March 28, 2024

Can Jeremy Grantham Profit From Ecological Mayhem?

Energy “will give us serious and sustained problems” over the next 50 years as we make the transition from hydrocarbons — oil, coal, gas — to solar, wind, nuclear and other sources, but we’ll muddle through to a solution to Peak Oil and related challenges. Peak Everything Else will prove more intractable for humanity. Metals, for instance, “are entropy at work . . . from wonderful metal ores to scattered waste,” and scarcity and higher prices “will slowly increase forever,” but if we scrimp and recycle, we can make do for another century before tight constraint kicks in.

Agriculture is more worrisome. Local water shortages will cause “persistent irritation” — wars, famines. Of the three essential macro nutrient fertilizers, nitrogen is relatively plentiful and recoverable, but we’re running out of potassium and phosphorus, finite mined resources that are “necessary for all life.” Canada has large reserves of potash (the source of potassium), which is good news for Americans, but 50 to 75 percent of the known reserves of phosphate (the source of phosphorus) are located in Morocco and the western Sahara. Assuming a 2 percent annual increase in phosphorus consumption, Grantham believes the rest of the world’s reserves won’t last more than 50 years, so he expects “gamesmanship” from the phosphate-rich.

And he rates soil erosion as the biggest threat of all. The world’s population could reach 10 billion within half a century — perhaps twice as many human beings as the planet’s overtaxed resources can sustainably support, perhaps six times too many.

Grantham, who is 72 and has what’s left of a British accent after living in Boston for more than four decades, outlined this wildly distressing assessment against a bland backdrop of chain décor and piped-in smooth jazz. He marked up his draft with a pen as he went along, departing from the text at times to emphasize a point. “Phosphorus makes up 1 percent of your body weight,” he said, looking up from the page to catch my eye. “It’s a basic element, the residue of exploded stars. You can’t just make more.” He also pointed out that most economists see global trade as a win-win proposition, but resource limitation turns it into a win-lose, zero-sum contest. “The faster China grows, the higher grain prices go, the more people in China or India who upgrade to meat, the higher the tendency for Africa to starve,” he said.

Grantham argues that the late-18th-century doomsayer Thomas Malthus pretty much got it right but just had the bad timing to make his predictions about unsustainable population growth on the eve of the hydrocarbon-fueled Industrial Revolution, which “partially removed the barriers to rapid population growth, wealth and scientific progress.” That put off the inevitable for a couple of centuries, but now, ready or not, the age of cheap hydrocarbons is ending. Grantham’s July letter concludes: “We humans have the brains and the means to reach real planetary sustainability. The problem is with us and our focus on short-term growth and profits, which is likely to cause suffering on a vast scale. With foresight and thoughtful planning, this suffering is completely avoidable.”

Grantham’s quarterly letters, which command a cult following of readers within and beyond the financial industry, inspire even the most short-term profit-minded investors to do a little fate-of-the-world-scale thinking. I find that they have the opposite, equally mind-stretching effect on a passive investor like me. Although I’m normally happy to turn over my paychecks to the missus and not inquire into what happens to them, my encounters with Grantham tend to whip me into a state of alarm that has me thinking about acquiring tracts of arable timbered high ground, preferably defensible ones well inland from the rising seas.

Doomsayers are always plentiful, and the economic and environmental news has encouraged even more doomsaying than usual of late, but Grantham compels attention, in part because he’s not simply prophesying doom. While it may be too late to “gracefully” deal with depleted resources­, climate change and related crises, it’s never too late to mitigate the damage. And, crucially, the consequences will be unevenly distributed, creating angles for you to make money and look out for your interests, however you define them.

Carlo Rotella (carlo.rotella@gmail.com) is the director of American Studies for Boston College.

Editor: Dean Robinson (d.robinson-MagGroup@nytimes.com)

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