Nearing The Brink  

The WSJ has a surprisingly even handed look at the idea that "The Limits To Growth" may have been worth paying attention to afterwards, noting that the demands of a growing population (and a rapidly industrialising one at that) may require a change to our current systems - Nearing the Brink (more commentary at Energy Bulletin).

THROUGHOUT history, there have been warnings that human activity would overwhelm the Earth's resources. The Cassandras always proved wrong. Each time, there were new resources to discover, new technologies to propel growth.

Today the old fears are back. Although a catastrophe is not at hand, the resource constraints foreseen by the Club of Rome are more evident today than at any time since the 1972 publication of the think tank's famous book The Limits to Growth. Steady increases in prices for oil, wheat, copper and other commodities are signs of a lasting shift in demand as yet unmatched by rising supply.

As the world grows more populous (6.6billion today) it also is growing the 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, petrol-fuelled transport and 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 could suffer, and some fear violent conflicts could ensue.

Some of the resources now in great demand have no substitutes. In the 18th century, England responded to dwindling timber supplies by shifting to abundant coal. But there can be no such replacement for arable land and fresh water. The need to curb global warming limits the usefulness of resources such as coal. Soaring food consumption puts stress on the existing stock of arable land and fresh water.

"We're living in an era where the technologies that have empowered high living standards and 80-year life expectancies in the rich world are now for almost everybody," says economist Jeffrey Sachs, director of Columbia University's Earth Institute. "What this means is that not only do we have a very large amount of economic activity right now, but we have pent-up potential for vast increases (in economic activity) as well." The world cannot sustain that level of growth, he contends, without new technologies.

The West is already grappling with higher energy and food prices. There's a growing consensus that this isn't just a temporary surge in prices. Some experts foresee a long-term upward shift in prices for oil and other commodities. ...

This troubles economists who used to be sceptical of the premise of The Limits to Growth. Thirty years ago, economist Joseph Stiglitz said: "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. 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," Stiglitz says.

Dennis Meadows, one of the authors of The Limits to Growth, says the book was too optimistic in one respect. The authors assumed that if humans stopped harming the environment, it would recover slowly. Today, he says, some climate-change models suggest that once tipping points are passed, environmental catastrophe may be inevitable even "if you quit damaging the environment".

One danger is that governments, rather than searching for global solutions to resource constraints, will concentrate on grabbing their share.

China has been funding development in Africa, a move some see as a way to gain access to timber, oil and other resources. India, once a supporter of the democracy movement in Burma, has signed trade agreements with the resource-rich country. The US, EU, Russia and China are all vying for the favour of natural-gas-abundant countries in politically unstable Central Asia. The rise of China and India already has changed the world economy in lasting ways, from the flows of global capital to the location of manufacturing. But they remain poor societies with growing appetites. ...

In 2005, China had 15 passenger cars for every 1000 people, close to the 13 cars per 1000 that Japan had in 1963. Today, Japan has 447 cars per 1000 residents, 57 million in all. If China ever reaches that point, it would have 572 million cars, 70 million shy of the number of cars in the entire world today. China consumes 7.9 million barrels of oil a day. The US, with less than a quarter as many people, consumes 20.7 million barrels.

"Demand will be going up, but it will be constrained by supply," says ConocoPhillips chief executive James Mulva. "I don't think we are going to see the supply going over 100 million barrels a day, and the reason is: where is all that going to come from?"

Harvard economist Jeffrey Frankel says: "The idea that we might have to move on to other sources of energy; you don't have to buy into the Club of Rome agenda for that." ...

The 1972 warnings by the Club of Rome struck a chord because they came as oil prices were rising sharply. Oil production in the continental US had peaked, sparking fears that energy demand had outstripped supply. Over time, America became more energy efficient, overseas oil production rose and prices fell. The dynamic today appears to be different. So far, the oil industry has failed to find new sources of crude. Without new discoveries, prices are likely to keep rising, unless consumers cut back. Taxes are one way to curb appetites.

New technology could help ease the resource crunch. Advances in agriculture, desalination and the clean production of electricity, among other things, would help. But Stiglitz contends that consumers eventually will have to change their behaviour even more than then did after the '70s 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.