Dutch disease: As an industry causes to the national economic crisis

Dutch disease gets its name from an economic phenomenon seen in Holland. The discovery of natural gas reserves in the Netherlands in 1960 led to a decline in other sectors such as manufacturing. Dutch disease is the recession affecting other areas where it dominates an area, or increases its exports.

The causes of the Dutch disease:
The main cause of Dutch disease was the discovery of natural gas in the Netherlands. Dutch disease usually leads to a country's currency appreciation in value. Since the value of the currency increases, the manufacturing sector is not more competitive, leading to a collapse of the manufacturing sector. This results in manufacturing jobs moving to other countries.

Results of the Dutch disease:
The Dutch disease causes an increase in imports and lower exports, since the high value of the currency makes manufacturing and other vital sectors. The high cost of production makes them less competitive goods from the goods produced by other countries.

Dutch disease: Economic Model
The economic model to explain the Dutch disease has been developed by W Max Corden and Peter Neary in 1980. According to them, the parties involved do not include the tradable goods sector and the traded good. The traded goods sector, an industry is a booming business, while the other is performance. The burgeoning field of commercial goods can be natural gas, while the under-performance can include manufacturing, agriculture, etc.

The booming sector will attract more work, leaving the non-booming "blocked". In the case of Dutch disease, this may not be cause for concern, because the natural gas sector is not labor intensive, so do not spend too much of the workforce in the country.

However, increasing the value of the currency means that the non-booming sector of trade is no longer attractive to the workforce. Instead, people turn to non-trade sector, such as services. Through an increase in demand for nontraded goods, the price increases for non-commercial sector. This leads to a steep rise in the real exchange rate.

Dutch Disease: examples from history
Prior to Holland in 1960, the Dutch disease had affected many economies around the world, even if it was not recognized as such at the time. In the 16 th century, the gold brought by the Spanish conquerors from South America to Spain brought the first known case of Dutch disease. The gold rush in Australia in the mid-nineteenth century is another example of Dutch disease. Even Great Britain has captured the Dutch disease in 1970 due to the discovery of gas fields in the North Sea.

Although some critics think that the effects of Dutch disease on the economy have been exaggerated, it is still a good option to be prepared for any eventuality. This is especially true if you run a small business, because your life does not depend on the tradable goods sector. A boom in one sector could lead to a collapse in another, so you better be prepared .......