In the 20th century, the world built a spectacular engine for economic growth, which delivered incredible, if deeply uneven, prosperity. Four key factors drove this engine.
- New technologies, especially those associated with the “second industrial revolution,” from the 1920s to the 1960s, across much of the OECD;
- Expanded labor inputs as a result of growth in the working-age population and higher female participation in the workforce;
- Urbanization, which acts as an accelerator for technological modernization and productivity growth;
- Increased use of resources: materials, water, land, energy and other forms of (largely unpriced) natural capital.
The first three factors are still in play. There is room to add new technology and many parts of the world economy have a huge “catch-up” opportunity. There is also still a population “growth dividend” in much of Africa, the Middle east and South/Southeast Asia — provided that education can be provided to the burgeoning populations of young people. (However, the developed countries and China are fighting the demographic headwinds of aging.) As for urbanization, the world as a whole is still in the middle of a long S curve, with brisk growth in many economies.
But the fourth factor — the use of natural resources — cannot last. And because of that, the 20th-century growth model will no longer work.
Over the next few decades, then, the world needs a resource revolution.