Advertisement

Natural Capital and Economic Development

  • Edward B. Barbier
Chapter

Abstract

The purpose of this chapter is to introduce the concept of natural capital, and to explain in more detail its role in modern economic development.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Notes

  1. 1.
    Edward B. Barbier (2011) Scarcity and Frontiers: How Economies Have Developed Through Natural Resource Exploitation. Cambridge and New York: Cambridge University Press.Google Scholar
  2. 2.
    World Bank (2011) The Changing Wealth of Nations: Measuring Sustainable Development in the New Millennium. Washington DC: World Bank.Google Scholar
  3. 3.
    Gavin Wright (1990) “The Origins of American Industrial Success. 1879–1940”, American Economic Review, 80: 651–668, p. 666.Google Scholar
  4. 5.
    For example, based on historical records of the trends in capital/income ratios for a handful of countries in Europe and North America since the 18th century, Thomas Piketty (2014) Capital in the Twenty-First Century. Cambridge, MA: Harvard University Press, p. 164 concludes: “Over the long run, the nature of wealth was totally transformed: capital in the form of agricultural land was gradually replaced by industrial and financial capital and urban real estate. Yet the most striking fact was surely that in spite of these transformations, the total value of the capital stock, measured in years of national income — the ratio that measures the overall importance of capital in the economy and society — appears not to have changed very much over a very long period of time.”CrossRefGoogle Scholar
  5. 6.
    See C. Anthony Wrigley (1988) Continuity, Chance and Change: The Character of the Industrial Revolution in England. Cambridge: Cambridge University Press;CrossRefGoogle Scholar
  6. and Brinley Thomas (1985) “Escaping from Constraints: The Industrial Revolution in a Malthusian Context”, Journal of Interdisciplinary History, 15: 729–753.CrossRefGoogle Scholar
  7. 7.
    David Landes (1998) The Wealth and Poverty of Nations: Why Some are Rich and Some are Poor. New York: W.W. Norton, p. 200.Google Scholar
  8. 8.
    Vaclav Smil (2005) Creating the Twentieth Century: Technical Innovations of 1867–1914 and Their Lasting Impact. Oxford: Oxford University Press, p. 29 makes a strong case for dating the start of the current global fossil fuel era as “sometime during the 1890s”, as stated in the following paragraph: “This legacy of the pre-WWI era is definitely most obvious as far as energy sources and prime movers are concerned. As already stressed, no two physical factors are of greater importance in setting the pace and determining the ambience of a society than its energy sources and prime movers. Global fossil fuel era began sometime during the 1890s when coal, increasing volumes of crude oil, and a small amount of natural gas began supplying more than half of the world’s total primary energy needs…. By the late 1920s biomass energies (wood and crop residues) provided no more than 35% of the world’s fuels, and by the year 2000 their share was about 10% of global energy use. The two prime movers that dominate today’s installed power capacity — internal combustion engines and steam turbines — were also invented and rapidly improved before 1900. And an extremely new system for the generation, transmission and use of electricity — by far the most versatile form of energy — was created in less than 20 years after Edison’s construction of first installations in London and New York in 1882.”CrossRefGoogle Scholar
  9. See also Bouda Etemad, Jean Lucini, Paul Bairoch and Jean-Claude Toutain (1991) World Energy Production 1800–1995. Centre National de la Recherche Scientifique and Centre D’Histoire Economique Internationale, Geneva, Switzerland;Google Scholar
  10. Roger Fouquet (2008) Heat, Power and Light: Revolutions in Energy Services. Cheltenham: Edward Elgar;Google Scholar
  11. and Vaclav Smil (2010) Energy Transitions: History, Requirements, Prospects. Santa Barbara, CA: Praeger.Google Scholar
  12. 9.
    Smil, Vaclav. 1994. Energy in World History. Westview Press, Boulder, CO. especially figure 6.5 and pp. 232–233. See also Etemad et al. (1991), op. cit.; Fouquet (2008), op. cit.; and Smil (2010), op. cit.Google Scholar
  13. 11.
    See, for example, Gregory Clark (2007) A Farewell to Alms: A Brief Economic History of the World. Princeton, NJ: Princeton University Press;Google Scholar
  14. Ronald Findlay and Kevin H. O’Rourke (2007) Power and Plenty: Trade, War, and the World Economy in the Second Millennium. Princeton, NJ: Princeton University Press;Google Scholar
  15. M. W. Flinn (1978) “Technical Change as an Escape from Resource Scarcity: England in the 17th and 18th Centuries”, in William Parker and Antoni Maczak (eds), Natural Resources in European History. Resources for the Future, Washington, DC, pp. 139–159;Google Scholar
