Oh, Belgium

November 17, 2007

A tiny country of 10 million inhabitants at the heart of Europe. It hosts the EU’s capital, Brussels: a mere 1 million inhabitants. The country can be crossed in a couple of hours by car or train. It hasn’t had a government for about five months, due to infighting between two native tribes: the Flemish and the Walloons. Everywhere there is talk of a split. The country was founded in 1830 after a revolution uniting two Catholic groups that felt uneasy under Dutch hegemony. Today, apart from religion not much seems to be uniting both parts of the country. In the past the French-speaking Walloons were the richer and culturally dominant group in the country. Belgium was one of the first and most dynamic economies in the 19th century, a pioneer of European industrialization. Now, the Flemish are the richer majority of the country – one just needs to take a 30-minute train ride from run-down Brussels to flourishing Antwerp, and the difference blows into one’s face. (Here a post – in French – with more on the economic divide between the two parts of the country). The Flemish express their long-nurtured resentment against francophone cultural hegemonism and their exasperation at having to support financially a French-speaking part of a country that is drifting away in unemployment and comparative poverty. The problem is that the country hosts a great number of immigrants and second-generation immigrants; many of them speak both Flemish and French, plus their native language, plus English. What ethnic group do they belong to? Unemployment rates are just below 7% in the Flemish part of the country, and more than 15% in Wallonia. Brussels itself has an unemployment rate of about 20%.

My first very personal impressions of Belgium, mainly here in Brussels, were: “wow, the worst of Germany and France!”. Germany was where I spent my teenage years, and France where I lived for ten years. Both are neighbours to Belgium. I arrived here in Brussels after three years of very happy liberal brainwashing in London. As a woman, I noticed a slight Latin “machismo” coming from men, with a hint of German conservative ways of keeping the wives at home – what the French do not do. The slowness and provincialism reflected in the terrible shop’s opening hours: after 18.30 it’s hard to find an open shop (not ideal for the kind of hyperactive working population to which I belong). All those beggars and homeless – mainly men – on the streets and welcoming you at the train station – reminds me and of France and of Germany. Many youth hanging around smoking hashish in the streets, and having the expressions in their faces of the bored and un-stimulated: something to be seen more frequently in countries with high rates of youth unemployment, where Belgium excels, as does France. (Has anybody run a regression to study the correlation between youth unemployment, dreadlocks and hashish dependency? I have lots of hands-on evidence to provide!).

The sense of service in Belgium: appalling! When you complain in a shop, you get a reaction that mixes French public-sector-union-member vindictiveness with Germanic grumpiness. “Ah, ce n’est pas ma faute”, “on manque de personnel”…. etc. Plus, I have been facing on the ground the office move of ECIPE in Brussels: we have to wait about 6 weeks for an internet line. Technically, to bring a cable and switch on the connections can be done almost instantly, but there is one public company – Belgacom – having the monopoly over this service, and we have to wait. If it were not for the modernity of the product: it is like in Soviet times or some developing country! (If at least it were possible to bribe to get things done! – bad joke.). Mobile phone services and internet providers are more expensive than in France or the UK, where there is more competition in the markets, and not just 1-2-3 mono-/oligopolistic providers like here. Food is also pretty expensive: this must be studied in-depth, but my guess is again: monopoly. In Brussels, the French retailer Carrefour, via its Belgian subsidiary “GB” seems to be enjoying a close-to-monopoly situation.

I used to think the phenomena and attitudes described above were cultural in nature. But I have done a bit of economics in the meantime and understand that a lot is due to the laws and institutions that govern working and economic life (a recent post on mental attitudes, and social and economic models in Europe here). Below are examples:

Belgians keeping their wives at home: Belgium has a pretty low employment rate for EU standards [i.e. not only people working but people actively seeking to enter the labour market. In my provocative concrete terms: active population people actually do-ing something]: at around 61% (Denmark, the UK, Sweden and the Netherlands have employment rates of more than 70%).

Companies not having enough personnel (explaining, among others, the bad service to customers): this is the reflection of Belgium’s high productivity levels. Labour is so scarce that those who work have to do it all! Reminds me of 35-hour France. The rest is idle: 20% unemployment (out of only 60% of the working population working or actively seeking to work) in the capital of the EU is shocking. Taxes and social contributions in Belgium are among the highest in the EU. The jobs are the safest (Belgium has a highly regulated labour market resembling France’s) – that’s why company employees don’t care about their customers: there is not much risk of losing your job even if you don’t do it correctly.

