Abstract!
In the article we try to review the history of Dutch disease and then more precisely examine the mechanism that would lead to the emergence of the Dutch disease and its complications. In addition to studying the Dutch disease, it is necessary to compare similar phenomena that are very close to the Dutch disease. Such as the definition of resources and the phenomenon called multi-speed economy.
We will continue to review the proposed strategies for treatment or relief of Dutch disease and successful and unsuccessful countries in the face of the Dutch disease challenge.
Because definitions and historical reviews are not enough, we will look at new literature on optimal Dutch disease and a multi-speed economy.
A section of this article is dedicated to the study of Dutch disease in Iran’s economy. According to the structure of the economy and the economic system frameworks, the proposed solutions are recommended for the Iranian economy.
An overview of history
Dutch disease today is associated with many economic and social problems. A disease that is caused by the huge discovery of natural resources, especially in the field of oil and gas, and its implications.
The root cause of the Dutch disease is the economic upheaval after the discovery of natural gas in the Netherlands in the 1950s, which resulted in a positive trade balance, a strengthening of the national currency and increased wages. For the first time the term “Dutch disease” was used by the Economist magazine for the effects of the development of oil and gas industry on the whole economy in the decade after exploration.
CIEP_paper_2013-02_FAQ_Dutch_Disease
An overview of the roots
Netherlands economy after discovering energy sources
The discovery of gas resources and the increase in its exports led to a significant increase in the budget and foreign exchange earnings for the Dutch government, which increased the value of the Dutch national currency, thereby reducing the competitive power of non-energy goods on world markets, on the other hand imports into The reason for the cheapening foreign commodities due to the strengthening of the national currency increased. On the other hand, the combination of employment in service and production sectors (non-energy) was also influenced by the transformation of exports and revenues.
From this, the exchange rate reached a new balance (strengthening of the national currency), competition in foreign markets (exports) and domestic (import goods) became more difficult. In addition, the development of its energy sector coincided with the liberalization of foreign trade with members of the European Economic Community, which would be more competitive in the energy sector.
Increasing government revenues led to wage increases in the public sector and government spending.
CIEP_paper_2013-02_FAQ_Dutch_Disease
Similar terms with Dutch disease!
Nonsense of resources
Dutch disease is a term used for the consequences of the discovery of natural resources, while the term “nonsense” refers to countries with many natural resources. The term “resources” includes many aspects, including economic, social, political and institutional.
In many countries, elite rentier behavior associated with natural wealth, such as corruption and bribery, suggests the distribution of unfair wealth among different classes. In addition, when the state enters incoming income more than the income tax, the public sector will distance itself from the demands of the taxpayer.
Inappropriate generalization of the term Dutch Disease
When economists apply precise definition, they mean certain economic and monetary aspects that are related to that term, for example, Dutch disease. But in non-academic media and non-academic publications, other aspects are related to the same term, or the terms are identical, such as the sources of illness and Dutch disease.
CIEP_paper_2013-02_FAQ_Dutch_Disease
Economy of two (multi) speed
Review of Complications
Manage structural changes
Inappropriate use of terms has led to ambiguities and misunderstandings about the phenomenon. For example, the cause and effect of problems in oil-rich countries and the Netherlands.
Indeed, countries that suffer from Dutch disease alone have no effect beyond those countries that have been able to economically and politically control the effects of natural resource exports. The northern marginal countries of the North, such as the Netherlands, Britain and Norway, and some of the oil-rich states of the United States, have suffered some degree of Dutch disease but have been relatively successful in comparison with energy-exporting countries (Saudi Arabia, Venezuela, etc.).
One aspect of Dutch disease is the decline in the diversity of goods and services produced after the exploration of natural resources. For example, in the northern margins of the North Sea, the employment rate in the user industries declined, which cited reasons such as rising wages, reduced competitiveness, and reduced import tariffs.
Government revenue management
The country experienced rapid growth in its natural resources sector in the 60s, as well as in the United Kingdom and Norway in the late 1970s and early 1980s saw the development of the energy sector. While many European countries experienced normal economic growth.
The rise in oil prices in the 73/74 and 78/79 years was for the benefit of the three countries of the Netherlands, Norway and the United Kingdom. But the distribution of wealth in these three countries was very different from each other due to differences in the political, cultural and institutional structure.
Economic diversification, economic absorption capacity, and the maturity of political and economic institutions in managing the rising oil and gas revenues are very important.
CIEP_paper_2013-02_FAQ_Dutch_Disease
Optimal Dutch Disease
There is a lot of literature about the abundance of resources that could reduce economic growth. These include the Gelb (1988) research, later approved by Karl (1997) and Auty (1999, 2001). Also, econometric studies carried out by
Sachs and Warner (1995, 1997, 2001),
Gylfason et al. (1999) and Busby et al. (2002). It also confirms this theory