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According to Paltseva and Roine (para. 1), natural resources contribute to spending, labor income, and jobs. These resources support numerous jobs and offer employment to the residents of a country. Natural resources and the educated workforce are interconnected and it is of great importance for the state to generate a quality labor force via the attainment of higher education.
Before the globalization processes started, it was prudent to assume that natural and environmental resources had no competition because resources were in abundance and the economy was using them in an unlimited way. Wealth, jobs, and prosperity were got from these resources via the extractive industries. In turn, the industries converted the resources into commodities.
A healthy economy, and a healthy environment could be achieved, but not at the same time. Economic competition was not rife and most of the resources in the environment were free. However, the current scenario predetermines that there is the increased competition for the natural resources that continues to grow.
These resources are no longer abundant with the increase in human population that is depleting them. This essay will highlight the economic effects of the environment and the natural resources.
The Effect of Resources on the Economy
According to Poser (20), natural resources can no longer satisfy the human demands that are placed on them. Therefore, when the resources are allocated to a particular use, other application methods compete with the primary one. It is worth noting that such a trade-off means that the decisions to allocate the resources, like development and protection, generate costs and benefits.
They have ramifications for the present and future inhabitants of the nearby communities and the entire regions. In this paper, it is clear that a natural resource cannot satisfy the demand for the service and goods that it provides.
Subsequently, to understand the economic ramifications of the development or protection of the economic resources, one should understand the extent to which it will affect the aforementioned competition.
One should keep in mind that the economic value of the natural resources stems from their commercial demands, which entails their development or extraction. The term extraction refers to activities, industries, and the use of resources associated with the production of timber, grazing, mining, and various activities that electrically, physically, or chemically remove several elements from their sources.
The term development can be regarded as occupation of a site by structures set up by human beings. This occurs mostly in the event of urbanization. It also entails intense activities by the human beings such as conversion of open land into commercial and housing buildings, the change of the floral community in the forest, the development of recreational sites for the developing industries, and other aspects.
The commercial demand for the resources in the environment comes from the public and private enterprises. This is defined broadly to include the groups that sponsor the development and extractive activities. There are two types of demand for the natural resources. First, there is the identification of a specific development, or extractive use of a piece of land that possesses various characteristics.
These characteristics can cover the fact that it uses the resources in a direct manner, it depletes the stocks of a number of resources, and that it has a better position compared to the competitors with regard to economic competitiveness (Sarsby and Meggyes 39).
Although the identification of a particular use is purposeful, it is arbitrary. This kind of demand is mostly associated with extractive industries such as forestry, mining, and industrial farming. Generally, only a single commercial industry has benefits from some use of the natural resources.
In the public domain and protection of resources, the economic significance of various natural resources use is expressed in terms of incomes and jobs for the local populace and profits for the local firms. In several cases, the aforementioned commercial use manifests as the only way for the local residents to derive incomes, profits, and jobs from the natural resources in the area.
It is a common event that the extractive or development uses of land are allowed. This translates to gains for the local economy in terms of profits, incomes, and jobs. However, if there is a restriction of these services, then the land will lack a positive influence on the particular economy (Qazi and Qazi 207).
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Measures of Economic Benefits
Assessment of economic benefits is achieved through four measures which include labor, income, employment, and value added. To understand these impacts, the principal idea is that the economic impacts of the resources and other economic activities are widespread after assessing the linkages between the various sectors of the country’s economy.
This means that the economic activities related to the environmental resources spread the economic benefits via the multiplier effect. Mining and other businesses related to tourism spend money, hire workers in the economy, and this translates to further income and spending.
Hence, in the multiplier effect, the economic activities are directly connected to the resource base of the state and are amplified because their hiring and spending in the economy creates multiple income layers for numerous sectors (Qazi and Qazi 245).
The multiplier is an accepted and practiced technique that is used in the assessment of the ramification of business activities in the region. The basis for the calculation of the economic ramification of the environment and the resources via the multiplier effect is an example of the output-input model.
The analysis of the economic impacts entails the calculation of the extent to which environmental activities stimulate economic effects. Based on this assessment, the results from the aforementioned model quantify the effects of the cluster of business activities developed around environmental resources (Hackett 340).
Although the output-input analysis requires an advanced training on the economy for full understanding of the economic benefits, the elements may be stated in terms that are straightforward. To arrive at the overall economic impacts, economists have to assess the initial effects of purchases and payroll.
The economic effects mentioned above are referred to as direct. Subsequently, the induced and direct effects emanate from the local purchases and the payroll. The aforementioned effects are assessed through various measures, which include the value added, employment, labor income, and the overall economic impact. Total impact refers to the contribution of the resource to the economic activity.
It is a measure of the yearly value of services and goods that are associated with business activities, which rely on natural resources. Value added means the general contribution that a resource has towards a country’s economy.
Labor income is the contribution that the resource has on salaries and wages. Last, employment is the number of jobs that are associated with the aforementioned economic activities that are tied to the natural resources (Resosudarmo 50).
