Sixteen months ago, when commodity prices were soaring, the Wall Street Journal published a front-page story (“New Limits to Growth Revive Malthusian Fears” March 24, 2008) that suggested that population growth and rising prosperity were contributing to a sustained rise in commodity prices. The article said that:
Although a Malthusian 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 of Growth.” 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.
Today, with the global economy mired in the greatest recession since the Great Depression, talk on Wall Street about “limits to growth” has abated. Or has it?
The article quotes Doug Fabian, a financial advisor who specializes in index funds, as saying that, “World population growth trends suggest massive numbers of new global citizens on the way — citizens that are going to require essentials such as food, clothing and shelter.” While commodities prices are still suffering from the effects of the recession, Fabian advised that “the protracted pullback in commodities likely will prove to be temporary.”
Of course, the prospect of rising commodity prices may be good news for savvy investors, but resource scarcity is bad news for people in developing countries. A renewed spike in food and energy prices could have a devastating impact on those living on less than $2 a day. The number of people living in severe poverty already has increased this year by an estimated 55 to 90 million people. A quick return to higher commodity prices could easily boost that number.
Posted by Robert J. Walker, Executive vice President