The New View of Minerals and Economic Growth

Resource economists have long been fascinated by the relationship between minerals and economic growth. This interest has historically been based in pan on the concern that mineral resources may someday constrain world economic growth, or worse, force a painful reduction in the living standards of the industrialized countries In recent years, however, a very different view of minerals and economic growth has emerged. This new view maintains that economic growth has over the last decade or two become ‘uncoupled’ or independent of minerals and other primary products. Economic growth no longer requires an increase in mineral consumption, and no longer stimulates the demand for metals and other mineral commodities. The new view offers an explanation for the stagnation in metal and mineral consumption since the early 1970s, and presumably was fostered by the depressed conditions of mineral markets over the past decade. An examination of the forces behind the stagnation, however, suggests that the new view is only partially correct Sectoral shifts, the rise of high technology products within manufacturing, resource‐saving technology, and material substitution have together caused intensity‐of‐use trends to deteriorate. As a result, metal consumption can now remain constant or even decline at the same time the economy is expanding, if rate of economic expansion is less than the rate of decline in intensity‐of‐use. While the relationship between minerals and economic growth has changed in recent years, the two are not independent Faster economic growth requires and stimulates faster growth (or a slower decline) in mineral consumption. This finding has implications for both the short‐ and long‐run behaviour of metal and mineral markets.