Local industry here in Australia is suffering badly from Dutch Disease with dramatic rises in volumes and prices for our resource exports.
Does Austrian theory offer any strategies for dealing with Dutch Disease as an alternative to the classic Sovereign Wealth Fund solution? The capacity of a gold backed currency to maintain purchasing power led me to ponder if it may be preferable in the inverse scenario of a currency gaining in relative value.
Dutch disease is a complete non-issue. What it really refers to is the process of more productive sectors (Australian mining) bidding resources away from less productive sectors (Australian manufacturing). Creative destruction etc. This isn’t a bad thing, and the government can only harm prosperity by taxing productive sectors to subsidise less productive sectors.
Dutch Disease is a myth.
Do a search on bing for “site:mises.org devaluation” and read the first 3 articles that come up [by Shostak, Murphy and Mises].
I’d write at length, but I just wrote a reply that got erased.
The real problem you are describing has nothing to do with the resource providing businesses and everything to do with the value of the currency. Unfortunately there is no solution other than to let the local industries who export things other than raw materials exist on their own merits or cease to exist. All other solutions will not resolve the problem of competition for resources and customers, and only make matters worse as they involve aggression against innocent third parties. And yes money devaluation is aggression against people who have savings in the money unit.
For the folks in local non-resource exporting businesses, I would say that you are looking in the short term where their seems to be an overwhelming currency difference. But, in the longer term (As inventory priced in old more valuable currency is consumed) the currency disadvantage will turn into a currency advantage. Your local businesses will be able to setup foreign operations and purchase foreign production technology at bargain basement prices.
Why do you think Switzerland and Singapore have strong currencies and booming economies? Why does the USA in its race to currency value 0 have a declining one? And if you look at the USA you will find that since 1971 the central bank has done nothing but devalue the currency and total imports have gone up as has the ratio of imports to exports.