Peak everything

Below find Jeremy Grantham’s latest quarterly newsletter. In it he draws out his thesis that the world stands at the edge of peak everything. Here is his executive summary on likely outcomes:


  • 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.
  • Although we will have energy problems with peak oil, this is probably an area where human ingenuity will indeed eventually triumph and in 50 years we will have muddled through well enough, despite price problems along the way.
  • Shortages of metals and fresh water will each cause severe problems, but in the end we will adjust our behaviour enough to be merely irritated rather than threatened, although in the case of metals, the pressure from shortages and higher prices will slowly increase forever.
  • Running out completely of potassium (potash) and phosphorus (phosphates) and eroding our soils are the real long-term problems we face. Their total or nearly total depletion would make it impossible to feed the 10 billion people expected 50 years from now.
  • Potassium and phosphorus are necessary for all life; they cannot be manufactured and cannot be substituted for. We depend on finite mined resources that are very unevenly scattered around the world.
  • Globally, soil is eroding at a rate that is several times that of the natural replacement rate. It is probable, although not certain, that the U.S. is still losing ground. The world as a whole certainly is.
  • The one piece of unequivocal good news can be found in the growth of no-till farming. In no-till, the residue of the previous crop is left on the ground and new seeds are planted without plowing. This technique reduces erosion by around 80%, reduces fertilizer run-off, preserves moisture, improves the soil (and, quite possibly, the quality of the food), and reduces the emissions of heat trapping gasses.
  • The growth of no-till has been very rapid in South America, rapid in the U.S. (which is now at 35%), and moderate in many other developed countries. But it is used on only about 5% of farms globally.
  • Overall, the best farms will have no erosion problems but, on average, soil will continue to be lost across the globe. Together with increased weather extremes and higher input prices (perhaps much higher), there will be increasing problems in feeding the world’s growing population.
  • In particular, a significant number of poor countries found mostly in Africa and Asia will almost certainly suffer from increasing malnutrition and starvation. The possibility of foreign assistance on the scale required seems remote.
  • The many stresses on agriculture will be exacerbated at least slightly by increasing temperatures, and severely by increased weather instability, especially more frequent and severe droughts and floods.
  • These types of slow-burning problems that creep up on us over decades and are surrounded by a lack of scientific precision hit both our capitalist system and our human nature where it hurts.
  • Capitalism, despite its magnificent virtues in the short term – above all, its ability to adjust to changing conditions– has several weaknesses that affect this issue. It cannot deal with the tragedy of the commons, e.g., over fishing, collective soil erosion, and air contamination. The finiteness of natural resources is simply ignored, and pricing is based entirely on short-term supply and demand. More generally, because of the use of very high discount rates, modern capitalism attributes no material cost to damage that occurs far into the future. Our grandchildren and the problems they will face because of a warming planet with increasing weather instability and, particularly, with resource shortages, have, to the standard capitalist approach, no material present value.

I don’t disagree with any of the above, except the last point. Capitalism can help deal with tragedies of the commons if the kind of long term environmental damage that Grantham describes is priced. As we are witnessing now around the carbon tax, that is a political question. Capitalism is rules. Change them and it will change. But you must choose to.

You really need to read this full document.


  1. Grantham’s point is that capitalism doesn’t automatically deal with the tragedy of the commons, or indeed, most slow-burn problems.

    It requires monumental political will to prevail over short-term opportunism. Most of the world will almost certainly fail to find that political will. We are destined to accelerate towards the cliff edge.

      • Oh I don’t know. If these awful polling numbers continue for another 6 months, and Shorten promises backbenchers a watered-down Carbon Tax (negotiated with the 500 big polluters) I think they’ll jump.

        These guys have form.

      • Their problem is as much a result of a perceived failure of leadership strength arising from a minority government and endemic communications weakness. Watering down their policies won’t help. Conviction will.

      • We’ve found it here

        That is a statement of advocacy not one of analysis.

        Tragedy of the commons is about everyone in the commons not just the first 500 of them

      • Agreed.
        The point about human nature not mentioned is our need to be optimistic, probably an evolutionary trait developed to weather the bad times. Unfortunately it makes our judgement very poor about anything not happening in the present or short-term future. One of the reasons behind all sub-optimal decision making with just one of a quintillion examples being the power play in US politics going on right now.
        No matter how good our best rationale we’ll always be fighting this..

  2. We need both economic, and political reform. Without it, the constantly expanding economy, and population consume with no regard. Unsustainable living practices make for a gloomy future.

