Page last updated at 08:25 Asia/Manila, Thursday, 05 November 2015 PH
As commodities prices fall to historically low levels during the ongoing world economic crisis, the scaremongers who have been advocating population control are reliving the embarrassment of Paul Ehrlich, the original “population bomb” alarmist. As the prestigious Financial Times recently commented in an editorial last September 1, 2015, falling prices show the world is not running out of resources. The FT reminded its readers about the celebrated wager between Paul Ehrlich and economist Julian Simon in 1980: “…the economist Julian Simon challenged doom mongering biologist Paul Ehrlich to a bet that the prices of any five metals would be lower in 10 years’ time. He won, and made his point: over the long run, technological progress means commodity pries are likely to fall in real terms.”
Julian Simon could have been thinking of the Philippines when he wrote a book entitled “The Ultimate Resource,” referring to human beings. If the Philippines is now the darling of investors from all over the world, the main reason is that our country is enjoying what is known as the demographic dividend which endows us with a growing, young and English-speaking population. If we examine the engines of growth of the Philippines, which is considered one of the highest in the region, they are all people-related: remittances from Overseas Filipino Workers, earnings of BPO/KPO enterprises, and a boom in consumption capitalizing on a large domestic market. More people mean more supply of competitively cost manpower and at the same time a large domestic market which makes the country basically immune from the ups and downs of the export market.
The FT editorial punches holes in a theory that became popular starting the early 2000s: that there are decades-long “super-cycles” in commodities prices which are expected to go up and up indefinitely into the future. Fear of these “super-cycles” motivated leaders in the Western world to strongly advice emerging markets to introduce birth control as a national policy. The Philippines was not spared this erroneous if well intentioned advice as some U.S. officials put pressure on the present Government to pass the Reproductive Health Law. Well, the truth is out: “With oil down about 57 per cent from its peak last June and copper and iron ore down about 50 and 70 per cent respectively from their peaks in early 2011, it has become clear that the “super-cycle” story was profoundly misleading…The past five years have dealt a fatal blow to the popularized version of the super cycle theory: that inexorably rising demand in emerging economies and constrained supplies of many commodities would inevitably put prices on a rising trend. With China apparently facing a future of slower growth than in the past two decades, and probably a shift away from resource-heavy investment spending towards consumption, the assumptions of strong long-term demand growth have been called into question.”
Thirty five years later after the famous “population bomb” debate, Paul Ehrlich’s pessimistic views appear even more unscientific. He was thoroughly wrong in assuming that rising prices were rooted in expectations of scarcity and that global population growth would have devastating consequences. Appearing ever more scientific is the sanguine view of Julian Simon that natural resources were for all practical purposes inexhaustible. He opined that, given freedom of private or individual economic initiative, market signals will always lead to increased supply and/or lower demand . I hope that those who will be elected in May 2016 will learn once and for all this lesson from both theory and history. For comments, my email address is email@example.com.