International economic relations are a complex and multifaceted system, and sometimes it is quite difficult to determine how certain factors will affect its further development. Almost always, a phenomenon that seems unambiguously positive at first glance carries some hidden threats to the economy of the country in which they occur. One such phenomenon is the Dutch disease. We will talk about what lies behind the name of this problem and how it arises in this article.
Dutch disease is an effect that arises as a result of the fact that in one or several sectors of the economy rapid development begins, which leads to a serious appreciation of the exchange rate. As a result, these seemingly favorable economic events lead to serious problems. Theoretical sources indicate that it does not matter in which sector strong growth began, but in practice it is known that the Dutch disease most often occurs when large mineral deposits are discovered. This phenomenon is also called the Groningen effect - in honor of the area in the Netherlands, where huge deposits of natural gas were discovered more than half a century ago.
Let us consider in more detail the mechanism due to which the Dutch disease harms the economy. Due to the fact that minerals (especially when it comes to fuel resources) are very expensive on the world market, the state starts exporting these resources to the world market, as a result of which a serious influx of foreign currency into the country begins. The increase in foreign exchange reserves leads to the strengthening of both the nominal and real exchange rates of the national currency. And from this moment negative effects begin to be observed:
1) due to the appreciation of its own currency, the import price for the country is reduced. Because of this, the number of imported products is increasing. At the same time, exporting any products other than the aforementioned resources no longer seems so attractive. As a result, there is a significant decrease in net exports and a skew in its structure;
2) due to the fact that the extractive sector now seems more profitable, structural changes begin in the economy - the decline in manufacturing begins. At the same time, due to the growth of incomes of the population, the service sector may continue to develop for some time, as a result of which GDP growth may remain at the same level, due to which the negative impact of the Dutch disease is masked;
3) the influx of currency becomes the cause of an external improvement in life, in particular, an increase in household incomes (the political factor already plays a role here - the government, in order to ensure popularity, is trying to increase salaries without thinking that they are not confirmed by real economic growth). Thus, the aggregate demand also rises, which can no longer be satisfied with the supply on the market. The inflation flywheel begins to unwind.
Interestingly, back in 1955, the then-economist student Rybchinsky proved that the sharp growth of some industries in the economy depresses others. Thus, the Rybchinsky theorem and the Dutch disease are inextricably linked: the first is a theoretical model, and the second is its practical implementation.
The economic history of foreign countries can and should be studied. We believe that after reading this article, few will have doubts that the Dutch disease in Russia has been observed for more than a decade and started back in Soviet times. Therefore, it is advisable to adopt the experience of the same Holland and other states in minimizing the consequences of this phenomenon, and we hope that in the future our state will return to the normal structure of the economy.
