‘It is our job to hold claims under a magnifying glass'

24 September 2014

And who will pay the price for next year’s budget? The economy. While all signs indicate that economic growth remains modest, this year and the next, the government presents mainly good intentions. Roel Beetsma is a professor at UvA's Amsterdam School of Economics.

As a macroeconomist he is willing to shed some light on the budget: ‘The promised tax reforms have been postponed to the mid-term future. That raises the question whether this will happen at all. And there are certain conditions attached to it, which makes it even more uncertain. While you would hope that the tax burden on labour will be reduced as soon as possible, precisely because of that fragile recovery of the economy.’ 

According to Beetsma most economists as well as both the governing and opposition parties agree that lowering the cost of labour is the way to create jobs and therefore support economic growth. Beetsma: ‘The only question that remains is where to find the money to do so. That’s where the opinions differ. Who makes that sacrifice? Are you going to shift burdens for example by further increasing the VAT? Or are you going to cut back on public spending and if so, on what? Will that be on subsidies, benefits, or government spending on infrastructure, for example? Politics is about making choices. The role of scientists is to show the consequences of possible choices.’ 

Beetsma denies that scientists can submit clear prescriptions that tell politicians what to do. 'Scientists should make clear what the trade-offs are and present that in an accessible way. It is not scientific to say that for example less money should go to benefits rather than to infrastructure.’ Beetsma sees a watchdog role for academics to check the accuracy of political arguments and claims. ‘It is our job to hold statements under a magnifying glass to see if they are correct. Because what politicians and policymakers say can at times be quite misleading. And I think it is important that scientists not only publish in scientific journals, but also target a wider audience through the media. To highlight different aspects and point out missed matters in certain discussions. The quality of the discussion will only get better this way. Without debate, politicians might get the idea that there are no checks and balances, which would impose the risk of taking measures with very unexpected and very unwanted consequences.’ But it is not appropriate for an academic to disclose a political preference when presenting an objective analysis. Beetsma: 'Scientists should be as objective as possible. If you stick to the facts, your political preference is not relevant.’ 

Let’s return to the urgency of reducing labour costs, which, according to Beetsma, scientists of all political persuasions agree on. ‘There is the evidence from many examples that this is an exceptionally good way to create new jobs. An employer looks at what an extra worker produces in terms of revenue versus the extra costs. So if you make sure that these costs are lower, employers will be more likely to take on new personnel. Numbers of 100,000 new jobs, as mentioned by the State Secretary for Finance Wiebes, seem realistic. In the Netherlands, the difference between net and gross wages is big, so there's enough room to do that.’ 

Another example where the economy suffers from lack of political attention is education. While economists can show clear calculations that investments in this area will pay for themselves and will increase prosperity in the long run, politicians make different choices, as they have for years. Beetsma: ‘For decades, there has been less and less money available per student in higher education. The lecture halls are overflowing because we have to educate more students with the same means. The consequences are that the educational level of the population lags behind, which is compromising our competitiveness. That is a very long-term process. While everyone agrees that the Netherlands is increasingly becoming a knowledge economy, which is where our opportunities are. But the short-term effects of cutting back on the welfare state are much more visible. For example needy elderly versus young unemployed. Ultimately it is a political power play.’