Dutch disease is an interesting phenomenon in the international economy

International economic relations - a complex and multifaceted system, and sometimes it is difficult to determine how these or other factors will affect its further development. Almost always, a phenomenon that at first glance appears to be positively positive, carries in itself some hidden threats to the economy of the country in which they occur. One of these phenomena is the Dutch disease. About what lies behind the name of this problem and how it arises, we'll talk in this article.

Dutch disease is an effect that arises from the fact that one or more sectors of the economy begin to develop rapidly, which leads to a serious strengthening 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 the strong growth began, but in practice it is known that the Dutch disease most often arises in the case of the discovery of large deposits of minerals. Another phenomenon is called the Groningen effect - in honor of the area in the Netherlands, where more than half a century ago, huge deposits of natural gas were discovered.

Let's consider in more detail the mechanism, due to which the Dutch disease harms the economy. Due to the fact that minerals (especially in the case of fuel resources) are very expensive in the world market, the state starts exporting these resources to the world market, which results in a serious inflow of foreign currency into the country. The increase in foreign exchange reserves leads to the strengthening of both the nominal and the real exchange rate of the national currency. And from that moment negative effects begin to be observed:

1) due to the appreciation of its own currency, the import price for the country decreases. Because of this, the quantity of imported products is increasing. At the same time, exporting any products, other than the above resources, does not seem so attractive. As a result, there is a significant reduction in net exports and a bias in its structure;

2) due to the fact that the extractive sector now seems more profitable, structural changes in the economy begin - a decline in the manufacturing industry begins . At the same time, as the incomes of the population grow , the services sector may continue to develop for some time, as a result of which GDP growth may remain at the same level, so that the negative impact of Dutch disease is masked;

3) the inflow of currency causes external improvement of life, in particular, the increase in the incomes of the population (here the political factor already plays a role - the government, in order to ensure its popularity, tries to raise wages, not thinking that they are not confirmed by real growth of the economy). Thus, aggregate demand also increases, which can no longer be satisfied with the supply on the market. The flywheel of inflation starts to be untwisted.

It is interesting that back in 1955, then, the student-economist Rybchinsky proved that the sharp growth of some industries in the economy is oppressed by others. Thus, the Rybczynski theorem and the Dutch disease are inextricably linked: the first is a theoretical model, and the second is its practical embodiment.

The economic history of foreign countries can and should be studied. We believe that after reading this article, few people will doubt that the Dutch disease in Russia has been observed not for the first decade and has begun since the 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.