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What happens during real resource austerity?

by A swedish kind of death Thu Aug 2nd, 2012 at 03:16:32 AM EST

From time to time there has been discussion here on ET on the impact (if any) of lack of real resources when it comes to the current crisis. In short, the question can be posed as if there is an element of resource austerity driving the political austerity. To find the answer I had a look at history and found a recent enough example of resource austerity.

What is resource austerity?
First for a definition. Resource austerity is the condition when an economy can no longer get natural resources at the high quantities and low prices that earlier was the case. As such it is a gradual condition, so to find a situation where it is a really big factor we want dramatic cuts in access to resources or dramatic price increases.

Choosing an example - Sweden during world war two
As example I have chosen Sweden during world war two. This is based on the topic being familiar to me, The League of Nations providing statistical information for the period and Sweden not being at war (only prepared for war) so you get rid of the direct effects of war like destruction and looting. In the diagrams Switzerland will also be included for two reasons, it had a similar history and it often was on the same page as Sweden in the League of Nations statistical yearbooks. However, I will not discuss Switzerland much, as my knowledge there is limited.

front-paged by afew


Resources and rationing
Building on experience from world war one Sweden prepared rationing as soon as the war broke out. Rationing card A was sent out before any goods needed rationing and was then applied to coffee and tea. The rationing system was built on starting rationing before stocks run low to ensure confidence in the system.

Sweden was also to a large extent cut off from the world markets during the war, though some shipping continued allowed by the combatting powers. For households the following goods were rationed.

Beredskapsmuseet - Föremål Beredskapsmuseet - Items
Kaffe, te, socker, tvätt- och rengöringsmedel, kakao, mjöl och bröd, fläsk, ost, sirap, risgryn, matfett, ljus, havregryn, korngryn, köttvaror, mandel, kryddor, makaroner, torkad frukt, ärter, grädde, potatismjöl, textilvaror, bönor, tobaksvaror, salt, soda, skor och ägg var de varor som ransonerades under 1939-1945.Coffee, tea, sugar, detergents, cocoa, flour and bread, pork, cheese, syrup, rice, cooking fat, light, oatmeal, barley, meat products, almonds, spices, macaroni, dried fruits, peas, cream, potato flour, textile products, beans, tobacco, salt, soda, shoes and eggs were the goods that were rationed during 1939-1945.

Access to oil was so bad that all was reserved for military use while the public had limited access to transportation based on wood gas. Even so wood gas was prioritised to military government and public (busses) and commercial transportation (taxis, delivery trucks). Shale oil was also extracted. Cycling was promoted.

Coal (for heating) was also rationed and largely replaced by firewood. Unfortunately I have not been able to find a picture I was searching for with what looks like defense walls surrounding houses. On a closer look you see it is firewood. Sweden has huge forests.

After the war the rationing was released gradually to avoid shocks to industries with 1951 as the end date of the last rationing.

Output, unemployment and inflation
Now for the fun, the graphs! First industrial output where two series span the period. They are roughly similar.

As can be expected, lacking access to resources lower the production. Not shown in the graph is the composition, but from the source we can see that construction falls dramatically with 1940 only having 14% of the construction of 1939. It then climbs but only in 1944 is the pre-war level beaten. Wood and paper also takes a significant hit and stays low. Iron, steel and machinery on the other hand increases throughout the war. Food production decreases in 1940 but stays over the production of 1934 and 1935 through the war, so I would guess it is the weather.

Now let's have a look at unemployment. Unemployment (Sweden reports only full unemployment, so I choose that for Switzerland too) goes up in Sweden in 1940, but then starts to decrease in quite dramtic fashion (even more so in Switzerland).

So more people worked, but produced less. More labour, less resources in the mix.

Switzerland decreased unemployment even more so, but I can't really say anything there so I'll leave it for informed commentators.

And finally inflation:

Whoa, that is a rollercoaster. I think it is safe to say that faced with increased costs of imported goods, Sweden and Switzerland to a large extent let that show in inflation. Imagine how much economic austerity would have been needed to avoid that inflation.

Conclusion
Faced with real resource austerity Sweden (and probably Switzerland) increased labour in production, reducing unemployment while production shrinked. Inflation was high during the transition phase. This was of course a political choice, one made easier by the rise of the labour movement and a war going on just outside the border.

Oh yeah, allmost forgot. If real resources were the driver in this crisis going on right now we would see inflation pressure. We don't so I think it is safe to say that resources is not the prime constraint of the economy right now.

