The Myth That We're Running Out Of Resources

In response to my last blog on the fallacy of destroying the planet there have been a few misapprehensions floating around. Consequently, I feel compelled to tell you that we are not running out of resources. It's a myth, and quite a big one, as most people (apart from most geology experts and most economists) seem to believe it. For that reason I'm not surprised the above blog post turned out to be quite contentious.

The fallacy of depleting resources is usually comprised of a misunderstanding of the word 'resources' and the word 'reserves'. Usually when people tell us we're depleting the earth's resources at a precarious rate they are confusing reserves with resources.

Here's the difference. Reserves are the materials that have been planned for use in the coming decades, consistent with current mining technology at current prices. Depleting our reserves is quite normal. Resources on the other hand are of a much greater quantity - they are all the potential reserves that haven't been factored into the forecast of reserves. And those, we are not going to run out of. One of the reasons potential reserves remain as resources is because beyond a few decades we don't know how much we'll depend on them or what future our innovations will do for us in terms of our being weaned off current dependencies.

People who warn us that unless we are careful we are going to run out of resources are misunderstanding both numbers and resources, namely regarding what we've planned to use and what we actually have the potential to use. To give you an analogy. My wages give me an indication of what I have to spend each month. If I have a particularly expensive month, that doesn't mean I'm always going to be short of money, because future pay days will be forthcoming. My wages this month is my reserve, and my future potential earnings are my resources.

I did some research on this matter a few months ago, consulting the works of several experts in this field - and they all said the same. They are the source of much of what I've said above. People with a green agenda, like George Monbiot and the Green Party, tell us differently - they tell us that we are in dire straits. What do you think is more likely: that the experts have got it wrong, or that amateur, agenda-driven green people have not grasped the difference between reserves and resources? Please note, I am not aiming this point at people who are merely green-conscious - for they are often caring people without a hidden agenda or a self-serving ideological drive.

Anyway, let's suppose you're still not sure who to believe. There is, as it happens, an economic way to test who is right out of the experts vs. the greens, and that is with the world's best mechanism for measuring the supply and demand levels of resources. I'm talking about prices. Prices are the key. If there were precarious times ahead with scarcer quantities of  paper, oil, gas, manganese, copper, zinc, bauxite, tin and chromium - you wouldn't find prices continuing to drop, you'd find them increasing, particularly if demand increases. But the reason they continue to fall is twofold - in part because supplies are not scarce, but also because newer technology reduces the demand. Remember too, all supply and demand markets are transitory - we don't continue indefinitely to rely on the same resources with the same level of demand. As I pointed out in this Blog post:

Because of the limitation of the earth’s resources, supply-side initiatives in the free market engender innovation, which creates value, but also brings about a change in the way we use the earth’s resources. For example, we used to burn a lot more coal than we do now. Currently the technology for electricity, gas, and solar energy has weaned us off coal dependency, which means we use less of it. Another example is paper. We used to use a lot more paper. Currently the technology for digital interfaces (laptops, mobile phones, iPads) has weaned us off much of our paper dependency (with much more still to come), which means….. you guessed it…. we use less of it. So when we see economic growth, and increased prosperity, as well as people continually being lifted out of poverty because of it - that growth is not defined as a calibration of any single resource we consume - it is the value created consistent with how the market most efficiently allocates the ever-changing use of varying resources.

When resources do actually become genuinely scarce (remember, 'resources', not reserves), the prices rise, which provides a signal to consumers that they should use less of them, and to manufacturers that they should look to alternate technologies. Or if possible, that suppliers should find ways to produce more of the scare resources. Thankfully, as far as I know, there isn't a single known resource in the world that we are predicted to run out of - not just because we have so much in terms of potential supplies, but also because there isn't a single resource that we are going to have to depend on for longer than our capacity to wean ourselves off it.

One last thing, all this doesn't mean we have to deny that bad things are happening and that people are misusing our planet in all sorts of cruel, careless and wasteful ways. But what we must never do is what it is easiest to do - to look at incidents of bad things happening and make that the entire argument. Of course if you only focus on the bad then pretty much everything is negative. But it just won't do.

What's always needed is a proper cost-benefit analysis that factors in everything - that is, all aspects of human progression, and all aspects of human retrogression (or to the best of our ability). The moment a balanced view is attempted, things change a great deal - and I must admit, I find it bizarre, given the incredible progression-explosion that has occurred, that people find it so easy to focus so much on the costs.

Don Boudreaux has a neat illustration for this progression explosion - what he calls "The Hockey Stick of Human Prosperity"- so named because if you graphed the living standards and life expectancy of humankind over the last few millennia, they would mostly be flat until the exponential advances that occurred in the aforementioned progression-explosion in the past two hundred years.

It is vital to emphasise just how good the hockey stick illustration is in conveying two important things - not just in conveying the benefits of becoming advanced at the point in human history at which the hockey stick's heel and toe curves upwards, but in conveying just how comparably bereft human beings were for so many centuries when they were without the things we take for granted. One can see the astonishing progression-explosion not just by how much we've reaped the benefits of capitalism, industry, science and technology in the past two centuries, but by the absence of these things in every century that pre-dated the Industrial Revolution, and in all the present day countries that lack the qualities of free enterprise, and a basic political structure, stable government, rule of law, and the conditions and technological capabilities to lift them out of poverty as quickly as we'd like.

