The Power and the Money

Environmental disasters are hard to stop, even in the Netherlands

The rash of earthquakes afflicting Oklahoma is old news. The cause appears to be backwash from fracking operations being pumped into old abandoned oil and gas wells. Lubricated rocks slip, and thus earthquakes where none were before. 

But now Groningen, in the Netherlands, is suffering from quakes! I am kind of embarrassed to learn about this now, since I was only recently in Groningen. (Disclosure: I am a Dutch citizen, passport and everything. Yes, I am also a U.S.A. veteran and short and olive-skinned and Spanish-speaking. ¿Tienes algún problema con eso? Daar heb ik geen moeite mee.) 

For those on the wrong side of the paywall: these quakes appear to be due to the rapid depletion of the Groningen gasfield to the east of the city. A 3.6 earthquake in 2012 wrecked thousands of homes (as you might imagine, Dutch houses are not built for tremors); on January 8th of this year another 3.4 did likewise. From the Financial Times:

Gert-Jan Veldink was at home when a 3.4-magnitude earthquake struck the northern tip of the Netherlands last month. First came the tremors, then the chimney broke and floor-to-ceiling cracks appeared in the hallway. Later, an engineer confirmed his 200-year-old farmhouse was filled with carbon monoxide from a damaged gas pipe. “The quake hit our house with all its force,” says Mr Veldink, an academic from the small town of Kiel-Windeweer, near Groningen, the regional capital. “If there’s another earthquake the same as before then the roof will collapse.”

Labor Party politicians estimate the number of houses that need rebuilding at around 90,000. The fields are operated by NAM, a 50-50 joint venture between Royal Dutch Shell and ExxonMobil. NAM has paid out about 80,000 claims, although their value is unknown.

The field has been in operation since 1959, but number of quakes started rising around the turn of the century. For an amazing visualization, click here.

Since 2013, production has fallen precipitously, but the number and intensity of the quakes has remained steady. The implication is that the ground has already been weakened; the number of quakes will fall slowly even if production stops immediately. Of course, if production doesn’t stop, then the quakes will get worse ...

Why does the government let production continue? The industry is highly taxed, with the Dutch state taking 80% of revenues. But that amounts to only 0.8% of total public revenue, down from 5% in 2013. In addition, the Dutch state is highly centralized and subsoil resources are not owned by the surface title-holder, so there is not much of a local lobby pushing for more production the way there would be in most of the United States. 

Which leaves three reasons to keep production going, albeit at a capped level. First, there are legitimate worries that lowering production caps would lead to big variations in monthly production, since NAM would want to sell more in the winter when prices are high. That could lead pressure to fluctuate, making earthquakes worse.

Of course, a total shutdown would solve that problem, but that brings us to the other two problems: 

1. The Netherlands still relies on natural gas for heat and light. Shutting Groningen, at least in the short term, means more imports from Russia. Nobody likes Russia. In fact, Dutch politicians dislike Russia so much that they see votes in lying about their knowledge of Russian “plans to expand the country’s borders and create a ‘Great Russia’ that would include Belarus, Ukraine, the Baltic countries and possibly Kazakhstan.”
2. Lobbying and legal issues. Even with the high government take, NAM makes a lot of money from the gas fields. They will not take it lying down.

So there you have it. Conventional gas production is causing earthquakes in the Netherlands. But even as wind power gets cheaper and more reliable, nobody can quite figure out how to shut it down.

The problem with political quizzes

In recent years, Dutch politics has fragmented. In part, this is a function of the country’s extreme form of proportional representation, which allows very small parties into Parliament. In addition, ballot access is easy. All you need to do is put up a refundable deposit of €11,250 and you’re on.

Nonetheless, the Dutch party system has seen increasing fragmentation in recent years. The standard measure of the effective number of parties takes each party’s share of seats, squares them, and adds up the result. A two-party system will always have a number below two, since one party or the other will have a majority. A system in which one party wins a majority will always have a number below four.

The number has issues, of course, all measures do. For example, it suggests that a parliament with three equally-sized parties (3.0 effective parties) is about the same as one with a majority party (53%) and five smaller ones (3.1 effective parties). Obviously whether that is true depends on the ability of those parties to form coalitions: the first system might be a competitive kaleidoscope while the second system could be a de facto one-party state. Or vice versa. In short, the measure does not tell you how easy it is to form governments or how different the possible coalitions on offer might be. 

