Politics, pandemics, and support: the role of political actors in Dutch state aid during COVID-19

Abstract

Abstract How do governments distribute resources across economic sectors during a crisis? And why do some sectors receive more than others? The recent COVID-19 pandemic has highlighted the urgency of these questions. In this paper, we explore the extent to which a political economy perspective can help explain the characteristics of sector-specific state aid in the Netherlands, a traditionally corporatist country. While KLM, the biggest player in the Dutch aviation sector, was promised loans worth €3.4 billion, the horeca (hospitality) sector was denied a similar deal. Limited cross-case analysis eliminates purely economic accounts. We employed process-tracing and analyzed hundreds of national media articles to understand the influence of elected leaders, interest groups, and experts. We find that, against the backdrop of economic concerns, vote-seeking behavior by elected leaders as well as the strength and organization of interest groups influenced how much each sector could expect. Meanwhile, policy-seeking behavior helps explain the form that aid took. Our findings highlight the need to consider fiscal support in political economy terms, even during crises, and to explore the composition of state aid, not just its presence or amount.