DEFENDING ECONOMIC GROWTH AGAINST LEFTWING FANATICS

Friday, April 20, 2007
If anyone doubts for a moment that Marxism is a cult* they need look no further than Ted Trainer. Full-blooded Marxism has been an utterly brutal failure that killed more than 100,000,000 people (The Black Book of Communism: Crimes, Terror, Repression, Harvard University Press,1999) yet Trainer remains so blind to historical facts that he proposes a Marxism solution to the non-problem of economic growth and natural resources. According to the learned Mr Trainer:
The fundamental cause of the big global problems threatening us now is simply over-consumption. The rate at which we in rich countries are using up resources is grossly unsustainable. It’s far beyond levels that can be kept up for long or that could be spread to all people. (The Age, )
Let me first deal with Trainer’s absurd notion that we are running out of resources. The following table clearly show that from a human perspective mineral resources are infinite. So much for Trainer’s easily refuted idea of over-consumption. (In economic theory over-production would be defined as capital consumption).
Table SMeasures of Mineral Consumption(in years)
Mineral
Known Reserves÷Annual Consumption
U.S. Geological Survey’s Estimates of “Ultimate Recoverable Resources” (= I °k of Materials in Top Kilometer of Earth’s Crust) Annual Consumption
Amount Estimated in Earth’s Crust ÷ Annual Consumption



Table SMeasures of Mineral Consumption(in years)
Mineral
Known Reserves÷Annual Consumption
U.S. Geological Survey’s Estimates of “Ultimate Recoverable Resources” (= I °k of Materials in Top Kilometer of Earth’s Crust) Annual Consumption
Amount Estimated in Earth’s Crust ÷ Annual Consumption
Copper
45
340
242,000,000
Iron
117
2,657
1,815,000,000
Phosphorus
481
1,601
870,000,000
Molybdenum
65
630
422,000,000
Lead
10
162
85,000,000
Zinc
21
618
409,000,000
Sulphur
30
6,897
NA
Uranium
50
8,455
1,855,000,000
Aluminum
23
68,066
38,500,000,000
Gold
9
102
57,000,000
Source:: Nordhaus (1974, p. 23)
However, what the above table does not reveal is that resources are basically a function of technology. Oil was a just a smelly nuisance, a liability that reduced the value of a farmer’s land. In 1886, when the Burma Oil Company of Britain first started to commercially pump oil, it bought thousands of barrels of oil from 24 families at Yenangyaung. In English it means “the creek of stinking waters”. (James Dale Davidson & Lord Rees-Mogg, Blood in the Streets, Sidgwick & Jackson Limited, 1988). Farming families in Pennsylvania experienced the same good fortune more than 25 years earlier, as did Arab sheiks at a much later date. This, and many other examples from economic history, demonstrates that genuine growth is actually a resource-generating process.
It also needs to be stressed that mineral and oil reserves are a function of prices. As prices rise so do reserves. This is why Ali Al-Naimi, Saudi Minister of Petroleum and Mineral Resources, was able to tell an international conference in April 2004 that his countries proven oil reserves have been greatly under-estimated and that the country “has 1.2 trillion barrels of estimated reserve” — four times what is usually estimated. No wonder that Peter Odell of Rotterdam’s Erasmus University was able to observe that
since 1971, over 1,500 billion barrels have been added to reserves. Over the same 35-year period, under 800 billion barrels were consumed. One can argue for a world which has been 'running into oil’ rather than 'out of it’. (The Economist, 30 April 2005).
Not only are running out of mineral resources we are also facing eventual famine because “the average per capita area of productive land available on the planet is only about 1.3 hectares”. This is called “cherry picking”. Let’s forget the “cherries” and concentrate of the sort of facts that lefties hate. In 1960 it took about 1500 million acres to produce the world’s supply of grain; today it still only takes about 1500 million acres. Without this 134 per cent increase in productivity we would now need about 3.5 billion acres for grain production.
J. H. Ausbel calculated that if world average agricultural productivity in grain rose by 5 tons per hectare (2 tons per acre) 10 billion people could enjoy an American diet on 75 per cent of the world’s current farming land. (American Scientist, March-April 1996). His calculations were not only based on passed trends but on what is currently happening. This miracle is being wrought by advances in science and technology — and not green cults or “scientific socialism”. In 1837 the American economist H. C. Carey pointed out that statistics in Eden’s History of the Poor showed that
In 1389, in securing the crop of corn from two hundred acres, there were employed 250 reapers and thatchers on one day and 200 on an other, On another day in the same year 212 were hired for one day to cut and tie up 13 acres of wheat and one acre of oats. At that time 12 bushels to an acre were considered an average crop, so that 212 persons were employed to harvest 168 bushels of grain, an operation which could be accomplished with ease in our time by half-a-dozen persons. (Edwin Cannan, The History of the Theories of Production and Distribution from 1776 to 1848, Staples Press, 1953, p. 137).
