Tuesday, March 29, 2011

Dutch Disease in Africa and Latin America

Nice short article here at the WSJ.

Excellent reading here at Business Spectator.


  1. Is there so much of too much of a good thing? Of course, my mother has been telling me this since I was born. Dutch disease is really just too much prosperity and rapid development within one sector. Its ironic that the phenomena is named after a largely developed country yet is typically found in undeveloped nations within Africa and South America.

  2. The second article is much more interesting. I thought it was remarkable that over half of Ghana's GDP may come from oil;assuming oil is not classified as a manufactured good. The rapid oil drilling done may have dire environmental repercussions. Nigeria is an example of how the exploitation of resources can lead to development of poverty and a host of health care issues. Disease and malnutrition in Nigeria is high due to poor sanitation systems, acid rain, and a host of environmental problems. Malaria forms in stagnant pools of water formed from lack of sanitation, clearing of land, and overall environmental degradation. Funds from depleted natural resources have been plundered and fail to reach the native people. Ghana better be careful how they use their oil.

  3. The last section of the second article highlights one of my favorite parts of Collier's book. He was talking about how natural resource wealth can turn a country to patronage if at least two components of democracy are not preset - elections, and a constitution that defines what each elected office can and cannot do. Ghana should be commended for having reached the second stage, as it would seem that a constitution is harder won than any number of elections.

    While reading this section of Bottom Billion, I couldn't help but think of the democracy building efforts in Iraq. We got news of two elections that went fairly well, all things considered, before a constitutional convention was ever mentioned (in fairness, they were electing the delegates to that convention...). The news from the convention phase of development was much more sparse, and negative. There were a number of walkouts by one faction or another during the process, and to be honest I couldn't tell you where it stands today. Perhaps since the constitution building phase didn't go as well, we lost interest - and the news coverage followed. (Ironically, it was probably replaced by coverage of our own election cycle leading up to the 2008 presidential election.)

    As Collier said, you can hold an election anywhere. It is too bad that we seem to underestimate the importance of that second step. I wonder if elections hold our attention better because we feel as if those are situations in which we each get to contribute direct input into the process, whereas constitution making is far more indirect; out of sight, out of mind... It's a bit like how I feel about micro versus macro economics. Micro holds my attention so much better just because I can relate it to things that I have actually done, and I don't think I'm alone in that feeling.