  16. Eric L. Jones (1987) The European Miracle: Environments, Economics and Geopolitics in the History of Europe and Asia, 2nd edn. Cambridge: Cambridge University Press; Landes (1988), op. cit.; Google Scholar
  17. Angus Maddison (2003) The World Economy: Historical Statistics. Paris: Organization for Economic Cooperation and Development;CrossRefGoogle Scholar
  18. Joel Mokyr (ed.) (1999) The British Industrial Revolution: An Economic Perspective. Boulder: Westview Press;Google Scholar
  19. Patrick K. O’Brien (1986) “Do We Have a Typology for the Study of European Industrialization in the XIXth Century?” Journal of European Economic History, 15: 291–333;Google Scholar
  20. and P. H. H. Vries (2001) “Are Coal and Colonies Really Crucial? Kenneth Pomeranz and the Great Divergence”, Journal of World History, 12(2): 407–446.Google Scholar
  21. 12.
    For instance, Nicholas Crafts and Terence C. Mills (2004) “Was 19th Century British Growth Steam-powered? The Climacteric Revisited”, Explorations in Economic History, 41: 156–171, find that the contribution of steam power to industrial output and labor productivity growth in 19th century Britain was at its strongest after 1870. Sean Adams (2003) “US Coal Industry in the Nineteenth Century”, EH.Net Encyclopedia, edited by Robert Whaples. 24 January 2003. This URL http://eh.net/encyclopedia/article/adams.industry.coal.us documents how expansion of the coal industry in the latter half of the 19th century became central to the “take off” into industrialization in the United States. In Japan, the proto-industrial center of Osaka became the focal point for industrialization by harnessing steam and coal, investing heavily in integrated spinning and weaving steam-driven textile mills during the 1880s.
  22. See Carl Mosk (2001) Japanese Industrial History: Technology, Urbanization, and Economic Growth. Armonk, New York: M.E. Sharpe.Google Scholar
  23. 13.
    For example, as summarized by Findlay and O’Rourke (2007), op. cit., p. 382, “it seems clear that the four decades leading up to World War I did indeed witness an unprecedented, dramatic, and worldwide decline in intercontinental transport costs — especially when declines in overland rates are taken into account.” See also C. Knick Harley (1988) “Ocean Freight Rates and Productivity 1740–1913: The Primacy of Mechanical Invention Reaffirmed”, The Journal of Economic History, 48: 851–876;CrossRefGoogle Scholar
  24. Kevin H. O’Rourke and Jeffrey G. Williamson (1999) Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy. Cambridge, MA: MIT Press.Google Scholar
  25. Patrick K. O’Brien (1997) “Intercontinental Trade and the Development of the Third World Since the Industrial Revolution”, Journal of World History, 8(1): 75–133;CrossRefGoogle Scholar
  26. and Jeffrey G. Williamson (2006) Globalization and the Poor Periphery Before 1950. Cambridge, MA: MIT Press.Google Scholar
  27. 19.
    See, for example, Paul A. David and Gavin Wright (1997) “Increasing Returns and the Genesis of American Resource Abundance”, Industrial and Corporate Change, 6: 203–245;CrossRefGoogle Scholar
  28. Ronald Findlay and Ronald Jones (2001) “Input Trade and the Location of Production”, American Economic Review, 91: 29–33;CrossRefGoogle Scholar
  29. Douglas A. Irwin (2003) “Explaining America’s Surge in Manufactured Exports, 1880–1913”, Review of Economics and Statistics, 85(2): 364–376; and Wright (1990), op. cit.CrossRefGoogle Scholar
  30. 21.
    C. Knick Harley (1978) “Western Settlement and the Price of Wheat, 1872–1913”, Journal of Economic History, 38(4): 865–878;CrossRefGoogle Scholar
  31. and C. Knick Harley (1980) “Transportation, the World Wheat Trade, and the Kuznets Cycle, 1850–l913”, Explorations in Economic History, 17: 218–250.CrossRefGoogle Scholar
  32. 22.
    See, for example, Barbier (2011), op. cit.; John C. Weaver (2003) The Great Land Rush and the Making of the Modern World, 1650–1900. Montreal: McGill-Queen’s University Press; and Williamson (2006), op. cit.Google Scholar
  33. 23.
    The methodology for determining the historical land use trends depicted in Table 2.1 is explained in N. Ramankutty and Jon A. Foley (1999) “Estimating Historical Changes in Global Land Cover: Croplands From 1700 to 1992”, Global Biogeochemical Cycles, 13: 997–1027. To reconstruct historical croplands, the authors first compiled an extensive database of historical cropland inventory data, at the national and sub-national level, from a variety of sources. Then they used actual 1992 cropland data within a simple land cover change model, along with the historical inventory data, to reconstruct global 5 min resolution data on permanent cropland areas from 1992 back to 1700. The reconstructed changes in historical croplands are consistent with the history of human settlement and patterns of economic development. By overlaying the historical cropland data set over a newly derived potential vegetation data set, the authors determined the extent to which different natural vegetation types have been converted for agriculture. Similar methods were used to examine the extent to which croplands have been abandoned in different parts of the world.CrossRefGoogle Scholar
