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In the late sixties, after the discovery of natural gas deposits in the North Sea, the Dutch economy changed dramatically for a relatively short period. In 1964 the country had almost exported gas; A decade later it exported the equivalent of 74 million tonnes of oil.
The export of gas increased the value of the guilder and taxes on the windfall enabled the Dutch to increase social expenses, such as research By Michael Ellman of the University of Amsterdam in the late 1970s. These pressed manufacturers outside the oil sector at both ends. The costs went home and the exchange rates made it harder to export.
In the Netherlands, an obvious advantage – a sudden tree in natural gas exports – changed a disadvantage: a hit for domestic production. By 1975 the output of the clothing industry in the Netherlands had fallen by 15 percent. For shoes it fell more than 50 percent.
We now call this phenomenon “Dutch diseases”. It has become a useful way to analyze countries that export raw materials, because it offers an explanation why they have a hard time turning export richness into diversified, productive economies at home.
Many now regard Dutch diseases as a phenomenon for developing a world, because developed economies are usually diverse and productive, with strong production sectors with added value. However, if we have been taking the US for the past 25 years, it is possible to consider the current account shortage in the current account as the strongest and most sustainable exports.
Until this year, people around the world have consistently desirable in dollar-mixed assets that Americans create when they borrow. And Americans are more than happy to give people around the world what they wanted.
Americans argue with each other, opportunistic, about debt levels. Democrats are usually better at finding ways to pay for their programs. But in general, if we don’t pay attention to what Americans say, but what they do, then the US is a country that has discovered debts as a natural resource around 2000 and has since exports.
The US has Dutch disease. The export is the dollar. The only thing needed to see that this is to stop the treatment of America as if it were magic and is not subject to the same forces as any other country.
The dollar lost roughly 8 percent Of its value in the past six months, which the old discussion has renewed about the fact that holding the reserve currency of the world is an exorbitant privilege or an exorbitant burden. The simplest answer is: it was of course a privilege for the US to issue $ 36 TN debts. However, part of the literature about Dutch diseases can help us understand how a privilege becomes a burden.
In the 1990s, development economists started documenting that countries with strong exports of raw materials had lower growth. In 1999, Aaron Tornell, now at UCLA, and Philip Lane, now Chief Economist of the European Central Bank, offered a theoretical framework To explain what had happened. The export of the raw materials changed the budgeting process, they argued. After a windfall, powerful groups will fight to get new expenses.
If the country has strong institutions and social solidarity, this grip will fail. With weak institutions it will succeed: instead of going to things that increase productivity, such as roads and schools, new editions go to powerful groups, as unproductive gifts.
Tornell and Lane called this the “Voriness effect”. They have applied it to data from Nigeria, Venezuela and Mexico, but if we accept that the US is not a magic, we can also easily ask these questions about it. How vorarively are the powerful groups? How strong are his institutions? The answers in order are: free, and not as strong as we thought.
The glory effect helps to explain the goobsmacking daring of the so -called “Big Beautiful” account of Donald Trump, with a cost of $ 3.4 tn over 10 years and the benefits that go overwhelming to the rich. In the past, Republicans have tried to present tax cuts for the rich as a policy to release productive investments. They have even tried to model this idea as a process called “dynamic scoring”.
But even the dynamic costs of the BBB looked embarrassing. The party shrugged; The rich were voriously. The dominant logic of the bill, to his name, comes: we do this because we can. At least that is fair. The US can borrow and the most powerful groups will take what they can do.
American institutions were never at this challenge, and they will not be until the US suddenly confronts a theoretical framework that it has not had to think about since at least 2000. Let’s call it the “scarcity effect”.
