hr: Money

It created an existential crisis for the global economy, leading many to argue that the world had reached its limits of growth and prosperity. We are back to the future, with the question we asked 30 years ago: How can we combine robust economic growth with tight global supplies of such critical commodities as energy, food, and water?

Then as now, the world economy was growing rapidly, around 5% per year, in the lead-up to surging commodities prices. Oil markets turned extremely tight in the early 1970s, not mainly because of the Arab oil boycott following the 1973 war, but because mounting global demand hit a limited supply. Oil prices quadrupled. Food prices also soared, fueled by strong world demand, surging fertilizer prices, and massive climate shocks, especially a powerful El Niño in 1972.

Oil prices have roughly quintupled since 2002, once again the result of strong global demand running into limited global supply. World grain prices have doubled in the past year.

Cheney was Gerald Ford’s chief of staff in 1976, when soaring oil prices helped doom Ford’s reelection campaign.

The first stagflation was overcome at very high cost, including 15 years of slower global growth.

The first episode of stagflation opened a great debate about the global adequacy of primary commodities, especially energy and food. In 1972 the Club of Rome published its manifesto, “Limits to Growth,” which predicted that the global economy would “overshoot” the earth’s natural-resource limits and subsequently collapse.

To make matters worse, human-made climate change is now adding enormous risks to global food production.

Today the world emits roughly 30 billion tons from those sources.

Our global resource binds are much tighter now than in the 1970s, because the world economy is that much larger, the resource constraints are tighter, and quick fixes are harder to find. In 1974 the world population was four billion, and total world income was around $23 trillion (in today’s dollars adjusted for purchasing power). The same annual growth rate of the world economy, say 4% per annum, requires vastly more natural resources - energy, water, and arable land - than in the 1970s and poses much larger risks for the world’s climate and ecosystems.

The more pressing limits will be in resources and a safe climate. It took 15 tumultuous years to overcome the limits on energy and food after 1973.

We need to adopt coherent national and global technology policies to address critical needs in energy, food, water, and climate change.

There is certainly no shortage of promising ideas, merely a lack of federal commitment to support their timely development, demonstration, and diffusion.