Exploitation of natural resources

The exploitation of natural resources describes using natural resources, often non-renewable or limited, for economic growth or development. Environmental degradation, human insecurity, and social conflict frequently accompany natural resource exploitation. The impacts of the depletion of natural resources include the decline of economic growth in local areas; however, the abundance of natural resources does not always correlate with a country's material prosperity. Many resource-rich countries, especially in the Global South, face distributional conflicts, where local bureaucracies mismanage or disagree on how resources should be used. Foreign industries also contribute to resource exploitation, where raw materials are outsourced from developing countries, with the local communities receiving little profit from the exchange. This is often accompanied by negative effects of economic growth around the affected areas such as inequality and pollution.

The exploitation of natural resources started to emerge on an industrial scale in the 19th century as the extraction and processing of raw materials (such as in mining, steam power, and machinery) expanded much further than it had in pre-industrial areas. During the 20th century, energy consumption rapidly increased. Today, about 80% of the world's energy consumption is sustained by the extraction of fossil fuels, which consists of oil, coal and natural gas.

Another non-renewable resource humans exploit is subsoil minerals, such as precious metals, mainly used to produce industrial commodities. Intensive agriculture is an example of a mode of production that hinders many aspects of the natural environment, for example the degradation of forests in a terrestrial ecosystem and water pollution in an aquatic ecosystem. As the world population rises and economic growth occurs, the depletion of natural resources influenced by the unsustainable extraction of raw materials becomes an increasing concern. The continuous alteration of the environment through water, mineral, and forest exploitation poses increased risks of climate-based displacement and conflict stemming from scarcity, which threaten to perpetuate social inequities.

Natural resources are not limitless, and the following consequences can arise from the careless and excessive consumption of these resources:

Natural resources are vital for human survival, however, if their consumption surpasses their natural replenishment rate, the resources can become depleted. According to the United Nations Food and Agriculture Organization, around 33% of the Earth's soils are presently classified as moderately to highly degraded, with projections indicating that more than 90% could face degradation by the year 2050 and thus cause significant economic consequences. With such rate of erosion of fertile soil, agricultural commodity prices tend to increase significantly. The connection between the consumption rate and the supply rate of resources holds significant implications for long-term economic growth, as sustained high consumption rates of certain resources ultimately jeopardize economic sustainability. For instance, in the case of extracting soil minerals, supply rate is exceedingly slow over geological time spans, inevitably leading to a consumption rate surpassing the supply rate. Such a scenario is evidently unsustainable in the long run. To ensure sustainability, the consumption rate must remain equal to or less than the supply rate.

There has been an ongoing debate among scholars and researchers on the economic implications of dependence on natural resources. Natural resources yield economic rents that can be allocated towards public welfare initiatives and other projects beneficial to local communities. However, in the long term, uncertainties linked to potentially unstable terms of trade for commodities might lead to decline in public finances and deter investment. For instance, if oil prices decline, it may lead to fiscal unease in significant petroleum-producing countries such as Russia, Qatar, and Saudi Arabia. Resource abundance challenges the progress of political and governance institutions by nurturing a culture of rentierism. For instance, revenues obtained from resources can be used for political manipulation. Additionally, extra capital from resources can dilute government accountability to both citizens and businesses by abandoning taxation completely, which leads to lack of government incentive to support economic growth through innovation. At the same time, citizens may lack the motives to advocate for better governance and transparency.

Because of environmental pollution, cities whose economies rely on natural resources face difficulties in attracting technology-driven businesses and skilled labor, posing significant challenges to their economic transformation and advancement. These resource-centric cities face disadvantages in the competition among local governments striving for environmental quality. Analyzing panel data spanning from 2005 to 2017 for 30 coal-mining cities, it's been discovered that environmental regulations offer a new approach to potentially reversing the adverse effects of resource dependence, and thus fueling greener sustainable development in coal-mining regions.

Despite the inevitability of environmental contamination associated with resource extraction because of current mining technologies, this pollution delays residents' engagement in agricultural and aqua cultural activities, which are negatively influenced by environmental conditions. As a result, these cities tend to rely heavily on a singular economic development model centered around resource exploitation, making them ill-equipped to address environmental crises effectively. Economic gains from natural resources are mostly beneficial when directed towards initiatives such as job creation, skill enhancement, capacity building, and pursuit of long-term developmental objectives. Thus, reliance on one or more natural resources holds financial risk when aiming for a stable economic growth.