New Netherland inflationary crisis
The New Netherland currency crisis was an crisis that occurred in New Netherland in the late 1970s, characterized by rapid inflation and the emergence of a wage-price spiral. The crisis occurred after a time of rapid economic growth in New Netherland and the adoption of expansive social welfare in the early 20th century, which led to the overheating of the New Netherlander economy.
Background
Pre-Crisis Economic Expansion (1920s-1960s)
Throughout the first half of the 20th century, New Netherland experienced prosperity, driven by fast growth in industrial output, expanding social welfare programs, and the emergence of a prosperous middle class. Leading companies such as Jonkman Enterprises and Haverströ Co. saw a surge in prosperity and initiated substantial wage increases as early as the 1930s, setting a precedent and expectation for broader wage growth within the New Netherland economy.
Currency appreciation
By the 1940s, New Netherlander companies were renowned for their craftsmanship and innovation. Goods produced in New Netherland were highly sought after around the world. This led to an increasing demand of the New Netherlander Daelder on the international currency market, and led to its steady appreciation against other global currencies such as the British pound. Overseas investors have also viewed New Netherland as a good target for capital investment, which only pushed the currency's value and the New Netherlander economy further.
Labor laws and social welfare
By 1947, the labor-friendly government of the Güman era brought about new labor laws such as the adoption of the revised New Netherland Labor Code and the increase of the minimum wage over time. This forced the companies of New Netherland, most of which were highly profitable, to distribute their earnings more equitably to the population in the form of hefty wage hikes throughout the 1950s.
Rise of the prosperous middle class
The growth in company profitability and high wages led to the growth of a strong middle class. New Netherlanders found themselves with greater disposable income, which in turn fueled domestic consumption. This rise in consumer spending was evident across various sectors of the economy, from retail and housing to leisure and entertainment. New Netherland witnessed a surge in demand for consumer goods and services, including automobiles, household appliances, to even dining out and travel. With their strong currency, New Netherlanders also started to consume premium imported goods from Europe. This uptick in consumption not only contributed to economic expansion but also reshaped societal norms, as access to a wider selection of goods became more attainable, and even expected as a minimum, for a growing portion of the population.
The crisis
Overheating of the economy
As consumer spending soared, businesses faced mounting pressure to ramp up production to meet market demand. To accommodate this, companies rapidly expanded their operations, investing heavily in new equipment, infrastructure, and workforce expansion in the 1960s. As companies hired more skilled and unskilled workers with high wages, the total costs of operations increased, which forced companies to offload the additional cost to the products and the customer, which led to higher prices.
Wage-price spiral under Zeyven Party rule
Under the leadership of S.S. de Haese and the middle-class-driven Zeyven Party in the late 1960s and early 1970s, pro-consumer policies were implemented in New Netherland. As a result, companies were compelled to raise wages to meet the demands of these policies amidst rising prices. This initiated a phenomenon known as a wage-price spiral, wherein wage hikes cause priced increases, which in turn caused further wage hikes, in a positive feedback loop.
Economic downturn and growing trade deficit
The Daelder's strength against foreign currencies brought difficulty to New Netherland's export-oriented industries. While the strong Daelder initially reflected confidence in the nation's economy, it eventually became a hindrance. This, along with the soaring prices of New Netherlander goods, made New Netherland's exports less competitive on the global market, leading New Netherlanders to import most of their goods and led to more and more companies outsourcing manufacturing and high-tech industries to neighboring Tussenland to maintain profitability.
WIP: Write about the hardships during this time
Causes
WIP: Introduce chrematic school of thought, what they thought about the crisis, and their proposed solutions.
