Dutch Diesease - The Silent Killer?
Dutch Disease
The Silent Killer?
DUTCH DIS-EASE [noun]: A condition that occurs when a large inflow of foreign currency related to a sharp surge in natural resource prices has negative repercussions on important segments of a country’s economy. This is the economic phenomenon that has seen countries hit on sudden wealth because of oil or gas or some other commodity, but the wealth does not benefit the entire country. It actually ruins the manufacturing sector because it drives up the country’s exchange rate making it extremely difficult to export goods. A country awash in riches suddenly finds itself poor. Is Canada the next victim of this economic catastrophe?
Dutch Disease has existed as long as time itself, however it only received its name about 40-50 years ago. In the 1960s, natural gas was discovered in the Dutch North Sea. The exploitation of these large deposits of natural gas greatly increased the country’s wealth driven by incoming petroleum investments, and outgoing gas exports. This unexpectedly had some serious repercussions on keys sectors of the economy later on in the 1970s. As the guilder took off, non-oil exports became less competitive and unemployment soared. Jim Stanford, an economist with the Canadian Auto Workers said “the Dutch economy was arguably worse off after the gas was discovered then before” (Globe and Mail, July 18th, 2005). The Netherlands has since recovered. The money from the gas boom was pumped into social services during the 80s and the manufacturing sector is back on track. The magazine The Economist coined the term Dutch Disease in its November 28th, 1977 issue.
Many other countries have experienced this debilitating condition. One of the earliest examples in history is Spain. In the 1500s, when Spanish explorers discovered large quantities of silver in America, the entire economy became focused on finding more silver. As a result, traditional products crucial...
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