Comment by hagbard_c
17 hours ago
You're missing what happened in the Netherlands when the gas reserves were found. The social-democratic government headed by Joop den Uyl - who thought the reserves should be extracted and sold within 30 years - used the proceeds to increase social benefits while lowering the acceptance rules to get government benefits. This had a large pull effect which ended up with more than 10% of the labour force getting benefits under the 'WAO' (an acronym for 'Wet op de ArbeidsOngeschiktheidsverzekering' or 'law governing insurance for those not fit for employment'). This way of spending temporarily available resources on expanding the welfare state got a name: The Dutch Disease. It was an example for Norway on how not to squander income from the oil reserves and a deciding factor in creating the oil fund.
>...This way of spending temporarily available resources on expanding the welfare state got a name: The Dutch Disease.
The term "Dutch Disease" is a bit more general than that:
>...The term was coined in 1977 by The Economist to describe the decline of the manufacturing sector in the Netherlands after the discovery of the large Groningen gas field in 1959.[1][2]
>The presumed mechanism is that while revenues increase in a growing sector (or inflows of foreign aid), the given economy's currency becomes stronger ("appreciates") compared to foreign currencies (manifested in the exchange rate). This results in the country's other exports becoming more expensive for other countries to buy, while imports become cheaper, rendering those sectors less competitive.
Ideally a temporary windfall should be used to invest in the future. Taking a temporary windfall and spending it on basically buying votes should have a name, but that isn't generally what the term Dutch Disease refers too.
https://en.wikipedia.org/wiki/Dutch_disease