Market forces or Government participation?
Nieuwegein, May 2019
It is quite surprising to see how the current political cabinet seems to implementing a new role for the government. Last decade, under leadership of the VVD (Dutch liberal party), quite some privatization has occurred. For example, the healthcare sector, public transport, postal service and the Dutch flight concern KLM. This has however changed in the beginning of 2019. The idea that optimums can be realized by giving full freedom to companies and subject them to market forces were the government takes a step back, is currently being re-evaluated.
Main reason for this seems to be the lack of a vote and/or control. A re-evaluation of the government’s role is taking place, especially when great public interests are at stake. The government wants to be part of important strategic choices again. A breach of trend has occurred in the privatization of government participation. Here are some recent cases:
The Healthcare sector
According to minister Hugo de jonge (Public Health department), market forces are “out of control” in the healthcare sector. It should be limited to ensure solid organization and affordability of the best healthcare for the Dutch population, as he claimed in a recent interview with the AD (Dutch news organization). “The sector needs less market forces and more collaboration. Otherwise there is no continuity possible”, as he said in the same interview. The bankruptcy of the IJsselmeer hospitals and the Slotervaart hospital at the end of 2018 has had a major impact on the society and raised the question whether market forces should be influenced or not in these situations. Therefore, at the beginning of this year, two healthcare institutions have been saved from bankruptcy; institution Arduin in Zeeland and hospital Pantein in Beugen. Furthermore, it seems there if some unofficial support towards pharmacists, to ‘bypass’ medicine patents when there are signals that a pharmaceutical company is charging extortionate prices for its medicines. Initiator is the pharmacist Paul Lebbink from The Hague, who opened his own laboratory to produce an imitation medicine against cystic fibrosis and was visited by minister Bruno Bruins of the Medical Care and Sports department. Paul Lebbink says that even though he is expecting lawsuits from the pharmaceutical companies, he prioritizes the interests of his patients.
The mail delivery has been privatized in the past, to realize optimization and price competition at the benefit of the Dutch citizens. However, the take-over initiatives of PostNL by the Belgian BPost was an eye-opener for the Dutch government. The postal sector is, despite of digitalization, still a crucial part of the Dutch infrastructure. When the take-over by BPost would be successful, this part of the infrastructure would for a large part be owned by the Belgian government, who has a majority stake in BPost. Therefore, currently the government is very enthusiastic about the intended merger between Sandd and PostNL; both Dutch companies. In fact, this would however result in a new monopoly in the Dutch postal sector, fully nullify the intended benefits of privatization. We would be right back at the start.
At the 26th of February 2019, minister Wopke Hoekstra (Finance) surprised society by acquiring a stake in Air France KLM. This action was completely contrary to the stance of the Dutch government in 2004, when KLM was allowed to merge with Air France and only the French government maintained a stake (44% in the merged company at that time, currently apx. 14%) and not intervening in the bankruptcy of aircraft manufacturer Fokker in 1996. Currently, the goal of the minister is to match the French stake in Air France KLM, because they want to ‘sit at the table and not be surprised’, as said by minister Cora van Nieuwenhuizen (infrastructure).
To prevent the bankruptcy of the ABN AMRO Bank in 2008, the Dutch government acquired the company and even though a part of the shares has already been sold again, the government still owns a majority stake. Expectation is that they will not give up control anytime soon. The Volksbank (formerly known as SNS Bank), is also fully owned by the Dutch government. As the Dutch tax authority is nowadays considering switching banks (currently ING), choosing for ABN AMRO Bank or the Volksbank could be considered logical.
In summary, it seams that the Dutch government is currently realizing on one end that there are some crucial sectors, where there are some major societal interests, that should be protected. In those sectors there will be an important role for the government. It is wise that the government takes this responsibility and does not naively assume that market forces alone will solve everything.
On the other hand, in some cases it can be desirable that when there is overcapacity, such as was the case in the before mentioned hospitals, it is taken away from underperforming organizations. In these cases, a bankruptcy cannot always be prevented, but will enable the healthcare sector to become stronger nonetheless.
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