An increase in a country’s income is not always a good thing. It is my first time to encounter the term ‘Dutch Disease’ when I read an article in Vancouver Sun, “Canada’s resource harvesters need a lesson from Lougheed”.
Dutch disease is when the increase in revenues coming from natural resources meant stronger currency of a certain country. But when this happens, it may result in the neglect of operation in the manufacturing sector, therefore, an increase in the price of exports that will eventually affect other countries buying the goods and making it less competitive.
For me, this probably has something to do with the principle that people respond to incentives. When the government realizes that the benefits of natural resources are greater than any other sources of revenues, employees may be encouraged to shift to the natural resources sector, affecting the manufacturing industry. If natural resources were abused, the country will suffer a big crisis as these are limited resources and reviving the manufacturing sector is not as easy as how they were extinguished.
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Sources:
Cayo, Don. “Canada’s Resource Harvesters Need a Lesson from Lougheed | Vancouver Sun Blogs.” Blogs – Vancouver Sun. 23 Sept. 2011. Web. 24 Sept. 2011. <http://blogs.vancouversun.com/2011/09/23/canadas-resource-harvesters-need-a-lesson-from-lougheed/ >.
Moffatt, Mike. “What Is Dutch Disease – Your Dutch Disease Questions Answered.” Economics at About.com. Web. 24 Sept. 2011. < http://economics.about.com/od/tradeexchangerates/f/dutch_disease.htm >.