Nationalism and Raw Materials

by EDWARD S. MASON

A FAIR should appraisal occupy of our a middle raw materials ground prospect between lamentations of the “plundered planet” variety and the Pollyanna optimism of “there’s plenty more where this here came from" school. Our planet has too often been plundered, but a wise use of our remaining resources will still make it possible to meet our raw materials requirements for the indefinite future. There usually is more, but frequently not where “this” came from or without the difficulty of devising new methods of discovery and development.

The over-all resource problem confronting this and every other country is: How are requirements — that is, the benefits from raw materials consumption— to be satisfied at minimum cost? And this over-all problem in turn breaks down into two subproblems: How are the raw materials requirements necessary for economic growth to be met? And how are the special raw materials requirements of wartime to be fulfilled if we are so unfortunate as to find ourselves again at war;

Economic growth

The report of the President’s Materials Policy Commission presents some startling figures on the raw materials requirements of economic growth. The over-all consumption of materials in the United States in 1950 was approximately five times the consumption in 1900. If this rate of growth is projected forward, consumption in the year 2000 would be twenty-five times that of 1000; and consumption in 2050, a century hence, would be 125 times as much as we consumed a hall century ago.

There are, fortunately, some reasons for believing that, even if economic growth continues at the 3 per cent per annum rate we have experienced for the last century, raw materials requirements will increase at a less rapid rate. Nevertheless, the future needs for raw materials will be stupendous. It is a sobering thought that the world’s consumption of minerals in the period between the wars probably exceeded the previous total consumption of mankind throughout recorded history.

Economic growth, which means simply an increase in output, is made up of two components: population increase and increase in per capita output. It has been calculated that if the population of the United States should continue to increase at the same rate as it did in the half century 18001850, there would be by the middle of the twentyfourth century but four square yards per person for the unfortunate future American citizenry. Since population density in this country is relatively low, it is easy to see that, the world over, spatial considerations if nothing else must, at some not very distant date, set limits to population growth.

It is conceivable that, with the development of atomic and solar energy, the extradion of foodstuffs and minerals from sea water, and other Buck Rogers possibilities that are likely to become probabilities, the per capita growth requirements of a relatively stable population might be satisfied for a very long period of time. In any case, speculation on situations as remote in time as these have no relevance for what needs to be done here and now.

Our domestic resources base

In here and now we face a situation in which continued economic growth means an over-all materials requirement for 1975 some 50 to 60 per cent larger than at present. Particular materials such as aluminum, titanium, and magnesium will, of course, show growth rates much larger than this. On the other hand, the consumption of tin may remain stable or actually decline.

To some people the fact that we have met our materials requirements at continually declining unit costs indicates that we will continue to meet these requirements indefinitely at declining unit costs. If the figures on economic growth mean anything, however, it is that the situation we confront tomorrow will differ materially from the situation we confronted yesterday. There are, moreover, certain facts suggesting that our resources base — what we have in relation to what we need — has been subject, over the last two decades, to substantial erosion. One of these facts is that this country, which before World War II was a large net exporter of materials, has become a substantial net importer. A second factor is that for U.S. minerals production, including oil, the unit cost of discovery and development is increasing rather than decreasing. A third fact is that for a number of important domestically produced minerals no really large discovery of ore bodies has been reported for a long time.

The change in the U.S. position from net exporter to net importer, highlighted in the Materials Report, has received extensive comment from the press. And inevitably a lot of this comment has been highly exaggerated and misleading. The United States is pictured as a former “have” country now unfortunately become one of the “have nots.” In Britain, Aneurin Bevan, no friend of the United States, envisages us as having exhausted our own resources and reaching out to exhaust the resources of the rest of the world.

Nothing could be more misleading. We shall, it is true, it conditions are favorable, become a net importer of materials on an even larger scale than at present. By 1975, if the projections of the President’s Commission are at all realistic, we shall be importing some 20 per cent of our total raw materials. But this dependence on foreign sources of supply could be largely, if not entirely, eliminated if it seemed desirable to do so. It is not in the interest of the United States, however, or of countries which export raw materials, that this normal increase in imports be arrested.

In general there are two ways of meeting the increasing demands for the materials required by a fixed geographical base. The one involves a cultivation of sources of supply outside this area. The other involves the development of new and improved techniques of discovery, extraction, cultivation, and use of materials within the area. Foreign trade and technology are the keys that will fit this lock. The implications of both for the raw materials situation confronting the United States need examination.

