One of the first agricultural techniques, which is still practiced in many parts of the world, is “slash and burn agriculture.” It’s pretty simple:
Slash-and-burn is an agricultural technique that involves cutting and burning of trees and plants in forests or woodlands to create fields. It is subsistence agriculture that typically uses little technology or other tools. It is typically part of shifting cultivation agriculture, and of transhumance livestock herding.
It works by clearing an area, planting crops until the soil is depleted, and then moving on to the next area. Eventually, one may move back to the original area, after a period of allowing regrowth, but that isn’t always possible. Its use as a successful method depends on having a small population and a lot of land to move to. The problem with it is that it’s not a sustainable method of agriculture. Once you reach a certain population density, or have exhausted the land available, it becomes unsustainable. So, what does that have to do with the economy?
Over time, I’ve come to the conclusion that many businesses operate under a “slash and burn” mentality. It’s particularly the case when it comes to various mineral mining or fossil fuel extraction, but not just them. It’s a behavior evident when it comes to regulations and labor costs. I pointed out in a previous post that people often tolerate this because of a “fear of losing jobs.”
People are so desperate for jobs they don’t want to rock the boat. They don’t want rules and regulations enforced that might cost them their livelihoods. For them, a job is precious — sometimes even more precious than a safe workplace or safe drinking water.
Which is why you have incidents like what has happened in West Virginia. Back in 2011, there were several explanations of the importance of the coal industry to West Virgina.
Without the coal mining industry West Virginia would just be an all-tourism state with a lot less population. The saying coal is “king” is very true to West Virginians that make a living mining the coal. As all the big wig bureaucrats keep restricting the livelihood of coal miners not only in West Virginia, but around the United States, I hope they have an alternative to provide decent jobs as miners lose their jobs and have nothing else to rely on for providing for their families.
The sad part of this? In the not-too-distant future those jobs will disappear anyway. There’s a pictorial over at Business Insider about mountain top removal, and its effects. One of the facts that is pointed out in it is that the state has already lost 100,000 jobs in mining, because strip mining requires a lot fewer miners, and machines are cheaper than people. Another fact? That West Virginia only has another 20 to 30 years of coal left even with this. The coal that can be economically extracted will have been, the companies will pack up and leave to other places, and the jobs will disappear within a generation. What will be left is a depleted, depressed area, with a real mess left behind. They won’t even have “all tourism state” as an option, unless people like viewing environmental cleanups.
We can see the same thing in the fracking debate. While the “boom” is on in many parts around the country, particularly in the Marcellus Shale, there are numerous concerns about pollution and water usage.
Much of the water used was in Texas. In 2012, half of all fracking water usage occurred in the state. The Department of Agriculture recently deemed Texas a disaster area because of its drought.
Agriculture is still by far the biggest user of water in the country, including in Texas, where it accounts for over 50 percent of usage. Fracking accounts for under 1 percent of water use in the state, but that number is growing. Environmentalists point out that in areas where fracking is concentrated, that number can be much higher.
In parts of Texas sitting atop the Eagle Ford shale, one of the biggest natural gas plays in the country, fracking accounts for up to 50 percent of water usage.
Once the water is used for fracking, it’s “out of the system.” If it’s not still in the ground, what returns is polluted, and can’t be returned easily to the environment. Even more, these are “temporary” in terms of a boom. Yes, people in those areas, particularly those who will benefit from the drilling on their land, are in favor of it, particularly if the economy has been slack – which it has been. But, as previous “plays” have shown, the actual “boom” is short-lived, on the order of one or two decades. Most of the jobs are created by people who migrate in (drilling rig operators and pipeline construction), and move on once the well is completed. It’s not a big boom when it comes to hiring local people, and it can actually stifle an economy. It’s called “Dutch Disease” in economics.
It doesn’t just have to be in mining or resource extraction, though. It’s also a factor in manufacturing. Look at how various manufacturing companies have migrated around the world. What makes them move? A different set of “resources:” Low or non-existent regulations, minimal taxes, and a very low wage workforce. Industries in this country moved first from the North to the South for this, then to Central America, and on to Asia. In general, they have moved on not because the workers are (fill in the excuse), but because once the local population starts to demand … a better wage, better work conditions, and a cleaner environment … there’s been another place which is willing to take them. They’re running out of those places, as many of the countries they’ve moved to are getting fed up with disastrously polluted air and water, and wanting safe workplaces and better pay.
The short-term mentality of business – and the stock markets – puts “profits now” as more critical than “long-term sustainability.” It’s the slash-and-burn method moved to the economy. But, as people in the past learned, there comes a time when it ends. Just as there were no more forests or available land to keep it as a viable agricultural method, so too is that lesson going to be taught to businesses and the people that rely on them. At some point in the future, and it’s closer than they think, there will be no more easily extracted resources, and there will be few places they can operate as they do now. The problem is that often it’s not until it has all collapsed that they learn that.
It doesn’t have to be that way, and that’s where good planning and government come in. Norway is an example.
Across Norway, the oil boom is being paralleled by record growth in the non-petroleum, export-driven economy. In November, Norway’s non-oil private-sector economy reported quarterly growth of 1.9 per cent, the equivalent of a 7.6-per-cent annual growth – an astonishing economic performance, beating even the growth of oil and gas exports.
And that is the real surprise here. While it isn’t hard for nations and provinces to get rich from oil, it is exceptionally hard – almost impossible, by conventional economic reasoning – for them to make money off anything else while the oil boom is taking place.
How did they do it? By investing, and planning for the future.
Norway’s fund, which collects taxes from oil profits and re-invests the money, mostly in stocks, is worth about $177,000 per Norwegian. The fund owns 1% of the globe’s stocks and a vast empire of real estate, but the government is only allowed to use 4% of it a year. With Norway’s liberal government, oil profits — including from state-run Statoil — are taxed at 78%
They knew that the oil was going to run out, and they’ve planned for it. It’s what we don’t see in our states, or our businesses. It’s something we as a nation should be doing, and what President Obama has been saying for the past 5 years. We can plan for “what’s next.” Education, infrastructure, better technology, and keeping things clean – or cleaning them up – will mean a sustainable economy. It’s the difference between a burned-out wasteland and a fertile field.