That means that less available equates to less Resources Credits available. In turn, not only can less activity occur on-chain, expansion is stunted.

I don't think this is accurate. The rate of RCs required for operations on the chain is not constant. If RC become more scarce (due to less HP), fewer RCs will be required to transact. The RC system is set up to control excessive resource usage, but it can do so at a lower (or higher) price in terms of RCs.