Comparison of Dutch Economy and German Econmy in Last 30 Years

Comparison of Economic Growth between The Netherlands and Germany (1978-2009) Introduction About 16 years ago, when European Community became European Union(hereinafter to be referred as EU) , the Netherlands and Germany, as two founding members of the EU, gravel been played an important role in European and worlds scrimping. When talked nearly Dutch frugal system, East indies company must(prenominal) be a start. As the first company in the world, it helped the Netherlands to be the leader of worlds economy seventeenth century and to build Dutch entrepreneurship.The cracking city of the Netherlands, Amsterdam, use to be the financial and business spirit of the world. Later, Dutch economy has seen by many declined for a while. But, since 1980s, dutch government has reduced intervention, dutch economy become much than prosperous and open again. To the east of the Netherlands, Germany stands in the central europe, as the largest national economy in Europe, ranked fourth by nom inal gross domestic product and fifth by GDP (PPP) in the world in 2008.After the industrialization, this country has become a driver and innovator in spheric economy. Especially when west and east Germany unified in 1990, the countrys economy went out from the recession after atomic anatomy 16 wars big hit. Comp bed these two countries scotchal development, there are a lot similarities and differences due to its close mystify in Europe continent, shade background, and even history. This paper is organized as follow.Section 2 introduces in brief the concepts of frugal developing and the diagnose concepts in measuring economical development, section 3 explains how rule of rectitude effect economic development in the Netherlands and Germany, section 4 presents the relationship between income distribution and economic development, section 5 describes cultural influence on economic development, section 6 consists of examples of successful entrepreneurship in the Netherlan ds and Germany, section 6 deals with the technology factor in economy in the two countries.Section 8 comprises comparison and conclusion. Section 1 1. 1 To start with the comparison,we need to define what economic reaping is and the key concepts of economic development. At first, the economic ontogenesis we are going to study is want-run economic growth. long haul economic growth is the growth of what an economy is able to puzzle given its labour force, knowledge, technology, tools, machines, land. It is not about the growth of what an economy actually produces, that type of economic growth is short-run economic growth.Economic growth implies increases in per-capita real gross domestic product (GDP), namely widening of the production scale in a country as a whole, or more efficient use of its economic resources to produce goods and services(Kibritcioglu, 2001). Real GDP is the value of final goods and services produced in a given year when value at unremitting prices. It is th e best measure of total production and the increase in real GDP is used to measure economic growth, as by comparing the value of the goods and services produced at constant prices we can measure the change in the quantity of production (Parkin, 2008, pp. 91). 1. 2 puzzle outs in the Netherlands and Germany emblem 1 GDP growth in percentage in the Netherlands and Germany(1978-2007) pic Source WDI(world development indicators) online 2007, the worldly concern Bank theme Figure 2 GDP growth per capita in percentage in the Netherlands and Germany(1978- 2007) pic Source WDI(world development indicators) online 2007, the World Bank Group Figure 1 and figure 2 show the annual GDP growth and GDP per capita growth in percentage in the Netherlands and Germany from 1978 to 2007.As in figure 1 and figure 2, from 1978 to 1982, the Netherlands and Germany both suffered an economics recession, with the annual GDP growth in percentage declining from 2. 33% in 1978 to -1. 21% in 1982 in the Neth erlands and 3. 01% in 1978 to -0. 39% in 1982 in Germany. Then the Netherlands and Germany both experienced fluctuations in GDP growth. Especially in 1990, the Netherlands had a sharp rise from -1. 21% in 1990 to 4. 42% in 1989 and Germany experienced a sharp increase in 1990 from -0. 39% to 5. 26%, which is the highest growth set out for Germany in last 30 year.Afterwards, it shows a different trend between the Netherlands and Germany. The GDP growth declined to 1. 26% in 1993 and raised again till 4. 68% in 1999, while German GDP growth declined to 2. 01% in 1999 steadily. In the next 10 years, Dutch growth rate decreased till 0. 08% again as the lowest rate and then the rate slowly went up and became steady in recent years. Germany similarly showed the very(prenominal) pattern but the rate is lower than the Netherlands in general. Though the figures, we can see the Netherlands and Germany induce a lot common in GDP growth rate and GDP per capita growth rate. sparing in these two countries are ilkly to be steady. Only in some year like 1982, 1990, 1993, 1999, 2002, it showed a sharp rise or decline. So, what happened in these remarkable years? What caused the difference in growth rate between the Netherlands and Germany? In the following sections we will discuss four key concepts related to economic growth in order to see through these problems. Section 2 2. 1 Economic independence Economic theory indicates that economic bleakdom affects incentives, productive effort, and the effectiveness of resource use(de Haan,2000).We start with definition of the economic libertyIndividuals have economic freedom when (a) station they acquire without the use of force, fraud, or theft is protected from physical invasions by new(prenominal)s, and (b) they are free to use, exchange, or give their property to another as long as their actions do not violate the identical rights of others(Gwartney et al. , 1996). Moreover, the key indicators of economic freedom are ad hominem choice, voluntary exchange coordinated by markets, freedom to enter and compete in markets, and protection of persons and their property from aggression by others (Robert, 2006).In this paper, we use the indicators of the Fraser Institute. Gwartney et al. (1996) choose 17 measures and rate a high number of countries on each of these measures on a scale of 010, in which zero means that a country is completely unfree and 10 means it is completely free. The measures are in four gigantic areas Money and inflation Government operations and regulations Takings and discriminatory taxation and International exchange(de Haan,2000). 