    Australia is a mini US now with so many SUV’s etc. We are past peak oil yet in this country we can’t support local electric vehicles, no support for fuel cell technology. and the list goes on.

    The current government is reducing R&D incentives for many issues. We support negative gearing at the expense of national saving. If we had a SWF we could do more to be sustainable IMO and stop buying in foreign wind, solar, etc. and develop a sustainable energy industry here.

    The need is for a global solution/agreement, but they can’t agree on small issues let alone something as important as this.

    • You need wealth to have a SWF and we run current account deficits. If money is set aside for a SWF it just means that the net government and private sectors will be further in debt than they otherwise would be.

      Even if that were not the case, are you suggesting that a SWF should be picking winners re: sustainable technology.

      We already have the CSIRO that researches these technologies e.g. solid oxide fuel cells were developed as a CSIRO joint venture.

      • I agree governments can’t pick winners (this current one at least).

        Yes I’m saying a percentage of a SWF could be used to fund sustainable living. If you look at our house building standards e.g., in general, they are so energy hungry it’s not funny. Compare European, and North American housing standards, and that’s where we need to be.

        The CSIRO does a great job (I support them 100%), but their funding is being cut, and I work with them on some issues. The Victorian CFCL fuel cell technology (this came from CSIRO research about ten years ago and is the most efficient fuel cell in the world) is in production, but Penny Wong in her last role rejected it as she did on the Blade electric vehicle. CFCL’s fuel cell is being installed in German, and UK homes and has political support there, but not so in Canberra…go figure.

        Surely we can get budget surplus by cutting big government, fighting wars, why do we need to buy 12 nuclear submarines, F35 (not fit for purpose -single engine- jet fighters, and the list goes on.

        I believe there is a way, and by saying nothing can be done is the political lack of vision; which we have plenty of. This is all about the politicians staying in power, and nothing else. The professional political elite in Canberra have no need to satisfy our concerns until polling day.

  3. It is estimated that there are currently 1 quadrillion ants in the world. There numbers are growing exponentially, but the earth’s resources are finite. We are clearly facing an ant population bomb just like Paul Ulrich, Malthus and others warned. While draconian, China clearly has the right idea with its ‘one-ant’ policy. All right-thinking people agree we need to put a price on ants. Some argue for direct action! But the more market-savvy types realize that we need an ant trading scheme (ETS). Someone please inform the queen ant. And don’t get me started on plankton. That’s an even greater threat. We’re doomed!

    • Ants have been living on planet Earth for a long, long time. Their population are NOT growing exponentially. Instead, they’re limited by the amount of food and the number of predator in an area, and ‘population growth’ usually means one colony killing off another colony. When the food runs our, the ants start eating their young.

      So the poster is suggesting.. human cannibalism?

      • Human population is not growing exponentially. We received a big boost during the industrial revolution (thank god, it’s the reason we are all alive today) but numbers are declining.

        The more of us the better. I am not suggesting cannibalism, just against whatever government plans people have to reduce global human population numbers.

        What exactly are you proposing to tackle the non-problem of “overpopulation”?

        And where precisely do people get of saying that some resources are “non-renewable”? Where exactly do these resources go? Do they float off in to space?

        Nope, people are ignoring the main issue: the battle of survival between us and the ants. History suggests in the end the ants will win. The ants always get ya in the end.

      • “And where precisely do people get of saying that some resources are “non-renewable”? Where exactly do these resources go? Do they float off in to space?”

        Yep! Sure do! Along with the brains of those who believe that this planet has an inexhaustable supply of everything needed to sustain an infinite number of human beings for an indeterminant number of years.

        “Anyone who worries about human population growth is economically, biologically, and historically illiterate.”

        When it comes to illiteracy in respect of human history, I think you may have written the book.

        History is littered with the remains of civilisations that self-destructed through the over-utilisation of often once-abundant resources.

        As Mark Twain once said “History may not repeat itself, but it sure does rhyme” (or words to that effect)

  4. Apologies for the typos. Writing this on the ferry on the way to work in one of the world’s most densely populated (and also one of the richest) cities in the world. A city which is also 70% national park.

    Anyone who worries about human population growth is economically, biologically, and historically illiterate.

    • “Anyone who worries about human population growth is economically, biologically, and historically illiterate”.

