How Natural Resources Boost the U.S. Economy

6 Natural Resources That Gave America a Head Start

Natural Resources
A dramatic sunset sky over a soybean farm field in rural Tennessee. Photo: Malcolm MacGregor/Getty Images

Definition: Natural resources are materials from the Earth that people use to meet their needs. There are two major types of natural resources.

The first, renewable resources, are those that are used at a slower rate than they are replaced. These include water, wind and the sun. Two categories, plants and animals, are considered renewable even though many specific species are going extinct.

The second, non-renewable resources, are those that are used faster than Nature can create more.

These include crude oil, coal, and natural gas as well as minerals. The sun could be considered a non-renewable resource because one day it will burn out. But, most people put it in the renewable category since that will be millions of years from now,

Natural resources are one of the three components of supply. The other two are capital, or the amount of money in the society, and labor, or the number of employees. In a market economy, these components of supply are provided to meet demand from consumers.

America's Natural Resources Gave the Economy a Head Start

The United States was blessed with an unusual abundance of six natural resources. First, it has a large land mass that early on, became governed by one political system. Second, it was bordered by two large coastlines that provided food and later ports for commerce. Third, it had thousands of acres of fertile land, thanks to the Great Plains.

Fourth, it had abundant fresh water. Fifth, it was once under a great sea that created the oil and coal. Sixth, it was easily accessible via ocean or land, making it attractive to immigrants and creating a diverse population.

Large Land Mass

The geography and geology of the United States provided a tremendous comparative advantage in building our economy.

Only Australia and Canada have both similar size land masses that are not bordered by enemies, as China and Russia have. This large land mass under one nation allows economies of scale in government and businesses, which lowers the cost of providing services and products.

Coastline

America has 95,471 miles of shoreline, including the Great Lakes, which border 26 of the 50 states. The coast contributed $222.7 billion to Gross Domestic Product (GDP), creating 2.6 million jobs in 2009. (Source: "," National Oceanic and Atmospheric Administration, 2016.)

Almost three-quarters of these jobs are related to tourism and ocean recreation. But, the highest paying sector is oil drilling, which pays $125,700 per worker. The ocean also provides other industries, including ship and boat building, transportation, and shoreline construction. (Source: "," National Oceanic and Atmospheric Administration, 2016.)

America is fortunate to have a large coastline. Countries that are landlocked or have little access to the sea find that both exports and imports are more expensive. Commerce in landlocked countries is dependent upon the whims of another government. America's large coastline meant it was not bordered by hostile governments.

It allowed the United States to develop peacefully without the need to incur large war costs.

Farmland

Unlike Australia and Canada, the United States had temperate climates combined with fertile soil. The early settlers found rich soil on the Great Plains (the 502,000 square mile area between the Mississippi River and the Rocky Mountains). The Plains were a huge basin sculpted out by glaciers during the Great Ice Age. As a result, mountain streams from the Rockies deposited layers of sediment. These streams then cut through the sediment to create plateaus. These large flat areas were untouched by erosion. That created thick sod and productive agriculture.

But the Great Plains is semi-arid. It receives on average less than 24 inches of rainfall a year. The Plains became the bread basket of the world only after irrigation was put into place.

The water came from streams fed by the Rockies. (Source: "," United States Geologic Survey, 1980.)

Water

Lakes, rivers, and streams provide 80 percent of the water used in America. Although an astonishing 41 percent is used in the electric power industry. It cools electricity-generating equipment, but is returned. Agricultural irrigation uses 31 percent, but it is not returned. Families, businesses, and industries use the rest. Only 20 percent has to be pumped out of the ground to irrigate the semi-arid Great Plains. (Source: "," "," United States Geologic Survey.)

Oil, Coal, and Gas

America has the world's largest reserves of coal, at 491 billion short tons or 27 percent of the total. This abundant source of energy helped fuel U.S. growth during the Industrial Revolution. It was used to drive steamships and steam-powered railroads. After the Civil War, coke (a derivative of coal) was used to fuel the iron blast furnaces that made steel. Soon after that, coal ran the electricity generating plants and still does. (Source: "," CIA World Factbook, U.S. Department of Energy.).

The United States had huge reserves of oil that were easily accessible, unlike Canada's shale oil. As World War I was brewing, the United States converted its coal-burning Navy ships to oil. That made ships faster, extended their range, and allowed easier refueling. Oil was also easily available on the West Coast, allowing the Navy to extend its reach across the Pacific. Oil made possible many innovations, including cars, trucks, tanks, submarines, and airplanes. Scientists made trinitrotoluene (TNT) out of toluene, which they extracted from oil. The United States supplied more than 80 percent of Allied requirements during World War I.

After the War, oil supplied the power for the internal combustion engine. It also powered the machinery and petrochemicals needed to boost agricultural production. In 1920, America supplied two-thirds of the world's oil production.

The number of cars registered increased from 3.4 million in 1916 to 23.1 million in 1929. That allowed America to move away from public transit. By 1925, oil accounted for almost one-fifth of U.S. energy consumption, growing to one-third by World War II. Other countries only used oil as a secondary fuel, and it accounted for less than 10 percent of their energy consumption. When the giant East Texas oil field was discovered in 1930, overproduction became the main issue facing the oil industry. (Source: "," Journal of American History.)

By 1950, those reserves weren't as cheap. Saudi Arabia and other producers in the Middle East supplied oil more cheaply than U.S. fields could. By 2005, 60 percent of oil used in the United States was imported. In 2011, oil prices were high enough to fund low-cost exploration of U.S. shale oil. By 2015, imported oil only contributed 24 percent to U.S. oil consumption. For more information, see Shale Oil Boom and Bust.

People

America has more immigrants (43 million) than any other country. Most of the people who came had the courage and flexibility needed to survive in a new country. That’s one reason Americans are more willing to take risks. It's created lots of innovation, especially in technology. As a result, Silicon Valley is the world's leading tech center. 

This cultural diversity is a strength in groups if people remember their common goals. That's because it brings fresh perspectives based on different experiences. But it takes the willingness to be open-minded and nonjudgmental about the value the differences bring.

President John F. Kennedy, the grandson of Irish immigrants, summed it up well when he call America, "a society of immigrants, each of whom had begun life anew, on an equal footing. This is the secret of America: a nation of people with the fresh memory of old traditions who dare to explore new frontiers...." (Source: “Society of Diversity,” U.S. Embassy.)