Fifteen years after the Global Financial Crisis: Recessions and Business Cycles in the History of Economic Thought

Experiencing the Resource Curse: Dutch Economists and the Discovery of Natural Gas Reserves, 1959-1977

Dekker Henk-Jan, CNRS - CIRED
Missemer Antoine, CNRS, CIRED Paris

In energy economics, the resource curse refers to negative macroeconomic and structural consequences of a natural resource boom: it tends to reduce incentives to increase productivity, does not encourage industrial diversification, and provokes currency appreciation leading to competitiveness issues in all sectors. The literature has invoked resource curse to explain why developed countries with abundant natural resources tended to experience strong deindustrialization in the 1970s and 1980s and why developing countries struggled – and still struggle – to profit from abundant natural resources. A synonym of the resource curse that we commonly find in the literature is the term Dutch disease, coined in 1977 by The Economist, to refer to the developments of the Dutch economy following the discovery of substantial natural gas reserves in 1959. Commentators controversially ascribed changes to the Dutch economy in the following decades to this resource boom. Until now, there has been little to no research on how Dutch economists reacted to this impactful discovery in the 1960s. This paper aims to fill this gap by studying key publications and archival sources from major Dutch economists such as Jan Tinbergen, Pieter de Wolff, and Roefie Hueting, or lesser known ones, many of whom worked for leading economic institutions like the Central Planning Agency (CPB) and the Statistics Agency (CBS). After depicting the economic and theoretical context of the 1950s in the Netherlands, by emphasizing the successful post-war policy of coal-based industrialization, which revolved around keeping wages lower than elsewhere in Western Europe to create competitiveness, we explore and analyze the initial reactions of economists to resource discovery in the early 1960s. At the time, competition with other abundant resources and the expectation of cheap nuclear energy led to the belief that gas reserves needed to be depleted quickly, with little thought for future generations. Debates about the competition of the struggling European coal sector in competition with cheap American coal crucially influenced energy debates as well. Finally, we examine the more advanced and lasting reactions to the gas boom after the Dutch economy exhibited symptoms that could be ascribed to the resource curse, in the early 1970s. In addition to historicizing the concept of resource curse, this inquiry sheds new light on enduring controversies about the existence and multifaceted character of the Dutch disease, still today. This paper is part of the ERC StG ETRANHET project, hosted by CNRS, CIRED. Henk-Jan Dekker | CNRS, CIRED, ERC-ETRANHET Antoine Missemer | CNRS, CIRED, ERC-ETRANHET

Area: Eshet Conference

Keywords: Energy economics; Resource Curse; Dutch Disease; natural gas; the Netherlands

Please Login in order to download this file