Table of Contents
- Explain the “Dutch Disease”?
- Term invented to explain a phenomenon first noted within the Netherlands following the discovery of gas within the 60’s, following which manufacturing declined and enemployment elevated (OECD 2006)
- The idea grew to become prominent among economic theorists within the 1980’s and it is now generally recognized both among economists, governments and political physiques following confirmation through empirical research (Corporation NetLibrary 2008)
- More generally, the word means “the dangerous economic effects that could arise in a few conditions from the sudden rise in a country’s wealth” (OECD 2006)
- The idea is associated with the economy and exchange rate: a boom in a single sector from the country’s economy coping with worldwide tradable goods results in a loss of other sectors as forex rates appreciate, individuals sectors making non-tradable goods expand, and also the finish outcome is less competitiveness overall (Zaqqa 2006).
- The idea assumes an easy economic model featuring a binary among two kinds of goods, the worldwide tradable and also the worldwide non-tradable (Zacca 2006).
- The ‘Dutch Disease’ following a discovery of natural sources has many other problematic effects, including poor growth, authoritarian regimes, civil war and government corruption (Corporation NetLibrary 2008).
- The phenomenon is tough to fix, and results in problems of handling the economy, for instance when the government borrows to sustain normal spending levels, this could make recession more prolonged and severe. (Corporation NetLibrary 2008)
- If your nation concentrates upon developing natural resource and doesn’t purchase other sectors, there might be “high uncertainty, chronic reduced rates of domestic investment, insufficient skills levels” (Corporation NetLibrary 2008)
- Describe a minimum of two different strands from the resource curse literature ?
- The word ‘resource curse’ was initially created by Auty (1993), to indicate a phenomena whereby countries rich in amounts of natural sources also often times have lower growth rates (Cornell 2010)
- A lot of the literature which attempts to explain the ‘resource curse’ takes either a fiscal or perhaps a political/social perspective (Di John, 2009)
- Economic perspectives explain the ‘resource curse’ when it comes to a nation’s economy, and can include different factors, as an example the volatility of commodity prices resulting in decreasing revenues, and exactly how these form relationships with ‘financial market imperfections”. They may also highlight the connection between your natural resource along with other sectors throughout the economy (Ellman 2006), or have a ‘rentier-state’ approach, suggesting that natural sources generate “rent-seeking behaviour”. The Nederlander Disease approach highlights the function of forex rates, worldwide and non-worldwide trade, and competitiveness of various sectors (Di John 2009).
- Political explanations widen the economical perspective by suggesting that government policy and institutional structures play a main role in allowing the resource curse (Di John 2009)
- Political explanations from the resource curse are varied: they are able to use, for instance “cognitive, societal or statist approaches”. Cognitive approaches hold that natural sources result in short-sighted economic policies in the government, societal approaches claim that an all natural resource boom allocates sources to social groups which aren’t dedicated to the general lengthy-term benefit of the nation, and statist approaches hold that the natural resource boom results in a less strong government and poorer policies for lengthy-term economic management (Gallagher 2008).
- Some declare that there’s less empirical support for social and political explanations (Kim 2003)
Auty, R (1993) Sustaining rise in mineral economies: the resource curse thesis. Routledge, London
Di John, J (2009) From Windfall to Curse? Oil and Industrialization in Venezuela, 1920 to the current. Penn Condition Press, USA
Cornell, S E (2010) Azerbaijan Since Independence, M.E. Sharpe, NY
Ellman, M (2006) Russia’s Oil and Gas: Bonanza Or Curse? Anthem Press, London
Gallagher, K (2008) Guide on trade and also the atmosphere, Edward Elgar Publishing, United kingdom
Kim, Y (2003) The resource curse inside a publish-communist regime: Russia in comparative perspective. Ashgate Publishing, Limited. Aldershot Hants
Corporation Internet Library (2008) Survey of Social and economic Developments within the ESCWA Region 2006-2007. Un Publications.
Organisation for Economic Co-operation and Development (2006) OECD Economic Surveys: Spain 2006, Paris, France
Zaqqa, N (2006) Economic development and export of human capital – a contradiction. the outcome of human capital migration around the economy of delivering countries a situation study of Jordan, Kassel College Press.