To endure in this competitive market, industries need three important
resources: inexpensive Raw materials, inexpensive Energy, and
inexpensive Labor (or REL for short) to lower their cost of production.
As long as REL is low, the final product is less expensive.
In many industries, technology also adds to the cost of the product
or services. For example, in the pharmaceutical industry, the cost of
research substantially adds to the cost of the product. (In this book,
when referring to REL, it includes the labor investment to develop
technology.)
Although many times, raw materials and labor pose problems and
increase the cost of the product, industries quickly find alternative
solutions to solve the problem. For example, if wood and steel become
prohibitively expensive because of a sudden shortage, industries
will quickly replace them with alternative materials like plastic,
rubber, or other alloys. Having already gone through the plastic era
in our lifetime, we have witnessed how plastic rapidly replaced many
traditional raw materials. Though it is not a permanent solution, this
“band-aid” quickly became an easy fix. Industries continually look for
and research alternative materials to make a product cheaper and/or
with better quality to win in the competitive marketplace.
Similarly, if labor becomes expensive in one area of the world, industries
hire labor from other areas in the region. To make products cheaper and
to survive in global competition, businesses are constantly looking for
low cost labor, not at a national level, but at a global level. The eventual
result of this labor fickleness is, of course, the dreaded “outsourcing”
that robs employees in one country/state while rewarding employees
somewhere else, often a world away.
Outsourcing started a few years ago, with developed countries looking
for low cost labor in less developed countries. This outsourcing has
helped develop those countries as well. The standard of living in many
less developed countries has increased due to this. Many countries
that used to provide low cost labor are also becoming more expensive.
Industries in developed countries will continue to hunt for even lower
cost labor elsewhere.
The most important factor in the REL resource group is energy, which
affects industries globally. When the economy grows at a steady pace,
the increased demand for energy makes it expensive and, in turn,
increases the cost of all goods and services. When that happens, the
buying capacity of people decreases. This slows down the economy.
This fluctuation in energy demand/supply is one of the major causes of
economic boom and recession.
The graph below shows the world’s continuously increasing energy
consumption since 1775.

<Page 15 at below link>

Humans are depending on resources like coal and oil, which have huge
production backlogs. For example, an oil refinery takes nearly a decade
to complete a turnkey project from start to finish, which is far from an
overnight answer to a very critical demand. With this kind of serious
bottleneck in place, energy production always lags behind demand and
quickly reaches the limit when demand exceeds supply during sudden,
or even steady, economic growth.
The graph below shows the effect of energy bottleneck on the global
economy in the near future. [Author’s perception]

<Page 16 at below link>

With this energy bottleneck, our technological evolution is like a bird
learning to fly. Until its wing muscles become stronger, it keeps falling.
Until we find a great source to produce energy, we will keep hitting
this bottleneck and endure economic recessions.
Similar to energy bottleneck, there are many other factors that are
responsible for economic recession. Every recession takes years to
recover from and more than a decade to regain the lost momentum.
The economy in US, Europe and other countries around the world has
collapsed several times this century; this has been a painful experience
for all of us.

-By RS Amblee
Author of "The Art of Looking into the Future: The Five Principles of Technological Evolution"

Amazon Link:
http://www.amazon.com/Art-Looking-into-Future-Technological/dp/0983157405/ref=pd_rhf_gw_p_t_1

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