      Australia’s population has grown by around 1.8% p.a. over the past five years. At this rate of growth, Australia’s population would double every 40 years meaning that by 2251 (240 years time) our population would reach 1,440 million people – greater than China. Obviously I have cherry picked the data to prove a point – that infinite population growth in a finite world is neither possible nor desirable. But the point stands – mankind cannot expect to continue to grow its population without significant blowback. The fact that the world is nearing peak cheap oil only heightens this fact.

    • Anyone who worries about human population growth is economically, biologically, and historically illiterate.

      Oh dear, the Simonite nutters have come out to play!

      Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.
      — Kenneth E. Boulding, Economist.

      • Grantham: the Malthusian and Cornucopians: the Ehrlich-Simon bet (Newsletter pg 12) where he says Ehrlich’s bet was right.

      • “The greatest shortcoming of the human race is our inability to understand the exponential function.”

        Albert Bartlett

    • “Anyone who worries about human population growth is economically, biologically, and historically illiterate.”

      Anyone who doesn’t worry about growth is mathematically illiterate.

      • Malthus was a mathematician. I would love if anyone can provide an example which demonstrates that he was right. There isn’t one. The solutions to the perceived problem of “overpopulation” are what we really have to fear. There are parallels with the carbon debate. Whenever someone says “carbon” insert the word “people”.

      • That seems a truism, and something self-evident, in a sense. Unfortunately, even if the world’s population stopped growing, even if it began falling, the economic and consumerist ‘development’ of India and China alone would see carbon emissions grow enormously over the short term, ie. a few decades. Unless you are a denier, that is a calamitous prospect. One suspects that reducing carbon emissions in a hurry should be distinguished from the more long-term question of reducing population growth or even absolute numbers.

      • I believe there was a Holocaust, but I’m not convinced about the extent of mankind’s contribution to the temperature of our planet. Does that make me a “denier” in your universe?

        P.S. it’s carbon dioxide, not carbon…

      • I think you need to go a bit further abroad than on your ferry Dingo.

        And pick up a calculator and a copy of some population statistics of the last 200 years and tell us its not exponential.

      • Nonsense. The human population growth since the industrial revolution has been a good thing. Just because something exhibits growth does not mean that growth will continue in exponential fashion.

        People who are concerned about “overpopulation” are not only wrong, demonstrably wrong, but their solutions are a danger to us all.

      • Dingo – There are some interesting concepts to consider there however it is essentially a pro-life group funded by organisations with views similar to that of Simons (the Cornucopians) – human ingenuity may yet resolve the issue of resource depletion but it cannot be denied that such depletion is occurring.

      • Oh, you stirrer, you!

        Some “facts”

        1800 First billion
        1930 Second billion
        1960 Third billion
        1975 Fourth billion
        1987 Fifth billion
        1999 Sixth billion
        2013 Seventh billion?

        Whew! not to worry then, the rate of population growth is slowing! Bye bye human plague!

        (And for anyone who wants to get a handle on exponential population growth, I thoroughly recommend reading Prof Bartlett’s work).

  5. If the threat to our civilisation is in resource depletion/peaking, particularily cheap fossil fuel, then what is the point of an ETS? An easily manipulated derivative trading scheme with densely obscure rules and dubious participants.
    Perhaps the better way to tackle the problem is to aggressively tax fossil fuel at the point of extraction, aka, the mining tax revisited.
    The income can be directed to a sovereign wealth fund targeting alternative energy investments.

  6. Oh please. A massive stretch to equate what is happening here with the carbon tax as akin to solving the very serious problems Grantham mentions. The carbon tax with its multitude of exemptions and allowances. Not even petrol. Will make no planetary difference at all. The real problem is not ‘global warming’ (planetary temperatures have varied considerably over centuries) but resource depletion exacerbated by population growth.

    Gilding the lily indeed.

    • This is a carbon tax advocacy website. The ‘commons’ in the case of carbon dioxide is the entire global atmosphere which is why in the absence of worldwide reduction in emissions the ‘tragedy’ will continue unabated. So the upshot is that we’ll be left with tragic commons and a lower economic output.

    • Its not a massive stretch at all. Global warming can be seen as a political framework for discussing Peak Everything. The action that needs to be taken to deal with peak everything is the same as the action needed to deal with global warming. Reducing use of fossil fuels and increasing investment in alternatives is the aim of the ETS. Id agree with you that we needed it on oil as well, however i am sure that will come, so one step at a time. Can you imagine the backlash/screaming in this country if it had been included now?

      • Well said Dan.

        While I agree with China Fanboy (aka 3d1k) that resource extraction and population growth are huge problems, the solutions are broadly similar.

