THE GROWTH DELUSION AND HANDLEBAR TAPE

The world is running on empty says CIWEM executive director Nick Reeves

How do you successfully break a mistaken and destructive intellectual and economic consensus? How do you persuade world leaders that 21st century problems cannot be fixed with 20th century economics?

The UK is no longer a front-line developed nation and has fallen behind Brazil in the league table of economic powers. It will take a lot more than handlebar tape to get a grip on things. We need to think in different terms and get a proper fix on our place in a world that is running on empty.

The economic crisis of 2007 was a car crash in slow-motion. The driver wasn't fit. And it was frustrating because nobody warned us and the banks danced to the speculative tune. Now economists can calculate a much more dangerous event that is being greeted with even less concern: our world is rapidly running out of resources - of water, energy, metals, phosphorous and food. The data is not in dispute. The market is reflecting what our leaders ignore.

The Industrial Revolution allowed us to make technological progress in delivering resources, outweighing the increasing marginal effort to dig ever deeper and chase lower-quality ores, for instance. The average price of 33 commodities (equally weighted) declined by 70 per cent (after inflation) between 1900 and 2002. Then, abruptly and without any particular crisis, prices reversed and in ten years the average commodity tripled to give back the advantage of the previous 100 years. It is perhaps the most important 'phase' change of modern times, yet it attracted, remarkably, little attention or concern.

The causes are not hidden: there has been an explosion in population and consumption since 1800 and the birth of the 'Hydrocarbon Age'. Global population has increased from one billion to seven billion, tripling even in my lifetime. At the same time, consumption of hydrocarbons and some metals increased one hundredfold. Initially, with few people and extensive high-grade resources, this did not show in prices, but more recently, with population growing still faster than ever in absolute terms, we have had to absorb an unprecedented surge in demand per capita from India, with its 1.2 billion people (growing at over seven per cent a year) and China, with almost 1.3 billion (growing for over 20 years at ten per cent a year), a rate that will double consumption every seven years. China last year accounted for a jaw-dropping 53 per cent of the world's cement use, 48 per cent of its iron ore and 47 per cent of all the coal used. How could reserves not wither away under this attack and prices not rise? We have every reason to be fearful.

Low-cost, high-grade coal, oil and natural gas - the backbone of the Industrial Revolution - will be a distant memory by 2050.  Much higher cost remnants will still be available but they will not be able to drive our growth, our population and, most critically, our food supply, as before. Conventional food production is dependant desperately on oil for insecticide, pesticide and fertiliser, and for transportation over thousands of miles. Modern agriculture is an industry that converts oil into food.

It will require brave political decisions to survive the loss of depleted hydrocarbons without risking economic collapse. If we permit the population to grow to the levels predicted, and if we don't curb our greed, we must find the capital - while we still have it - to build very large-scale, very smart electricity grids, across Europe and North America, fed by increasingly efficient wind and solar power and other renewables that may come on stream.

Once they are built, the marginal operating cost will be much lower than our present hydrocarbon-dependent system and, critically, cost will be constantly falling while hydrocarbon costs rise. This will be a great threat to the giant hydrocarbon multi-nationals, several of which fund well-organised obfuscation and propaganda campaigns to reinforce our wishful thinking. Carbon dioxide has lost its greenhouse effect, they say, and coal is clean! In the US, even larger investments are made: Congress is bribed (legally) to ignore both climate science and the logic of finite resources.

Metal resources are the stuff of nightmares because entropy is merciless. Every time you use a metal, some is lost. European countries recycle between 40 per cent and 80 per cent - the US is worse - yet at even 90 per cent these precious resources will slip through our fingers. So frugality is needed, because even an economy with zero increase in physical output will slowly lose its metals. But which politician has the nerve to talk about the necessary zero growth in population and physical output?

The most immediately threatening shortage is in our food supply, and not just from oil constraints. The bigger threats lie in four limiting inputs: water, soil, potassium and phosphorus. We build homes and grow food in deserts and over-pump irreplaceable underground water. (Already, about 300 million Indians and Chinese, among others, are fed by over-pumping reserves that will inevitably run out.) We waste over half our global water supply and we totally misprice it. For most countries, all of this can be fixed. Yet some over-populated, poor nations have a more intractable problem and water scarcity will cause increasing friction for them. Water wars is here. It's happening now.