Display:
Missed it in the industrial output graph, but all the graphs are based on Statistical Yearbook of the League of Nations §942-44, courtesy of Northwestern University Library. Statistics on National Income (think GDP) was only collected for Argentine and a bunch of Anglo countries, so nothing to use there.

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by A swedish kind of death on Mon Jul 30th, 2012 at 04:07:09 PM EST
Wood gasifier on tractor. Probably from Sweden and world war two:

CC from Per Larssons Museum

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by A swedish kind of death on Mon Jul 30th, 2012 at 04:10:45 PM EST
That tractor looks suspiciously like a converted car with a wood gasifier as a fuel source. Interestingly, when I taught Introductory Physical Science back in the late '60s, which was a lab based curriculum, one of the experiments involved heating wood splints in a test tube with a glass tube delivering the products into a bottle with water. One of the chief products was methyl alcohol as vapor, but that was after condensation. It would likely have been possible to run a small internal combustion engine off the evolved gas with a proper carburetor. The other main product was charcoal in the tube, which was almost impossible for me to completely clean. Those test tubes got set aside for the same experiment the next year.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Jul 30th, 2012 at 05:46:41 PM EST
[ Parent ]
with that kind of experience have you thought of making biochar for your garden soil?

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
by melo (melometa4(at)gmail.com) on Mon Jul 30th, 2012 at 10:55:11 PM EST
[ Parent ]
Yes, but in a smothered bondfire, not a test tube. My neighbor's father in law used to run charcoal kilns about 10 miles from where I live, but that would be overkill.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Jul 31st, 2012 at 12:57:40 AM EST
[ Parent ]
if i have my facts right, don't you live in the most deciduously biodiverse region on the planet?

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
by melo (melometa4(at)gmail.com) on Tue Jul 31st, 2012 at 09:34:07 AM EST
[ Parent ]
It is mixed forest with cedar, oak, hickory, ash, walnut, etc., etc. along with introduced species, including various pine, spruce, and fir trees along with ornamentals such as white magnolia, pink magnolia, tulip trees, ornamental pear trees, redbud, dogwood, and various cultivated fruit trees and bushes. From or on my property I have seen deer, turkey, roadrunners, red tail hawks, turkey vultures, grey squirrels, possums, racoons, woodchuck, rabbits, and, from what the cat has drug in, a chipmunk, wood rats, mice voles and a star nosed mole. We have robins, cardinals, titmice, mocking birds, house wrens, blue jays, brown thrashers piliated, redheaded and ladderbacked woodpeckers pretty much year round and seasonally I have seen painted buntings, indigo buntings, bluebirds, juncos, along with red and bluebreasted nuthatches. In addition I have heard owls and whipporwills as well as coyotes and have seen bats sweeping the twilight summer sky for insects. That is just what I can remember off the top of my head. We are part of the Eastern Woodlands fauna area, almost at the boundary between the northern and southern areas.  

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Jul 31st, 2012 at 02:53:49 PM EST
[ Parent ]
As I recall, all the flora of North America got concentrated there during the glaciations, hence the decidedly diverse deciduosity.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Wed Aug 1st, 2012 at 06:02:14 AM EST
[ Parent ]
The Ozarks have been above sea level and ice free for 400 million years, if I recall correctly. So, at a minimum, there would have been no glacial extinctions here, even if the ice sheet had reached this latitude elsewhere, which it did not. But we are part of a very ancient ecosystem, relatively.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Aug 1st, 2012 at 10:32:50 AM EST
[ Parent ]
But then you can't run a generator on the gas.
by njh on Fri Aug 3rd, 2012 at 12:43:05 AM EST
[ Parent ]
It is an EPA-tractor, which is apparently a particular Swedish cathegory. Started during the 30ies but really took off during the war.

Tractor - Wikipedia, the free encyclopedia

During World War II, a shortage of tractors in Sweden led to the development of the so-called "EPA" tractor (EPA was a chain of discount stores and it was often used to signify something lacking in quality). An EPA tractor was simply an automobile, truck or lorry, with the passenger space cut off behind the front seats, equipped with two gearboxes in a row. When done to an older car with a ladder frame, the result was not dissimilar to a tractor and could be used as one.

