Under the Status-Quo system, earth resources, along with production of these resources, is controlled by a handful of International Corporations. Artificial Scarcity is the condition resulting from limitation in any production stage of products and services which would otherwise be plentiful and inexpensive. One way of accomplishing this is through a technique known as Planned Obsolescence, which we’ll address here.
Artificial Scarcity characteristics:
- It artificially and unreasonably increases the price, as well as profits, of goods and services that would otherwise be inexpensive.
- It implicates a fear of not having to keep us fighting to have and store more.
- It fuels international wars driven by the illusion that there are basically not enough resources for everyone.
According to Paul D. Fernhout, creator of www.artificialscarcity.com, “Capitalism requires scarcity in order to operate, and in that sense, is defective by design if we aim to universal abundance. If there is universal abundance under capitalism, it needs to be privatized and locked away, otherwise capitalism will cease to function.” As we can see Artificial Scarcity is needed for certain economic systems to prosper, but it at the same time creates much bigger economic problems. For example, low paid workers can be endlessly pitted against each other for “jobs” at the lowest possible compensation, and hence divided and collectively swindled, forever.
– According to The Financial Times Ltd, unmet high demands to work and live in Britain’s successful capital makes its failure to provide sufficient space more evident. Moreover, the scarcity of London land for development is mostly artificial, and is largely coordinated by politics. Influenced by other examples by Singapore government, which owns 80 per cent of the homes its population inhabits, along with, Hong Kong, which imposes restrictions on foreign buyers to limit ownership and keep the resources in the family. In contrast with Singapore and Hong Kong, London has sufficient land that could be better utilized for development but government restrictions suffocate the supply of land and keep the prices high.
– Diamond is another great example of a plentiful resource that’s given artificially scarce status. Until the late 19th century, diamonds were found only in a few riverbeds in India and in the jungles of Brazil, and the entire world production of diamonds at that time amounted to a few pounds a year. Fast forward to 1870, when huge diamond mines were discovered near the Orange River, in South Africa, diamonds were being scooped out by the ton. The market was flooded with diamonds and the price that depended greatly on scarcity fell, to keep prices high and profitable The British financiers who organized excavations of the South African mines monopolized the market (a technique which we’ll discuss later on) and limited the production of diamonds in hopes to keep the prices high.
In light of these examples, Artificial Scarcity is a status and reputation where public demands could be met by better utilization of already available resources, but is often left unfulfilled due to various reasons such as price effect, political influences and governments and individuals’ hidden agendas.
Resources Monopolization is nearly complete control over natural resources that are critical to the production of a good. Dictatorship over a resource gives the owner of the resource the ability to raise the market price well over marginal cost without losing clients to competitors. In other words, Monopolization exists when single individual or enterprise is in control of a particular commodity absent of economic competition. This is a classic outcome of imperfectly competitive markets that allow the firm to determine the price regardless of demand or economic value.
Distinctive traits of Resources Monopolization
- Lack of competition.
- Exclusive rights of certain resources in a specific region or even in global market.
- Monopolized profits due to monopolized prices that do not correlate to demand or value.
- Monopolized resources market is usually associated with Barriers to Entry enforced to prevent new competitors from entering the market.
– De Beers Consolidated Mines Ltd, 19th Century.
A classic example of a monopoly based on resource dictatorship is De Beers Diamonds Ltd. The story begins when English-born businessman Cecil Rhodes started renting water bumps to diamond miners in South Africa in the 1870s. Rhodes sensed that he’d ventured into untapped market and started buying as many diamond mines as could, his collection of mines later became De Beers Consolidated Mines Limited in 1888. De Beers was named after a mine Rhodes bought in 1880 from two brothers “De Beer.” Exploiting the miners need for common infrastructure and to form diggers committees it only took a few years for De Beers to become the owner of almost all of South Africa Diamond mines.
By then De Beers had a complete control over the mines and hence the production of diamonds for most of the 20th century when Diamonds production was limited to India and Brazil. De Beers monopolized the Diamond market and eliminated competitions.
Absent of De Beers influence on such a rather otherwise inexpensive and useless gem, Diamonds would have a normal price tag of $2 to $30 given that it’s not actually scarce resource nor is it essential in any form.
Artificial Scarcity along with Resources Monopolization have tremendous effects that could last for centuries and are very difficult to neutralize as we’ve seen in previous examples, but they are not impossible to overcome and could be avoided. By employing the right intermediate enterprises that would act as the gateway to global markets, as well as overcome physical burdens and limitations on suppliers and buyers choices, buyers and suppliers will no longer be limited to what’s currently available in their region. For example, Tajerinn is a global e-commerce that specializes in raw material advertisement and procurement that aims to revolutionize commodity market trends and is committed to achieve global resources sustainability.
- The Financial Times LTD: http://www.ft.com/cms/s/0/d93b7036-fe19-11e4-8efb-00144feabdc0.html
- Artificial Scarcity Essay: artificialscarcity.com
- The Atlantic Magazine: http://www.theatlantic.com/magazine/archive/1982/02/have-you-ever-tried-to-sell-a-diamond/304575/
- Business Insider: http://www.businessinsider.com/history-of-de-beers-2011-12
- Kitco Metals Inc.: http://www.kitco.com/ind/Zimnisky/2013-06-06-A-Diamond-Market-No-Longer-Controlled-By-De-Beers.html
- Boundless: https://www.boundless.com/economics/textbooks/boundless-economics-textbook/monopoly-11/barriers-to-entry-reasons-for-monopolies-to-exist-70/resource-control-261-12358/
- Wiley Online Library: http://onlinelibrary.wiley.com/doi/10.1046/j.1439-0310.2003.00948.x/abstract