Jeremy Grantham on ‘Welcome to Dystopia': We Are ‘Entering A Long-Term And Politically Dangerous Food Crisis’

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"Jeremy Grantham on ‘Welcome to Dystopia': We Are ‘Entering A Long-Term And Politically Dangerous Food Crisis’"

Summary of the Summary:  We are five years into a severe global food crisis that is very unlikely to go away. It will threaten poor countries with increased malnutrition and starvation and even collapse. Resource squabbles and waves of food-induced migration will threaten global stability and global growth. This threat is badly underestimated by almost everybody and all institutions with the possible exception of some military establishments.

The yield per acre for wheat in England, France, and Germany and the yield for rice in Japan. These top-producing countries for the two most important cereals for direct human consumption have failed in the last 10 or more years to increase productivity.

Uber-hedge fund manager Jeremy Grantham has released another important discussion. Grantham, a self-described “die hard contrarian,” is one of the few leading financial figures who gets both global warming and growing food insecurity, two cornerstones of Climate Progress analysis.

I’m going to excerpt his analysis, which comprises the entire quarterly newsletter from the former Chairman and now Chief Investment Strategist of GMO Capital, which has more than $100 billion in assets under management.  Grantham’s work makes very clear that the global economy is a Ponzi scheme.

In Grantham’s blunt 2Q 2010 letter (see “Grantham: Everything You Need to Know About Global Warming in 5 Minutes“), he wrote “Global warming will be the most important investment issue for the foreseeable future.”  Then in his January 2011 newsletter he wrote about “Things that Really Matter in 2011 and Beyond”: “Global warming causing destabilized weather patterns, adding to agricultural price pressures.” Later that year, he wrote another blunt analysis “Time to Wake Up: Days of Abundant Resources and Falling Prices Are Over Forever.”

In his new discussion, he warns we are in a “chronic global food crisis that is unlikely to fade for many decades, at least until the global population has considerably declined from its likely peak of over nine billion in 2050.”  Why? “There are too many factors that will make growth in food output increasingly difficult where it used to be easy”:

  • Grain productivity has fallen decade by decade since 1970 from 3.5% to 1.5%. Quite probably, the most efficient grain producers are approaching a “glass ceiling” where further increases in productivity per acre approach zero at the grain species’ limit (just as race horses do not run materially faster now than in the 1920s). Remarkably, investment in agricultural research has steadily fallen globally, as a percent of GDP.
  • Water problems will increase to a point where gains from increased irrigation will be offset by the loss of underground water and the salination of the soil.
  • Persistent bad farming practices perpetuate land degradation, which will continue to undermine our longterm sustainable productive capacity.
  • Incremental returns from increasing fertilizer use will steadily decline on the margin for fertilizer use has increased five-fold in the last 50 years and the easy pickings are behind us.
  • There will be increased weather instability, notably floods and droughts, but also steadily increasing heat.  The last three years of global weather were so bad that to draw three such years randomly would have been a remote possibility.  The climate is changing.
  • The costs of fertilizer and fuel will rise rapidly

He points out something I have reported on many times here, “Talk privately to scientists involved in climate research and you find that they believe that almost everything is worse than they feared and accelerating dangerously.” The good news/bad news is:

On paper, though, the energy problem can be relatively easily addressed through very large investments in renewables and smart grids.  Those countries that do this will, in several decades, eventually emerge with large advantages in lower marginal costs and in energy security.  Most countries including the U.S. will not muster the political will to overcome inertia, wishful thinking, and the enormous political power of the energy interests to embark on these expensive programs.  They risk being left behind in competiveness.

The devastating food crises to come will, however, largely affect the United States indirectly, through much higher prices and the terrible global instability they causes. He notes that:

For Fortress North America (ex-Mexico), or what we might call Canamerica, these problems are relatively remote.  When corn crops fail we worry about farmers’ income, not about starvation.  In the long run, the truth is that Canamerica seen as a unit is in an almost unimaginably superior position to the average of the rest of our planet.  Per capita, the U.S. alone has five times the surface water and seven times the arable land of China!  And Canada has even more.