Nationalism on the march

Taking the free world as a whole, continued growth in the incomes of constituent countries requires a balanced expansion of primary and secondary production; of raw materials and of manufactures. The kind of expansion achieved during the nineteenth and early part of the twentieth century involved a heavy geographical specialization. Certain countries became very large net exporters of manufactured products, others of raw materials. Frequently the raw materials specialists concentrated heavily on one or a few materials subject to all the fluctuations that beset internationally traded commodities. Banana republics and tin dictatorships were likely, in consequence, to be as unstable as the prices of the commodities they exported.

Almost continuously, furthermore, from 1875 to 1940 the terms of international trade moved against raw materials exporting countries. It required an increasing volume of their exports to pay for a given volume of imports. The Western European colonial powers added the weight of governmental proscription and discouragement to the economic forces handicapping industrial expansion in raw materials producing areas. No wonder resource countries have revolted.

Those days, it need scarcely be said, are gone forever. Colonial Asia barely exists. The rule of colonialism in Africa has been heavily reoriented towards the interests of the governed. The so-called economic colonialism of Latin America is rapidly becoming a thing of the past. Nationalism is on the march throughout the raw materials producing areas of the free world. The paramount economic slogan of these new nations (and most of the old ones) is “economic development,” and economic development is almost everywhere interpreted to mean industrialization.

What is all-out industrialization likely to do to the balance in the free world of primary and secondary production, and to the interests of those areas — notably Western Europe, the United States, and Japan — that are, or are rapidly becoming, heavy net importers of raw materials? The consequences — let us make no mistake about it—could be very serious. If the densely populated industrial countries heavily dependent on exports of manufactures to produce needed foodstuffs and raw materials are forced to depend much more extensively on the cultivation of their own limited natural resources, the result may be not only a decline in standards of living but fairly large-scale, and perhaps forced, migration.

Is industrialization the answer?

The industrial countries of the world are vulnerable to this threat in varying degree. The United States, for reasons suggested above, is relatively invulnerable. We are still net exporters of foodstuffs and could enlarge our food production greatly with little increase in the agricultural labor force. Although exclusive dependence on domestic minerals production would inevitably increase costs, this increase for our most important imported minerals would be relatively slight. Other industrial countries, however, are in a different, position. Difficulties in obtaining foodstuffs and raw materials tend to make the resumption of so-called East-West trade with Russia and her satellites even now extremely attractive to Western Europe and Japan. Further impediments to the expansion of output of raw materials in resource countries could present Western Europe and Japan with a nearly insoluble problem.

Although the industrialization of raw materials exporting countries could create a serious problem for manufacturing countries, it need not. And if the interests of resource countries are clearly perceived, it will not. The United States, up to the most recent decade of its history, stands as an example of a highly industrialized country that yet remained a net exporter of raw materials. For nearly half a century our country was simultaneously the world’s largest producer of manufactured products and the largest net exporter of raw materials. Even now the United States is a net exporter of foodstuffs though less than 20 per cent of the labor force is employed in agriculture.

The way to a simultaneous industrialization and expansion of raw materials exports lies, of course, in improvements in technology. In many of the resource countries, close to 80 per cent of the labor force is engaged in a mere feeding of the population. Unless and until methods are found of raising per capita productivity in agriculture, manpower cannot, be found for employment in industry no matter what industrialization policies are followed. Frequently the appeal of industrialization to underdeveloped areas lies in a comparison of industrial output per man using Western methods with agricultural output per man using local methods. A comparison, however, of local agricultural output per capita with Western agricultural output per capita yields the same discrepancy. It is not only industrial techniques that need to be introduced, but also agricultural techniques— both modified, of course, to suit local conditions. If both can be accomplished, it will be found that expansion of manufactured output is by no means necessarily incompatible with expansion of raw materials exports.

A balanced expansion.

An expansion of minerals exports, in particular, is not only compatible with industrialization but frequently a necessary step prior to industrialization. Foreign capital is available for minerals expansion, which means that local capital can be reserved for other uses. Minerals development requires the construction of auxiliary facilities such as port installations, roads and railways, and power plants. These facilities can and usually do contribute to general development. Minerals production involves only a small diversion of labor away from other uses. The foreign exchange yielded by minerals exports can be utilized to purchase abroad equipment needed for industrialization. The prime illustration of this process is Venezuela, whose minerals exports yield 97 per cent of her foreign exchange receipts, furnish 60 percent of government revenues, provide important auxiliary facilities, and yet divert less than 5 per cent of the country’s labor force away from other employment.

