Wednesday, September 16, 2009

Is there a vaccination for Dutch Disease?

I'm taking malaria pills weekly and I was vaccinated against typhoid and yellow fever before traveling to Nigeria. Studying Nigeria's development during our exchange program, I've learned of a new disease for which it doesn't appear a shot can be prescribed.

The Open Society Initiative of West Africa (OSIWA), one of George Soros' open society programs, published "Natural Resource Management Capacity in West Africa," in 2008. They define Dutch Disease as referring "to the phenomen, first observed in the Netherlands, where, partly because of the discovery of oil or minerals, a country's economy is de-industrialized to the extent that its local production capacity including agriculture and manufacturing becomes non-competitive. Imports increase, exports fall and there is a general shift of resources away from tradable towards non-tradables like construction. Farmers suffer most as cheap agricultural imports make their produce less competitive." Indeed, Nigeria is poorer today than it was before oil production began.  The report mentions that three types of effects occur with Dutch Disease:
1. Resource Movement, whereby the natural resource sector drains away talents, capital, public spending, etc. from other sectors of the economy
2. Spending, as (a) revenue windfalls create demands that cause inflation in other sectors and (b) tradables have fixed international prices, the country becomes non-competitive in those sectors globally
3. Exchange Rate, refers to increasing flows of foreign exchange, especially in boom times, and if the foreign exchange is sterilized, it can cause an appreciation of the local currency, damaging exports. 
The Nigerians we met with shared a few symptoms of Dutch Disease from their own perspectives:
• Nigeria imports petroleum since despite its oil wealth (the 5th largest producer worldwide, with proven reserves of approximately 30 billion barrels), it lacks the manufacturing capacity to refine its own crude oil. 

• Nigeria imports food since, despite being the world's largest producer of cassava and ample arable land, the protectionist West dumps its subsidized agricultural commodities with ease due to free-trade agreements like the African Growth and Opportunity Agreement (AGOA). 

• Nigeria aims to repair its image as being infamously corrupt. Over $400 billion has been siphoned off from the national coffers by politicians and the military. Despite introduction of the Independent Corrupt Practices Commission (ICPC) and Economic and Financial Crimes Commission (EFCC), lawlessness appears to be the rule. Dayo Olaide, of OSIWA, insisted in our meeting that the rhetoric around corruption needed to change. "Stop fighting corruption and start fighting impunity." 
It is a paradox of plenty that the largest oil producer in sub-Saharan Africa (earning over $340b in the past 40 years) still leaves 70% of its citizens living on less than a dollar per day.

Minnesota is also blessed with countless natural and human resources, ranging from the mighty Mississippi to the miles of farmland to our Fortune 500 companies. In many ways, the generations that have preceded our own set up innovative mechanisms to build our thriving community. Are we taking our prophylaxis or getting our shots these days to make sure all the good we've got is immune from being lost? Can we imagine and implement strategies for a strong and sustainable Minnesota in the decades to come?

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