nomic growth. The fact is that we do not know the extent of the resources ultimately recoverable from the earth. Resources are constantly "becoming." We have not found it necessary to inventory the stock because no stock inventory makes sense as time allows technology and exploration to change, and substitution of materials, natural and man-made, to occur. Reserve estimates have been made on frequent occasions, and they merely reveal the impracticality of policies of long run resource management.

Some illustrations drawn from the recent World Bank Special Task Force study are in order.

The reserve estimates have changed several times in the past and are likely to change again in the future. Some recent illustrations are: Iron Ore

In 1954, world iron ore reserves were estimated at 85 billion gross tons, with an iron content of 42 billion tons. In 1966, reserves were in the order of 250 billion gross tons and another 200 billion gross tons were identified as "potential ores" leading, together. to an estimate of about 200 billion tons of metallic iron in both categories, or five times larger than the 1954 estimate. The Limits' estimate is 110 billion tons, or roughly half the 1966 estimate of 'reserves and potential ores' which most people agree is extremely conservative. According to the U.S. Bureau of Mines, the price increase required to double the current reserve estimates is 3540 percent.

Copper

In 1935, world copper reserves were estimated to amount to about 100 million tons (copper content); officially reported reserves were 74 million tons. The latest estimate (1972) places reserves at 340 million tons, or roughly 3.5 times more than in 1935. It is estimated that a trebling in price would raise the current reserves by about 2.5 times, to a level 8 times greater than that of 1935.

Bauxite

World reserves increased seven-fold between 1950 and 1972, from 1.6 billion tons to 11.7 billion tons.

Lead

A 1929 study had concluded 'assuming a continuity of present techniques and a London price of 3 cents per pound it is clear that the world's resources cannot meet present demands.' Today, 43 years later, according to the data in the Limits, reserves are sufficient to last for another 21 years (at exponential demand growth). True, prices have increased four-fold since the twenties, but no one can argue that this has affected mankind. Demand for lead is far from bullish; no one is seriously worried about a lead shortage. Significantly, pollution prevention has induced the removal of lead from modern gasolines (lead's only end-use where the metal is dissipated or 'lost'-in all others, it is recoverable), adding on to the potential supply.

Tin

The same 1929 survey had concluded: "The known resources of tin under the price range which has existed during the past five years do not seem to satisfy the ever increasing demand of the industrial nations for more than 10 years.' Forty-three years later, according to the Limits' figures, reserves are adequate for another 15 years. Tin is highly substitutable; its depletion is not likely to cause a serious problem.

Phosphate Rock

World reserves increased from 17 billion tons in 1929 to 47 billion in 1950 and 104 billion in 1972, or six-fold in 43 years.20 This suggests the difficulties any resource management program faces. Knowledge about the world's presently estimated stock of recoverable materials, or about world consumption, provides no guidelines for policies aimed at conservation and use.

20 International Bank for Reconstruction and Development "Report on the Limits to Growth," September 1972.

SECTION 5

PROSPECTS FOR CARTELS

An international cartel is essentially a contractual agreement among producers domiciled in different countries that is formed "for the purpose of influencing or regulating the market by enterprises maintaining their autonomy" 21 International cartels regulate international trade on the basis of mutual understandings and common policy with regard to price and output. The aim of the cartel is to raise prices or reduce losses for its membership by restricting output or exports to consuming countries. As the objective of price and output control is to increase the income of the cartel membership as a whole, an action taken by the cartel as an organization is not necessarily in the interest of any specific member. A producer with low costs of production may seek to expand his own output and to persuade the cartel to increase the assigned shares of its members and hence to generate a higher total output. The prospects of international cartels being able to restrict supplies or raise prices, in the manner of the recent oil cartel, in commodities other than oil, has concerned recent legislative investigation. Since 1970 there has been a substantial increase in the prices of industrial raw materials and metals. The percentage increase in prices of non-ferrous and ferrous metals in the last four years has equaled that of the previous two decades. Some of these price increases result from special factors, for example the introduction of pollution control regulations coinciding with increases in facilities in the major industrial countries. This increase in costs, with accompanying price increases, acted to curtail demand and from that point of view would be expected to act as a depressant upon raw material prices.