A proper balance between raw materials and industrial expansion is of vital importance to resource countries. It is also of paramount importance to economic growth in the whole of the free world. What is needed is an encouragement, to foreign private capital to do what foreign capital and enterprise can do best: technical and capital assistance to both agriculture and industry in resource countries; a freeing of barriers to trade; a handling of the security problem that embraces opportunities rather than merely imposes restraints. A whole set of complex but not insoluble problems is necessarily involved in the achievement of a satisfactory balance.

The foreign raw materials policy of the United States thus embraces more than ways and means of satisfying our raw materials requirements at minimum cost. Success of our security policies, both in Western Europe and in Japan, is closely related to the way their raw materials problems are solved. The United States could certainly survive a less of foreign sources of raw materials supply. Whether the system of relations among countries we regard as necessary to our security could survive is a different matter.

Technology and natural resources

One way, then, of meeting the problem of a dwindling resources base is to turn to outside sources of supply. The other possibility is to find new ways and means of using what we have. If low-grade ores hitherto unexploited can, through scientific and technological advance, become commercial: if uses can be found for minerals hitherto unused; if plentiful materials can be substituted for scarce; if scrap can be reclaimed; if land in inferior use can be transferred to superior use; if water resources hitherto unusable now become useful, we will have succeeded in expanding our resources base. This is largely a task for science and technology.

Scientific and technological advances in the discovery and use of natural resources have, of course, been operating in this direction for a long, long time. It is an interesting question, however, why one nation occupying an area with certain resource potentialities will effectively develop and enlarge the flow of resource services while another nation, occupying an area with similar potentialities, will not. It is not simply because one country has brains that the other lacks. The primary explanation has to do with differences in social structure, in political and economic institutions, in public policies and the relations of government to business that succeed, or do not succeed, in channeling the talents of the population into a successful conquest of nature.

These differences can influence both the rate of scientific and technological innovation and the speed at which innovations are put to use. The expansion of yields on the corn lands of the United States was the product, not only of the development of hybrid strains, but of the rapidity with which these new developments were applied on millions of farms. Expansion of our domestic resources base through scientific and technological development involves both innovation and dissemination.

Our free enterprise system, with its millions of decision-making units motivated by desire for profit and fear of loss, is an admirable mechanism both for stimulating innovation and for adopting innovations once their utility has been demonstrated. This mechanism is dependent mainly on the schools and universities for a continuing flow of trained scientists and engineers. Scientific and technological discovery is the result not only of work in industrial laboratories, but of governmental and university research. The dissemination of new techniques can be, and is, assisted either by positive governmental programs such as the agricultural extension service or by the provision, through appropriate government action, of an environment favorable to the operation of private enterprise. Given sensible arrangements and policies, the native talents of our people and the drives provided by an enterprise system can be relied on to get the job done. Sensible arrangements and policies involve questions that primarily concern the relation of government and business. To a lesser extent they also concern the relations of both government and business to the nation’s schools and universities.

Government vs. private enterprise

American scientific research is neglecting pure science in favor of its applications. The current flow of engineers from our universities is pitifully inadequate for the engineering tasks that lie ahead; and of this inadequate flow of scientists and engineers, a still more inadequate percentage is going into the earth sciences and the metallurgical pursuits on which the effective use of natural resources essentially depends. A reorientation of research and training programs is therefore badly needed. It is, moreover, a task that cannot be shouldered exclusively by the universities; it is mainly up to government and business to provide the financing of scholarships and research — above all, of pure research — without which the universities are powerless to perform their function.

When we turn from the training of manpower and the area of pure research, which basically belong to the universities, to technological applications, the burden falls primarily, though not exclusively, on private enterprise. Not exclusively because in certain areas, such as agriculture, the size of the business unit is too small to permit effective research into new methods of land use, plant and animal breeding, and the like. Government research also has a role to play in areas in which the national interest requires search for new sources of materials supply long before commercial motivations begin to operate. Government experimentation in synthetic fuels, low-grade iron ores, the recovery of manganese from slag, may be cited as examples. Finally, the tremendous expansion of government buying, particularly for military needs, has opened up a fruitful field of government materials research. Very large opportunities for materials savings through the substitution of plentiful for scarce resources lie relatively unexplored. When all this is said, it still remains true that the principal responsibility for scientific and technical applications relative to the expansion of our resources base lies in private hands and should remain there if our enterprise system is to function effectively.