But the staggering immorality of our food, energy, and climate policies will become increasingly indefensible. As but one example:

Despite corn being almost ludicrously inefficient as an ethanol input compared to sugar cane and scores of other plants, 40% of our corn crop – the most important one for global exports – is diverted away from food uses.  If one single tankful of pure ethanol were put into an SUV (yes, I know it’s a mix in the U.S., but humor me) it displaces enough food calories to feed one Indian farmer for one year! To persist in such folly if malnutrition increases, as I think it will, would be, to be polite, ungenerous: it pushes the price of corn away from affordability in poorer countries and, through substitution, it raises all grain prices.  (The global corn and wheat prices have jumped over 40% in just two months.)

Our ethanol policy is becoming the moral equivalent of shooting some poor Indian farmers.  Death just comes more slowly and painfully.

Once again, why single out Indian farmers?  Because it was reported last month in Bloomberg that the caloric intake of the average Indian farmer had dropped from a high of 2,266 a day in 1973 to 2,020 last year according to their National Sample Survey Office.  And for city dwellers the average had dropped from approximately 2,100 to 1,900.

The whole discussion — “Welcome to Dystopia! Entering a long-term and politically dangerous food crisis” — is a must read. Below is just the discussion on climate change.

The negative effect of climate change on grain production

I used to think that “climate change” was a weak, evasive version of “global warming” but not anymore, for weather extremes – drought, floods, and bursts of extreme heat – have turned out to be more devastating for food production than the steady rise in average global temperatures. Droughts and floods were off-the-scale awful three growing seasons ago, and I forecasted some improvement. But with impossibly low odds – based on the previous weather distribution pattern – severe weather events kept going for two more growing seasons. Just as with resource prices, detailed last year, when the odds get into the scores of thousands to one, it is usually because the old model is broken.

So in the resource case, the old model of declining resource prices was broken and a new, very different era had begun. Similarly, the odds of three such disastrous years together are just too high to be easily believed and the much safer assumption is that the old weather model is broken and a new era of rising temperature and more severe droughts and floods is upon us. All-time heat records in cities across the world are falling like flies and the months of March through May this year were the hottest in U.S. history. As with the equally unpleasant fact of rising resource prices, this new, less desirable climate has to be accepted and adjusted to. Once again, the faster we do it, the better off we will be. Several industries like insurance are already deep into the study of the new consequences. Farming must also adjust, and not just to the rising prices. With skill, research, and, above all, trial and error, farmers will adjust the type of crop and the type of corn seed they use to the changing weather. And I have no doubt that they will mitigate some of the worst effects of increased droughts and floods. But the worst shock lies out quite far in the future: grains have developed over many thousands of years in an unusually moderate and stable climate (moderate, that is, over a scale of hundreds of thousands of years); and selective breeding of the last few hundred years also was done in that moderate environment. Grains simply do not like very high temperatures. By the end of the century, the expected rise in temperature globally is projected by the IPCC to reduce the productivity of grain in traditional areas by 20% to 40% – numbers so high that the heart sinks given the other problems. Yes, northern climates will benefit (so Canada once again looks like a good ally) but more world-class grain land will be lost than is gained. And do not for a second think that the scientists can be dismissed as exaggerators in the pay of evil foundations as right-wing think tanks would have you believe. The record so far has been one of timid underestimation. Much the majority of scientists hate being in the limelight and live in dread of the accusation of the taint of exaggeration, so severe a crime in the academic world that it is second only to faking data. What the timid scientists forget (this is all driven by career risk just as with institutional investing) is that in this unique case it is underestimating that is dangerous! To put the science clearly in the public domain – a task so far totally failed at – is left to a brave handful of scientists willing to be outspoken.

Talk privately to scientists involved in climate research and you find that they believe that almost everything is worse than they feared and accelerating dangerously. A clear example is in the melting of the Northern ice, now down in late summer by 30% from its recent 30-year average to 2005. It is at a level today (and last month was the least ice cover of any June ever) that was forecast 15 years ago for 2050! Dozens of ships last year made commercial voyages across the Northern waters where none had ever gone before 2008. A dangerously reinforcing cycle is at work: the dark ocean absorbs heat where ice reflects it, so the water warms and more ice melts. Other potentially more dangerous loops might also start: the Tundra contains vast methane reserves and methane acts like supercharged CO2. It warms the air and more Tundra melts and so on. For agriculture, which is very sensitive indeed to temperature shifts, it has become a very dangerous world. There is now no safety margin to absorb unexpected hits as we are seeing in the global crisis playing out in the Midwest today.

