The thought that this could be because China produces “26 per cent of the world’s crude steel, 32 per cent of the rice, 37 per cent of the cotton and 47 per cent of the cement” just didn’t occur to him. Then again, people who cannot take an economic argument more than one step are not likely to put things like this in perspective. So let me try and give him a little help.

Steel is produced — surprise, surprise — from iron ore. Now the 1974 US Geological Survey estimated that the top kilometre of the Earth’s crust contained enough iron ore to last for 1,815,000,000 years at current rates of production. I don’t know about Gittins or the Lowy Institute but nearly two billion years supply of any resource rates is infinite in my book.

lime and silica make up about 85 of the ingredients for making cement. Silica is the second most abundant element in the earth while calcium is the fifth while iron rates as the fourth. Only a neurotic would worry about the supply of steel and cement. In the early ’70s the Commodities Research Unit in London calculated that the top mile of the earth’s crust held a million times more than the estimated reserves of most metals. With figures like this, why panic?

Worrywart Gittins is also anxious about the rice situation. Once again, what is missing is any historical perspective, not to mention commonsense. If China’s rice consumption was a genuine problem this would be reflected in rising prices for rice. Last time I looked rice prices were not a signalling a food crisis.

Nevertheless, let us turn to some comparatively recent history for illumination. In 1960 it took 1500 million acres to produce the world’s supply of grain; today it still only takes 1500 million acres. Without this 134 per cent increase in productivity we would now need about 3.5 billion acres for grain production. (It’s surprising the number of people who do not know that rice is a cereal).

J. H. Ausbel calculated that if world average agricultural productivity in grain rose by 5 tons per hectare (2 tons per acre) 10 billion people could enjoy an American diet on 75 per cent of the world’s current farming land. (American Scientist, March-April 1996). This, Mr Gittins, is not pie-in-the-sky thinking. His calculations were not only based on passed trends but on what is happening now. This miracle is being wrought by advances in science and technology. Nevertheless, Gittins still claimed that if “Chinese grain consumption per person . . . nearly 40 per cent of today's global grain harvest would be needed in China”.

Gittins is playing a cracked Malthusian record. Back in 1837 the American economist H. C. Carey pointed out that statistics in Eden’s History of the Poor showed that

In 1389, in securing the crop of corn from two hundred acres, there were employed 250 reapers and thatchers on one day and 200 on an other, On another day in the same year 212 were hired for one day to cut and tie up 13 acres of wheat and one acre of oats. At that time 12 bushels to an acre were considered an average crop, so that 212 persons were employed to harvest 168 bushels of grain, an operation which could be accomplished with ease in our time by half-a-dozen persons.

Carey’s is point is abundantly clear: there had been a massive rise in agricultural productivity in England. Raising agricultural output per acre is the equivalent of increasing the quantity of farmed land. Nevertheless, Gittins and the Lowy Institute are obviously writing as if the supply of agricultural land is fixed when in fact it, like oil or any other resource, it is a function of price and technology. There is, for example, huge amounts of land in the US that can easily be farmed to meet an increase in international demand.

But what about China’s huge population? But a population needs to be looked at not only in relation to available resources but also in terms of population density. China’s population density is 136 per square kilometre: the figures for Taiwan, South Korea, Israel, Holland and the UK are 636, 491, 302, 395, 243. I put it to Mr Gittins and the Lowy Institute that these figures strongly suggest that China’s real problem is not too many people but too few capital goods.

Gittins is worried about China’s “growing appetite for energy, food and raw materials, which perpetually threatens to outstrip supply and keeps upward pressure on prices”. Well we’ve already dealt with the food situation. As for raw material prices, Gittins makes the same inexcusable mistake he made with food production.

China’s stunted property rights and its small capital structure explain much of the pollution and mismanagement of her natural resources. To blame these problems on economic growth is to reveal a gross ignorance of what it really is. If Gittins and the Lowy Institute knew what they were talking about they would have taken into a account the fact that economic growth is a resource generating process.

History up to the present day is replete with examples of the market process finding new resources and substitutes when they have been most needed, from the substitution of coal for charcoal in 18th century England; of kerosene for whale oil and gas for kerosene; of steam for wind, animal and waterpower; of electricity for steam and gas; of aluminium for cast iron pots and pans; transistors for valves and optic fibres for copper cables. The list is never-ending and growing at a massive rate

The Lowy report paid a great deal of attention to the oil situation and the strategic problems it might cause. The devil, as it goes, is in the details — and the details is what is missing from this report as well as Gittins’ article.

Ali Al-Naimi, Saudi Minister of Petroleum and Mineral Resources, stated that his countries proven oil reserves have been greatly under-estimated and that the country “has 1.2 trillion barrels of estimated reserve," Al-Naimi told an international conference in April 2004, four times what is usually estimated.

Reading the likes of Gittins one would think that oil reserves are declining: in fact they have been rising. Peter Odell of Rotterdam’s Erasmus University observed that

since 1971, over 1,500 billion barrels have been added to reserves. Over the same 35-year period, under 800 billion barrels were consumed. One can argue for a world which has been ‘running into oil’ rather than ‘out of it’. (The Economist, 30 April 2005).

I think Michael Lynch of the Massachusetts Institute of Technology put the oil situation in perspective when in the 1990s he estimated there were 26 trillion barrels of recoverable oil, including unconventional oil but excluding coal liquefaction.

I think Gittins and the Lowy Institute fell into the old error of confusing a recent increase in the demand for oil with a long term increase in its price. They also failed to see that even if current prices proved to be a long term phenomenon this would not necessarily mean a shortage of oil or a fall in incomes. Long-term higher prices caused by a genuine increase in demand make alternative but costlier sources of oil economic to develop. In the meantime, increased capital accumulation would cause the cost of oil to fall in relation to real incomes.

Gerard Jackson is Brookes’ economics editor

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