After the war it remained popular, now not as a farm vehicle, but as a way for young people without a driver's license to own something similar to a car. Since it was legally seen as a tractor, it could be driven from 16 years of age and only required a tractor license. Eventually, the legal loophole was closed and no new EPA tractors were allowed to be made, but the remaining ones were still legal, which led to inflated prices and many protests from people who preferred EPA tractors to ordinary cars.

IIRC, wood gas was once also used in some places instead of coal gas (way before coal gas was replaced by natural gas as the gas of preference).

My grandfather had quite a few stories about his experiences with wood gas (he drove deliveries during the war). Often involved getting stuck at a steep hill.

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by A swedish kind of death on Tue Jul 31st, 2012 at 04:18:29 AM EST
[ Parent ]
Just what I was thinking.  No way that's a tractor.
by rifek on Sun Aug 5th, 2012 at 11:33:29 PM EST
[ Parent ]
Next you will tell me that this is not a tractor concert:

Sveriges första EPA-konsert på Tjörn - Nyheter P4 Väst Sweden's first EPA-concert at Tjörn - News P4 West
I går hölls Sveriges första EPA-konsert i Skärhamn på Tjörn. Traktorkonserter har satts upp tidigare på ön, men det här är första gången EPA-traktorerna tog sig in på scenen.Yesterday was the first Swedish EPA concert in Skärhamn Tjörn. Tractor Concerts have been set up earlier on the island, but this is the first time EPA tractors made their way onto the stage.


Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Mon Aug 6th, 2012 at 01:19:05 AM EST
[ Parent ]
You ever get the feeling something's getting lost in translation?  I see now that what we're talking about is that peculiarly Swedish phenomenon, the A-traktor (Norwegian cousin tipped me off.).
by rifek on Wed Aug 8th, 2012 at 12:03:16 AM EST
[ Parent ]
Actually, the A-tractor class was introduced to replace the original EPA-tractors, but after protests the existing EPA-tractors remained although no new EPA-tractors can be registered.

A-traktor - Wikipedia A tractor - Wikipedia
Den principiella skillnaden mellan EPA- och A-traktorn är att A-traktorn måste vara konstruerad för en maxhastighet av 30 km/h +/- 10% medan EPA-traktorn skulle vara konstruerad med ett visst utväxlingsförhållande (10:1).The principal difference between the EPA and A tractor is that the A tractor must be designed for a maximum speed of 30 km /h /- 10%, while the EPA tractor would be designed with a specific gear ratio (10:1 ).

A-tractors are often called EPA-tractors too, so your Norwegain cousin was almost right.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Wed Aug 8th, 2012 at 08:04:19 AM EST
[ Parent ]
Isn't that what Powell presented the UN as a BioLab for WMD?
by Euroliberal on Tue Jul 31st, 2012 at 02:12:07 PM EST
[ Parent ]
<soundeffect>Snort!</soundeffect>
by rifek on Sun Aug 5th, 2012 at 11:36:53 PM EST
[ Parent ]
Not shown in the graph is the composition, but from the source we can see that construction falls dramatically with 1940 only having 14% of the construction of 1939.

Under which heading of the source is construction broken out? I don't doubt that it collapsed, but can't find the citation.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Jul 30th, 2012 at 05:54:58 PM EST
Mineral and Industrial Production (141-185) page 184 in the Yearbook, that is page 44 in the pdf. I relied most on Sveriges Industriförbund's (Swedish Industries organisation) breakdown as it both stretches further and is broken down in more useful cathegories. "Building" is furthest to the right.

Building : index based on the number of rooms in dwellings for which building permits were delivered, in eleven large towns.


Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Tue Jul 31st, 2012 at 04:01:42 AM EST
[ Parent ]
i imagine during real resource scarcity the ability to tinker in steampunky ways will become as valuable a skill as financial services is wrongly supposed to be today.

one might even hazard a possible inverse correlation!


'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Mon Jul 30th, 2012 at 10:58:29 PM EST
Yes, indeed. I see it as a problem that we now - as a matter of product policy - are making products that are getting harder to fix so that people will buy new ones instead.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Tue Jul 31st, 2012 at 11:57:17 AM EST
[ Parent ]
yes, it is The Problem.

it makes us addicted accomplices at such an early age.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Tue Jul 31st, 2012 at 02:23:58 PM EST
[ Parent ]
I do not have time right now but I can tell you a lot about this topic as Serbia was under sanctions for quite some time and I lived there at the time...

