Dutch Disease - The Curse of Mineral Rich Countries


Extract form Michael Hudson's 'J is for Junk Economics: A Guide to Reality in an Age of Deception'

"Dutch Disease: The curse of rich natural resources, especially oil. The Economist, which coined the term in 1977, explained:

Large gas reserves had been discovered in 1959. Dutch exports soared. But...from 1970 to 1977 unemployment increased from 1.1% to 5.1%. Corporate investment was tumbling. We explained the puzzle by pointing to the high value of the guilder, then the Dutch currency. Gas exports had led to an influx of foreign currency, which increased demand for the guilder and made it stronger.

 This definition might be equally well applied to Australia during it's boom in iron ore exports. In both cases the added liquidity spilled over into a real estate bubble, discouraging industrial competitiveness by increasing the cost of living to new homebuyers."
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