“Slash and Burn” Is Not A Sustainable Economy

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.



Filed under Business, Politics

4 responses to ““Slash and Burn” Is Not A Sustainable Economy

  1. Excellent post. It wasn’t another tale of woe that leaves us with what is becoming a sad state of affairs but with a view of what our options are and a sense that there’s still hope.

    • Thanks! 🙂 I think the difference in mentality between progressive and conservative is that one looks forward, the other looks backwards. I can look forward, as well at my own experiences, and see that “this isn’t going to last.” Others seem to fall into a mindset of “was, is, and always will be.”

  2. Russia’s economy is largely dependent upon its energy resources, especially oil. With more countries investing in alternate forms of energy, Russia is exporting fewer energy resources. Not many Americans will believe it, but this explains why Putin takes certain positions on issues on the world stage. The author of an article I read a few weeks ago mentioned that the recent animus Putin has shown toward Pres. Obama and the U.S. is related to the president’s decision to invest in alternate forms of energy. This means that the U.S. is importing less oil from Russia, something that upsets Putin. It appears that neither Putin nor the Russian government is ready to admit that their energy resources will run out one day. They appear to be incapable of thinking the way Norwegian politicians are thinking. The author also mentioned that Putin’s threatening actions/comments toward the Ukrainian government are also related to Russia’s economic woes. The Ukrainian government owes Russia millions in overdue energy payments. Putin knows this and used it and the threat of withholding energy resources from the Ukraine in the future to get Yanukovich to kill the trade deal with the EU. It isn’t being said out loud, but Putin wants to keep the former Soviet republics under his thumb using any means necessary.

    I had no idea that Russia’s economy was almost totally dependent upon the export of energy resources. When I discovered this to be the case, it made me recall the South’s dependence on “King Cotton” before the Civil War. This became a huge disadvantage to the South in the Civil War because it had an economy which was based on one resource. The southern states hadn’t thought ahead and diversified their economies, whereas leaders in northern states had.

    If Putin keeps refusing to invest in diversifying the Russian economy, he’ll be condemning future Russian citizens to a life without a future, except in low paying jobs. I was truly amazed when I read that Putin is scared sh*tless that he may turn out to be a failure when it comes to economic policy-making. Since so many Americans think of him as being a more successful leader than President Obama, one would think that they would do a bit of research on him. He’s not what he appears to be. The research I’ve done on Putin and Russia was depressing–an anti-gay law on steroids, few regulations for business but many for the press and civil rights, Putin aligning himself with the Russian Orthodox Church to use its’ members to do his bidding, many areas suffering from severe environmental and economic blight, citizens working at low wage jobs, and many other issues that could give Putin’s American sycophants terrifying nightmares. Snowden didn’t know that when he asked Russia for asylum, the kind of nation he’d be living in. I think he does now because he wants to come home. I did research on other westerners who defected to the former Soviet Union, and I could have told him that few were ever satisfied with living in a communist society, and that he wouldn’t like living in a nation that has had a long history of communism whose leader is a former member of the KGB.

    The Americans who are against investing in alternate forms of energy are stifling the nation’s growth. The research I’ve done shows that when our traditional energy resources run out, if we don’t have enough alternate sources of energy, the U.S. economy will return to one resembling the U.S. of the 1950s.

    Who in their right mind would refuse to invest in their nation’s future when faced with this view of a future from the 1950s? It’s sad to say, but it would be our climate change deniers and those who refuse to believe that science plays a huge, and very important, role in our future.

    • One of the other examples is Venezuela. Extremely rich in oil, but for the most part it’s never been invested – not even by the “socialist government” 🙄 – in infrastructure and diversifying the economy. Because they had all that oil money rolling in, they were (and are) importing most things, instead of domestically sourcing it. Which has led to the problems we’re seeing there now, and it’ll only get worse once (not if) the oil runs out.