If the resources are finite then how are economies growing?

Question

If the resources are finite then how are economies growing?

In: 0

Answer 1

The idea that an economy is based on resources is outdated.

Different economic systems are founded on different things, and even the same economic system can shift its foundations and adapt to new situations.

For instance, feudalism was based primarily on land ownership. This was tied to food production, but it wasn’t necessarily reducible to food production; land had many uses. The bubonic plague reduced the value of land, though, and feudalism couldn’t adapt and collapsed.

Capitalism replaced it and was first founded on a feudal land ownership economy (the landlord, which still exists today). As the industrial revolution got going, though, this transitioned more into natural resources and labor (that’s why working days more than doubled and the working day went up to 16 hours).

Unlike feudalism, though, capitalism adapted over time and shifted its foundations more towards speculation. This shift started in the second half of the 19th century, but didn’t really explode until the advent of telecommunication technology in the 1970’s.

Today, our economic system is founded more on speculative investment than on anything tangible like land, resources, or labor. This speculation can theoretically expand infinitely, as it’s not founded on anything material (and uses a fiat currency that’s no longer backed by anything material). In practice, though, the digital technologies and distribution networks tied to the speculative market cannot grow infinitely, so there are practical limitations.

As those limitations are reached, capitalism will once again attempt to adapt towards more infinite expansion. Intellectual property is a historical example of this, and data collection and modeling is a more contemporary example (think Amazon and its predictive systems to create an extremely efficient centrally managed economy that other companies cannot compete with).

Ultimately, all this expansion depends on some kind of expansion of resource exploitation, so it will inevitably collapse (this is ultimately the cause of climate change), but the fact remains that the economy has continued to expand far beyond imagination due to capitalism’s unique ability to appropriate anything and use it as a form of economic expansion.