The above chart is The Economist's inflation-adjusted industrial price index with 1845-50 = 100 as its base. One does not have to be a mathematician to see that by 2000 the index had dropped by 80 per cent. What needs to noted is that is decline took place during a period of enormous population growth made possible by massive industrialisation, first in the West and then in Asia. The first spike in the demand for commodities was the result of the California and Australian gold discoveries, after which prices fell and then became comparatively stable despite a significant increase in demand. (This, Mr Turnbull, was because of increased efficiency).

The next spike was generated by WW I. Once the war was over commodity prices fell again. However, this was followed by plummeting prices caused by the Great depression. The next jump in prices was a product of WW II, after which they continued their secular fall. The next two spikes were inflation-driven. We can now deduce that China's demand for commodities — much of which is fuelled by monetary expansion — is just another temporary spike in the remarkable downward trend in commodity prices.

The likes of Turnbull could argue that this trend is unsustainable because resources are finite and that means prices must rise. This is an old greenie argument that has been discredited time and time again. For years the environmentalist doomsayer Paul Ehrlich had been predicting the emergence of massive shortages of natural resources. In 1980 Julian Simon, an economist, challenged Ehrlich. Simon allowed him to choose any five metals worth $1000 and then bet him that in 1990 the value of these metals would have fallen in real terms. The metals chosen were copper, chrome, tungsten, tin and nickel. Come 1990 the prices of these metals had fallen in real terms by 18.5% , 40% , 57%, 72% and 3.5% respectively. (Julian Simon, Population Matters: People, Resources, Environment & Immigration, Transaction Publishers, 1993, pp. 378-80).

What arrogant economic ignoramuses like Turnbull cannot seem to grasp is that economic growth is also a resource-generating process. It not only leads to the discovery of new resources and the development of substitutes, the process of capital accumulation embodies technological progress. This means that more and more inferior grades of ore become economic to mine, making resources infinite from a human perspective. In other words, the quantity of resources become a function of price and technology. The following table tells us why running out of natural resources is the least of humanity's problems.

Table S Measures of Mineral Consumption (in years)
Minerals	Known Reserves ÷Annual Consumption	U.S. Geological Survey’s Estimates of “Ultimate Recoverable Resources” (= I °k of Materials in Top Kilometer of Earth’s Crust) Annual Consumption	Amount Estimated in Earth’s Crust ÷ Annual Consumption
Copper	45	340	242,000,000
Iron	117	2,657	1,815,000,000
Phosphorus	481	1,601	870,000,000
Molybdenum	65	630	422,000,000
Lead	10	162	85,000,000
Zinc	21	618	409,000,000
Sulphur	30	6,897	NA
Uranium	50	8,455	1,855,000,000
Aluminum	23	68,066	38,500,000,000
Gold	9	102	57,000,000
Source:: Nordhaus (1974, p. 23)

Economic efficiency also has the same impact on agriculture, something that nineteenth century economists understood. The following quote makes this fact clear:

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. (Edwin Cannan, The History of the Theories of Production and Distribution from 1776 to 1848, Staples Press, 1953, p. 137).

This process works fine — until politicians meddle with it. The recent world hike in food prices is the fault of politicians who stupidly bribed farmers into producing grain for ethanol rather than for food. As expected, ignorant journalists also played a role in promoting this fiasco. For instance, Andrew Bolt wrote:

Look at our vast fields. All those crops, right to the horizon. See all that? Mulch it and ferment it and you have a sea of ethanol, a green petrol for the future*. (Andrew Bolt, Reap the good oil, Herald Sun, 11 August 2006).

Thanks in part to the infantile economics of ignoramuses like Bolt there have been food riots in Jakarta. So how was the Liberal Party reduced to a state where asinine statements masquerading as informed opinion became the order of the day? Because Party bluebloods like Michael Kroger and David Kemp have made it impossible for informed Liberals to make themselves heard.

Kroger has made sure that ordinary members of the party will not be allowed to use the Liberal Speakers Group as a means of communicating ideas and informed opinion to their fellow Liberals. In future only influential people (sic) — people like Bolt — will be invited to speak at the LSG. For those who think I exaggerate, let me remind you that last December David Kemp — who is the party's state president — tried to gag party members. To add insult to injury, he also said that Mr Julian Sheezel — State Director of the Victorian Liberal Party — had done an "exceptional job" during the federal campaign.

In fact, Sheezel was so "exceptional" he deliberately spiked information that would have contributed to the party's labour market reform campaign. Was this because Kroger had spiked the same information? Perhaps we should ask Mr Bolt, now that he has joined the Kroger camp.

Sheezel is Kroger and Kemp's puppet, and like them he too has worked to suppress the emergence of alternative ideas and open debate within the party. I think this goes a long way to explaining the gross economic stupidity of the Liberal Party hierarchy.

*Government MPs plan to rip millions off in subsidies for ethanol producers

Gerard Jackson is Brookesnews' economics editor