"Resources - Where are we going? Competition for resources, or innovations for the future?"

Dialogue forum "Resources" opening event on 21 October 2008

The 2008/2009 dialogue forum series is the fourth to be organised by the Munich Re Foundation. This year’s theme, resources, is very much in the news these days. How many people can our planet sustain?

Not a single spare seat was to be had for Munich Re’s Forum evening. Dr. Patrick Illinger, Science Editor of the Süddeutsche Zeitung, issued the following challenge to Dr. Thilo Bode, Director of consumer protection organisation foodwatch, and Prof. Michael Heise, Chief Economist of the Allianz Group: “Is the exploitation of resources going to end in disaster?”

It is now more than thirty years since Dennis Meadows, one of the Club of Rome pioneers, wrote a report on raw materials shortages that explored the limits to growth. The problems are certainly no less pressing today. Around one billion people do not have access to clean drinking water, whilst 2.5 billion lack hygienic sanitation. Thomas Loster, Chairman of the Munich Re Foundation, commented: “ Experts estimate it would cost around $20bn to solve these problems”, which ironically is “equivalent to the amount people spend each year on ice cream in the USA.”

Despite the Club of Rome’s predictions, foodwatch expert Bode does not believe nine billion people will inevitably run out of raw materials one day. In his view: “no one need go hungry; distribution is a political problem”. Meat consumption, for instance, is too high: livestock farming alone accounts for around a half of cereal acreage. In the case of non-renewable commodities like metals, rising prices and recycling would help mitigate the effects of shortages. But problems would arise if the consumption of renewable commodities outstripped the rate at which they were replenished. “The ecosystem is being harmed, biodiversity is declining”, the former head of Greenpeace concluded. In terms of sustainability, the key issue is, “what level of economic growth we can afford”.

Even in the case of fossil fuels Bode sees no immediate threat of shortages: “We have plenty of coal, the problem is CO2 and the climate change this causes. Renewable energies alone will not solve that problem. It is more a question of making more efficient use of energy. Bode did not perceive this as a threat to economic growth, “but not as we know it today.”

Heise believes the main reason for the surging cost of raw materials is the frenetic growth of recent years. He explained: “Energy has become three-and-a-half times more expensive since 2000”. Supply has been unable to keep pace with demand, a trend further aggravated by speculative elements. However, exorbitant price increases have halted the boom, forcing commodity prices down. Even if some of the more extreme instances have been eliminated, we should not delude ourselves. Heise predicts: “once growth has recovered in the emerging economies and the economic crisis is over in the industrial countries, the resources issue will be back with a vengeance”.

The economics expert sees a need for action in two main areas. “Firstly, we have to increase energy efficiency and boost the share of renewable energies. Secondly, we will have to keep ourselves in check in future just to get a handle on the climate problem”. For many parts of the world such as China or India, which are in the process of catching up, this is not a welcome diagnosis. Heise fears that the inherent discrepancy between the need to eke out natural resources and the need to tackle poverty could be a future source of conflict. “The competition for resources will escalate so that a greater degree of international networking will be necessary.”

Faced with the gloomy pronouncements – oil is running out, climate change will drive people out of their traditional habitats, biodiversity and lands are under threat – is humanity not inevitably heading for disaster? Heise is confident: “I think we’ll cope given the right policies”. However, politicians are all too keen to dodge the issue to avoid losing votes. He acknowledged that it would be necessary to drum up support for the necessary international coordination.

Director of foodwatch, Bode, also believes this is an issue for the politicians: “It can’t work without rules.” If justice is to be done in the distribution of resources, we have to rethink current assumptions about what is rightfully our due. It was clearly necessary to appeal to people’s individual sense of responsibility but, essentially, man was an economic animal. He believed “if the market can’t get the price right through its own efforts, where CO2 is concerned for instance, it’s up to the politicians to impose limits”.

Bode believes interest groups hinder progress to a large extent. Citing the car industry as an example, he commented: “we know enough about efficiency but we don’t do enough to put what we know into practice”. Engineers perform amazing technical feats, engines are fascinating pieces of technology. However, the benefits of more economical engines are being lost because cars are getting heavier. Appealing to the audience, he stressed: “all it needs is the will to take courageous and painful decisions”, and accused politicians of not doing enough. “I’m frustrated because, for years now, we’ve been going round in circles”.

But why, given that we have long known that our resources are in limited supply, are we using them up at breakneck speed. Chief Economist Heise explained that “attaching far greater importance to the present than to the future is typical human behaviour”. A further contributory factor is the special supply structure of raw materials. In many cases, they are extracted in countries that find themselves in the midst of economic development and need the money now.

Could we not carry on as before and assume, as some people hope, that a solution will somehow turn up? Heise argued: “technical innovations are not something you can project”. Politicians should not therefore rely on them. But it was possible to promote innovation using certain procedures. Bode agreed, and warned: “We are already lagging behind and cannot put our trust in innovations that may or may not happen. That would be like going to a restaurant with no money and ordering a plate of mussels in the hope of finding a pearl to pay the bill.”

Bode was also unenthusiastic about proposals to protect resources like rainforests by allowing wealthy people to buy a share in them. “I don’t think that will work because the areas that would be suitable are too small and the ownership issue is far from clear.” He also pointed to a huge credibility problem: “we can only solve the problems if we lead by example”.

Europe has, at least, taken a lead on emissions trading. Heise thinks this idea should be adopted in other areas where market forces alone do not produce a satisfactory solution. Two hours’ of lively debate can do no more than scratch the surface of issues such as the problem of finite resources. However, the next four 2008/9 dialogue forums will doubtless yield yet more useful ideas. The next forum, scheduled to take place on 20 January 2009, will look at “Raw materials shortages – An inevitable source of conflict”.

21 October 2008