Economy

Where are the ‘purchasing power pictures’ for broad prosperity and earning capacity?

Last year, Rutte already called purchasing power pictures ‘terrible’, but a large part of the Miljoenennota was about this. This year purchasing power development is mainly ‘difficult to interpret’ and is not mentioned too much.

Instead, the budget is all about widespread prosperity and earning capacity. And that’s fine. Focusing policy on more than just GDP is more in line with the needs of the Dutch.

Earning power also important

That may seem at odds with the attention to earning capacity, but I agree with the cabinet when it writes: “Targeted investments in our earning capacity are a means of tackling societal challenges and increasing our prosperity in a broad sense.”

Things like income and employment are also important to people. And public services such as healthcare and education have to be paid for.

Need more than purchasing power pictures

So there was more attention for widespread prosperity, but it did not become concrete.

Unfortunately, the cabinet has not asked the CPB to devote more attention to broad prosperity and earning capacity. The Macro Economic Outlook (MEV) does not mention broad prosperity.

And earning power is mentioned onceā€¦ in the foreword by Minister Wiebes. However, purchasing power is included, almost sixty times!

Too little attention to other prosperity

Rutte said this year that he cannot prohibit the CPB from making purchasing power pictures. That wouldn’t solve much either. Although purchasing power calculations could be better, I don’t think the problem is that they are made.

Purchasing power is important to people and contributes to widespread prosperity. The problem is that we have paid too little attention to other dimensions of prosperity.

Broad prosperity is also economy

That now seems to be changing in steps, but then it is also important to invest more in tools to measure the impact of policy on widespread prosperity, just as it happens for purchasing power.

It is being worked on. Statistics Netherlands has a broad welfare monitor and Utrecht University and RaboResearch together have the Broad Welfare Indicator (BWI).

Need more research

But much more economic research needs to be done before the government can answer questions such as “Does an extra euro in education yield more or less BWI than an extra euro in care?”.

I consciously write ‘economic’, because as far as I am concerned, the trade-off of scarce resources to increase prosperity is a thoroughly economic question. It is therefore best for the cabinet to ask the CPB and the other planning offices to build tools for this to be used in the explanation of the budget.

Earning capacity could also be more concrete

And that (surprisingly) also applies to earning power. Because how much does 20 billion euros in investments from the National Growth Fund yield? Okay, there must first be more clarity about which projects.

But even then, the CPB does not use a so-called endogenous growth model to calculate what this means for technological development and structural economic growth.

So it is very good that the cabinet is working on broad prosperity and earning capacity. But to make good policy on these concepts, the cabinet also needs better calculations. Not so much less pictures, but different ones.

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