The Netherlands is an exemplar of peaceful nationhood, democratic stability, and commercial prosperity. It has followed a small-state development strategy of export-led growth, partnership among government, capital, and labor, a mixed economy, and pragmatic crisis management (Katzenstein 1985). Since 1945, it has withstood major changes such as decolonization, the emancipation of citizens and households, European unification, immigration, and the globalization of markets and communications. Beginning in the mid-1970s, however, the Netherlands came to be seen as a model of European sclerosis. Exploitation of natural gas drove up domestic producer costs through currency appreciation and there was rapid expansion of social security and public transfer expenditures (Ellman 1984a, 1984b, 1986). Unemployment rose to 11 percent by 1983 and stayed high for the entire decade.

Since the mid-1990s, however, the Polder model has been praised far and wide because of a complete turnaround created by wage restraint, welfare state reform, and seamless entry to monetary union. Unemployment was 2.8 percent in 2000, employment having risen by more than 2.5 million people between 1983 and 2000 (more than 25 percent in labor-years) (Wolfson 2001: 209). There was price stability, a trade surplus, and moderate wage and income inequality, relative to both the Dutch past and to other Western countries today. Indeed, the Dutch record of economic growth, declining unemployment and inflation in the 1990s approached the outstanding performance of the American economy, while public policy remained broadly in line with embedded liberalism – that is, public coverage of the basic risks of an open economy and ongoing internationalization (UNDP 2001).