Science without religion is lame, religion without science is blind...Albert Einstein
by vbo on Tue Jul 31st, 2012 at 02:45:39 AM EST
I think both similarities and differences can be illuminating. I am thinking that the ideological trends could be interesting to take a look at, Sweden in the 40ies had the Soc-dems settled into power and central planning was by and large viewed as efficient, while the 90ies had neoliberalism spreading through the world not least through the work of IMF (Yugoslavia in the 80ies being one of the first victims).

For example in Sweden in the 40ies there was (of course) a black market but it seems to mostly have involved the usual small-time criminals and one of the few cases of corrupt official I remember was very low in the hierarchy (stole coupons that was to be discarded, iirc) and was punished with jailtime.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Tue Jul 31st, 2012 at 11:54:31 AM EST
[ Parent ]
Surely there is also the difference that a serious shooting war between major industrial powers is known to be time-limited. Whereas economic sanctions against a government the US State Department does not like are indefinite (not permanent, but without any forecastable termination condition).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Jul 31st, 2012 at 12:32:19 PM EST
[ Parent ]
 through the work of IMF (Yugoslavia in the 80ies being one of the first victims).
--------------------
Yes...in the 80ies there was a lack of foreign... money (to pay debts)  and in ex YU they found solution so we were not to import stuff like coffee, components for laundry powder,chocolate etc. so there was none of these stuff on the market.Black market obviously flourished and inflation started to kick , but it was nothing compared to what happened later... Also we were exporting electricity abroad and that's why we had to have restrictions. Then came Ante Markovic...Suddenly dinar : D Mark parity was 1:7 and stable and everything was better then ever before that people could remember.
But it did not last long...Markovic was kicked out by leadership of all republics and here came the war...

Science without religion is lame, religion without science is blind...Albert Einstein
by vbo on Wed Aug 1st, 2012 at 02:50:58 AM EST
[ Parent ]
I wonder to this day what actually happened and why? Why west let go of Markovic? My husband has a theory...

Science without religion is lame, religion without science is blind...Albert Einstein
by vbo on Wed Aug 1st, 2012 at 08:54:17 PM EST
[ Parent ]
It seems his recipe had similar consequences as elsewhere.

Ante Marković - Wikipedia, the free encyclopedia

He became prime minister in March 1989 following the resignation of Branko Mikulić. After that decision had become public, the U.S. had anticipated cooperation because Marković was known "to favor market-oriented reforms" [4] - the BBC declared that he is "Washington's best ally in Yugoslavia".[5] At the end of the year, Marković launched a new and ambitious program of unprecedented economic reforms, including stabilization of currency and privatization, as well as a program of limited trade liberalization. The result of his monetary reform was a temporary halt to inflation leading to a short-lived rise in Yugoslavia's otherwise plummeting standard of living. Nonetheless, the short-term effect of economic reforms undertaken by Marković led to a decline in Yugoslavia's industrial sector. Numerous bankruptcies occurred as the state-owned enterprises struggled to compete in a more free market environment, a fact later wielded against Marković by his many ethnic nationalist political opponents. By 1990, the annual rate of growth in GDP had declined to -7.5%. In 1991, GDP declined by a further 15 percent and industrial output decreased by 21 percent.


*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Thu Aug 2nd, 2012 at 03:45:48 AM EST
[ Parent ]
I was just going to comment on Serbia and Bosnia.

There were many articles about grandmothers in Serbia who had always warned their children to keep their woodburning stoves. There were a great many in use during the 1990s.

Don't make fun of me for getting my information from a comic book but, in Joe Sacco's "Safe Area Gorazde," Sacco goes to great lengths to write on some of the contraptions built to keep energy flowing. The people of Gorazde, surrounded on all sides, used jerry-rigged hydroelectric barges that were each connected to individual homes. Sacco drew a river full of them.

You can see the pictures here of the mini-centrales:

http://thefunambulist.net/2012/04/18/bosnia-gorazdes-mini-centrales-self-sufficiency-in-war-time/

by Upstate NY on Wed Aug 1st, 2012 at 01:19:59 PM EST
[ Parent ]
Oh yeah...you wouldn't believe or imagine what people can do when it is necessity...

Science without religion is lame, religion without science is blind...Albert Einstein
by vbo on Wed Aug 1st, 2012 at 08:58:52 PM EST
[ Parent ]
Something to read here:

http://www.transparentnost.org.rs/dokumenti/d012.html

If we for the moment forget about sanctions as such and just take in to account consequences of austerity, there are things to be learned here.
Our conservative leaders somehow have fate in private sector but all I can say is hahahaha...
With a globalization in place private investors are running around the globe and even if it is hard to follow the money it is kind of visible for those who want to see.Because money is hard to hide...