The Truth About Greed, Coercion & Exploitation

We haven't talked about greed, exploitation and coercion yet, have we?  Let's do it now.  I’ll come to greed in a moment – but, first off, the archetypal example of 'exploitation' or 'coercion' usually given is one of a rich company setting up a factory in a third world country and hiring impoverished workers to work for meagre wages, and in conditions in which virtually no Westerner would consider working. The other popular example is of a big supermarket franchise coming into town and taking customers away from local businesses. Now I'm the first to admit that (particularly in the first case) these conditions are not ideal, and that labour is being bought at a cheaper rate than I'd wish to see in an ideal world.  Nor would I deny that in a lot of cases the conditions under which such work is taking place in third world countries are of a far less good standard than we'd put up with in the developed world.  Finally, I'd also concur with the view that anything we can do to help improve the situation in any of these places is most welcome.

But despite those admissions, it is simply inaccurate to say that what's going on is 'coercion' or 'exploitation'.  To suggest anything to the contrary is to confuse 'coercion' or 'exploitation' with 'imperfect’ or ‘not ideal’ conditions. The upshot is; although it is true that workers in third world countries do long hours for little pay, and that small businesses often collapse due to larger and more competitive corporations, in most cases no one is being exploited or coerced.  When a new Tesco's store opens up in a market town, nobody forces the residents to switch grocery suppliers.  When a business hires workers in underdeveloped countries their situation is usually better than the alternative of not-working.  It may still not be as good as we'd like, but to call it exploitation or coercion is often a spurious and misjudged attack on success.

Imagine a man in Bangladesh working 65 hours per week to provide himself with just enough resources to survive.  A new clothes factory opens in his town offering him the 60 hours per week with a wage that enables him to not just survive, but live relatively comfortably.  Not only will he take the job, he will do it voluntarily, and benefit in doing so.  Typically, if the factory was started up by an indigenous young Bangladeshi businessman there would be positive vibes, but if it was brought to the town in the shape a rich American company, there would be lots of claims of exploitation.  Of course, I'd like the American company to pay the workers a better wage, but paying workers more than you have to is generally speaking not a good model for business, and the chances are that that clothes factory wouldn't exist if its shareholders had started off by trying to pay workers more they have to, because they would have been out-competed in the price market by the businesses that maximised their profits by paying workers as little as they had to.  

The truth is, in a free market economy where supply and demand are the driving forces, and monopolies scarce, the only way to exploit or coerce someone is to get them to act involuntarily by preventing them from buying the goods they desire at the most competitive prices.  In other words, coercion isn't occurring when Tesco's opens up a store in a market town and takes away business from local shops - coercion is occurring when pressure groups are preventing people from using Tesco's because they want them to pay more at local stores (again, I would prefer it if the locals paid that little bit extra to support their local businesses, but that's a different issue).

Here's a way to make it even clearer – let’s use an example of dating, which just about everyone agrees is voluntary.  Gary is the university hunk whose looks and intelligence gets him all the prettiest and most intelligent girls. Then along comes Mike, with better looks and even more intelligence than Gary.  Now all the prettiest and most intelligent girls want to date Mike instead of Gary.  Gary is put out, but he has no grounds for complaint because the girls have switched their attention Mike voluntarily.  To force them to ignore Mike and stick with Gary would be to prevent them from doing something they'd chose to do voluntarily.  There is no real difference between the dating illustration and the situation between the supermarket and the local businesses. In the shop model, Tesco's is to Mike as the local grocery stores are to Gary, and the customers are the girls who've shown their preference. 

So greed isn't always bad for the majority of beneficiaries, and coercion isn't very often seen in the places anti-capitalists claim it is?

That’s right. Even though there has been a lot of noise made about what people (usually on the left) refer to as corporate greed – it is erroneous to talk about greed as though it has the same effects as coercion or exploitation. It doesn’t. What I will say is, there's no denying that a greedy individual does a degree of harm both to his own psychology, and to his interpersonal relationships, as such people are often very self-centred, parochial and relatively disinterested in the emotional needs of others.  But the kind of aversion to greed that is peddled by academics in disgust directed at the corporate world, with accusations of multi-national companies 'exploiting' their workers and 'forcing' smaller companies out of business is, at best, only sometimes partially right, and at worst, completely spurious.  The real irony is that the arguments against corporate greed are usually made as an attack against unfettered capitalism - which is about as wrong as you can get.  Exploitation and worker coercion does occur in the world, but only usually when companies wield totalising and monopolising power.  If there's one place it happens in a much less damaging way it is in free markets where supply and demand drives the global economy.

Here's the real truth about the benefits of greed in a market economy.  Consider Greedy George - never has a man been so avaricious, and so voraciously hungry to obtain wealth.  But Greedy George can't force anyone to give him money, so he must earn it - and to earn it he must find someone willing to pay him, either for goods or services.  George's greed isn't necessarily detrimental to everyone else because if George wants lots of money he needs to produce goods or acquire skills for which others are willing to pay him big money.  To do this he must be innovative; and to be innovative in a competitive market he must come up with something valuable and beneficial to a lot of people, otherwise George won't satisfy his greed.  If he becomes one of the world's most popular comedians he'll entertain a lot of people; if he invents something that millions of consumers buy he'll sell a lot of something that people desire; but he won't force anybody to make him rich, so there's no exploitation or coercion. 

Greed can be destructive for the few – but when it engenders multinational success it has benefits for the many, because people won’t just hand over their money unless there’s something more valuable than that money in return.  Similarly, what can seem like coercion and exploitation to the untrained eye is usually nothing of the kind – it is usually consumers and workers voluntarily choosing a cheaper product and a more efficient method of obtaining it (supermarkets enable consumers to buy all their groceries in one place, as well as at a cheaper rate), or a job that even with low wages is an improvement on not having that job. 

* Photo courtesy of demotix.com