  34. 25.
    Raymond W. Goldsmith (1985) Comparative National Balance Sheets: A Study of Twenty Countries, 1688–1978. Chicago: University of Chicago Press; and Piketty (2014), op. cit.Google Scholar
  35. 27.
    See, for example, Adams (2003), op. cit.; Barbier (2011), op. cit.; David and Wright (1997), op. cit.; Findlay and Jones (2001), op. cit.; Irwin (2003), op. cit.; Douglas W. Meinig (1998) The Shaping of America: A Geographical Perspective on 500 Years of History. Volume 3 Transcontinental America 1850–1913. New Haven, CT: Yale University Press;Google Scholar
  36. Paul M. Romer (1996) “Why, Indeed, in America? Theory, History, and the Origins of Modern Economic Growth”, American Economic Review, 86(2): 202–212; Wright (1990), op. cit.; Google Scholar
  37. and Gavin Wright and Jesse Czelusta (2004) “Why Economies Slow: The Myth of the Resource Curse”, Challenge, 47(2): 6–38.Google Scholar
  38. 32.
    Giovanni Federico (2005) Feeding the World: An Economic History of Agriculture, 1800–2000. Princeton, NJ: Princeton University Press, table 8.11, p. 168.Google Scholar
  39. 33.
    From Federico (2005), op. cit. Total factor productivity is usually measured as a residual; i.e., the difference between the rate of growth of output and aggregate inputs, weighting the rates of change in inputs with the respective shares on production. Federico (2005), op. cit., pp. 74–75 discusses the methods, and inherent difficulties, of applying such a total factor productivity measure in agriculture. Federico (2005), op. cit., table IV, p. 240 indicates that historical estimates of total factor productivity growth in US agriculture averaged around 0.4% before 1870, ranged from 0.17 to 0.53% between 1870 to 1910 and rose to a range of from 0.5 to 1.08% from 1910 to 1938. However, Federico (2005), op. cit., p. 79 also notes that total factor productivity in US agriculture actually declined from 1900 to 1920, so much of the growth in the 1910–1938 period occurred during the upheavals of the Great Depression and Dust Bowl of the 1930s. Bruce L. Gardner (2002) American Agriculture in the Twentieth Century: How It Flourished and What It Cost. Cambridge, MA: Harvard University Press, figure 1.3, p. 6 shows that US real agricultural gross domestic product per person in farming (farmers and agricultural workers) grew at a long-run trend rate of 1.0% per year, excluding the Great Depression, from 1880 to 1940. But immediately after World War II, and for the next four decades, the trend rate of growth was 2.8% annually.Google Scholar
  40. 35.
    Peter J. Hugill (1988) “Structural Changes in the Core Regions of the World-Economy, 1830–1945”, Journal of Historical Geography, 14(2): 111–127, table 2, p. 121.CrossRefGoogle Scholar
  41. 36.
    The statistics for central electricity generation are from Arthur G. Woolf (1984) “Electricity, Productivity, and Labor Saving: American Manufacturing, 1900–1929”, Explorations in Economic History, 21: 176–191. Woolf confirms the findings of earlier studies that the large increase in total factor productivity that occurred in US manufacturing from 1900 to 1929 were largely attributable to the rapid technological change accompanying the transition from firm-based electricity generation to reliance on centrally generated electricity.CrossRefGoogle Scholar
  42. 37.
    Richard R. Nelson and Gavin Wright (1992) “The Rise and Fall of American Technological Leadership: The Postwar Era in Historical Perspective”, Journal of Economic Literature, 30(4): 1931–1964, p. 1945.Google Scholar
  43. 41.
    Both trends are noted by Vaclav Smil (2006) Transforming the Twentieth Century: Technical Innovations and Their Consequences. Oxford: Oxford University Press, p. 7 and pp. 87–88: “Intensifying traffic necessitated large-scale construction of paved roads, and this was the main reason for hugely increased extraction of sand, rock, and limestone whose mass now dominates the world’s mineral production and accounts for a large share of freight transport… Rapid growth of aggregate material consumption would not have been possible without abundant available energy in general, and without cheaper electricity in particular. In turn, affordable materials of higher quality opened up new opportunities for energy industries thanks to advances ranging from fully mechanized coal-mining machines and massive offshore oil drilling rigs to improved efficiencies of energy converters. These gains were made possible not only by better alloys but also by new plastics, ceramics, and composite materials.”CrossRefGoogle Scholar
