4. Feb, 2006

The Dutch Disease: Lessons from Norway

In the original sense of the term, the ‘Dutch disease’ refers to the fears of deindustrialization that gripped the Netherlands as a result of the appreciation of the Dutch guilder that followed the discovery of natural gas deposits within the country’s jurisdiction in the North Sea around 1960. The appreciation of the currency following the gas export boom reduced the profitability of manufacturing and service exports. Total exports from the Netherlands decreased markedly relative to Gross Domestic Product (GDP) during the 1960s. The expansion of petroleum exports in the 1960s reduced other exports disproportionately. Many feared dire consequences for Dutch manufacturing. Even so, the
problem proved short-lived. From the late 1960s onwards, exports of goods and services have increased from less than 40 per cent of GDP to 65 per cent, a high ratio by world standards. The fears of de-industrialization did not materialize, but the name stuck. It is sometimes said that, being neither Dutch nor a disease, the Dutch disease is a double misnomer. But when, as in this case, a disease bears the name of the first patient diagnosed with it, it would seem a bit harsh to require the patient to remain sick for the name to stick. The fact that the Dutch recovered fairly quickly from the disease that bears their name, while some other countries have suffered much longer and continue to do so, does not by itself call for a name change.