Dutch Disease Turns 50

Here's what happened in 1959. When Holland exported the gas it had discovered in its waters, that increased the value of its currency and made other industries less competitive. In the process thousands of jobs were lost. The term was coined by The Economist in 1977 to remind us that what was supposed to be a blessing turned out to be a curse.

Now, getting record amounts of Foreign Direct Investment (FDI) like we did starting 2006 should have had a similar effect. Our currency should have appreciated and made us all feel richer. And we could have allowed it to appreciate painlessly so that the non-greedy section of our manufacturing sector had had time to adjust.

But as you will recall, that's not exactly what happened. We had Sithanen on TV informing us that a fatwa had to be issued on our rupee in the second half of 2006 on the basis that it had not depreciated for a few years! And that was done in a year of agriflation and after the finance minister had removed subsidies on rice and flour and introduced an inequality-creating flat-tax.

And just to dissipate any remaining doubts that we might have had that this was coming straight from Kafka, a 'Person of the year' award was even attributed to Dr. Sithanen in the same year.