The economic conditions created in a country
when its natural
resources (especially energy
) start to be exploit
ed and export
ed. This leads to a sudden and sustained appreciation of the country's currency
as importers rush in to trade
This is great if you want to buy a foreign car or travel abroad, but if you are a manufacturer your products will have to compete with cheaper foreign products (both domestically and in foreign export markets). Manufacturers move offshore or go out of business, leading to deindustrialisation, unemployment, economic disparity and a slowdown in economic growth. A mineral boom thus becomes a double edged sword with social problems emerging, particuarly since the mining industry tends to have fewer workers and shareholders than export orientated industries.
The term originates from when the Netherlands began exporting oil in copious amounts in the 1960s. By the mid 1970s, gross corporate investment had fallen by 15% since the start of the decade, while employment in the manufacturing sector fell by 16%. Unemployment dramatically rose from a modest 1.1% to 5.1%.
More recently it has been seen in Russia where its oil revenues has boosted the value of the Ruble at the expense of what remained of Russia's manufacturing sector. Some researchers have applied this dynamic with other sudden infusions of hard currency in a country, such as remittances from foreign workers back to a developing country.