Timmy ElsewhereFebruary 4, 2008 Tim WorstallTimmy Elsewhere2 CommentsAt the Business. Russia and the Dutch Disease. previousKrugmanism of the DaynextAs Instapundit Said 2 thoughts on “Timmy Elsewhere” Jim Winfield February 5, 2008 at 9:12 pm Anyone interested in economics knows what is meant by “the Dutch disease”. But it didn’t seem to harm Holland for all that long, did it? During the 1980’s they had an overvalued currency and an easily financed state sector. But the overall run of business is positive – high value-added industries, world-class in special areas, a surplus in traded goods and services. Perhaps the Dutch disease is most dangerous when the easy money dominates the economy to the extent it does in Russia. Bob B February 6, 2008 at 2:10 am “But it didn’t seem to harm Holland for all that long, did it?” The adjustment process in the Netherlands to recover from the Dutch disease has not been painless. Try the review of the Netherlands economy by Bart van Ark and colleagues in Nicholas Crafts and Gianni Toniolo (eds): Economic Growth in Europe since 1945 (CUP, 1996) chp. 10. Adjustment was achieved by maintaining a national consensus constraining growth in wages: ” . . the reduction in wage growth after 1973 – even to less than 1 per cent a year during the 1980s – is quite remarkable, although it should be added that between 1990 and 1992 real wages again rose by 3 to 4 per cent a year.” [p.297] The result was that the annual increase in unit labour costs 1979-90 was kept down to 0.6 per cent, in marked contrast to what happened elsewhere in western Europe at this time. The question is how many other countries could have maintained such a ferocious but effective incomes policy by national consensus? “The polder model is the Dutch version of consensus policy in economics. . . ” http://en.wikipedia.org/wiki/Polder_Model For a recent and – presumably, authoritative – assessment of the performance of the Netherlands economy, try the recent OECD survey: http://www.oecd.org/document/18/0,3343,en_2649_201185_39991250_1_1_1_1,00.html Note in the associated OECD Policy Brief in PDF format at the supplied link: “After a long stagnation during the first half of the decade, the Dutch economy has made a successful comeback.” Leave a Reply Cancel replyYour email address will not be published. Required fields are marked *Comment Name * Email * Website Save my name, email, and website in this browser for the next time I comment.