Relationships between the economy and national security

Analysis and considerations for economic security policy in the Netherlands

by Lucia Retter, Erik J. Frinking, Stijn Hoorens, Alice Lynch, Fook Nederveen, William D. Phillips

Download eBook for Free

FormatFile SizeNotes
PDF file 2.4 MB

Use Adobe Acrobat Reader version 10 or higher for the best experience.

Research Questions

  1. How can national security be defined and what does the international literature suggest about its main components?
  2. What can be learned from the (academic) literature about the relation between the economy of a country and the various aspects of national security? Which factors, mechanisms and underlying causal mechanisms can be identified?
  3. What is the impact of contextual, country-specific characteristics and factors on this relationship?
  4. What do the answers to research questions 2) and 3) tell us about the factors and characteristics that have an impact on the interconnections between the Dutch economy and its national security?
  5. How does the Netherlands perform with regard to these economic factors, which trends or developments can we identify, and what do they mean for the national security of the Netherlands?

In a context of globalisation and further economic integration in recent decades, the relationship between the economy and national security has become increasingly interlinked. For the Netherlands, these connections represent both opportunities and potential threats for the country's national security. The open and interconnected nature of the Dutch economy creates vulnerabilities from potential internal and external threats. In recognition of this, economic security has emerged as an important strategic priority for the Dutch government, with the connection between economic security and broader national security subject to particular emphasis in the most recent National Security Strategy (2019). 'Threats to vital economic processes' has been cited in the Integrated International Security Strategy 2018-2022 (IISS) as one of the six most urgent national security threats.

Given these growing international interdependencies within Dutch national security, as well as recent concerns raised by planned foreign investments into Dutch strategic sectors, there is a recognised need for assessments of the potential risks to national security that may emerge as a result of such economic activities. Given the importance of certain sectors to the effective functioning of the Dutch society, there is a need for a deeper conceptual understanding of the economy-related threats that may impact Dutch society.

In this context, RAND Europe was commissioned by the Research and Documentation Centre (WODC) to examine the relationship between the economy and national security in the Netherlands, with a focus on the characteristics and performance of the Dutch economy and the consequences of this for its national security.

Key Findings

  • Definitions of national security have an important economic dimension and the economy cannot be easily separated from National Security. The relationship between the national security and economic spheres is complex and characterised by many close interconnections and feedback loops. For the purpose of this study, national security is understood through those aspects that relate to the protection of critical infrastructure, sectors and processes that are vital for the sustainable functioning of [Dutch] society.
  • The potential threats to national security from economic factors can be understood through 'risk vectors', which highlight the avenues through which the interaction between the components of 'the economy' and 'national security' takes place. A range of complex interactions of varying strengths exist between different risk vectors, their underpinning drivers and the global economic and geostrategic environment.
  • Contextual and country-specific factors will have a bearing on how the different risk vectors may manifest themselves, as well as the degree to which each vector is important for any particular critical sector. These country-specific factors include: the size of the critical sectors and the level of government ownership, privatisation and regulation; the nature of the economy and the broader integration of the state in regional and global structures; the proportion of foreign ownership of companies in critical sectors; and the presence of skills gaps or insufficient R&D and innovation in critical sectors.
  • Certain country-specific economic factors and characteristics of the Dutch economy are closely linked with the country's national security. These factors and characteristics include high reliance on international trade within critical sectors, low FDI restriction, skills gaps in digital literacy, STEM and ICT, and heavy reliance on imports of raw materials.
  • Based on the unique characteristics of the Dutch economy, a number of risk vectors are identified as presenting particularly relevant to national security in the Netherlands. These include low FDI regulation in critical infrastructure, sectors and processes, technical skills gaps, and heavy reliance on imports of raw materials to meet the energy, food and resource needs of the Dutch society and economy. These risks vectors may constitute security threats if not managed effectively.

Recommendation

  • Dutch policymakers face a number of trade-offs in terms of managing the potential national security risks resulting from economic activities. To inform the analysis of trade-offs in relation to specific economic activities, a range of questions can be considered to better understand the nature of the security risk presented by economic activity in critical sectors and processes. These questions should examine: the vulnerabilities of the sector in question and the costs to the Netherlands if the vulnerability is exploited; the nature of the threat posed; and the likely security consequences if the threat were to materialise. Applying these questions to the Netherlands' critical sectors, infrastructure and processes may allow for a more complete understanding, and subsequent management of, the nature of the risks posed by economic activities to national security.

Table of Contents

  • Chapter One

    Introduction and context

  • Chapter Two

    A historical perspective on definitions of national security

  • Chapter Three

    Interconnections between national security and the economy

  • Chapter Four

    The connections between economy and national security in the Netherlands

  • Chapter Five

    Conclusion

  • Annex A

    List of interviewees

  • Annex B

    National security: country examples

  • Annex C

    The approach to national security in the Netherlands

Research conducted by

This report was commissioned by the Research and Documentation Centre (WODC) in the Netherlands and conducted by RAND Europe.

This report is part of the RAND Corporation research report series. RAND reports present research findings and objective analysis that address the challenges facing the public and private sectors. All RAND reports undergo rigorous peer review to ensure high standards for research quality and objectivity.

Permission is given to duplicate this electronic document for personal use only, as long as it is unaltered and complete. Copies may not be duplicated for commercial purposes. Unauthorized posting of RAND PDFs to a non-RAND Web site is prohibited. RAND PDFs are protected under copyright law. For information on reprint and linking permissions, please visit the RAND Permissions page.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.