Taking the Scare out of Scareonomics

Global population hit 7 billion well ahead of most predictions. The UN now forecasts that we will share the planet - - and its increasingly scarce natural resources - - with about 10 billion fellow humans by 2050. Even more sobering are the numbers of people moving from ultra-low water-food-energy footprints to the middle class in China, India, Africa and South America, setting new records for buying everything from cars and groceries to homes and lawn flamingoes. Welcome to a not-too-distant future of “scarceonomics”.

By now we’ve all read reports about fisheries collapsing; predictions that world-wide demand for freshwater will exceed supply by?as much as 40 percent by 2030; and serious food shortages, with attendant price spikes, are already spreading from local to global. Few have put these trends in context as succinctly as Lester Brown, President of the Earth Policy Institute.

"The geopolitics of food is fast overshadowing the geopolitics of oil," he said. In fact, oil and food are directly inter-connected, because industrial agriculture depends heavily on petroleum for fertilizers and fuel to plant, harvest, process, and transport crops. In a growing number of places, as disparate as Bahrain and California, energy is used to desalinate water, so the availability and price of those crops will also be inextricably dependent on how wisely we use those finite resources (or how quickly we can develop more abundant renewables, such as wind and solar).

So what does the scarceonomics of food, water, energy, and other critical commodities mean for governments, economies, investors, and consumers? If we apply some lessons learned and a little ingenuity, the prospects could be positive.

Hong Kong–based Shuanghui International Holdings has proposed a multi-billion dollar acquisition of U.S. pork producer Smithfield Foods. Smithfield has long been criticized for failing to address the environmental and human health impacts from the 4.7 billion gallons of manure it generates each year. Chinese companies have been criticized for selling food that is unsafe, even as that nation worries over how to feed so many mouths. If the parties see the opportunities in scarceonomics, China could learn more efficient protein production methods and Smithfield could invest in new waste conversion technologies that would produce renewable diesel fuel from all of that manure.

Win-win approaches to shrinking resources can address other global challenges. The Arab Spring was powered largely by unemployment in the Middle East and North Africa (MENA). According to the International Monetary Fund, youth unemployment there exceeds 25 percent, more than “any other region in the world.” But job opportunities abound when scarceonomics makes governments and investors look at underutilized resources.

For example, most of the countries in the MENA region truck waste to dumpsites or landfills, with little sorting or recycling. I recently toured one large landfill in the region, which handles 4,000 tons of waste per day employing a few dozen workers. A modern sorting facility at that site with technologies to convert organics to fertilizers; plastic bottles back into plastic bottles; and construction debris into new building materials could employ hundreds.

And speaking of scarcity, many of the MENA oil-producing countries are beginning to plan their futures when oil and gas runs out, especially in terms of their own food security. These governments are planning massive renewable energy projects to power desalination plants that will be needed. Now might be a good time to invest in the companies that produce the goods and services needed in those industries as demand increases over time.

Many more solutions will be needed to address the challenges presented by growing demand on shrinking resources, but these few examples demonstrate that a little awareness and innovation can at least begin to take the “scary” out of scarceonomics and create a more sustainable future for our shared global environment and economy.