Dutch Disease

On January 16, the Macdonald-Laurier Institute published a study by former Statistics Canada analyst Philip Cross, entitled “Dutch Disease, Canadian Cure.” It argues that “after 10 years of a muscular dollar, Canadian manufacturers have adapted well to a strong currency – demonstrating that Dutch Disease is economic myth rather than reality.”

Bank of Canada Governor Mark Carney recently delivered a widely-publicized major speech in Calgary on the economic phenomenon known as the “Dutch Disease.” This was more nuanced than much of the media coverage.

Governor Carney argued that the booming energy and wider resource sector concentrated in Western Canada has provided a significant boost to the national economy, creating jobs in the rest of the country in both manufacturing and services. Overall, he said, high resource prices have been a plus for Canada.

However, the Governor recognized that rising resource prices...