Four Centuries of Fiscal Decentralisation in the Netherlands in View of Different Economic Theoretic Perspectives

The history of the Netherlands reveals major shifts from centralisation of government tasks towards decentralisation and vice versa. In the seventeenth century, the Republic of United Provinces was the first federal state in modern history. Many transformations later the Kingdom of the Netherlands became a big centralized welfare state. Since the 1980s a reverse development has started: the welfare state is being downsized and decentralised. This paper describes and discusses this evolution in view of a broad spectrum of economic theories. Four conclusions are drawn. Firstly, a major reason for changes in fiscal decentralisation arrangements was a deterioration of economic and political circumstances. Secondly, also many other factors, like the increase in communication, mobility, population density, urbanization and the role of government, necessitated changes. Thirdly, accountability and transparency of local government has been improved substantially. Fourthly, current arrangements are not optimal and should be changed. For example, Dutch municipalities should increase further in scale and the role of Dutch provinces should be reconsidered