Resources as a medium of economic exchange
Resources serve as a fundamental medium of economic exchange, deeply influencing global trade and development. Natural resources, which include essential elements like water, food, energy, minerals, and biodiversity, are unevenly distributed across the globe, often concentrated in developing nations while wealthier countries consume them extensively. This disparity intensifies as industrialization in populous nations escalates demand. The interplay between resource exploitation and environmental sustainability poses significant challenges, as pollution and resource depletion can lead to economic and social consequences, particularly in poorer regions where communities rely on shared resources.
Economically, the management of these resources can reflect broader societal structures, where externalities and side effects of natural resource use often escape consideration in traditional market models. This disconnect can perpetuate environmental degradation while limiting equitable distribution of wealth and opportunities. Technological advancements have the potential to improve resource efficiency, yet they can also prolong dependency on finite resources, raising questions about long-term sustainability.
Looking forward, addressing these complex issues of resource management requires a concerted effort towards environmental justice and sustainable practices, aiming to balance economic growth with the preservation of natural capital. Through international cooperation and innovative policy-making, societies can work towards a more equitable and sustainable approach to resource use.
Subject Terms
Resources as a medium of economic exchange
The value of worldwide environmental products and services is estimated to be in the tens of trillions of dollars annually. The true value of natural resources, such as breathable air and potable water, is difficult to calculate. Determining the cost of substitutes for nonrenewable resources, if they exist, also presents problems. Further complicating the equation, resource ownership is commonly not clearly defined.
Background
Many developing nations have natural capital but few financial resources. The lifestyles of citizens of wealthy nations are resource intensive. Japan has almost no natural resources of its own. Even the resource-rich United States imports oil and platinum. There is international trade of manufactured goods, but natural capital underpins that as well. Broad categorization of capital includes water, food, energy, land, minerals, timber, fisheries, atmosphere, and biodiversity.
Total water use continues to grow. According to the World Economic Forum, from 1900 to 2024, water use rose by about 3,500 m3 throughout the world. This is nearly equivalent to adding an Olympic-sized pool, which contains 2,500 m3, every 2.79 seconds. Although water is generally not treated as an economic commodity, rivers are an economic natural resource. Countries, states, and municipalities downstream are affected by draw and pollution from upstream neighbors. In terms of food, the United States is the largest agricultural exporter. North Africa and the Middle East import the largest amounts of food. Global change is expected to exaggerate this trade imbalance.
Global resource use will continue to increase because of population growth and improving lifestyles. Where large amounts of money are exchanged (such as in the diamond trade), greed, corruption, and violence prevail. While global shortages of nonfuel minerals are not predicted for the near future, environmental and social consequences of mineral exploitation are of immediate concern.
Forests are primarily threatened by conversion of the land to subsistence farming and large-scale ranching. In the late 1980s and early 1990s, nongovernmental agency (NGO) initiated debt-for-nature swaps were temporarily successful in Latin American countries. These programs wrote off a portion of foreign debt in exchange for protection of rainforests and biodiversity. Short duration of the exchange agreements, corruption, cronyism in the governments, and monitoring and enforcement difficulties limited the success of these programs.
Pollution reduction is at the center of international atmospheric agreements. Without even discussing the costs and responsibility for pollution controls, nations disagree over parity in emission reductions. For example, one issue concerns how a developing nation’s gross national product (GNP) suffers if that nation is not allowed to develop along the path of already developed nations. Related issues entail determining the responsible parties for reducing carbon emissions. Whether a resource is renewable or nonrenewable, plentiful or scarce, widespread or localized, or privately owned or publicly held, the life cycle of a particular resource is shaped by political, economic, and environmental factors.
Politics
Resources are unevenly distributed around the globe. Many resources are located and harvested in poor, densely populated nations for use by industrialized countries. The disconnect of distance divorces growing resource scarcity and pollution from the appetite for resource consumption, leaving little incentive to develop technologies to conserve or economize use. Questions remain concerning what will happen as developing nations industrialize and increase their resource use. The economic expansion of highly populated countries, such as China, adds to the urgency for change in resource management in and between nations.