Hear! Hear!

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34 Responses to Jeremy Grantham on ‘Welcome to Dystopia': We Are ‘Entering A Long-Term And Politically Dangerous Food Crisis’

  1. Mike Roddy says:

    Large scale food crashes are in the living memory of some of us. In Biafra in 1970, the breakaway tribe died massively, quietly, and with great dignity. Calcutta and other parts of India experienced periodic famine in the 60’s, and the people watched slow starvation with stoic patience.

    It won’t be like that next time around. This may mean business for the military, and a boom in secure fortress homes for the wealthy. The rest of us had better be ready to watch out.

    • Mulga Mumblebrain says:

      As I believe I have stated more than once, I believe that this food crisis has been planned. Already one billion are under-nourished, even when sufficient food is grown,because of poverty, speculation by financial parasites, dumping of food by rich countries that subsidise their farmers (mostly transnational, vertically integrated, agribusiness behemoths)and diversions like the obscene ethanol for fuel boondoggle. The powers that be see a purely Malthusian solution to the ecological, economic and geo-political crises as ideal, and they have no moral compunction in putting it into action.

      • John McCormick says:

        Mulga, I read your comment and start to feel this may not be a conspiracy. It might be a plan. How will I ever know. I suppose the Bildibergers have broached this topic from time to time. We are truly in frightening times.

        (A reminder of this secretive enclave’s MO:

        What is unique about Bilderberg as a forum is
        the broad cross-section of leading citizens that are assembled for nearly three days of informal and off-the-record discussion about topics of current concern especially in the fields of foreign affairs and the international economy;

        the strong feeling among participants that in view of the differing attitudes and experiences of the Western nations, there remains a clear need to further develop an understanding in which these concerns can be accommodated;

        the privacy of the meetings, which has no purpose other than to allow participants to speak their minds openly and freely.)

        Sounds like an interesting way to spend a weekend….deciding winners and losers.

        • Mulga Mumblebrain says:

          We know for certain that the Bilderbergers and other transnational elites such as the Trilateral Commission have discussed human population reduction. Naturally the leaks or open communications from these conclaves and cabals have talked of population control through fertility control and other benign methods (even these, of course, opposed by various misogynistic reactionaries). They do not, of course, advocate the surest and swiftest route to the ‘demographic transition’ ie radical redistribution of the planet’s huge wealth, because they are the direct beneficiaries of the system of global inequality and mass immiseration.

  2. prokaryotes says:

    Drowning and Drought – Extreme Weather Impacts on Economy and Society http://www.youtube.com/watch?v=OGCqYR0P9W0&feature=plcp

    3 Expert speaking …

  3. Paul Magnus says:

    “the United States indirectly, through much higher prices and the terrible global instability they causes. ”

    He is under estimating extreme climate variability… the US is going to collapse too.

  4. Jack Burton says:

    A real warning for us to consider. Climate instability is a big economic issue going forward. Witness the shipping problems today on the low water level Mississippi River which impacts grain shipments to the world.
    As climate grows more hostile in the grain basket areas, food could spike in price and this knocks on to political instability. Many say the Arab Spring was set off by fast rising food prices in the Middle East. Syria experienced strong price rises before the civil war broke out.
    Sadly, many free market economic thinkers also see climate change as a Big Government lie designed to give government more regulatory power and more taxing power via carbon taxing laws. They cling to any denial theory they can find and are very anti science when they ought to know better. Economics is dependent on climate, always has and always will. Many great economic systems in ancient times collapsed due to climate shifts.

  5. Jake from Oz says:

    I don’t want to make light of this subject, but I think there is a good reason to turn 100% of your corn crop into fuel. I mean who would want GMO crops as food?

  6. Mark Shapiro says:

    How important is it that a respected, successful investor sounds such a clarion call on global warming and climate change?