The lesson is absolutely clear: capitalism (market processes) has brought a massive and unprecedented increase in agricultural production. And by increasing agricultural output capitalism has, in a sense, created an enormous amount of additional farming land. The only people puzzled by this process are those whose narrow-mindedness leads to them think in terms of the quantity of agricultural land being fixed when in fact it, like oil or any other resource, it is a function of price and technology.
But our “radically green anarchist ” (his own description) is not going to let a little thing like facts and economics challenge his calcified ideology. This is why he makes the patently absurd assertion that we need to cut resource use by “90 per cent” and share “ the remaining energy among 9 billion people.” This Marxist cultist seems unaware of the scientific fact that there can never be an energy shortage. Energy is neither created nor destroyed. What is scarce is the capital — material means of production that can be used to turn energy into a useful work. And that is why we build power stations — or used to. He then made the idiotic claim that once we had virtually abolished our use of natural resource and slashed our consumption of energy to a suicidal level we could all enjoy a
... simpler [and] far more satisfying way of life.. [and be] able to live well on two days work for money a week, without any threat of unemployment, or insecurity in old age, in a supportive community. To the conventional mind such claims are insanely impossible.
Only a certifiable idiot could possible think that one could reduce energy use to the level of a medieval peasant and still enjoy a 21st century lifestyle. Revealing his extensive knowledge of economic history and his profound grasp of economic theory Trainer also claimed that an average rate of growth of 3 per cent from now until 2070 would mean that “total world economic output each year would be 60 times as great as it is now” then it is at present if the economic expectations of the “then the 9 billion people” are to be satisfied. Gee! How terrible! How will our grand children and great grand children manage if they are going to be 60 times richer than their grandparents?
I’ve got news for Mr Trainer and those lefty dummies at The Age, the current crop of Westerners are already thousands of times richer than their ancestors — and in getting richer they made the earth a better place to inhabit. We have already seen that the lefty argument that we are running out of resources is a bald-faced lie. When confronted with this fact lefties switch to another line of attack: we cannot continue indefinitely to produce more and more goods; we must eventually reach a point of satiation. This is the old over-production fallacy dressed in green. The classical economists put this one to rest — or so they thought. This is how John Stuart Mill dealt with it:
The argument against the possibility of general over-production is quite conclusive, so far as it applies to the doctrine that a country may accumulate capital too fast; that produce in general may, by increasing faster than the demand for it, reduce all producers to distress. This proposition, strange to say, was almost a received doctrine as lately as thirty years ago; and the merit of those who have exploded it is much greater than might be inferred from the extreme obviousness of its absurdity when it is stated in its native simplicity. It is true that if all the wants of all the inhabitants of a country were fully satisfied, no further capital could find useful employment; but, in that case, none would be accumulated. So long as there remain any persons not possessed, we do not say of subsistence, but of the most refined luxuries, and who would work to possess them, there is employment for capital; and if the commodities which these persons want are not produced and placed at their disposal, it can only be because capital does not exist, disposable for the purpose of employing, if not any other labourers, those very labourers themselves, in producing the articles for their own consumption. Nothing can be more chimerical than the fear that the accumulation of capital should produce poverty and not wealth, or that it will ever take place too fast for its own end. Nothing is more true than that it is produce which constitutes the market for produce, and that every increase of production, if distributed without miscalculation** among all kinds of produce in the proportion which private interest would dictate, creates, or rather constitutes, its own demand. (Essays on Economics and Society, Routledge & Kegan Paul, 1967).
Therefore what greens and their Marxist allies have done is to confuse economic growth with simple replication. This line of thought leads to the ridiculous conclusion that modern cars are no different from the original cars. This gross error is made by those who fail to see that growth is capital accumulation and not an accounting identity, as Lenin thought. It does not mean the simple piling up of capital goods but the building of a capital structure consisting of numerous complex stages of production. That leftists cannot grasp this fact was made evident by two Age readers.
Graham Patterson declared that “capitalism is doomed” because the “planet can’t be saved while growth drives the economy.” Mr Patterson is obviously confused. Growth does not drive the economy. It is growth that is driven, without which Mr Patterson would be leading a thoroughly primitive existence. Then Matthew Mitchell piped up with the peculiar statement that capitalism is “bizarre” because “many houses have a lawnmower, bread maker, chainsaw etc, which are used once a month, if at all”. In other words, expenditure on any good which is not fully utilised 24 hours a day is wasteful. Does this mean I have to keep my car, computers, television, phones, etc., fully employed. Mitchell has obviously made the socialist error of confusing so-called idle capacity with economic inefficiency. (Letters to the editor, 9 April 2007).
1. The striking feature of all cults is their state of permanent denial. Any evidence, historical or otherwise, that contradicts their beliefs will be either denied or ignored, if possible, or simply rationalised away. And so it is with Marxists.
2. This is part of Say’s Law of markets. So long as goods are produced “without miscalculation” (in equilibrium) large-scale unemployment and gluts and shortages cannot emerge. Keynes’ deliberate mutilation of this doctrine has poisoned the minds of thousands of economists.