But the determination on the part of producer countries to strive for larger shares of the final product price is based not on economic reasoning but on political considerations and judgments of distributive justice. This is particularly untimely; the traditional bargaining strength that may be enjoyed in the short run by suppliers of raw materials is likely to disappear as the world-wide boom which tightened the squeeze on supplies and prices of raw materials moderates. According to one important study 22 "there is no import and non-energy mineral which is in scarce supply in the foreseeable future." The study goes on to suggest evidence that shows reserves of such metals as iron and steel, aluminum, magnesium, nickel, molybdenum and cobalt

21 Kronstein. Heinrich, The Law of International Cartels, Cornell University Press, 1973.

22 Burrows, James C. Testimony before Subcommittee on Economic Growth, Joint Economic Committee. U.S. Congress, July 22, 1974. Also an unpublished paper by Fred Sanderson, "Future Mineral Requirements of the Industrial Countries and Some Legislation for the Developing Countries." (Except Group Meeting, UNCTAD, Geneva April 22-27, 1974).

"are large enough to support centuries of production while the possibilities of substitution (are numerous)". Indeed, the reserve estimates are conservative because the reserve figures apply to the existing deposits now identified and profitably exploited at prevailing prices. The trend in technology and price have both been downward as the capacity to produce minerals has been roughly proportional to land area explored, and exploration has been more widespread since the end of the Second World War. There have been few persistent situations in which the circumstances of an individual commodity permit its seller to raise its price to exploit the inelasticity of demand for the product. The more inelastic the demand with respect to a price increase, the easier it is to control supply. When the demand is inelastic the increase in price more than compensates for the decline in output sold, total revenues are raised. Producers are rarely able to exploit this situation, since each of them faces a more elastic demand curve and a curtailment of output leaves resources underemployed. It is difficult to maintain an effective cartel under these circumstances; if, in addition, unit costs are decreasing, the temptation to expand output will be there and prices will be reduced. It is difficult to maintain a cartel if prices are falling or if there is excess productive capacity, and one or the other of these conditions is likely to emerge sooner or later.

Despite recent price increases, the overall prices of minerals have been trending downward since 1950. Lead, aluminum, chromite, mercury are good examples. There have been either stable costs or slightly increased cost of production for other minerals but for the most part price increases have been temporary or slight. The closing down of inefficient facilities or environmental regulations, may have produced temporary shortages. However, most factors such as substitution and secondary recovery set an upper limit on supply price.

The question of security of supply posed by the oil embargo is primarily a question of the prospect of obtaining supplies from alternative sources should a producer boycott develop in any of the imported minerals. In the short run, such disruption will raise prices if demand is inelastic. But a supplying country attempting a boycott of the United States alone, while continuing to export to the rest of the world, would find the boycott ineffective as exports would be reallocated within the market system. For example, a threatened Chilean embargo on exports of copper to the United States did not stand up; although Chile accounts for about one-eighth of non-communist supplies, copper was available from other sources and the effectiveness of the embargo depended on other countries acting in concert. with Chile.

Even the best established cartel arrangement comes under severe pressure during economic declines. For the first time since the nineteen thirties, business activity has fallen off in all of the major trading nations at the same time, and tight money has made expansion plans less ambitious than in the recent past. It is too early to determine whether the attempt on the part of the oil exporting cartel OPEC, (Organization of Petroleum Exporting Countries) to reduce output reflects the softening of markets for petroleum products in the light of the decline in demand or whether it symbolizes the market power they possess. Historically, however, cartels have been weakest in the face of declining demand, and the demand for most mineral products, including oil, is closely linked to changes in business activity.