    Very important. More Americans — especially influential Americans — understand the language of business than understand the language of science.

  7. Paul Klinkman says:

    We feed our grain to cattle. We feed our corn and soybeans to cars. Robots make our cars and many other things. Our technology rumbles ahead with a doubling of computer power every 18 months, with much the same growth rate as 50 years ago.

    The food insecurity crisis is vastly more about excluding food from the hungry, forcing them to work dangerous and soul-deadening jobs, than it is about running out of food. I agree that billions of people are hungry tonight. Honesty in politics holds the answer.

    You may not like my agricultural forecast. Given our technological rate of change, I could see the earth producing 100 times the food that it now produces. We’d have to build a huge number of greenhouses. Yes, we can build no-fuel greenhouses.

    Climate change is real to me especially because it makes our common heritage, which we were supposed to pass on to the next generations, mostly extinct. Megafires in dead forests and oceans of algae and jellyfish aren’t much of a gift to our children.

    • John McCormick says:

      Paul, huge green houses, like those in the Shenadoah Valley are works of art and targets for baseball-size hailstones and straight line wind storms. I’m just wondering.

    • Bernard J. says:

      You may not like my agricultural forecast. Given our technological rate of change, I could see the earth producing 100 times the food that it now produces.

      Paul, it’s not a matter of whether or not one “likes” your numbers, but rather that they are not possible given the limits of the planet. Technology is great, but it’s not endlessly progressable except in science fiction.

      Consider some of the data here:

      http://www.globalchange.umich.edu/globalchange2/current/lectures/freshwater_supply/freshwater.html

      especially co-opted net primary productivity, co-opted evapotranspiration, and co-opted available run-off.

      Even with a complete global escewing of meat-eating, there is no wiggle room for a hundred fold increase in food production. In fact, given the thermodynamic limits of the biosphere’s resources, and the needs for a functioning ecosystem apart from the direct co-opting of productivity by humans, even the suggestion of ten times more food production is fantastical.

      And if it weren’t, simply increasing the human population to the size that it could chew through ten times more food than it does today would result in the exhaustion of so many other resources that the whole planet would be little more than a battlefield.

  8. Tom Bennion says:

    The problem of biofuels is particularly acute for the airline industry. It has nowhere to go but biofuels if it wants to reduce emissions. Therefore, modern mass commercial aviation has to either downscale, or we accept that Indian farmers and others starve while other countries fly to go on holiday, business trips, to visit family etc.

    But I expect that, if the big push for aviation biofuels in the US and Europe continues, people in developed nations will start to make the link between their higher food prices and aviation. See my post here” “do you want to fly or do you want to eat”?

    http://hot-topic.co.nz/do-you-want-to-fly-or-do-you-want-to-eat/#comments

  9. Paul Magnus says:

    What one concludes from this paper is that its time investors stop worrying about the market and start concentrating on survival.

  10. Spike says:

    The Arctic meltdown got me looking at albedo a bit, and I came across this page at NASA from back in 2005, and quote

    “A drop of as little as 0.01 in Earth’s albedo would have a major warming influence on climate—roughly equal to the effect of doubling the amount of carbon dioxide in the atmosphere, which would cause Earth to retain an additional 3.4 watts of energy for every square meter of surface area.

    In the May 6, 2005, issue of the journal Science, the CERES Science Team reported Earth’s shortwave albedo has been steadily declining since the Terra CERES instrument began making the measurement in February 2000. Over the 4-year span (2000 through 2004), the CERES instrument measured an albedo decrease of 0.0027, which equals 0.9 watt of energy per square meter retained in the Earth system. The CERES Team is currently unsure what caused this decline in albedo. The team says future research will focus on comparing CERES data to data from other space-based sensors to see if there are any significant changes in Earth’s climate system during that time that could account for the change in albedo.”

    http://earthobservatory.nasa.gov/IOTD/view.php?id=5484

    I wonder what the latest information on albedo change is. It seems like a very powerful feedback.