Still, the measure captures the degree of parliamentary fractionalization quite well. And you can use it to make comparisons across time. And so, here is the number of effective parties in the postwar Netherlands:

Rising fragmentation creates a problem for voters, of course: which party to vote for? There are more options than ever and many of those options are brand new.

Well, André Krouwel a political scientist at the Vrije Universiteit Amsterdam, developed an online survey to help voters with this problem. A quarter of Dutch voters used it in the 2017 election. Since this will be relevant for me in the next Dutch general election, I decided to give it a whirl.

And to my surprise, it pegged me as a Christian Union voter. Huh? I took it again, same result.

So I took a different survey. Now I was with the Greens (officially “GreenLeft”), which makes more sense.

What went wrong the first time out? Well, simple: the quiz did not properly weight the importance of each question. Consider the following two sets of political positions:

1. Abolishing legal suicide
2. Recriminalizing marijuana
3. Toughening criminal justice
4. Ending automatic organ donation unless you opt-out

 and

1. Opposing mandatory national service
2. Abolishing health care deductibles
3. Ending nuclear power
4. Enabling referenda to overturn laws
5. Liberalizing dismissal laws

The first group are policies with which I disagree with the Christian Union and agree with the Greens. The second group are policies about which which I disagree with the Greens and agree with the Christian Union.

With the exception of #4 on the first list, I feel rather strongly about these issues. With the exception #4 on the second list, I do not feel particularly strongly about these issues. So I am much closer to the Greens than to the Christian Union. But the election survey had no way to know this.

Aside: why am I unbothered about where I disagree with the Greens? Well, (1) is not going to happen so whatever. (2) is an issue, but the Greens recognize that premiums will have to rise; I disagree about the tradeoff but the Greens are not peddling nirvana. (3) is a major issue for Europe and the world ... but the Netherlands has only one small nuclear power plant. (5) is also a real issue, but the Dutch labor market performs all right regardless, so it is hard to get worked up either way.

There are a lot more policies on which the two parties agree, by the way. The Christian Union is a weird animal by American standards, being socially conservative but redistributionist, pro-immigration and very green. In fact, GreenLeft came into being from a merger of four parties, one of which was an openly Christian organization called the Evangelical People’s Party.

Anyway, to return to the title of this post, beware these political quizzes, including the ones that try to site you in some sort of two-axis issue space. They have trouble capturing issue valence and are therefore not to be trusted.

You can’t get there from here: path dependency and public health care

California just costed the proposed Medicare-for-all system. It came to about $400 billion. $200 billion would come from existing federal spending. The remainder could be financed by a 15% payroll tax (or something else). Of that $200 billion, $150 billion would displace employer-provided costs around $150 billion. The remainder would either replace out-of-pocket spending or represent the cost of getting the small remaining number of uninsured Californians into care. 

$400 million is nonetheless a huge number. It is a little more than $10,000 per person. The Canadian public sector, in contrast, spends about $3,200 (U.S.) per person. (Total spending was C$6,299 in 2016, according to the Canadian Institute for Health Information; about 70% of that was public.) 

And therein lies the rub. The United States has seen years of runaway health care costs, driven by our odd hybrid system. That means that whether you like Canada on the left, or Singapore on the right, any sort of transition will be very expensive.

Which is why, at the end of the day, I favor making Obamacare work. The Dutch have shown how: automatic sign-ups, direct deductions, and high penalties. And more subsidies to push up affordability. At the same time, slowly expand Medicaid eligibility while reducing the Medicare age. It is incremental and messy ... but anything else would require a big bang at big cost, as California just discovered. 

Dutch lessons for Obamacare

 It looks like the Obamacare exchanges are running into some trouble, which is disappointing for anyone who would like to see all Americans have access to affordable health care. The problem, as noted elsewhere, is that not enough healthy people are buying insurance via the exchanges. That is leading to adverse selection, which increases the cost and decreases the amount of available plans. 

Back in 2008, the Obama campaign claimed that you did not really need a mandate to make health care reform work. Enough healthy people would buy insurance if it was properly subsidized. The Clinton campaign said, no, that’s wrong, you need a mandate. When the Affordable Care Act was actually written, however, the authors soon realized that you did, in fact, need a mandate. The problem now seems to be that the mandate is not strong enough; too many healthy people are not buying insurance. 

The Dutch experience is worth noting. The Health Insurance Act of 2006 required all Netherlands residents to purchase subsidized health insurance. Their mandate was pretty weak, though: a penalty of 130% of the premium over the period of being uninsured. Note that this is different from the U.S., where the penalty is less than the premium.

