Lawyers in politics are much more confident about using economic jargon than economists in politics. New Democrat leader Thomas Mulcair’s use of the expression “Dutch disease” to dramatize what is wrong with Stephen Harper’s vision of Canada is a good example.
The term sounds fresh and is clearly a bad thing, something a sophisticated opposition leader would say. Unfortunately, it just repackages two of Canada’s oldest vices: resistance to change and fear of competing with Americans on a level playing field.
The term was coined by The Economist in the 1990s to describe the disruptive effect of the North Sea Oil boom on the manufacturing sector of the Netherlands. Simply, the rapid inflow of resource investment dollars rapidly drove up the Dutch currency and, for a while, made it much harder for Dutch manufacturers to export. The “Dutch disease” is used in Canada to brand the Canadian dollar as artificially too high; allegedly, it has floated too high because of the West’s success in exporting filthy, finite supplies of fossil fuels.
Of course, Mulcair has nothing against the Netherlands. Indeed, its economic and social success today largely undermines what he’s talking about.
The Dutch didn’t choose to sell more stuff by driving down their currency simply to work just as hard for less purchasing power. The Netherlands championed the Euro-zone and is thriving as a manufacturer and as a trader. Today, its standard of living matches Canada’s. It is an indispensable ally of the Euro and open European markets.
The Dutch model, in fact, invites Mulcair and the Canadian left to think again about the virtues of a poorer Canadian dollar. Indeed, they might even check out the potential benefits of living within a common currency area with the United States.
US manufacturing, incidentally, is growing again—despite the persistent success of Texas and its own highly profitable energy sector.