Science without religion is lame, religion without science is blind...Albert Einstein

by vbo on Wed Aug 1st, 2012 at 09:38:25 PM EST
[ Parent ]
European Tribune - What happens during real resource austerity?
If real resources were the driver in this crisis going on right now we would see inflation pressure.

In my opinion, we are. But

  • raw materials are a smaller fraction of GDP than they used to be
  • inflation from resource austerity is cancelled out by the deflation created by "stupidity austerity".

The fact that the central bankers haven't worked this out is one of the driving forces in the ongoing train wreck.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Tue Jul 31st, 2012 at 06:13:53 AM EST
raw materials are a smaller fraction of GDP than they used to be

That probably tells you something about the silliness of GDP but what does it tell you about inflation? We're certainly not less dependent on stuff than we used to be.

by generic on Tue Jul 31st, 2012 at 06:24:52 AM EST
[ Parent ]
well, GDP used to be dominated by the production of goods, where increased raw materials costs make a major impact and are generally passed on in increased price of the output. A GDP dominated by services would surely show a much diluted inflationary effect from raw materials.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Tue Jul 31st, 2012 at 07:20:48 AM EST
[ Parent ]
Why? What use is a massage when you need food transportation and clothes? And whoever provides services also needs all those things. Unless you can convincingly argue that resources have become less vital to our well being I don't see how the composition of GDP matters here.
by generic on Tue Jul 31st, 2012 at 08:23:36 AM EST
[ Parent ]
It's easier to shaft service providers out of wages to pay for those things than it is to shaft manufacturers out of goods to use in manufacture.

So raw materials shortages don't show up as much in the consumer price index, because service workers make do with less stuff.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Jul 31st, 2012 at 08:43:01 AM EST
[ Parent ]
Yes, the impact being worked through is a drop in real incomes. To the extent that wages and the labor markets are not sufficiently "flexible" to pass that drop in real income as a drop in nominal incomes, then it must work out as a pulse of high inflation.

Obviously holders of wealth in financial assets prefer the former, which concentrates the loss real income on wage earners, to the latter, which spreads the loss in real income into some of the high income households.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Aug 2nd, 2012 at 11:41:46 AM EST
[ Parent ]
and meanwhile, resource-driven inflation keeps headline inflation positive during wage deflation. Which lets central bankers get away with the outrageous lie : "we are delivering price stability".

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Thu Aug 2nd, 2012 at 11:57:53 AM EST
[ Parent ]
The unstated "... and income instability" need not be noticed if its not the incomes of the PTB that are unstable. If, indeed, they are either steady or rising, from windfall gains on resource ownership that tends to be concentrated at the top end of the income ladder, that would be good income instability, so long as the hoi polloi don't start a civil war or some such inconvenience.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Thu Aug 2nd, 2012 at 12:05:00 PM EST
[ Parent ]
it's all value-added now in the first world, tweaked to commodification. raw materials are getting more expensive, sure but it's the chain reaction on legions of middlemen jacking up their prices, genteely known as passing on costs to the customer, that really amplifies inflation.
new services are being dreamed up everyday to invent new markets, like new diseases being dreamt up to justify peddling more pharma to gulled idiots.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
by melo (melometa4(at)gmail.com) on Tue Jul 31st, 2012 at 09:31:50 AM EST
[ Parent ]
That is a good point.

Maybe I'll settle for the more limited point that economic austerity is not an effect of resource austerity. TARA and all that.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Tue Jul 31st, 2012 at 11:43:46 AM EST
[ Parent ]
I don't know about Sweden, but in the U.S. about 50% of the population was listed as "rural" in the 1930s, while now it's only about 20%. Being a farmer isn't easy in any conditions, but you're a lot closer to self-sufficiency if you have some land, some relevant technical experience, and a market system that allows local trading.

City dwellers are hosed if the electricity goes off.

by asdf on Sat Aug 4th, 2012 at 01:02:12 AM EST
That affects the specifics of a political answer to resource austerity, but I think the general pattern stays the same: Rationing, refitting and adapting to resources you have instead of imported resources.

Sweden for example had (and have) a ton of hydro, lots of forest but no hydrocarbons to speak of.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Sat Aug 4th, 2012 at 10:09:10 AM EST
[ Parent ]


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