THE IMPACT OF RESOURCE DECISIONS ON AMERICA'S ECONOMIC DEVELOPMENT by JIM E. REESE Professor of Economics Professor Reese served as Joint Council Staff Economist during It would be hard to overestimate the impact of resource decisions on the economic development of the United States. In the beginning, it was the lure of the exotic commodities of the Orient; the silks, precious stones and spices, which led Europeans to seek new water routes to the Far East. After the discovery of the New World, the Spanish search for precious metals opened up the entire Southwest. The demand for furs led the French down the St. Lawrence, across the Great Lakes, and into the Mississippi Valley, while the English settlements were still in their infancy. Even in the English colonies where expansion was slower, the desire for new land drew the settlers westward in a never-ending movement until by 1776, American frontiersmen were beginning to settle in the Kentucky-Tennessee region. Thus, throughout our history, the search for resources, for new sources of raw materials, has been a basic factor in the exploration and opening up of new geographic areas. After the settlements were established, the less exciting, but more important problem of resource-use had to be faced. Perhaps the most important decision, the one with the greatest effect on our way of life, the one responsible for the current interest in conservation, was the decision to use land or resources in the place of labor or capital. It was this decision which led to the so-called "rape" of the continent (if we may borrow without endorsement the phraseology of a modern writer). All of us are familiar with the more spectacular results of this type of resource-use. The soil mined of its fertility by excessive cropping, and then left in abandoned fields with no fence against swift erosion. The trees girdled for quick clearing of land, whole forests cut down by lumber companies interested solely in easy profits, the ruthless destruction of the beaver, the extermination of the buffalo, the careless use of minerals, the pollution of streams, and the fouling of the air itself need not be retold here. There were other equally important, although more subtle and less spectacular, results of this decision to exploit resources rather than labor or capital. The basic character of American agriculture was extensive rather than intensive. Almost without exception, the important improvements in agricultural machinery: the reaper; the thresher; the combine; the cotton picker, and the milking machine were designed to enable one man to farm more land or run a bigger operation with less help. More efficient farming in terms of greater yields per acre is a comparatively recent development. There are still other examples of the pervasive effect of this resource policy. The entire transportation system: the public roads; the railroads, and the canals were designed to minimize the effects of distance, to enable people to spread out and still get products to market quickly and cheaply. Throughout most of the 19th century, the foreign trade of the nation was essentially the exportation of cheap raw materials and the importation of manufactured goods. In short, American economic development for the first one hundred years of our history was based on the exploitation of our resources. The prodigal use of resources on a scale that seems unbelievably wasteful to modern eyes was probably inevitable under the circumstances which existed at that time. To understand these practices, we must realize that land, water and other resources were present in seemingly inexhaustible quantities within relatively easy access of thousands of people. On the other hand, there was a shortage of skilled labor and capital, and money was difficult to obtain. In economic terms, land or resources were cheap, while labor and capital were dear. Under these conditions, costs of production were minimized by using a maximum amount of resources with a minimum amount of labor or capital. To be specific, a farmer who sold his products at the prevailing prices could not afford the expense of even the crude soil conservation practices known at that time. In the lumber industry, the exploiter with his lower cost could bankrupt the conservationist and much the same situation prevailed in other lines of endeavor. From an economic standpoint, the system was justified by a growth in wealth and income almost unparalled in history, and by the high standard of living enjoyed by the American people. Furthermore, the nation, by using its resources freely was able in the short span of 100 years to occupy the vast territory between the Allegheny Mountains and the Pacific coast. Under these circumstances, it is not surprising that there was little or no concern over this exploitation or "waste" of resources. As a matter of fact, federal land policy and the action of state and local governments were designed to facilitate such usage. Even had the need for a different policy been envisioned, there was no agency, government or otherwise, capable of supervising or regulating thousands upon thousands of people moving ever-westward. It will be remembered that the government had little success in keeping settlers away from Indian territory and a conservation program to protect the resources of these lands would have been even more difficult. Furthermore, and even more important, to a native born in the midst of a revolution against economic controls who had grown up under the relative freedom of pioneer circumstances, the ability of each individual to manage his affairs as he chose was an asset of great value. An asset which incidentally is still cherished today. If the individual chose, as he did in this case, to exploit the resources available to him, it was held to be of no concern of the government's or of anyone else, for that matter. On the whole, then, we must conclude that the basic decision to exploit resources worked to the satisfaction of the majority of the people throughout the nineteenth century. Despite its popularity and the economic progress made under this policy, it was not without opposition even during its heyday. The lavish use of resources, particularly in the older settlements, resulted in shortages and economic hardship when these resources were depleted or exhausted. In these areas, there were always people who, for one reason or another, were unable to move on to more fertile regions. This lack of mobility created problem areas. Parts of New England, sections of the Deep South, and the cutover lands of the Midwest were all examples of the resource exhaustion which resulted in low incomes and poverty ridden pockets in an otherwise prosperous nation. In these instances, the ignominy of poverty was frequently increased by a dreary landscape veined by erosion, and traversed by rivers running dark with silt between barren lands. Indeed, the blighted landscape and the destruction of natural beauty in these areas probably had a greater impact on the general public than did the economic condition of the inhabitants. The impact of these problems was augmented during the latter part of the century by a gradual realization that, after all, the geographic area of the United States was limited and that the supply of untilled land, virgin timber and undeveloped resources was rapidly diminishing. The announcement by the Bureau of the Census that the population frontier had disappeared in 1890 highlighted