Land availability and erosion are also limiting our ability to grow food. Over the millennia, we have lost about one-third of our land, turning it into desert and stone. We build new cities on our best river valley soil, which is replaceable only with more marginal land. There are no New Worlds or new Midwests. The land we have - eroded by wind and water - loses one per cent of its soil each year, about 100 times the rate of natural replacement. If sustained, this erosion would bring our species to its knees. But the problem can be solved relatively easily by moving towards no-till, in which crop residues protect the soil against the elements. We need to move rapidly, though: to 100 per cent from less than ten per cent, globally, today.

The limits on phosphorous and potassium are terminal potentially. They are elements and cannot be made. There is no substitute for them. They are vital for the growth of all living things, vegetable or animal (we humans are one per cent phosphorus by body weight). And these irreplaceable nutrients on which modern agriculture depends are mined and are steadily depleting. So what will happen when the reserves run out?

The only glimmer of hope would be if the world went organic - nurturing the soil with worms, fungi and complex micro-organisms and avoiding use of pesticides and insecticides. Organic farming extends critical fertiliser resources many times, perhaps at best approaching the rate of natural replacement from bedrock. However, organic farming is just one per cent of the agricultural total, and we will, typically, wait for a greater crisis in fertiliser prices before we move.

Finally, global warming's most reliable consequence is weather extremes - droughts and floods, which have badly hit production, will continue to do so. Far from being alarmist, scientists have consistently under-predicted the speed of environmental decline, failed to address population growth, and so we slalom our way to hell. Scientists, with a few brave exceptions, are fearful of being criticised as doom-sayers and exaggerators - a terrible academic crime - even though underestimating, in this case, is far more dangerous and irresponsible. (Arctic ice-melt is already at levels that, 15 years ago, were predicted for 2050.)

Both population and yield per acre for grains are growing at 1.2 per cent a year.  A stand-off? You bet. Population growth will slow, but so will productivity as we approach the limits of each grain species. How, with no safety margin, will we find the extra grain necessary to produce meat for the growing middle class of developing nations when a single pound of dressed beef displaces 30 pounds of grain?

There will be a single painful answer to all of these questions - rationing through price. We the rich nations can and will be careless with our resources for decades longer, but only at the cost of pushing prices up unnecessarily fast and thereby inadvertently forcing the poor into malnutrition and outright starvation. A typical developed country now spends ten per cent of its income on food; Egypt spends 40 per cent. You can see easily that, if food prices triple again in the next 30 years as they did in the past ten, the numbers will not compute. A growth-reducing and lifestyle-eroding irritant for us will become life and death for them.

Greater income equality in such countries and better education, especially for women, would help lower population growth and increase productivity. Less corruption and more efficient distribution of the food available, especially in India, would buy decades of time. But this is who we are: a species given to corruption, incompetence and self-interest. Capitalism sucks because it believes that its remit is exclusively to make maximum short-term profits - come hell or high water.

We could solve all our problems if only we were the efficient, rational human beings of standard economic theory and had politicians willing to think in the long-term interest of their people rather than their own. Perhaps later, as the crisis grows, as failing states threaten to destabilise global politics (resource pricing already played its part in the Arab spring) and China throws its increasing weight around in its correctly perceived great need for more resources, the developed world will act with resolve, as the US, the UK and others did so well in the World War II. We must hope so.

Fortress North America with (per capita) five times the water and seven times the arable land of China, has the capability and willingness to ignore this global problem for now. Yet eventually it, too, will be dragged kicking and screaming into world turmoil - just as it feared would happen in the 1930s - and share the pain.

In the meantime, countries such as Egypt, with surging populations, escalating food import bills and widening trade deficits, cannot afford to feed their people. Who will do it for them? We rich countries cannot even make the tough political decisions required to keep our own resource prices down, let alone worry about others. This attitude is epitomised by the use of one-third of the US corn crop (the world's biggest) for desperately inefficient ethanol production as a subsidy for already rich farmers. To fill a 4x4's tank once would displace enough maize to feed one Indian farmer for a year.  One day, this will be seen as the moral equivalent of shooting some of the world's poorest people, but more painful.

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