Our merchants are still dying on Flanders Fields

UPDATE: rewritten and adapted the title to integrate more properly some of the ideas of Prof. Dr. Peersman’s study.

Opening statement: as goes for all the articles on this blog, this article represents my personal views and only my views. It does not, in any way, represent a view of any of my former or current employers, nor should it be read as such.

Belgium was where you had your wars

In the past, if a European nation wanted to have a war, the geographic area that covers what is now Belgium was usually the place to be. Over the past couple of hundred years, our lands have been conquered by the Dutch (a couple of times), the Spanish, the Austrians, the Germans (also a couple of times), with occasional visits from the British, but they usually came just for the battle. The rest stayed and ruled the Belgian masses. And the local population suffered, often greatly.

Memorials in remembrance to those conflicts still dot the Belgian landscape. Being quite pragmatic about it – and how could you not be, given the number of times another nation rolled over us – we often put a café right next to it, but I recently found one such memorial right in front of the local high school. It is a piece of a concrete road made with Belgian stones, Belgian mortar, Belgian sand and the blood of Belgian prisoners of war, shed to build a German airfield, used during World War Two. There are many more memorials like it, bearing witness to the fact that what remains after the war is over is often a local population wondering how they are going to rebuild their lives, once again.

Of course, the World War Two is far from the only war we had roll over us. Flanders Fields of World War One still attract many hundreds of thousands of visitors each year. And the plaques (and poems) describing that horrible disaster read a grim tale: first use of chemical weapons on a battlefield; a stalemate during years in the Ypres Salient during which many tens of thousands soldiers and civilians died.

Yes, we need the EU, but we also need a longer term vision

This “Great War” (to be clear, it wasn’t that great, not for the Belgians at least) as well as the subsequent Second World War is one of the reasons, as Guy Verhofstadt, the leader of the Alliance of Liberals and Democrats for Europe in the European Parliament, recently stated during a TV program on Brexit, why Europe and the EU are so important to Belgium. Structures like the EU which amongst others maintain the peace are essential to our survival. If they are not present – and I agree we probably can run them more efficiently, but between efficiency and inclusivity there is always a trade-off – who knows who is going to come and fight in our fields again. But I believe Guy Verhofstadt forgets to mention a missing component. In order to make Europe work we need not only relevant European institutions, we also need relevance of the nation itself, other than being a pretty good battleground. And in order to be truly relevant as a nation, we need leadership with a longer term vision. The following article in the Belgian quality newspaper “De Tijd” documents that Belgian businesses ask for nothing but such a longer term vision from the ruling political class.

Ignoring interdependence … to our detriment

So, in order to be relevant in an international context, where you seek broader protective cover, as a nation you need to ensure you have something to offer. You need to bring something to the table. Because if you are not bringing something to the table, you are usually on the menu.

However, building such relevance requires a long term vision and a willingness to forego short term individual gain. What I am referring to is not protectionism, it is common sense. It is being open to opportunity and joint collaboration without being gullible. It is not about independence, and not about dependence either, but about interdependence.

  • Dependence is being guided by what others think or ask to do, trying to please others without regard for what you yourself want;
  • Independence is ignoring others and our coexistence, wishing to deal with everything on your own and not acknowledge your own need for support;
  • Interdependence is being and acting while taking into account your own needs and at the same time caring about others’ needs instead of pleasing or ignoring others.

And such positioning goes for all kinds of conflict, whether hot or cold, whether physical or … economic.

Which bring us to economic warfare … and as to this, Flanders Fields, or Belgium’s fields, are still being bled on. Not by all of our people, but most certainly by our merchants. By the lifeblood of our nation, the small to medium sized enterprises commonly known as SME’s. And they bleed on a daily basis, because of a lack of leadership commitment to a long vision to ensure we, as a nation, are economically relevant and therefore well protected. To rephrase, our leadership focused on short term gains and independence and have completely ignored the essential reality of interdependence.

From the first Google (2019) to being eaten for breakfast

You may have trouble believing me, but let’s take e-commerce as an example. Look to the neighbouring countries. The Netherlands and Germany have very well established e-commerce infrastructures. France as well; they started their e-commerce build later, but they are catching up fast.

Belgium, on the other hand, has completely missed the boat, because of the above mentioned lack of clear long term vision. Most of the failings regarding e-commerce occurred in the past 15 years, because of lack of vision and an unwillingness to federate enough actors and stakeholders to lay the necessary groundwork to create a fertile ground on which e-commerce initiatives could grow. And now, years later, there is no longer room or appetite for partnerships from the now large players … there is only conquest, the fight for the purchasing power the Belgian consumer has. That purchasing power is significant, and we are losing it, because that battle is being fought over the heads of our Belgian merchants … they cannot easily find their way to this new way of working. Now, isn’t that very sad for the country that boasted the first Google, the Mundaneum, in 1910?

