Economics - Trends in Real Prices of Representative Mineral Commodities, 1890-1957

The price records of seven representative mineral commodities for the 68-year period 1890 through 1957 have been compiled and analyzed for significant trends. When these records are reduced to real prices in terms of dollars of constant purchasing power or to the purchasing power of industrial wages at average rates, a substantial overall fall in prices is revealed. This downtrend contradicts the widely held concept that heavy drafts on a mineral resource must lead to scarcity, reflected in rising prices. Three metals (aluminum, copper, and pig iron), two fuels (bituminous coal and petroleum), and two nonmetals (sulfur and cement) have been chosen because of their pre-eminence in their respective categories, their significance in an industrial economy, and the ready availability of their price records. It might be added that these seven commodities were selected before any price figures were compiled; none was selected or rejected to substantiate any preconceived notions as to price trends. The overall importance of the seven is demonstrated by the fact that, taken together, they composed over three-fourths of the value of all minerals produced in the U. S. in 1957. The first step in the analysis was to reduce the price records to a basis for significant comparisons. Two such comparisons have been made: 1) The quantities of each of the commodities that could have been purchased for an average hour's wage in each year, and 2) the unit price of each commodity through the years in terms of deflated dollars. These data are set forth in the accompanying table and two charts. The quantities of the mineral commodity purchasable with the average wage for one hour's work in all manufacturing industries through 1926 were based on annual average prices and on average annual wage rates determined by Paul H. Douglas and published in his "Real Wages in the United States, 1890-1926." The series was extended through 1957 by the Bureau of Labor Statistics, U. S. Department of Labor. Calculations based on these data show that the average worker could have purchased 1.28 lb of copper with his hourly wage in 1890, whereas his hourly wage would have purchased 8.11 lb in 1957, an increase of 633 pct in the 68-year period. An average hour's wage would have bought 10.85 gal of petroleum in 1890, compared with 33.04 gal in 1957. Even more spectacular is the increase in sulfur, of which 25.25 lb could have been purchased with the 1904 average hourly wage; 223.08 lb were purchasable with the wage in 1957—an increase of 883 pct. Comparable price data for sulfur are not available for years earlier than 1904. For every commodity, the calculations show an improvement in the wage earner's purchasing power in 1957 compared with the early years. Measuring purchasing power in terms of wages does not give an entirely fair picture of the availability of a commodity in an economy. When the efficiency of an economy changes and the balance shifts among such elements as raw-material production, manufacturing, and service trade, the economic significance of an hour's work changes. Partly to meet such criticism, but mostly to present another interesting measure of the response of minerals to changing market conditions, a second set of calculations has been made to deflate unit prices for the seven commodities into terms of 1954 dollars. To accomplish this adjustment to a common 1954 parity, the Gross National Product Price Deflator, developed by the Office of Business Economics, U. S. Department of Commerce, was used. Although the results of these calculations are not as striking as those based on labor's increasing purchasing power, nevertheless the declines outweigh the rises in the prices of the mineral commodities. In terms of these deflated prices, aluminum and sulfur are much cheaper today than in the early years; copper was substantially cheaper in 1957 than in 1890; pig iron and petroleum are little changed; and only bituminous coal and cement have increased substantially. Strangely, the two mineral commodities with the strongest reserve positions are the two to exhibit rising real prices. Now this apparent overall downtrend in prices has taken place during a period of almost fantastic increase in the demand for mineral products. The value of minerals consumed in the world during the period greatly exceeds all mineral consumption up to 1890. A stage has been reached in the U.S. in which 95 pct of the energy used is of mineral origin and in which machines, structures, roadways, communication facilities, and most other elements in the industrial economy are primarily of mineral origin. Even agricultural fertility is maintained, in large measure, by mineral fertilizers. A series published in Minerals Yearbook shows that the value of U. S. mineral products has risen from $615 million in 1890 to $18,000 million in 1957, a 29-fold increase. Even in deflated dollars, the increase has been eightfold, while population has expanded less than threefold. Not only are demands of the industrial nations— the U. S., countries of Western Europe, and Japan— increasing at rapid rates, but those countries with agrarian economies are calling themselves underdeveloped and clamoring to industrialize. The ever-expanding mineral requirements in the U. S. and throughout the world show no abatement. Mineral reserves frequently have been described as wasting assets. Much concern has been shown for future users, who have been pictured as finding themselves on a plundered planet. Conservationists have viewed the future with alarm and have demanded legislation and regulations to reduce the drain on mineral reserves.