  11. Ozonator says:

    This AGW food crisis stems from the dysfunction of the GOP and requires the repeal of Obamacare and victory against science, women, minorities, and the planetary ecosystem – to adjust the mortality rate to match conditions. Increasing use of NRA gun morality suggests some GOP members are getting restless that won’t peak with the Presidential election. Associated hate groups are increasing stealing words of their victims, especially deniers and pro-life, in lieu of advancing this country. Their utopia would ultimately create large families at the poverty level and an Arab Spring within 20 years in the US. Iran has had a sick relationship with the GOP since Reagan and may wish it’s 40 years of vengeance too expensive when this next wave of poverty babies is drafted to storm across parts of the world to make up for a lost generation.

    • John McCormick says:

      Too much ozone here.

      • Mulga Mumblebrain says:

        Remember how it used to be an advertising tripe..oops…trope, to speak of visiting the seaside to ‘breathe the ozone’. Methinks Ozonator has tarried at the beach a tad too long.

        • Ozonator says:

          I haven’t had such an incomplete whizz quiz since my worker comp claim was judged by popularity in what was to become Jindalstan.

          Team Obama’s offer of earthquake aid to Iran appears to be of good faith as the record includes a Nobel Prize, saving the US auto industry, put a spacecraft on Mars, and sent Sheik Osama bin Laden to the heavens. However, feeding the soul more than denier “scientists” wanting to multiply the CO2 levels, world leaders learned from the last Bush and Katrina, Supreme Leader of the Islamic Revolution “Ayatollah Khamenei Visits Iran’s Quake-Hit Areas” (FNA; english.farsnews.com, 8/16/12). “Charlton Heston Reads Crichton on Our Arrogance … March 2, 2007 … radiation is good for life … Many forms of life will thrive with more” and more more toxic exposures, “Wednesday Quotes: Pearls of Wisdom … September 14, 2011 … ” I know liberals like every square inch of my glorious naked body … “” (the old, ugly and evil Rush “looting” Limbaugh whistlesucker performing and perfuming the stink at rushlimbaugh.com).

  12. BillD says:

    The public doesn’t understand the strength of the culture of conservative understatement in science. After a long career, I was surprised at how reviewers required me to tone down already cautious statements in my most recent peer reviewed article. Science is really not like business, politics and everyday conservation where exaggeration is expected. Journalists and environmentalists are less cautious, but do not look to scientists to highlight the worst case scenario. Scientific articles give very cautious, understated views on climate change–it’s just the way science works.

    • Spike says:

      Lonnie Thompson on this subject:

      Is silence the answer? Not according to Thompson of Ohio State, who admits to being “frustrated” by skeptic tactics and scientists’ lack of response to them. “If they want to be more than just a historian documenting the change—if they want to make a difference—[scientists] have to speak out about these issues.” Thompson himself regularly speaks about climate change, even allowing TV and print journalists to join his polar ice expeditions.

      http://insideclimatenews.org/news/20120604/climate-change-scientists-global-warming-ipcc-report-scientific-consensus-skeptics-humans-ice-sheets-melting

      • Mulga Mumblebrain says:

        How could science ever be the answer when the fate of humanity is at risk and the other side, richly endowed, is screeching lies at the top of their voices? I suspect University and other authorities, who represent the elite, may be doing a little active and implicit leaning-on of the scientific community. Who wants to be a martyr?

  13. Gail says:

    UNEP report: “Feeding a growing world population has become one of the major issues of our century and we cannot afford to lose millions of tons of crops each year because of air pollution. Present day global relative yield losses due to tropospheric ozone exposure range between 7-12 percent for wheat, 6-16 percent for soybean, 3-4 percent for rice, and 3-5 percent for maize.”

    http://witsendnj.blogspot.com/2012/06/inferno-ignites.html

  14. Joan Savage says:

    Grantham quite rightly focused on the precariousness of overall food supply.

    He didn’t mention one aspect which is emerging, how extreme weather disrupts transport of food to distant markets.

    Several reporters have picked up on the American Waterways Operators’ statement that the Mississippi River system usually transports 60 percent of the nation’s grain. With river barges limited by low water level, the bumper crops in Arkansas are piling up, unshipped.

  15. We might be called backyard orchardists. At least we are active enough to have joined the California Rare Fruit Growers. This year we easily see that everything is a little off: some varieties are fruiting less (not enough chill?), others are ripening earlier (more heat and less water?). Paying attention to these things makes it clear to us that climate change will have a significant impact on our food future.