But nonetheless Dutch enforcement was American-style lax. As a result, by 2010 about 1% of the population failed to buy insurance and another 2% made no premium payments on the insurance they did buy. (It is not clear how these figures compare to Obamacare, since the Dutch system is universal, whereas most Americans still get insurance via their employer.) Costs increased markedly, which is what you would worry about with an ineffective mandate.

So in 2011, the government started deducting premiums directly from people’s paychecks if they failed to pay. (See page 7 for the details.) Interestingly, the change did not go through Parliament: rather, it was a regulatory reform issued under the provisions of the 2006 act. And the Netherlands is still having some trouble. 

The problems with Obamacare are fixable, but they are real. 

Colonize England! Or, a brief word on Brexit and Scomain

 The Kingdom of the Netherlands consists of several countries and a few overseas municipalities. Only one of them, the eponymous one sitting on the northwest shore of the European peninsula, is part of the E.U. The rest are overseas territories, including the special municipalities. 

So lets look at those special municipalities and the E.U. They consist of the islands of Bonaire, St Eustatius and Saba. Dutch citizens on those islands vote in Dutch national elections. But they do not live in the European Union. What does that mean?

First, there are border controls between the special municipalities and the European Netherlands. Land at Schipol, go through customs and immigration just like any European citizen returning from a foreign country. 

Second, they are not in the single market. They can export duty-free to the E.U. (see Article 43) but with limits: (1) Re-exports can only be sent duty-free if the overseas territory imposes trade taxes at least as high as European tariffs (Article 45); and (2) services are not included (Article 51).

Third, they can establish employment restrictions on non-Dutch citizens. (In point of fact, they can also restrict Dutch citizens born elsewhere in the Kingdom.)

So all Parliament needs to do is declare England to be an overseas territory of the United Kingdom! The English could still vote for Parliament. In fact, they would still be E.U. citizens, strictly speaking. But Parliament could restrict non-British (or even non-English) from working in England.

Of course, England-based financial firms would no longer be able to sell financial services across Europe ... but British firms based in Scotland certainly would. Moreover, the U.K. would remain an E.U. member, and thus retain its voice in Brussels debates over financial regulation. As my GWU colleague, Christopher Mitchell, has pointed out in the Washington Post, retaining that voice is vital for the sector to thrive.

Now, I do not want to minimize the problems: other than retaining duty-free access to Europe, English manufacturing firms would face all the same non-tariff barriers faced by, say, Turkish companies. The dislocation of having financial firms move to Scotland is not nothing. And you would need to institute a customs boundary along the line between England and Scotland. 

But it keeps Scotland in both Unions and keeps Britain at the European table, although its voting weight would drop considerably, given that English residents would no longer count.

There might be a problem with doing this unilaterally, however. Annex II of the consolidated Treaty on the Functioning of the European Union explicitly lists the overseas territories; London may not be able to add to them unilaterally. But it would be a legal mess if it tried; I have no idea how the European Court would rule. 

Somehow I do not think this will happen, but I am not sure why I do not think it will happen. After all, something much weirder just did happen. 

Is Sint-Maarten an independent state?

 The Kingdom of the Netherlands is a strange animal. It isn’t much of an empire. Nor is it a proper federation; it doesn’t even have a federal government per se. International treaties apply differently to the different parts. (See Articles 24-28 of the Charter of the Kingdom.) The Caribbean members have duty-free access to the European Union, but there is no true common market. In theory, Article 35 requires that they pay for their own defense. (In reality, it doesn’t matter: the insular Caribbean outside Cuba is a de facto military protectorate of the United States.) The Supreme Court of the Netherlands is the ultimate court of appeal, but most of the ex-British insular states (save Barbados and Guyana, but including Mauritius an ocean away) still use the Privy Council. It uses a different currency, with its own central bank. Finally, the Caribbean countries can all withdraw fairly easily, using provisions laid down in the Charter. Sint-Maarten could remove Dutch influence far more easily than the Bahamas could get rid of the United States.

So is the Kingdom meaningless? Are the constituent countries simply independent countries without a seat in the U.N.? Well, not quite. First, there is a common citizenship. Immigration and naturalization laws may vary (the latter by rather little), but once you’ve got that Kingdom passport you’re a full citizen. If Great Britain had been willing to extend that to the West Indies Associated States, I doubt that any of them would be sovereign countries today. (To be fair, the WIAS had other issues, not least of which that there was no equivalent of the Charter. British officials treated the association as nothing more than a British administrative inconvenience, which rankled on the islands.)

