&#91FOUNTAIN&#93The Dutch disease

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[FOUNTAIN]The Dutch disease

The word “Dutch disease” is used to describe the Netherlands’ experience in the 1960s. At that time the country thought it would prosper after a huge natural gas field was discovered.
But the gas field could not boost the nation’s economy. On the contrary, the Netherlands suffered an economic slowdown. Since then, the term “Dutch disease” has been used to warn that a boom in a particular economic sector, regardless of the geographic area or kind of resource, could produce the illusion that the whole economy could boom.
So, having a precious natural resource which is in the spotlight with industrial development: Is that a curse or a blessing to a nation’s economy? Many economists would say that it could turn out to be a curse. An analytic report recently published by the Open Society Institute, run by the Soros foundations network, claimed that economic growth is more influenced by factors other than natural resources. The report said that poor countries lacking in natural resources doubled or tripled in economic size between the 1960s and the 1990s.
When the Organization of Petroleum Exporting Countries started raising oil prices in the 1970s, it expected that countries in the Middle East would join the group of advanced countries or get closer, thanks to revenue from selling oil. But those countries still remain the same as before. The constant rise in oil prices didn’t alter the corruption-ridden politics, underdeveloped economic systems and human rights problems. By contrast, South Korea and Singapore, which have few natural resources, have grown almost to advanced-country status.
But Chile and Norway showed the advantage of natural resources. Norway raised a “stabilization fund” from its oil revenues and invested the money in the nation’s infrastructure and education.
A representative developing country, Chile, took a similar step by putting revenues from copper into economic reform. So perhaps the best answer to the question is that what matters is not a wealth or poverty of natural resources but the people.
In terms of a world view or international relations, the Dutch disease can still be found. Competitive geopolitical conditions do not guarantee national security.
Rather, unreasonable reliance on specific nations, regions and ideologies and complacency could result in another Dutch disease.


by Kim Seok-hwan

The writer is an editorial writer of the JoongAng Ilbo.

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