As I mentioned in the previous post, recently the Wall Street Journal published an article, New Limits to Growth Revive Malthusian Fears, with an interesting graphic at the bottom.
Here’s my redering of the WSJ data regarding how US commodity prices and world population have changed over time:
The CRB Spot Index is based on the prices of these goods:
- burlap, cotton, print cloth, wool
- butter, cocoa, lard, sugar, rosin, rubber, soybean oil, tallow
- corn, wheat
- hides, hogs, steers
- copper scrap, lead scrap, steel scrap, tin, zinc
Notes:
- fossil fuels are not involved in this index
- the index is not adjusted for inflation
- to grossly understate the case, the upward trend in the last six years is worrying
I’ve overlayed the population curve on the graph to emphasize (as did the WSJ article) that rising prices are not solely the result of central bankers putting more money into the economy. Since minerals and other natural resources like good agricultural land are finite resources, population growth and rising per capita consumption must force prices up — unless counterbalanced by rising productivity.
A couple of weeks ago I made essentially the same case, suggesting that inflation has been tightly bound to the price of oil (a commodity) rather than the actions of central banks, and offered this chart:
And this one annotated with past oil crises and the coming of age of the Asian “miracle” economies:
The message is clear. With the CRB spot index doubling and the price of oil tripling in the last 6 years, productivity increases have not been able to address increasing demand (more people coupled with increasing per capita consumption) and diminishing resources.
Consider this graph, from an earlier post:
Here, the trend from 1950 is horrible. It’s little solace to see CO2 per capita (maybe) leveling off while total CO2 emissions and population continue a steady increase.
All of the above in one go:
And with some smoothing to make it easier to digest:
The 1st and 2nd oil crises were artificial, that is, politically motivated not the result of real production limitations. The spike in oil prices of the last six years, however, is not a political statement. What if that spike reflects actual cost? What if the spike in the CRB spot index is not the result of financial hocus-pocus by central bankers and commodity traders but a reflection of reality on the ground?
Justin Lahart, Patrick Barta, and Andrew Batson — the authors of the WSJ article mentioned above — put it this way:
Steady increases in the prices for oil, wheat, copper and other commodities — some of which have set record highs this month — are signs of a lasting shift in demand as yet unmatched by rising supply.
As the world grows more populous — the United Nations projects eight billion people by 2025, up from 6.6 billion today — it also is growing more prosperous. The average person is consuming more food, water, metal and power. Growing numbers of China’s 1.3 billion people and India’s 1.1 billion are stepping up to the middle class, adopting the high-protein diets, gasoline-fueled transport and electric gadgets that developed nations enjoy.
The result is that demand for resources has soared. If supplies don’t keep pace, prices are likely to climb further, economic growth in rich and poor nations alike could suffer, and some fear violent conflicts could ensue.
And they talked with one of the most cited economists of our time:
As a young economist 30 years ago, Joseph Stiglitz said flatly: “There is not a persuasive case to be made that we face a problem from the exhaustion of our resources in the short or medium run.”
Today, the Nobel laureate is concerned that oil is underpriced relative to the cost of carbon emissions, and that key resources such as water are often provided free. “In the absence of market signals, there’s no way the market will solve these problems,” he says. “How do we make people who have gotten something for free start paying for it? That’s really hard. If our patterns of living, our patterns of consumption are imitated, as others are striving to do, the world probably is not viable.”
…
But Mr. Stiglitz, the economist, contends that consumers eventually will have to change their behavior even more than then did after the 1970s oil shock. He says the world’s traditional definitions and measures of economic progress — based on producing and consuming ever more — may have to be rethought.
reflections
When politicians or corporations find out there is some bad news about to break, they mitigate the damage by coming clean about their involvement. It’s time for environmentalists do the same.
The bad news is we need higher prices for food and fossil fuels to provide the market signals necessary to change economic behavior. It’s important, but not enough, for activists to point out the problems of population growth, consumption growth, and the damaged incurred by burning fossil fuels, but only clear market signals actually change behavior quickly and dramatically enough to affect positive outcomes.
Inflation of food and fuel prices is just the ticket. When it’s not driven by governments printing money willy-nilly, inflation reflects the reality on the ground. Increasing demand meets finite supply.
Only after accepting this can we begin to meaningfully address the need to:
- make family planning services ubiquitous
- ensure all women have the same political and economic rights as men
- ensure all children get a sound basic education
- provide a social safety net for everyone (food, shelter, medical care, jobs)
- build a new economy based on ecological health and limited natural capital
- reduce consumption to sustainable levels
Any other alternative says some people deserve to live well while using a large share of environmental resources and others should simply get out of the way and die.