Second, law enforcement. The relationship is a bit of a mess. This Dutch document goes into it: since I am not a Dutch speaker, and translation software is overvalued, I can’t say that I understand the details. That said, while Dutch police have less authority in Sint-Maarten than, say, the FBI does in Puerto Rico, they do have authority, even if they generally need local approval to make arrests. That is a bit more authority than, say, OPBAT gives American officials in the Bahamas, or than DEA agents have in Colombia or Mexico.

Third ... well, here it gets interesting. The Netherlands provides financial support to the other countries in the Kingdom, but it is phasing it out. Development and fiscal aid is supposed to end by 2013. In fact, transfers have been generally miniscule. According to IMF data, in 2008 aid to Sint Maarten amounted to only 0.3% of GDP.

Recently, however, that has changed. Aid rose to 2.0% of GDP in 2009 and 6.2% in 2010, most of it to pay off Sint-Maarten’s debt arrears. More substantively, the Netherlands took over the debt from the former government of the Netherlands Antilles that otherwise would have gone to Sint-Maarten, a gift worth approximately 30% of the country’s GDP. In return, however, the island has had to accept Dutch financial supervision. The Financial Supervision Authority is supposed to stick around until 2013, by which point Sint-Maarten is supposed to have trained up enough people to take over the functions formally carried out by the government of the Netherlands Antilles. We’ll see.

In short, being part of the Kingdom of the Netherlands is a bit more substantive than simply lacking a U.N. seat. That said, technical sovereignty matters very little. The U.S. routinely took control of the finances of Latin American countries before WW2, and the IMF effectively does so today. (A country can refuse IMF money, of course ... but Sint-Maarten can, in theory, also refuse Dutch support.) Similarly, law enforcement officials from a powerful state can often find ways to exercise their authority inside a weaker one. Finally, lots of nominally sovereign countries share or outsource judicial authorities. What matters, rather, is citizenship and the moral authority to call on Dutch resources when necessary. It is a relatively weak relationship, but a real one nonetheless.

The French side of the island is completely different. If there’s interest, I’ll discuss it later.

A new nation in the Caribbean

 Every Christmas, we go to a different Caribbean island to meet my wife’s family. This year, we went to Sint Maarten, Saint Martin, and St. Vincent. The first two, I should add, share the same island.

Sint Maarten, which makes up the southern half of a tiny Caribbean island in the north of the Lesser Antilles, is a new country in two ways. First, it really is a new country. The Kingdom of the Netherlands is not a small country on the northwestern coast of Europe. Rather, it is a federacy of several different countries, called, well, “countries.” In 1954, when the former empire was turned into a federacy via the Charter, the Kingdom consisted of the Netherlands, Suriname, and the Netherlands Antilles. (Dutch New Guinea was not part of the new structure.) In 1975, Surinam became independent in a disgusting little racist episode engineered by Prime Minister Joop den Uyl. Aruba split from the rest of the Netherlands Antilles in 1986, but remained part of the Kingdom. Finally, last year the Netherlands Antilles dissolved into two more countries, Curaçao and Sint Maarten, while the three remaining territories (Bonaire, Saba, and Saint Eustatius) became part of the Netherlands. Sint Maarten’s status as a country, then, is only a little over a year old.

Sint Maarten is a new country in another sense, however: more than three-quarters of the population consists of the descendents of immigrants who arrived after 1960. The sugar and cotton industries collapsed after the abolition of slavery in 1863. Maartenese laborers went to Cuba, Puerto Rico, and the Dominican Republic to work in the sugar industry. In 1918 a giant oil refinery opened on Curaçao, followed by one in Aruba in 1928, sucking out more labor from Sint Maarten. The result was stagnation: in 1960, the population was only 2,728. The island looked to be sinking into a backwater, an unpopulated remnant.

The jet age (and Fidel Castro) changed all that. The Cuban Revolution removed that island as a destination for North American tourists. Sniffing opportunity, in 1964, the Antillean government relocated and expanded Princess Juliana International Airport.

Tourists began to arrive en masse, the cruise ships followed. And the population grew. And grew. And grew. To only 40,000 people, admittedly, but the entire country covers only 13 square miles. By 1992, only 30% of the population had been born in St. Maarten, and a solid chunk of those were the children of post-1964 immigrants.

