(This is an archived extract from the book Patterns of Power: Edition 2)
Most businesses can buy the goods and services they need – so the availability of supplies doesn’t constrain the amount of wealth that any one business can create, though the price of those supplies is clearly important in determining the competitiveness of that business. The operation of supply and demand (3.3.2) determines where the supplies come from and their price.
Not all supplies are purchased. Minerals can be extracted from the ground and crops can be grown on suitable land, and these products can be used as raw materials in the manufacture of other goods and services. From a national perspective, a country's GDP is directly increased by the raw materials it is able to provide for itself.
From a global perspective, the availability of raw materials puts a theoretical limit upon the total amount of wealth that can be created – though this limit is changing:
· Supplies of oil, for example, must be finite and many people foresee problems – but there is considerable elasticity of supply as less accessible resources are tapped and substitutes are found. Failing that, the laws of supply and demand will cause consumption to fall.[1]
· New sources of mineral supply are constantly being discovered, for example under the sea[2] and in the Antarctic.[3]
· New technologies enable substitute materials to be used in cases where the previous material has become too expensive.
· The use of renewable sources of energy – the sun, wind, waves and tides – will diminish the world's need to burn fossil fuels.
· Recycling is becoming more sophisticated, as it becomes economically viable to extract and reuse valuable materials that had previously been discarded.[4]
· There is still a substantial opportunity to improve the productivity of land, to grow more crops.[5]
Environmental considerations, rather than absolute shortages, are likely to place a limit on the use of raw materials in practice (3.5.7).
© PatternsofPower.org, 2014
[1] As an example of the popular perceptions of resource shortages, the website DiscoveryNews published a report entitled EARTH COULD BE 'UNRECOGNIZABLE' BY 2050 on 20 February 2011, which was downloadable in April 2014 from http://news.discovery.com/earth/earth-unrecognizable-2050-resources-110220.html.
On 21 February 2011, Professor Donald Boudreaux published a response to this report on the Cafe Hayek blog, entitled Substances, Resources, and the Future, that was available in April 2014 from http://cafehayek.com/2011/02/substances-resources-and-the-future.html.
[2] As an example of underwater resources, methane hydrate or ‘fire ice’ is potentially a huge source of natural gas – as described in an article in The Spectator on 15 June 2013, entitled Energy special: Get ready for the ‘fire ice’ revolution, which was available in April 2014 at http://www.spectator.co.uk/features/8931741/energy-special-get-ready-for-the-fire-ice-revolution/.
[3] A Global Research article, entitled Scramble For World Resources: Battle For Antarctica, was published on 16 May 2009 and was available in April 2014 at http://www.globalresearch.ca/scramble-for-world-resources-battle-for-antarctica/13639.
[4] The European Commission published an article on 27 July 2011, entitled Recovering valuable metals from industrial waste, which was available in April 2014 at http://ec.europa.eu/environment/ecoap/about-eco-innovation/good-practices/eu/735_en.htm.
[5] On 24 February 2011, The Economist published an article, entitled The 9 billion-people question, which explained how a field can produce 10 tonnes of wheat per hectare if best practice is used – but the same field only produces 1 tonne per hectare with typical African farming practices and 4 or 5 tonnes a hectare with the ‘Green Revolution’ farming practices in India and Argentina; this article was available in April 2014 at http://www.economist.com/node/18200618.