  44. 42.
    Lorie A. Wagner (2002) Materials in the Economy — Material Flows, Scarcity, and the Environment. US Geological Survey Circular 1221, US Department of the Interior, US Geological Survey, Denver, CO, pp. 6–7 and figure 5. Wagner defines “ non-renewable organic materials” as all products derived from feedstocks of petroleum and natural gas and coal for non-fuel applications, including resins used in the production of plastics, synthetic fibers and synthetic rubber; feedstocks used in the production of solvents and other petro-chemicals; lubricants and waxes; and asphalt and road oil.Google Scholar
  45. 48.
    Food and Agricultural Organization (FAO) of the United Nations (2010) Global Forest Resources Assessment 2010, Main Report. FAO Forestry Paper 163. Rome: FAO.Google Scholar
  46. 49.
    See, for example, D. B. Bray (2010) “Forest Cover Dynamics and Forest Transitions in Mexico and Central America: Towards a ‘Great Restoration’?”, in H. Nagendra and J. Southworth (eds), Reforesting Landscapes: Linking Pattern and Process. Netherlands: Springer, chapter 5, pp. 85–120; FAO (2010), op. cit.; Google Scholar
  47. M. C. Hansen, et al. (2013) “High-Resolution Global Maps of 21st-Century Forest Cover Change”, Science, 342: 850–853;CrossRefGoogle Scholar
  48. N. Hosonuma, et al. (2012) “An Assessment of Deforestation and Forest Degradation Drivers in Developing Countries”, Environmental Research Letters, 7: 1–12;CrossRefGoogle Scholar
  49. and Patrick Meyfroidt and Eric F. Lambin (2011) “Global Forest Transition: Prospect for an End to Deforestation”, Annual Reviews of Environment and Resources, 36: 343–371.CrossRefGoogle Scholar
  50. 50.
    Eric F. Lambin and Patrick Meyfroidt (2011) “Global Land Chance, Economic Globalization and the Looming Land Scarcity”, Proceedings of the National Academy of Sciences, 108: 3465–3472.CrossRefGoogle Scholar
  51. 51.
    As noted previously, Piketty (2014), op. cit., p. 164 provides similar evidence of this trend in major industrialized economies: “Over the long run, the nature of wealth was totally transformed: capital in the form of agricultural land was gradually replaced by industrial and financial capital and urban real estate.” See also Thomas Piketty and Gabriel Zucman (2014) “Capital is Back: Wealth-Income Ratios in Rich Countries, 1700–2010”, Quarterly Journal of Economics, 129(3), pp. 1255–1310 forthcoming and especially appendix table A21: Agricultural land/national wealth 1810–2010 (decennial averages), which shows similar trends for the United Kingdom, United States, Japan, Germany, France, Italy, Canada and Australia from 1810 to 2010, available at: http://piketty.pse.ens.fr/fr/capitalisbackCrossRefGoogle Scholar
  52. 56.
    Maurice Obstfeld and Alan M. Taylor (2004) Global Capital Markets: Integration, Crisis and Growth. Cambridge: Cambridge University Press, p. 55.CrossRefGoogle Scholar
  53. 58.
    For example, O’Rourke and Williamson (1999), op. cit., p. 229 state: “The most obvious explanation for the size of European capital exports is that the New World investment demand was high due to labor and capital requirements associated with frontier expansion. If New World land was to produce food for European consumers and raw materials for factories, railways had to make it accessible, land had to be improved, and housing had to be provided for the new frontier communities. Since the bulk of UK overseas investment went to land-abundant and resource-abundant locations like the New World, this explanation has considerable appeal. The Americas, Australasia, and Russia took almost 68 percent of British foreign investment… These regions also took almost 40 percent of German foreign investment and almost 43 percent of French foreign investment… The amounts going to Britain’s African or Asian colonies, such as West Africa, or the Straits and Malay states, were minimal in comparison.” Similarly, Gregg Huff (2007) “Globalization, natural resources, and foreign investment: a view from the resource-rich tropics”, Oxford Economic Papers 59: i127–i155, p. i127 maintains: “Between 1865 and 1914 three-fifths of British, and two-thirds of trans-European, foreign investment went to regions of recent European settlement, or the New World, with only a tenth of global population; just over a quarter of capital went to Asia and Africa where two-thirds of people lived.”CrossRefGoogle Scholar

Copyright information

© Edward B. Barbier 2015

Authors and Affiliations

  • Edward B. Barbier
    • 1
  1. 1.University of WyomingUSA

Personalised recommendations