The days when money was an option are long gone. Since our population started migrating away from rural, farm-based communities towards urban, manufacturing-based cities, society has become progressively dependent upon trade between individuals. If you don’t grow your own food, you have to exchange something of value with the farmer in order to eat. If you can’t build your own wagon and pull it with a horse, you have to buy a vehicle through some exchange of value.
During the industrial revolution, the way to wealth was owning one or more necessary elements in that value exchange, e.g., land, the mineral rights to natural resources, transportation equipment to get what’s in the land to where it is needed, the manufacturing facilities and equipment necessary to make things people used to be able to make for themselves, etc.
In the last thirty years or so, we’ve migrated away from a resource and manufacturing-based value exchange to a service economy. The leverage is pretty high. About 30-35% of our GDP is built on getting stuff out of the ground and making things with the raw material. The rest of our economy is based on providing services to each other: sleeping quarters, accounting, legal advice, hair-do’s, window washing, trash removal, investment management, car rentals, dental care, hospital care, car repair, psychotherapy, tax preparation, valet parking, etc., etc. So the large majority of us don’t make a living making anything. The service economy is built on two things: physical labor and information. And the service economy is unsustainable unless the bedrock, fundamental economic components of raw materials and the means of production are operating like a smooth engine.
In other words, the global economy is always connected to the ground. But in the U.S. only one out of six people work in primary or secondary industries (those concerned with the raw resources from the ground and the things that can be made with those resources, respectively). The amplification of ground-based economic dynamics is therefore very high. This means that a perturbation in the ground-based industries affects a much higher number of people than those directly working in these industries.
When farms were family-owned and much smaller, weather and pest effects that caused poor crop yields directly affected the vast majority of the population. A hundred and fifty years ago, 98% of the American population lived on farms. But even though the ratio is now reversed, the 98% of people who don’t live and work on farms are still affected by such things as drought and pestilence. But here’s the difference: the risk is spread over a much broader land base. We have become more resilient in weathering bad weather, because most of us don’t depend on a specific plot of land to gain our daily sustenance. We get it where we can, for what we can afford.
In the mining industry, the economic dynamics are based on who owns the minerals, who has the means of extraction, who has the means of transporting the material, who has the ability to store it between source and end-user, who has the ability to break it into pieces and get it to that end-user (distribution), and how many customers want the material to begin with. Again, there are many fewer people today directly making their living from extracting the raw materials from the land, but everyone is affected indirectly. This amplification or impact leverage again spreads the risk across a broader land base of resources.
But the amplification and risk reduction in a leverage model of resource access are entirely dependent upon a stable set of links between end-user and the ground. When these links are disrupted by attempts of land owners to control the supply-demand equation (think OPEC and Enron), by wars fought over coveted land (think Middle East and Kashmir), by a lack of stable currency (think Ecuador prior to 2000 and Russia after perestroika) and/or by exhaustion of the land itself (too many examples to list), the risk reduction normally associated with production leverage turns into a risk escalation. The risk goes up because the end-user has no direct alternative to provide for the lost resources of food, minerals, water, etc. Ninety-eight percent of us can no longer grow our own crops, build our own houses from the forest, fix our own wagons, etc. However, that can change.
We are a technologically advanced society that must now relearn the value of self-sufficiency which was common prior to the industrial revolution. If one believes in the rapid adaptation capability of the human species (and I do), I think micro-farming will be the first sign that urban populations are grafting self-reliance with our service economy.
I mean, at $4.00 per bell pepper, my patio could pretty much cover my mortgage.