households by raising allowances, lower the VAT on digital purchases, raise the VAT on scarce goods, or announce an unregulated period for staff recruitment in the healthcare sector.
 
These are just some ideas off the top of my head. Like most people in the Netherlands, I have a great deal of faith in the government. That by itself makes the measures so very effective compared with neighbouring countries. But then the government should stop being reactive, and become proactive.

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