We can create a Dickensian world or one that’s better. It’s our choice.
notes
US commodity data from Commodity Research Board (CRB) Spot Index of 23 markets, B7. (Same source as the WSJ article.)
YAFP.
Yet Another Fine Post.
Dear Trinifar,
Nothing that follows will be news to you; nevertheless, others might find some benefit.
I am imagining that the following questions are rhetorical ones to many people this blog.
“Why are politicians and skeptics so willing to risk their future and everyone else’s future on blindly clinging to a course of action that has a high probability of leading to a seriously crippled future? If you even suspect that global warming represents a serious risk to your survival (and we have far more than suspicion these days), why wouldn’t you do everything protect and conserve your planet?”
It would please me to hear from others; but from my humble perspective the “answers” to these questions are all-too-obvious.
The leaders in my generation of elders wish to live without having to accept limits to growth of seemingly endless economic globalization, of increasing per capita consumption and skyrocketing human population numbers; our desires are evidently insatiable. We choose to believe anything that is politically convenient, economically expedient and socially agreeable; our way of life is not negotiable. We dare anyone to question our values or behaviors.
We religiously promote our shared fantasies of endless economic growth and soon to be unsustainable overconsumption, overproduction oand overpopulation activities, and in so doing deny that Earth has limited resources upon which the survival of life as we know it depends.
My not-so-great generation appears to be doing a disservice to everything and everyone but ourselves. We are the “what’s in it for me?” generation. We demonstrate precious little regard for the maintenance of the integrity of Earth; shallow willingness to actually protect the environment from crippling degradation; lack of serious consideration for the preservation of biodiversity, wilderness, and a good enough future for our children and coming generations; and no appreciation of the understanding that we are no more or less than human beings with “feet of clay.”
We live idolatrously in a soon to be unsustainable way in our planetary home and are proud of it, thank you very much. Certainly, we will “have our cake and eat it, too.” We will fly around in thousands of private jets, own fleets of cars, live in McMansions, exchange secret handshakes, go to our exclusive clubs and distant hideouts, and risk nothing of value to us. Please do not bother us with the problems of the world. We choose not to hear, see or speak of them. We are the economic powerbrokers, their bought-and-paid-for politicians and the many minions in the mass media. We hold most of the Earth’s wealth and control the power it purchases. If left to our own devices, we will continue in the exercise of our ‘rights’ to ravenously consume Earth’s limited resources; to expand economic globalization unto every corner of our natural world and, guess what, beyond; to encourage the unbridled growth of the human species so that where there are now 6+ billion people, by 2050 we will have 9+ billion members of the human community and, guess what, even more people, perhaps billions more in the distant future, if that is what we desire.
We are the reigning, self-proclaimed masters of the universe. We have no regard for human limits or Earth’s limitations, thank you very much. We are idolaters of the global political economy. Please understand that we do not want anyone to present us with scientific evidence that we could be living unsustainably in an artificially designed, temporary world of our own making…… a manmade world filling up with distinctly human enterprises which appear to be approaching a point in human history when global consumption, production and propagation activities of the human species become unsustainable on the tiny planet God has blessed us to inhabit……..and not to overwhelm, I suppose.
Sincerely,
Steve
Dear Steve,
How about my generation? I mean: I’m part of that strange generation of people who easily call themselves boys and girls until they are well into their forties. I’m talking about a generation of people who will go to any length in order to stay forever young. It wasn’t like this in the 1950s. I don’t think it was like this in the 1970s either. I think those were periods of time in which people were supposed to be grown men and women by the time they reached thirty. Or even earlier. Who am I to know? — I’m nothing more than a 37-year-old “boy” –
Amazing graphs, terrifyingly beautiful – or beautifully terrifying.
Bring on the revolution. Looks like we’re about to hit the wall.
Trinifar, are you still around?? What happened to you? I miss your posts.
Quick question, the CRB Index does not appear to be adjusted for inflation. Did I miss something in looking through the CRB description?
Thx,
David
What the fuck are talking about trinnifer.
You start off by saying we need market signals and then go into this horse about having more abortion clinics and crap about women having the same political rights as men. They do dip shit. Women are allowed to vote last time I heard or is that news to you?
And by the way, you idiot, oil was once 500 dollars a barrel when the population was much smaller. You graphs are nonsense.
You would be better off plotting those commodities against gold.
David, yes, the CRB index is adjusted for inflation in the above. I need to correct the text to the post.