How 'Dutch Disease' is Destroying Russia's Economy

Let's talk about the Ukraine War - and what it's doing to the Russian economy. We discuss the phenomenon of Dutch Disease, and why it will be so hard for Vladimir Putin to come back from it.

This video is intended for entertainment purposes, and should not be used as financial advice.

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[PaulJWarburg]

Don't forget to like and subscribe. It's one of the best (and free) ways to support the channel!

[ArkadiBolschek]

For those who are new to the concept of Dutch Disease, that's also the reason why Argentina had a golden age during the first half of the XXth century and then sunk into economic stagnation. In their case, it was meat: while world wars raged across the globe and US farming was ravaged by the Dust Bowl, Argentina basically became _the_ provider of cow meat to the whole world. This caused a lot of money to flow in, but also concentrated a lot of economic power and political influence into the hands of wealthy landowners and the meat industry, who of course used that influence to further their own interests, which stimied growth in other sectors of the economy. When the world recovered and became less dependent on Argentinian meat, the whole country went down.

[SammywiseG]

A modern example of Dutch Disease is Venezuela's oil dependency and how its economy collapsed due to mismanagement and corruption, declining oil prices, and sanctions imposed over election irregularities and political turmoil.

[briandeschene]

I saw this on a micro scale at a workplace. A small plastics plant I worked at went from making many materials for many customers to increasingly making one profitable product for one large customer. The percentage of our overall output of this one material for this one customer eventually was ~90%. Over several years. And we became very good at fulfilling it.

And then the customer stopped needing that particular material. Completely. Orders went to zero during one business quarter. Place went belly up by the end of that year.

Lesson learned: Stay diversified or learn the evolutionary lesson too many species of plants/animals experienced over time. Evolving themselves into a corner and then oblivion.

[bill]

The late Senator John McCain once said, “Russia is a gas station masquerading as a country”. Meaning. They have a very short list of products and no hard cash.

[michaelingram]

Great Summary- There is one other level of the disease, the USSR military Stockpile and arms sales.
Not only have they lost all arms sales during the war, they’re rapidly blowing through the saleable USSR assets & burning their reserve cash on internal expenditure on refurbishing old equipment. Basically pumping up the economy for next to zero return.
Finally, they have effectively demonstrated that their military technology is woefully substandard, loosing them large arms sales and international military ties & influence.
Anyway-Slava Ukraine!

[Tuckaway]

Moral of story is, don't put all your eggs in one basket.

[stevengrice]

One correction... USSR was already a collection of countries under the control of Russia. When the money failed, It could no long control these countries or pay the army to keep them under control. So they REGAINed their independence.

[vsiegel]

I think the original Dutch case of Dutch disease was based on tulips.
For a time, they were exported in large numbers and were very valuable. The Dutch are famously good in scaling up plant production on their very limited space.

[ranger]

Clearly and succinctly explained. Thank you, Paul.

[jennieparker]

Wow, this was a great politico an economic schooling for me. I don’t think I ever truly understood this until now. Not familiar with you. I just happen to come across your channel a few minutes ago. I have my select channels on YouTube every day now you will be included thank you so much, I’m in my 81st year. We never too old to learn.!

[alanwilneff]

You have the skill to explain things in every day terms. Keep up the good work.

[RASMUS]

It's sad in a way to see a country that once held so much promise tear itself apart. The Russians are great at revolutions, but they just don't know what to do once the previous dictator has been de-throned and just end up choosing a new one. They could be one of the wealthiest countries in the world if they just learned how to play the game, but at this point it's really hard to even imagine a way back from having ruined just about all trade possibilities with their previous major customers for the foreseeable future. It's well deserved, but it's still sad. Cooperation would be so much more fruitful.

[MrKbtor]

I love these talks. They are educational, grounded and don't make wild spectacular predictions. We all know who I'm talking about.

[radiojet]

Great video Paul. The Dutch Disease actually got its name from the Dutch Tulip Disaster when in the 1700s the Dutch centered their economy around tulip production. All went well until the collapse in the tulip market which sent profound ripples throughout the entire Dutch economy. They did it again with natural gas.

[teddybear]

Your video is the best, clearest explanation on Russia's economy. Thanks for your explanation, an eye opener for me!

[michaeldodridge]

Really impressive videos. You explain concepts very clearly..

[dadgarage]

Alberta, Canada frequently struggles with this problem. The oil sector is very powerful in that province.

[asmodon]

Extraction of value is easier than creating value. That also applies to the finance sector.

[reinoutburgers]

I am from Holland....I am still waiting for the collaps of our economy! Did you know we are the second largest exporter of food in the world. We manufacture many things and export services and knowledge. One of the high sellers is yes, we benefited from our gas resources in the past. Why the Dutch stopped mining gas, is because of the environmental impact and earthquakes/descending landlevels...Sorry. Paul, with this video you have undermined your own channel as being knowledgeable. Although your content is interesting, from now on I will listen to it with a grain of salt and scepticisme. Btw everything bad is called Dutch..Dutch Elm disease, going Dutch, Dutch oven, Dutch rub, Dutch Agreement, Dutch act, Dutch courage, Dutch generosity...etc, etc, this a Dutch diesease while we haven't had any melt down form our economy (besides the world wide melt downs). As a matter of fact, our economy is one of the strongest in the EU....