In spreading the use of scientific and technological innovations it is clear that, government has a minor, though important, role to play, as exemplified by the agricultural extension service, and a major role to play in channeling effectively the drives and motivations of private enterprise. It is of little use to devise new methods of mineral exploration — the airborne magnetometer, for example— requiring exploration rights over large areas, if public lands are in fact only open to prospectors in plots whose size is adapted to pickand-shovel operators. A change in public policy concerning mineral exploration on public lands is essential to the dissemination of technological improvements.

Improved forestry practice designed to provide a continuous cropping of forest lands has been widely disseminated in the United States on public holdings and on private holdings of a size sufficient to make these methods pay. Two thirds of the forest land of the United States, however, is in small wood lots where desirable practice is not easy to achieve. Public policies assisting the combinative or coöperative management of wood lots can make an important contribution to the spread of sound forestry methods.

The President’s Commission reports the principal tasks of technology in the materials field to be: “to foster new techniques of discovery”; “to bring into the stream of use, materials which so far evade our efforts"; “to apply the principle of recycling (re-using) more and more broadly”; “to learn how to deal with low concentration of useful materials"; “to lessen or eliminate the need for a scarce material by substituting one that, exists in greater abundance”; “to develop and use more economically the resources that are renewable in nature.” Some of these tasks require a devising of new techniques; others will be accomplished through the spread of known techniques to operations that are currently substandard.

National security

In the unhappy event of war, we are likely to be cut off from certain traditional sources of supply. It does not follow from these facts, as commonly supposed, either that, in handling the materials requirements of war, consideration of cost and economy are “out the window’,” or that, since foreign sources of supply may be vulnerable, we must rely so far as possible on domestic production.

Certain materials should be stockpiled in adequate quantities when opportunity permits. For other materials the best procedure may be to set aside domestic reserves to be exploited only in the event of war. In some cases it will be necessary to create stand-by facilities. The military requirements for other materials may best be handled by encouraging peacetime expansion of output in safe — but not necessarily domestic — areas. To a considerable extent these possible lines of action offer alternatives. The guiding principle of public policy must then be, as it is in the meeting of materials requirements for peacetime economic growth, to provide adequate availability at minimum cost. If materials preparations for the eventuality of war are properly handled, we shall not only have provided ourselves from lowest-cost sources but shall have eliminated the necessity of a large-scale diversion into raw materials production in wartime of resources better employed at or immediately behind the battle front.

The security argument is nevertheless frequently and heavily used to justify the protected expansion of domestic sources of materials supply. When expansion of domestic output, is the cheapest way of assuring adequate supplies of materials in the event of war, the argument is a sound one. As we have seen above, however, there are many other ways of attaining this objective, and a sensible public policy will compare the costs and benefits of domestic expansion with the costs and benefits of other routes.

The security policy of the United States, moreover, raises important additional doubts concerning expansion of domestic output as the preferred route to adequate materials supply in the event of war. The cornerstone of this policy is a system of alliances. If the requirements of our allies have to be taken into account — and this is elementary — shall we prepare for war contingencies by increasing the current drain on our already heavily exploited resources base, or is it better to attempt to meet Allied requirements by expansion elsewhere?

Furthermore, the peacetime economic relations that make coöperation in the event of war possible consist largely of relatively unimpeded access to markets and to sources of supply. Only if countries which export raw materials can count on a continuing import of their products by other countries, and a continuing access to sources of manufactured products, will the economic basis for a mutual security arrangement persist. An attempt by the United States to push materials security by expanding domestic output at the expense of foreign sources of supply might very well end by destroying the cornerstone on which our whole security policy rests.

It can be seen, then, that although security considerations create a new set of materials problems for which special action is required, these considerations neither involve a departure from the general principle of meeting our requirements, however defined, from lowest-cost sources, nor favor an all-out expansion of domestic production at the expense of foreign sources of supply.

The United States and the rest of the free world confront a materials problem, first, because of the very great increase in materials requirements associated with economic growth; and, second, because of the necessity of not only meeting these requirements but preparing at the same time for the eventuality of a hot war. The difficulty is not that we may run out of materials, but that a meeting of requirements may involve a continued increase in unit costs. Economic growth in the past has depended on a persistent downward trend in the costs of both material extraction and fabrication.

The difficulties can be successfully met if the United States and the rest of the free world can draw freely on lowest-cost sources of supply and if improved ways of using our physical environment continue to be discovered and disseminated. The former solution lies largely in the field of international economic relations, the second in the area of domestic institutions and of public and private management.