Extractive Resources in the World Economy
| Author | John Helliwell |
| DOI | 10.1177/002070207402900405 |
| Published date | 01 December 1974 |
| Date | 01 December 1974 |
| Subject Matter | Article |
JOHN
HELLIWELL
Extractive
resources
in
the
world
economy
Extractive
resources are
by
no
means
the only
important
raw
ma-
terials
in world
trade,
but
there
are enough separate
issues
sur-
rounding
them to
warrant
separate
treatment.
For
one
thing,
extractive resources
have
a
number
of
distinctive
features
that
re-
quire
special
analytical
treatment.
As
well
there
is
the
effect
of
the
concept
of economic
rent
which
is
so
crucial
to
public
policies
surrounding
extractive
resources.
The
difficulties
of
defining
and
collecting economic
rents
create
a
number
of
problems
in both
the
Canadian
and
the world
perspective,
including
conflicts be-
tween
political
jurisdictions.
Finally the
role
of
multinational
cor-
porations
in
resource
trade
is
a large
one
and
the need for
multi-
national
policies
of
sufficient
flexibility
and
scope
to
control
their
activities
is
increasing.
There
are
three
major
features
particular.
to
extractive resources
in
world
trade:
volatility
in
price,
non-renewability, and
uneven-
ness
of
world
distribution.
Extractive
resources share
with
most
other
raw
materials
a
variability
of
price
much
greater than
that
applicable
to
services
and
industrial
products.
For
example the
Economist's
index
of
metal
prices,
with
a
base
of
1970
=
1oo,
reached
a
value
under
75
at
the
end
of
1971
and
then
increased
to
a peak of
about
28o
at
end
of
March
1974.
Since
then
the
index
has
dropped
pre-
cipitously,
reaching
155
by
the
middle
of
July
1974.
Variations
in
this
index
are
much
greater
than
variations
in
average
metal
Professor
of
economics,
University
of
British
Columbia.
I
am
grateful
to
J.L.
Helliwell
and
A.D.
Scott
for
helpful
comments
on
earlier
drafts of
this
paper.
592
INTERNATIONAL JOURNAL
Table
i
Evolution
of
basic
commodity
prices
since
195o:
percentage
change
over
selected
periods,
measured
in
United
States
dollars
19 5
0
to
1950
to
196o
to
197
0
to
1973Q4
1960
1970
1973Q4
Primary
commodities
0oo.o%
-0o.o%
9.1%
103.7%
Food
120.0 -
6.o
18.1
98.2
Non-food
agricultural
raw
materials
68.9
-13.9
-3.8 104.0
Mineral
raw
materials*
165.6
11.1 11.0
115.3
Metal
ores
122.2
23.5
22.0
47.5
Non-ferrous
ores
142.2 -
3.9
52.0
65.8
Fuels
173.4 6.4
9.0
135.8
Non-ferrous
base
metals
193.0
23.3
69.8 40.0
Manufactured
goods
-
exports
1o5.o
22.5
19.4
40.2
*Extractive
resources
include
mineral
raw
materials,
which
has
three sub-groups,
and non-ferrous
metals.
SOURCE:
Extracted
from
table
i
of
the
Annex
to
'Evolution
of
Basic
Commodity
Prices Since
1950,'
UN
DoC
A/9544,
2
April
1974,
Note
by
the
Secretary-
General
for
the
Sixth
Special
Session.
prices, since
many
sales
are
covered
by
long-term
contracts
whose
prices
do
not
vary
with
day-to-day
quotations
on
the
London
Ex-
change.
Nevertheless,
even
the
average
prices
of
most
metals
and
other
extractive
resources
move
around
more
dramatically
than
do
those
of
industrial
products.
The
recent
sharp
decline
in
the
metals
index
probably
indicates widespread
expectations
of
sub-
stantial
future
declines
in
industrial
growth and
hence
in
the
demand
for
metals.
This
can
be
seen
from
the
comparative
statistics
in
table
i
which
show
the
swings
of
the
prices of
exports
of
extractive
resources to
be
larger
than
those
of
manufactured
exports,
even
when
comparisons
are
made
on
a
decade-to-decade
basis.
The
variability
in
materials
prices
has several
causes.
For
agricultural
products,
where
planting
cycles
and
crop
conditions
interact,
the
factors
making
prices
move
are
different
than
for
minerals
and
other
extractive
resources.
The
volatility
of
mineral
prices
is
based
partly
on the
uneven
pattern
of
discoveries,
partly
on the
uneven
global
distribution
of
resources,
and
partly
on
the
key
role
that
extractive
resources
play
as
raw
materials
in
the
industrial
process.
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