Losing 8 billion EUR each year

So where does that bring us? As this COMEOS study shows, many of the things we used to get from local merchants, we find online. In 2018, 20% of our food purchases happened online, +12% as compared to 2011. 61% of fashion purchases (+23%), 45% of computer and electronics (+5%), 40% of health and beauty products (+21%) are being bought online. 1 out of 10 people buy food online at least twice a month. Online food purchases are seen as the top potential area of growth for the future, according to that same study.

COMEOS estimated a study referred to in this 2018 article that about 5.5 billion EUR in Belgian purchasing power leaves the country each year in e-commerce purchases. This purchasing power is no longer available to Belgian retailers. Some other experts familiar with the e-commerce sector estimate this amount, which is staggering, is likely even underestimated. And that amount does not take into account Belgians purchasing retail products across the border. The following article from Retail Detail estimates that an additional 2.5 billion EUR in additional Belgian purchasing power is spent in the Netherlands, France and Germany. Belgians living up to 50 km from any of the borders are ready to drive the distance to find some meal products cheaper.

Because on a leadership level Belgium has failed to take the long term view, our merchants bleed on our fields, at the rate of at least 8 billion EUR per year. That, by the way, is not bleeding, that’s haemorrhaging. This 8 billion EUR (yes, I like to repeat it because it still completely stumps me) is money not spent with Belgian merchants, therefore the revenues of such businesses are not being taxed by the Belgian government and employment being lost for which we then need to pay social contributions.

We lose the full potential effect on our economy of 8 billion EUR as a multiplicator … all because we lacked longer term vision. We failed to create one of the key ingredients of balanced interdependence … having something to offer as well other than what one can take by brute force. And the Belgian consumers’ purchasing power is now being robbed, by brute force.

And to those who say that these large e-commerce chains only kill local business, I retort that bol.com and amazon.de are more than anything else storefronts for Dutch and German merchants. The platform is their business. Belgian merchants? Not that many. Same situation if you look at amazon.fr. Our merchants are not significantly present because no one has shown them the way. So where is our storefront?

Three words: Lack. Of. Vision.

For an idea of what long term vision looks like, just look right across the border

But what does long term vision look like? Well, let’s look at what the Dutch did. They built Maasvlakte and Maasvlakte II, which are key distribution hubs for routing shipments from all over the world, coming into Rotterdam, to all over Europe. Goods are passing through their harbours to be delivered throughout the world. Politics and business worked hand-in-hand for years to ensure this was realised. They then created the necessary conditions for entrepreneurs to build bol.com and Coolblue. These in turn led to even more jobs in their harbours and in the supply chains.

Oh, and about protecting those assets? When a Belgian partially state owned company, bpost, tried to acquire Post NL, a privatised company, the Dutch blocked it. Whatever their formal argumentation was, Post NL, while it was loss-making at the time, is an essential supply chain link in the entire e-commerce eco-system in the Netherlands and beyond. Belgians could not touch it. The Dutch took the necessary measures to protect a key asset in their value proposition and maintained their position in the interdependent structure.

Meanwhile, in Belgium, we have no e-commerce and we have no believable digital and physical infrastructure (seen the traffic jams around Antwerp lately?) that allow our merchants to find their way to e-commerce and efficiently and effectively exploit it either. The web front initiatives we do have, launched late but which at least have the merit of existing, of trying, are often quite costly for the merchant. Oh, and we are bleeding from cheaper products right across the border. If you want to know more about the damning effect on our growth, I invite you to read this eye-opening presentation by Prof. Dr. Gert Peersman of the University of Ghent.

Subsidies are not an option

So how will we rejuvenate our Belgian merchants? With subsidies? Sectoral and individual subsidies are pretty much ruled out by EU regulations, in order to create a level playing field. What we can do is limited to some token direct subsidy gestures that will not make a real difference.

And that playing field? It isn’t really level, because while we in Belgium are often very strict in our interpretation of the rules, often even adding additional requirements (the so-called “Gold Plating”), the economic development approach of the neighbours is much more assertive, yet squarely within the bounds of what is acceptable. Working together between government level there is often seen as an opportunity to do good for the target audience. In Belgium, not so much. Six state reform initiatives have created such a convoluted situation some politicians are now calling for a re-federalisation. Perhaps we should consider the costs of our convoluted state structures first and see whether with an optimisation we can free some resources to start to structurally invest in our future.

EU regulations rule out significant direct subsidies, which does make sense – if your country had been adequately prepared – but even if we could subsidise, where would we get the money? The Belgian federal and regional budgets cannot compensate for such an important yearly haemorrhage of purchasing power. Because that heamorrhage actually affects the budget as well. Less spending on the territory, less revenues to be taxed and VAT to be collected resulting in less income for the government. And besides, we just don’t have the budgetary room to subsidise even part of 8 billion EUR per year.

So what is left? Directive policies

I strongly believe in the virtuous cycle we can start if we use directive policies as a means to bring not just life support but even an entire new lease on life to our merchants.

I have written about directive policies (the carrot) and how they compare to traditional coercive policies (the stick) before, and you can find the article here. They are not perfect instruments, but in the current situation I believe they can actually provide some firewall to some of our merchants. And they will need it.