Jeremy Grantham: Resources are the whole story

• Until about 1800, our species had no safety margin and lived, like other animals, up to the limit of the food supply, ebbing and fl owing in population.
• From about 1800 on the use of hydrocarbons allowed for an explosion in energy use, in food supply, and, through the creation of surpluses, a dramatic increase in wealth and scientific progress...
• The rise in population, the ten-fold increase in wealth in developed countries, and the current explosive growth in developing countries have eaten rapidly into our finite resources of hydrocarbons and metals, fertilizer, available land, and water...
• The fact is that no compound growth is sustainable.  If we maintain our desperate focus on growth, we will run out of everything and crash.  We must substitute qualitative growth for quantitative growth...
• From now on, price pressure and shortages of resources will be a permanent feature of our lives.  This will increasingly slow down the growth rate of the developed and developing world and put a severe burden on poor countries.  
• We all need to develop serious resource plans, particularly energy policies.  There is little time to waste...

Investing in Resources Today.  As resource prices rise, the entire system loses in overall well-being, but the world is not without winners. Good land, in short supply, will rise in price, to the benefit of land owners. Technological progress in agriculture will add to the value of land holdings. Fertilizer resources – potash and potassium – will become particularly precious. Hydrocarbon reserves will, of course, also increase in value. In general, owners or controllers of all limited resources, certainly including water, will benefit...

The U.S. is, of course, very well-positioned to deal with the constraints. First, it starts rich, both in wealth and income per capita, and also in resources, particularly the two that in the long run will turn out to be the most precious: great agricultural land and a pretty good water supply. The U.S. is also well-endowed with hydrocarbons. Its substantial oil and gas reserves look likely to prove unexpectedly resilient, buoyed by improving skills at fracking and lateral drilling. And, by any standard, U.S. coal reserves are very large. All other countries should be so lucky. Second, we are the most profligate or wasteful developed country and this fact, paradoxically, becomes a great advantage. We in the U.S. can save resources by the billions of dollars and actually end up feeling better for it in the end, like someone suffering from obesity who succeeds with a new diet.

The slowing growth in working age population has reduced the GDP growth for all developed countries. Adding resource limitations is further reducing it. If our GDP in the U.S. grew 2% for the next 20 years, I think we would be doing very well. Dropping to 1.5% would not surprise me, nor would it be a disaster. In the past 28 years, we have increased our GDP by 3.0% per year with only a 0.9% increase in energy required. That is, we increased our energy efficiency by 2.1% without a decent energy policy and despite some very inefficient pockets like autos and residential housing. This would suggest that at a reduced 2% GDP growth rate, we might expect little or no incremental demand for energy, even without an improved effort. If in addition we halved our deficit in energy efficiency compared with Europe and Japan in the next 20 years, then our energy requirements might drop at 1.5% a year. Given the plentiful availability of low-hanging fruit in the U.S., this is achievable.
---Source  (email required).  Longish piece; recommended