Poor countries tend to have communal property rights to resources, based on custom and traditions rather than legal deed. For example, in Africa’s Sahel, state rules destroyed communal management of the forests, bankrupting the fragile and spurring the rapidly advancing desertification of the landscape. From the individual to the national scale, little incentive exists to conserve publicly held resources. In the scramble for profit, what one person does not use, another will. Maximizing one’s resource use maximizes individual profit.
Rather than fostering wide distribution of prosperity and social progress, globalization tends to sharpen the existing contrast between rich and poor. The number of people living in poverty continues to expand. Resource cash flow in developing nations all too often ends up in the ruler’s personal coffer.
Governments have continually oversubsidized the overextraction of resources. On one hand, taxes fund environmentally harmful subsidies, while on the other hand, citizens pay increased prices for substitute services a degraded ecosystem can no longer provide. Subsidies damaging to the environment will eventually damage the economy also. Global governance of development (resource use) is inflicted on the majority by those in the privileged minority, spurring a growing global justice movement that advocates greater social regulation of market capitalization.
Economics
Externalities, side effects borne by those outside a transaction, are unidirectional rather than reciprocal, providing little incentive for changing business as usual. Subsidies for virgin material extraction are counterproductive. Epitomizing outrageous reverse logic, the cleanup costs for the Exxon Valdezoil spill were added to the US GNP.
Dumping is the term used to describe the selling of products in other countries below actual production costs. Holding environmental costs outside economic assessment virtually guarantees the perpetuation of dumping across the board, which is good neither for the environment nor for business. The practice of discounting, valuing today’s “needs” over future events, also favors exploitation.
Subsistence economies revolve around meeting the basic needs of survival. Capitalist market economies, of course, involve monetary transactions between buyers and sellers, with prices shaped by supply and demand. A centrally planned economy with government intervention may be part of the means to actually valuate natural resource capital. Traditional capitalism relies on market solutions to provide equality of opportunity. A new global capitalism would require redistributive measures to encourage equality of outcomes.
Conversely, environmental economies internalize environmental costs through initiatives such as pollution taxes and depletion quotas. Industrial ecosystems use renewable energy, share and minimize the use of natural resources, and use each other’s waste and by-products. Human society and the environment are interdependent. Promotion of environmental may hinge upon redistribution of global wealth and democratization of international politics.
Technology
Economic growth is limited. Society must face the fact that natural capital, rather than man-made capital, is the limiting resource. Usable resources are those that are accessible at affordable prices. Prices may not reflect the impending collapse of a resource base.
Dwindling natural resources provide an incentive for technological advances. Bioengineered crops alleviate a multitude of natural resource woes. While not immune to controversy, bioengineered crops can reduce soil erosion, water usage, use, and fertilizer runoff and can increase yields.
In terms of natural resources, technology has positive and negative attributes. It may allow us to prolong dependence on a particular resource by becoming increasingly input driven, thereby producing less return and more waste. Diminished accessibility doubles the cost of oil production every fifteen years. Secondary recovery methods, such as energy-intensive enhanced oil recovery, consume one of oil to extract three additional barrels. Copper of declining grade triggers deeper strip mines, increasing the stripping ratio of waste rock.
Despite technological changes, vast quantities of natural resources are still used and wasted. Policies that eliminate subsidies for outdated technologies; remove barriers to trade; provide incentives for recycling, reuse, and conservation; and adjust prices to make solutions economically competitive and feasible are necessary.
The Future
International discourse, decision making, and trade would surely benefit from a scientific approach to cost/benefit analysis. Economic downturn, coupled with resource scarcity, will increasingly feed nationalist tendencies and pit country against country. Ideally, practices of sustainability and environmental justice should guide resource brokerage.
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