Specific Economic Activities
Recreational activities are the ones in which the benefits of the environmental activities can be assessed. Natural resources form the basis for most of the recreational activities in various parts of the world. These resources must be managed and their maintenance should be given the utmost consideration. Hunting, fishing, and wildlife viewing are also activities that are connected to economic impacts.
Most regions have departments that ensure the aforementioned activities are catered for based on their economic impacts. Coastal tourism is also an environmental resource that makes immerse economic contribution.
Most educated people prefer to reside in areas that have natural resources with high quality. Environmental resources are also sources of amenities, which make working and living in a particular region to be more pleasant (James 35).
Unlike the consumer goods that are purchased in specific stores, natural amenities’ consumption is catered for by the federal government or the state. In other locations, regulatory bodies deal with it. Mountains and beaches are environmental resources that help in attraction and retention of the skilled workers in various countries as this is directly connected to economic benefits.
Factors for the quality of life are vital factors in the recruitment and retention of the skilled workers and entrepreneurs. The ramification of the natural resources has been confirmed in numerous research studies that tend to look at the investors’ choices.
Some natural characteristics of a country could enhance its attractiveness. Moreover, to add to the income generated and the local jobs connected with spending on recreation process, it is clear that the amenities engender consumer surplus with regard to the economic value.
The surplus is the difference of whatever consumers are willing to pay for the amenities like lakes and beaches and the value that they pay for to enjoy the benefits.
Surveys have estimated that the economic value, which consumers place on various types of recreation like camping, hunting, wildlife, and swimming, translates to billion dollars. For countries that are endowed with the aforementioned resources, there is a huge value that reflects high economic benefits (United Nations 142).
Forestry is another environmental activity that provides the basis for economic activities. This form of natural resource has widespread economic ramification with activities line logging and forestry amounting to billions of dollars. These activities rank as the most significant parts of the manufacturing sector.
In the direct terms, the forestry industry of the state is the first in employment among the manufacturing sectors in many countries. When the economy is strong, the annual exports from the products amount to billions.
Generally, the export of forest products has grown and the exports are poised to attain significant growth in the future. Forestry has had immense impact on the economy of countries that are endowed with the resources because it is a source of employment opportunities (James 20).
Minerals are also environmental and natural resources that have an economic impact on a country. Mining activities such as quarrying are rampant in various parts of the world. This results from the endowment of the state with resources that are usable.
Quarries and mines extend to various regions and are in the rural and urban areas. The economic impact is huge with mining being a driver of the economy in many regions. It contributes to not only the value added but also to numerous jobs connected to the industry via induced, indirect, or direct effects (Resosudarmo 67).
Commercial fishing is also another domain in which the economic impact of natural resources can be assessed. In the recent past, various regions have witnessed the transformation of the realm of commercial fishing, which is vital in an economy that depends on resources.
Commercial fishing is a business that keeps alive the character of various regions. Presently, it includes a bubbling aquaculture industry in which fresh techniques have created new opportunities for businesses in a number of countries. Commercial fisheries have accounted for millions in revenue (Poser 10).
According to the aforementioned findings, natural resources contribute to spending, labor income, and jobs. Natural resources support more jobs and employment offers than any other asset in a state. It should also be mentioned that natural resources and the educated workforce are interconnected and complimentary.
On one hand, it is important that a state generates the quality of labor force through the attainment of higher education. The state also has to retain the educated population and this is assisted by maintenance of the integrity of the natural resources.
In addition to creation of jobs, natural resources help in preservation of the human capital because of the fact that educated people are mobile in nature, human capital, and amenities are complementary. Amenities like natural resources have a positive influence on the quality of life of a country’s residents.
A high life quality means that the residents have a high likelihood of remaining where they are. The natural environment is also influential in maintaining the health of its inhabitants (Poser 20).
Individuals benefit immensely from their contact with the nature. Hence, preservation of the natural resources is a part of the health strategy of a state. Overall, the true value of the natural resources is high. Therefore, they should be considered vital in the development of the economy.
The strategy of the state should be to focus on the rewarding business of the natural and environmental resources and enhance the quality of life of the state in the process. Thus, it should be a central part of regional and local economic strategies (Qazi and Qazi 35).
A Table Showing How the Economy Depends on Natural Resources
Source: Paltseva and Roine
In summary, the environment and natural resources have a huge economic impact that is felt in domains such as employment, which has a direct impact on the country’s inhabitants’ life quality. The promotion of the natural resources base should be a key in the development policy of all economies.
During the time of economic uncertainties, relevant departments need to utilize their resources in promotion of development that can translate to benefits of businesses. Natural resources play a great role in taking such economic decisions.
This essay has articulated the economic benefits of the environment and natural resources. It is important for a country to take care of its natural environment because of the accruing economic benefits. Several measures of how natural resources contribute to the economy have been assessed.
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