the problem in a dramatic fashion. The concern over resources continued to mount and by 1900 a substantial number of people were convinced, for one reason or another, that a basic change in the resource policy was in order. These individuals, led by dedicated men who had been vigorously supported by President Theodore Roosevelt, were finally successful in launching what is now called the conservation movement. This is neither the time nor the place for a history of conservation, since our main concern is with the basic decision to change our approach to the use of resources. The results of this decision have taken a variety of forms. The movement has been both public and private. It has been manifest in laws and educational programs. It ranges from soil conservation to wildlife refuges, from oil proration to reforestation. Nevertheless, there are certain threads common to almost all programs and as a consequence of these basic assumptions, the conservation movement as a whole tends to follow a common pattern. The one central theme running through all the programs is the concept of limited supply the resources involved are considered finite. The amount may be large or small, it may or may not be replaceable, but it is limited. Once this hypothesis is accepted, the proper procedures to be followed become almost selfevident. If supplies are limited, the amount of land and water, the number of trees and fish, or the supply of coal and oil, we must save these resources, use them wisely and replenish the supply whenever possible. Now for the first time, waste, the injudicious use of resources, becomes the crime against the community. Within this conceptual framework, the way of thinking prevalent in early resource policy becomes wasteful and injurious to the community. Indeed, in those instances where important materials are in short supply, the continuation of the previous policy of resource-use could lead to disaster. Spurred on by this threat to our future well-being, the conservation leaders have worked tirelessly to arouse the public to the dangers that we face. While the accomplishments of the movement are undoubtedly far short of its objectives, the results are impressive. Today more and more of the resource decisions are being made in conformity with sound conservation practices. To cite one example, the flaring of natural gas which at one time made the oil fields bright throughout the night is no longer allowed. Progress has also been made in land use, in forestry programs, and there is some indication that the public is at last becoming aware of the need to cope with air and water pollution. Despite these successes, there is still much to be done and the task is further complicated by the fact that conservation programs call for a never-ending series of policy decisions within the programs themselves. Since these decisions are so crucial and important, they are worth considering in more detail. The first problem found to some extent in all conservation activity, but most important when dealing with the so-called irreplaceable resources, is the task of deciding between present use and future use. If one accepts the concept of finite supply then it is obvious that reducing the current use of these materials will make the supply last longer. Stated in a more extreme fashion, the standard of living must be reduced today in order to be raised tomorrow. Conservation, or wise resource-use, costs money at least in the short run and the whole weight of our previous history is against it. This is blunt language, but the dilemma is a real one. How much are we willing to spend or give up to protect the future? It is the inability to make this decision or to convince the public that such a decision has to be made that causes many programs to flounder. A second issue and one which involves considerable bitterness and emotion is the whole question of government regulation and ownership. The Hells Canyon controversy, the resentment in the West against Federal ownership which removes property from the tax rolls, the fight over T.V.A., the interstate oil compact, the soil bank plan and the decision in the Phillips case which gives the Federal Power Commission the right to regulate the production of natural gas, are all cases in point. In short, who shall decide how our resources shall be used? Can we expect private enterprise, which of necessity must be concerned with immediate profits, to raise costs or forego earning for the sake of the indefinite future? On the other hand, can we expect government agencies, either state or federal, which are subject to the pressures of the political arena to take what is often an unpopular position? Unfortunately, there is no one right answer to these questions, rather a variety of possibilities which must be dealt with in each separate case. Finally, the conservationists are forced to make a choice between conflicting interest groups with different sets of values. In every program, the conservationists are faced with a host of clamoring partisans and any decision they make is bound to arouse bitterness and antagonism. If we use water as an example, we must decide which of a number of localities shall have the water supply created by a new lake. Shall the water be used for power, for irrigation, for recreation, or shall it be reserved for industry? Shall urban or rural use have priority, shall industrial or agricultural use take precedent, or shall domestic consumption outweigh all other considerations? In some cases, the policy decisions must be carried a step further and a choice made between a local interest and national policy. On an even larger scale, one may on occasion have to weigh the results of a nationalistic policy against international repercussions. To use other illustrations, shall we import oil or produce our own, shall we import or grow sugar? In other instances, the choice involves conflicting sets of values, for example; is the economic development of a community more important than social or aesthetic considerations? Do we want waterfalls, or power projects? Do we want grass and trees or strip coal mines? Resort hotels or untouched beaches? A new lake or the old family homestead? The answers to these questions have had a profound effect on the American economy. Government conservation expenditures affect taxes. The proration policy in oil and the soil bank in agriculture have had an impact on oil and farm prices. Our tariffs have frequently protected the high cost producer and contributed to the inefficient use of resources. Meanwhile, the drive for economic gain has seriously decreased the number of recreational facilities and areas of natural beauty available to the general public. Unfortunately, there are no universally accepted or right answers to these problems and each separate case requires a new evaluation of the evidence. When we consider all the difficulties involved it is little wonder that the progress of the movement is sometimes slow. On the balance, however, we need not be ashamed of our conservation record. Our country could not have continued indefinitely to support the unrestricted exploitation of resources so characteristic of the nineteenth century, and the conservation movement, by calling attention to this danger, has undoubtedly enhanced the well being of this generation and of future generations as well. While there is still much work to be done, there is ample evidence that this need is recog |