It is possible to be naturalized as a Dutch citizen, but it isn’t easy. (Strangely, it seems as though I may qualify for Dutch citizenship without the need to be naturalized, just as I qualified for Spanish citizenship until last Tuesday.) In 2001, citizens made up 51% of the population. 30% of the population was (still) native-born; an additional 10% came from elsewhere in the former Netherlands Antilles and 2% came from the Netherlands proper. The math, then, shows that only 9% of the population consists of naturalized citizens.

Who naturalizes? It isn’t easy to tell, but it is easy to see who doesn’t naturalize: in 2001, people born in the British West Indies made up 20% of the population, whereas citizens of those countries made up 21% — they do not naturalize; neither did a small number of their Sint-Maarten-born children. Even more dramatically, the Haitian-born made up 8% of the population, but Haitian citizens made up 12% — very few of their children naturalize. Finally, Dominican-born made up 12% of the population and while Dominican citizens made up 10%; of the three major groups, they are the most likely to naturalize. (Two-thirds of the foreign born outside those three groups and developed-world expats become Dutch citizens. Most of them are from Cuba, South America, and Lebanon.) The West Indians may be unlikely to receive Dutch citizenship, but they are also next-to-invisible on the Dutch side. The initial plantation owners on that side of the island were from Britain; they brought English. Everyone speaks it fluently, from birth, with a faint West Indian inflection. 

The Dominicans, on the other hand, are pretty distinctive. Our first contact with them actually came on the French side of the island. We were walking along Orient Bay in the evening, and heard tropical music coming from one of the beach clubs, all the way at the southern end of the beach. It was a live band, and an awesome live band. Everyone in there except for us (including the waitress) was Dominican. (There are no border controls.) It was awesome ... and by day an utterly nondescript beach bar populated by tourists.

On the Dutch side, you can see money-sending places, Spanish service shops, and evangelical iglesias scattered around the poorer outskirts of Philipsburg. The Dominicans are visible. The migration is skewed towards women: 61%. According to the Sint Maarten government, most of the initial migration came in illegally from Romana and San Pedro de Macoris. The migrants provided fake work sponsors to Sint Maarten’s then-lackadaisical immigration officials. It’s also skewed towards the unskilled: Dominicans make up 29% of all unskilled workers, with Haitians filling an additional 30%.

The Haitian migration is almost the mirror image of the Dominican one in terms of gender: it’s 59% male. It’s also the mirror image in terms of visibility. The only easily-spotted presence is the fishermen near the airport, and the stalls where they sell their products.

Policy, as you can imagine, has been confused, although it is getting better. Before August 1, 1996, education was neither free nor compulsory for immigrant children. The legal school population doubled in 1990-95, and so educating immigrants was not particularly popular, especially since many of the Haitians were refugees fleeing the chaos of the early 1990s and living in tent cities.  Nonetheless, the government came around to the idea that creating a large uneducated underclass was a bad idea, and so compulsory education was extended to all. State health insurance, however, is not available for undocumented immigrants, who often cross over the French border to receive emergency care. 

Thoughts?

Welcome to Earthport!

And now, for the second installment in our continuing series about el Caribe.  Hopefully, this will keep you entertained and edified as the real owners deal with, well, life. 

 

Outside the walls of Old San Juan lies, well, mostly ocean.  But go east along the island, past the grandeur of the Capitolio, and you enter the unpleasantly named "Puerta de Tierra."  It sounds like something out of a science fiction movie.  It isn’t, unless the movie in question is Class of 1984.  It’s a run-down area full of housing projects, homeless shelters, and a Catholic school with a grand building in dire need of reconstruction.  But the Archivo General de Puerto Rico is there, and so am I.

Over on the north side of Puerta de Tierra there are a bunch of nice hotels.  A massive tourist complex is going up on the northeastern edge.  There are also a lot of signs advertising new high-rise condos but not a whole lot of condos themselves. 

The south side is mostly housing projects.  The first one on the island, El Falansterio, was built in 1937 and could be in Miami Beach ... architecturally-speaking, at least.  El Falansterio aside, Puerto Rican housing projects, called "caseríos," mostly look like they were built on an assembly line somewhere in central California and shipped here in a pod.  Most of the ones in Puerta de Tierra don’t look all that bad, until you notice the bars on all the balconies and windows. 

At least they demolished the tower projects back in 2000, as part of an urban renewal program that’s still underway.

In other words, the government got rid of the arrabales by building caseríos, and now they’re replacing the caseríos with condos.