    So, how do we get the climate issue to be part of the political debate in the US. I was appalled when I listened to Jim Lehrer (PBS) explain that his role as debate moderator was to “help the candidates.” I would have thought that, as a long time fixture on PBS, he would have seen his role as helping the public understand what these candidates are really going to do.

    Among other things, we need an organized effort to get Lehrer and the other moderators [Crowley (CNN), Schieffer (CBS), Raddatz, (ABC)] to make climate, and it’s relationship to energy policy and the economy to be part of this debate.

    If Climate Progress (Joe) could post on the importance of this and the readers could take the time to address those 4 moderators directly (I’ve already posted to the Newhour story in which Lehrer explained how he will “help the candidates”.) maybe we can get some coverage. As long as we let the discussion center on whether Romney should release more tax returns or what Biden really meant about putting us “back in chains” we all lose.

  16. Ric Merritt says:

    The global limits on food, CO2 releases, and fossil fuel, not to mention population generally, are no less real for being hard to quantify with precision. They all feed back to each other ferociously.

    Those who “get it” about climate and food often undervalue or dodge the peak oil part. Don’t forget, severe problems in oil supply and price also hit around 2005, continue today, and are guaranteed to get worse, though the timetable is legitimately disputable. Glib predictions about, for example, extrapolating the price of solar panels or wind power never seem to acknowledge that their manufacture, along with the rest of industrial civilization, is dependent down to the ground (and below) on our current fossil fuel supply. It is *impossible* to make an intelligent prediction about such things without feeding back from interrelated predictions about fossil fuels, and what will happen to investment capacity when things get tough.

    Make a windmill while sourcing *all* your parts and labor from renewable energy, and you’ll really have something. If you aren’t moving *rapidly* in that direction, you are losing. Extrapolating past figures about price and capacity without feeding back the consequences of sickening drops in fossil fuels is worse than useless.

    • I think people underestimate all sorts of things that feed back into each other, both within the climate change side of things and in terms of human behaviour. Keeping modern civilisation going requires a whole lot of global supply changes and complex logistics operating globally. Social collapse in a given region can be contagious and have knock on effects around it.

      The article seems to suggest a “managed decline” where some billions die, presumably to famine and conflict.

      I personally think “implosion” is a better description of what we will see once we stress modern civilisation too far.

  17. PeterW says:

    Once again I’m frustrated by overwhelming view from 30,000ft up. The current abomination of an agriculture system is always looked on as the only possible answer. If it can’t produce more food then we’re all screwed. BUT it isn’t the best system by a long shot. The modern family farm (ie; Joel Salatin) blows the doors off of big ag production but no one ever looks at that. We just see the current system as the only solution because no one ever pays attention to the details of how absolutely stupid it is. Stop analyzing from the sky and see what can be done on the ground.

  18. PeterW says:

    If you think the only possible solution is industrial farming then you will fail and people will starve. Modern industrial farming is a huge environmental catastrophe. Soil is depleted, huge lagoons of waste are created, tonnes of fossil fuels are wasted and the product is absolute crap. No wonder there are so many health problems.

    Small diversified family farms are much more productive and self sufficient when you look at all the land used by both systems. They actually grow topsoil instead of strip mining it, comparatively they need very little inputs from outside the farm. You also build the rural community which has been decimated. If you get rid of the subsidies to industrial ag small farms are very competitive.

    For once I would like one of these people with their agricultural stats to realize there are other solutions.

  19. Turboblocke says:

    I used to think that “climate change” was a weak, evasive version of “global warming”

    Clearly the man’s research didn’t lead him to look closely at the IPCC which was set up in 1988 or maybe he doesn’t realise what the CC stands for.

  20. Vincent Diepeveen says:

    Food crisis is entirely artificial so far. 50% from entire harvest of USA + Australia and other nations get burned for bio-fuel subsidy. That’s causing all those prices to be so high. It’s genocide giving Obama votes so far as he ‘supports the farmers’. This can be done better without committing mass genocide to the poorest of people who are dependant upon the cheapest of foods which get burned right now.