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The Era of Living Dangerously

We saw what happens when over-leveraged economies like the U.S. and Europe failed to anticipate the threats posed by unsustainable debt loads; we don't want to see what happens if we ignore signs that we are over-leveraging the planet's resources.
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The world is on edge: On the edge of another financial crisis, another global recession, another bout of extreme weather, another humanitarian disaster, another food crisis, and another round of violence and civil unrest. The world's problems, it seems, are not being solved; they are being recycled with rising -- and disturbing -- rapidity.

If this were a movie, we might borrow a title from yesteryear and call it "The Year of Living Dangerously." But, unfortunately, this is not a movie; and the challenges that we face will not be resolved anytime soon. Our troubles are not cyclical, they are structural. We live in a world that is fundamentally out of balance, and rectifying those imbalances will take years, if not decades, to correct. Welcome to "The Era of Living Dangerously."

This new era, and it is a perilous one, is not the result of excessive debt accumulation. Unsustainable debt loads have contributed to our current economic woes, but the economic malaise that now grips the world is indicative of a larger, more systemic problem: an over-heated, over-crowded, over-leveraged planet.

The last half of the 20th century produced an unprecedented rise in global standards of living. While increased efficiencies contributed to this burst of prosperity, much of it was fueled by increased consumption of fossil fuels, water, timber, metals, and minerals. And it came with escalating environment costs: the degradation of oceans, forests, rivers, and soil, and the warming of the planet.

For decades now, scientists have been warning that we live on a finite planet with finite resources, but until very recently those concerns have been widely dismissed -- even derided -- as theoretical, not practical. But for those who are concerned about biophysical limits to economic growth, there are plenty of warning signs today.

In the last half of the 20th century, the real inflation-adjusted prices of commodities trended downward as we got more efficient at growing food and extracting minerals and fossil fuels. But in the 21st century, the demand for commodities has far outstripped supply. And it's not just oil. Almost without exception, the prices of major commodities, including grains and basic food stuffs, have doubled or tripled in the past seven or eight years.

Some of that increase reflects the growing demand for commodities, much of it emanating from China and the other emerging economies, but production costs are also rising. In an increasingly resource-starved world, companies and countries will go anywhere to extract oil and minerals. In the immortal words of Marvin Gaye, "There ain't no mountain high enough; ain't no valley low enough; ain't no river wide enough to keep me from getting to you, baby." That's why countries and companies are scrambling to establish oil and mineral rights on the Arctic seabed and in other extreme environments.

Far more worrisome for the world's poor is the escalating cost of food. Climate change, rising energy and fertilizer prices, erosion of topsoil, depletion of underground aquifers, and loss of arable land to urbanization and desertification, are making it ever more expensive to satisfy the world's growing appetite for food. With the demand for grains and basic food stuffs expected to increase by 70 percent over the next 40 years, the outlook for food prices is not good. Two months ago, Oxfam International released a research report, Growing a Better Future, predicting that the price of key food staples could increase 120 to 180 percent by 2030. For commodity speculators that's an investment opportunity, but for the world's urban poor living in shantytowns on less than $1.25 a day it's a potential death sentence.

With world population reaching 7 billion later this year and projected to reach 9.5 billion by mid-century, the challenges we are now confronting will not go away anytime soon. And make no mistake about it, if demographic push comes to economic shove, it's the poorest of the poor who will pay the ultimate price.

To get a glimpse of what the future may hold for the world's poorest citizens, look at the human tragedy that is unfolding on the Horn of Africa, where over 13 million people are in a struggle for survival. A record or near-record drought -- that may or may not be related to climate change -- is already killing tens of thousands, most of them young children.

In Ethiopia, one of the poorest countries in the world, food prices have increased by 50 percent in the past year. Even the urban middle class in Ethiopia, far removed from the drought-stricken regions, is struggling to put food on the table.

Meanwhile, as the world suffers through another year of severe droughts and floods, the evidence is growing that the planet is over-heating, and that climate change is here to stay, but in the U.S. and elsewhere policy is being dictated by the climate deniers.

It would be comforting to think that the growing unrest that is sweeping the world, including the rioting that has broken out in England, is the product of a temporary spike in food prices or the lingering aftereffects of the Great Recession, but it may just be a sign of things to come. If there are practical -- not just theoretical -- limits to economic growth, the competition for resources will get more intense, not less; the gap between rich and poor will widen, not close; and the ranks of the disenfranchised and the disenchanted will expand, not shrink.

When the world economy was growing at 3-4 percent a year it was difficult enough in many countries to find jobs for young people; it will be a far more daunting task if biophysical limitations drag the growth rate down to 1 or 2 percent. With the world's large generation of young people about to join the labor force, the challenge is enormous and unprecedented.

In the Era of Living Dangerously, there are no easy answers, but the search for solutions has to begin with a recognition of the biophysical limits that are straining -- and stressing -- our world. We saw what happens when over-leveraged economies like the U.S. and Europe failed to anticipate the threats posed by unsustainable debt loads; we don't want to see what happens if we ignore signs that we are over-leveraging the planet's resources.

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