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Dutch Disease


Dutch Disease is a disorder of the economy of the nation. They are the harmful or devastating effects a nation or country may suffer. This could have resulted to various reasons. In Holland, the crisis that occurred in the economy on the discovery of the natural resource gas gave rise to this term. It is from then used to refer to the negative impacts on the economy resulting from harmful consequences. During this period that a nation suffers from The Dutch Disease, the imports are likely to increase. The exports may reduce in the country. This implies that the country is spending more than it is earning. This can be a crisis for any nation. The value of currency for the particular nation or country that suffers the Dutch Disease in its economy may be higher as a result of the increase. This to some may be viewed as a good or positive consequence or outcome. The truth is however that the consequences and effects that may follow the increase in the currency for a nation. Economists have been in the study of this disorder for a nation. The implications or consequences may be all negative on the nations. The studies of the Dutch disease and the implications for the economists till today fail to give answers to some questions.

Causes of the Dutch Disease

Resource discovery may be a major reason. These resources include minerals, gas and oil. International aid in the country may also lead to the disorder in the economy of the country who receive the aid. The boom in some industries and not others is a cause too. An example is a growth and boom in tourism as an industry.

Harmful Effects and Implications of the Dutch Disease

The harmful effects that have been associated with the Dutch Disease over the years by the economists have devastating implications and especially in the economy of any land or state. The growth potential for the local industries in the country may be less as it is inhibited. The amount that the country exports drastically reduces. This consequently leads to the growth of industries being lower. They produce less of the goods they manufacture to avoid wastage as less is required in foreign states or nations. The other consequence is that wealth distribution in the nation may become uneven at once. Sustainability of the exports for the country may not be guaranteed by the state of the Dutch Disease

 

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