Reforms?: The OECD has stressed how well Belgium has been doing. GDP growth reached 2.9% last year, a really very good performance for a Eurozone country. Given the number of construction sites and flashy cars around in Brussels, growth is even tangible and visible. And indeed the country has among the highest per capita income rates (working men can afford to have their wives at home and their 25-year old sons not finding a decent job and hanging around smoking pot).

Recent economic performance also reflects the marginal reforms undertaken by the previous government led by Guy Verhofstadt. Public debt went down from way above 110% in the early 2000s and 95% today (N.B. Belgium is still in complete breach of the Maastricht criteria to join the euro). Overall income tax rates have gone down quite significantly, but remain extremely high. What would the country be if it really went deeper in doing the reforms that would inject dynamism into its economy and provide jobs for its few million people? It could be a marvel. There’s a lot of potential around. The country is doing very well despite all its self-imposed legal and tax restrictions. It is just at the junction of Northern and Southern Europe, with Dutch/Germanic and Latin influences; a rich cultural heritage, geographically it is located very strategically. With post-colonial/post-modern cultural influences due to immigration: add to it London-style economic dynamism (i.e. a very free labour market and lots of competition in the economy), and the place could really be groovy.

One thing I really appreciate from Belgians: their sense humour. And their lucidity. I heard a Belgian recently say that the current deadlock is politician’s self-serving activity, supported by the big bureaucracies of the Flemish region, Wallonia, and the wider Brussels region everybody is fighting over: civil servants want to keep their jobs…. Most Belgians don’t want the country to split. A bit of public sector slimming down (Again: Belgium has among the highest taxation rates in the EU…) would really help revive the country, not only economically, but also politically.


4 Responses to “Oh, Belgium”

  1. Dear Iana,

    Many of the problems you spot in Belgium are not so much the result of high taxation rates, but of too high contributions on wages. Trade unions and employers’ organisations administer pension funds, unemployment insurance, and health insurance and finance it exclusively through high obligatory contributions on wages. Independent political parties in parliament have no direct say in one of the politically most important functions of the modern state. The effect is de facto taxation without representation and political parties like the CD&V taken hostage by their Christian-democratic labour movement not to detax labour and shift the burden to taxes on consumption and capital, freeing the large idle labour force of high wage contributions and giving incentives to firms to take on new personnel. Demand for labour is there, but political party fragmentation is so excessive (the largest formation, a cartel of CD&V and N-VA has only 17% of the national vote…!?) that no powerful block is available to force the feudally organised so-called social partners into work-creating policies.
    Add to this the legitimate fear that the francophone elite will loose its perks as soon as Flanders can force social and fiscal autonomy for itself, and you will understand that conservative veto-powers rule Belgium.


    Dirk De Bièvre
    Department of political science
    Universiteit Antwerpen

  2. Thank you, Dirk, for your input. Indeed payroll taxes are a major problem, and thanks for your extra comments on how veto-powers influence matters! Best, Iana

  3. Jean Duvivier Says:

    As an American descendent of Belgian ancestors, whose dad fought in the Yser trenches for four years in WW1, and who has lived in Antwerp and Hainaut for some years (besides The US, Brazil, France), I must say that the above analyses are exactly on target. As I have seen the problems at close range as well as from a distance, they are very similar to those that I have encountered in a number of socialist/command economies elsewhere. Since WW2, a succession of governments imbued with the topdown bureaucratic approach to social and economic problems have badly damaged a country and people that were once very successful and active. The current Belgian government and structures remind me of Peronista Argentina. The destructive results are similar.
    As a child I learned French and Dutch (Flemish are local dialects, just as there are several Walloon dialects). I fail to understand why both North and South can’t learn each other’s language. The Swiss do it well. It appears to me that the ault lies mostly with the political class which does not want to lose its patronage powers, (just like the Democrats over here).

    @ jean: thanks!

  4. Hi Iana,
    I jsut have to say: I LOVE YOU.

    Thank you for sharing this with us.

    I recently started a blot, for obvious reasons. Still needs some serious work on the layout and the colors, and of course, the content, but bit by bit, you can get a feeling already.
    I want to start with my beloved gym, the worst in the world, passage fitness, that will be my next post.


    Kind regards

    @ smart customer: Good luck! 😉

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