        If the government was to impose an “oil conservation tax” Fanboy would no doubt be strongly opposed as well.

        The difference is markets will ultimately force our hand with resource depletion. The market has utterly failed to address carbon emissions because the price for polluting has to be artificially imposed by government.

      • Reading Grantham’s newsletter it is appears that ‘global warming’ is a relatively minor concern to him. The very real problems of exhaustion of finite resources and growing population, agricultural erosion and water supply are what will have the most impact in coming decades.

        Tackling those REAL problems is the imperative. I have expressed similar views on the CeC posts – real problems affecting the world right now (including real chemical pollutants and heavy metals contamination). Our approach to ‘saving the planet via the issue of global warming (in fact I think Grantham refers to weather instability, something that has occurred for eons) via the carbon tax is simply political game-playing with the fairies. A diversion from the real challenges of depletion facing us – and there, as Grantham says, pricing will play an important role but also a role that will ensure a more desperate miserable existence for the already poor nations.

        A population of 1.5 to 5 billion and a planet that can sustainably support that number. He is talking of a very different world and it is a most tenuous link between Grantham’s view and Australia’s carbon tax. As I said, gilding the lily.

  7. From the planet or Universal life point doesn’t matter whether the humanity will survive or not. We are too greedy to survive and our specie is not more valuable then any other. If our conscientiousness and reason can’t help us to safe our specie, no one else can. Why anyone expect something to change, when even after the disaster of the GFC nothing has changed? The system can’t change, because if it does it won’t be anymore capital and profit driven. Does anyone have any idea what kind of society we have to live in in order to solve the problem with our greed and selfishness?

  8. “Prices impose the most effective kind of rationing – self-rationing. Why is rationing necessary? Because what everybody wants always adds up to more than there is. It doesn’t matter whether you are talking about a capitalist economy, a socialist economy, a feudal economy or whatever. Resources are limited but desires are not. That is the basic and defining problem of economics.” Thomas Sowell

    “The issue is always the same: the government or the market. There is no third solution.” Ludwig von Mises

    “State interference in economic life, which calls itself ‘economic policy,’ has done nothing but destroy economic life.” Ludwig von Mises

    “Inflation is the fiscal complement of statism and arbitrary government. It is a cog in the complex of policies and institutions which gradually lead toward totalitarianism.” Ludwig von Mises

    “Inflationism, however, is not an isolated phenomenon. It is only one piece in the total framework of politico-economic and socio-philosophical ideas of our time. Just as the sound money policy of gold standard advocates went hand in hand with [classical] liberalism, free trade, capitalism and peace, so is inflationism part and parcel of imperialism, militarism, protectionism, statism and socialism.” Ludwig von Mises

    John Maynard Keynes: “Lenin was certainly right, there is no more positive, or subtle means of destroying the existing basis of society than to debauch the currency. By a continuing process of inflation, governments can confiscate secretly and unobserved an important part of the wealth of the citizens. The process engages all the hidden forces of economics on the side of destruction, and does it in a manner that not one man in a million can diagnose” (Economic consequences of the Peace)

    The whole of mankind’s progress has had to be achieved against the resistance and opposition of the state and its power of coercion. – Ludwig von Mises.

    “The state is the great fiction by which everybody tries to live at the expense of everyone else.” Frederick Bastiat. (This includes one country exploiting another).

    It is impossible to introduce into society a greater change and a greater evil than this: the conversion of the law into an instrument of plunder. Frédéric Bastiat

    “Sometimes the law defends plunder and participates in it. Thus the beneficiaries are spared the shame and danger that their acts would otherwise involve…” ~ Frederic Bastiat

    “But how is this legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them and gives it to the other persons to whom it doesn’t belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime. Then abolish that law without delay … No legal plunder; this is the principle of justice, peace, order, stability, harmony and logic.” ~ Frederic Bastiat

    “Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place.” ~ Frederic Bastiat
    “By virtue of exchange, one man’s prosperity is beneficial to all others.” ~ Frederic Bastiat

    “The worst thing that can happen to a good cause is not to be skillfully attacked, but to be ineptly defended.” ~ Frederic Bastiat


  9. Nice article!
    It’s a shame not much time or thought is given to dealing with the ever growing problem of plastic/petro chemical by product pollution, which I believe also feeds into the capitalism arguement.

  10. We should be saving the petrochemicals for plastics instead of burning them inefficently in our 2 ton cars.