2. 2 Figures compend Figure 3 take aim and ranking of economic freedom of the Netherlands(1970-2006) picSource freetheworld. om 2008, The Fraser Institute Figure 4 level and ranking of economic freedom of Germany(1970-2006) pic Source freetheworld. com 2008, The Fraser Institute Though these two figures, we can see the Netherlands and Germany had the same pattern during last 30 years and they both got a high rate, which means they were both free to a large extent in economy. After 1980, the rate in the Netherlands was a slim higher(prenominal) than the rate in Germany, but both are very stable. Compared with the rest of the world, the economy in the Netherlands and Germany are comparatively free. . 3 Results After we look though the GDP growth rate and economic freedom rate, we found there is a relationship between those two figures. More economic freedom fosters economic growth, but that the level of freedom is not related to growth. In other words, our findings suggest that more economic freedom will bring countries more quickly to their steady state level of economic growthif they are below that level. , but that the level of steady state growth is not affected by the level of economic freedom(de Haan and Sturm, 1994).And always the countries with more economic freedom can achieve higher levels of GDP per capital and grow f aster (Lawson & Moor Chair, 2006). So we can say high economic freedom rate do contribute to high GDP growth rate, and steady economic freedom also has a positive effect on economic growth. Section 3(income distribution) 3. 1 income distribution Section 4 (Culture) 4. 1 Culture As Hofstede said the world is full of confrontations between people, groups, and nations who think, feel, and act differently.At the same time, these people, groups, and nations, are exposed to common problems that demand cooperation for their solution(2004, p2). Those confrontations and cooperation are called culture. Using the Hofstedes Onion model to depicts four cultural concepts symbols do the most superficial and values the deepest manifestations of culture, with heroes and rituals in between(2004, p6). Economic development will not insure at national borders. Globalization also require us to deal with culture differences and all the countries should work more closely than ever. 4. 2 Dimensions of Cul tureFive dimensions were frequently used to measure culture difference major power distance(PDI), the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally(Hofstede, 2004, p46) Individualism(IDV), pertains to societies in which the ties between privates are loose everyone is expected to look after himself or herself and his or her immediate family(Hofstede, 2004, p76) Masculinity(MAS) A society is called masculine when emotional gender roles are clearly distinct(Hofstede, 2004, p120) Uncertainty Avoidance(UAI), the extent to which the members of a culture feel threatened by ambiguous or unfathomable situations(Hofstede, 2004, p167) Long-term Orientation(LTO), the fostering of virtues oriented toward succeeding(a) rewards, in particular, perseverance and thrift(Hofstede, 2004, p210). Following is the index stacks of Germany and the Netherlands, compared with the Worlds average. Figure 5 Culture dimensions index scores of Germany(1967-2001) pic punctuate The Germanys Index ScoresPDI=35, IDV=67,MAS=66,UAI=65,LTO=31 Sources from IBM data base(1967-2001),except LTO from pilot program Chinese Value mint database(2005) Figure 6 Culture dimensions index scores of the Netherlands(1967-2001) pic nonee The Netherlands Index ScoresPDI=38, IDV=80,MAS=14,UAI=53,LTO=44 Sources from IBM data base(1967-2001),except LTO from original Chinese Value Survey database(2005)Figure 7 Culture dimensions average index scores of the World(1967-2001) pic Note The world Average Index ScoresPDI=55, IDV=43,MAS=50,UAI=64,LTO=45 Sources from IBM data base(1967-2001), except LTO from original Chinese Value Survey database(2005). According to the figures above, we can see PDI in these two countries are lower than average,which means people in these two countries are more equally treated than the rest of the world. For IDV index, the Netherlands and Germany are both societies with more single at titudes, people there are more self-reliant and look after themselves or their close family members, also, individual pride and respect are more highly held values than worlds average.When talked about uncertainty avoidance, Germany scored a little higher than the Netherlands, which shows its a country will reduce the level of uncertainty by enhancing laws, policies and regulations to avoid unknown circumstances. In LTO, the Netherlands scores higher than Germany, which indicates its long-term oriented culture. But compared with the worlds average,the Netherlands and Germany scored more or less in above four dimensions, except in Masculinity, the Netherlands got a lowest score at 14 among its dimensions which indicates a lower level of differentiation and discrimination between men and women. In Netherlands, women are treated more equally than Germany.Though every country has its own culture background,economic development will not stop at national borders. Globalization requires us to deal with culture differences and work more closely with other countries than ever. Nuclear warfare, ball-shaped warming, poverty, AIDS, even recent economic recession are all good examples for global cooperation. Section5 (Entrepreneurship) Reference Kibritcioglu, A. and S. Dibooglu, Long-run Economic Growth An Interdisciplinary Approach, Office of Research Working Paper No. 01-0121, University of Illinois 2001 (http//www. business. uiuc. edu/Working_Papers/papers/01-0121. pdf ) Parkin, M. (2008). Economics(8th ed). Boston Pearson Education. J. De Haan and J. -E.Sturm, On the relationship between economic freedom and economic growth, European ledger of Political Economy 16(2000), pp. 215241. Gwartney, J. , Lawson, R. , Block, W. , 1996. Economic Freedom in the World, 19751995. Fraser Institute,Vancouver. Cowell, F. A. , 1999, Measurement of Inequality in Atkinson, A. B. and F. Bourguignon (eds) handbook of Income Distribution, North Holland, Amsterdam. Hofstede, G. (2004) Cu ltures and Organizations Software of the Mind. New York McGraw-Hill International. Wealth, Culture, and Corruption Bryan W. Husted and Instituto Tecnologico y de Estudios Journal of International Business Studies, Vol. 30, No. 2 (2nd Qtr. , 1999), pp. 339-359 http//www. jstor. org/stable/155316