Catch-Up Growth, Resource Scarcity, Fall-Behind Immiseration, and Political Instability

I alluded to this briefly in my Great Stagnation review, but separately on his blog Tyler Cowen has presented an intriguing hypothesis that the historical trajectory of natural resource prices is going to turn around.

Think of a world in which there are two kinds of growth. One is leap-ahead growth in which technologically advanced societies dream up even more advanced technology. The other is catch-up growth in which technologically backwards societies learn to use the advanced technology that already exists in the advanced countries. In the twentieth century we saw some instances of catch-up growth, but leap-ahead growth accounted for the majority of global growth in output. One result of that is that we got much much better at extracting natural resources (energy, food, metal) from the fixed supply of land, and commodity prices generally went down. But over the past ten years, catch-up growth in India, Brazil, and (especially) China has been the majority of world growth. Consequently, the rate of stuff-utilization is going up higher than the rate of stuff-production, meaning we'll see rising commodity prices rather than falling ones.

For rich countries, that's inconvenient but we'll deal. For China, it's fine—the whole point is that incomes will be rising faster than prices. But for poor countries that aren't growing rapidly, it's potentially a disaster. This kind of trend is what's driving the current instability in North Africa and will probably be a major story for years to come.