THE ROLE OF COMMODITY PRICES IN ECONOMIC RECOVERY*
The economic model which in my view is most likely to highlight the central problems facing the world economy is the one which looks upon the economic activities of the world as consisting of two large complementary sectors. One is the primary sector, which supplies food, raw materials and energy, all of which depend upon man's powers to exploit for his own use the natural resources of the planet. The other main sector is the so-called secondary sector, which consists of the production of finished goods out of the products of the primary sector. In a simple approximation we could refer to these two sectors as 'agriculture' and 'industry'. But not all primary products are agricultural; there are all the minerals and forms of energy such as coal and oil which are the result of mining. What is common to all of them is that they are 'landbased' activities in the production of which natural resources (or simply 'land' to use the classical expression) play an important role. Industry on the other hand is dependent on the flows of supplies of primary products, for the conversion of which it requires increasing amounts of labour and capital. However, the availability of labour and capital for industrial purposes cannot really be regarded as an effective limitation in itself except for short periods. The conversion capacity of the numerous industries of the world can be treated as given at any one moment, as the heritage of the past, but over longer periods it can be increased almost indefinitely, since on a global scale there are no practical limits to the increased employment of labour, whilst the accumulation of capital through additional investment is but a facet of the increase in industrial production and a more or less automatic consequence of the increase in demand for manufactured goods.
The classical economists, Adam Smith and his followers, were____________________