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Column: Era of Scarcity - Climate, Business Cycle and Chaos

2021-10-24T12:41:53.014Z

The world is in a raw material crisis - and we are experiencing how bottlenecks determine our everyday lives. There is much to suggest that the times of the abundance economy are over.



Enlarge image

Less labor: the population is getting older

Photo: Marijan Murat / dpa

The last great raw materials crisis hit the world 13 years ago.

At that time, oil cost $ 140 a barrel at times. The prices for rice, wheat and corn went through the roof.

In poorer countries, many people were threatened with starvation.

Protests and riots were the understandable consequences.

In the affluent West, inflation rates rose.

The world economy was at the end of the globalization boom of the noughties.

After a resource-intensive upswing with growth rates of five percent, natural limits had been reached.

China had become the world's largest consumer of coal, iron ore, nickel, aluminum, lead, zinc and copper, as well as the largest consumer of grain.

All the things that cannot be multiplied in factories at will became scarce: mineral resources, arable crops, water.

Speculation on the stock exchanges also drove prices up.

13 years ago there were 6.8 billion people on earth.

Today there are 7.8 billion.

The annual carbon dioxide emissions were 3.1 gigatons annually.

Today it is 3.6 gigatons.

The global average temperatures have risen since then, possibly by half a degree Celsius, as calculations by researchers at the University of Berkeley show.

The earth is getting full.

And warm.

Fundamentally, however, little has changed since then.

That doesn't make the tasks that lie ahead of us any easier.

Once again we are stuck in a raw materials crisis.

Once again we experience how scarcity determines our everyday life.

Gas, copper, computer chips, rapeseed, labor - many markets are getting tight.

Delivery bottlenecks paralyze production.

Prices skyrocket.

The inflation rates are rising, the central banks are undecided whether it is a question of temporary tension or the beginning of a new era that requires a correspondingly tighter monetary policy.

(Look out

for the EU energy ministers

meeting

on

Tuesday,

the ECB council meeting

on

Thursday,

and new inflation and growth figures on

Friday.

)

Frankly, I would be surprised if we reverted to the normality of a stable abundance economy.

Fracking whizzes and bottlenecks

Three major trends will increasingly determine our actions: climate change, demographics and globalization.

I tried to estimate how these developments interact in a book published in 2008.

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The three major trends, according to the central thesis, would cause "seven shortages" - fundamental shifts that could be covered over and over again by opposing developments in the short term, but which ultimately determine our future.

In recent years, some short-term postponements have counteracted the shortages, such as the fracking boom in the USA, which at times made oil and gas heavily cheaper on the world market.

At the moment, however, short-term developments are exacerbating the situation: The consequences of the pandemic, including lockdown-related production losses, are still noticeable, while large economic stimulus packages and special measures by the central banks are boosting demand.

The pent-up private savings do the rest.

Taken together, a state-pumped demand meets a restricted supply. This leads to bottlenecks and is currently causing a »bottleneck recession« in German industry, for example, according to the Ifo Institute. Despite full order books, production is being cut back. (On

Monday

there are new figures for the Ifo business climate index; on

Thursday

the US statisticians will present new estimates of economic growth, on

Friday

their German colleagues will follow.)

The picture is the same everywhere: Problems in the procurement of raw materials and intermediate products are slowing down the economy.

But that will pass.

Markets are usually pretty good at reacting quickly to shortages: Rising prices lead to capacity expansions and evasive reactions on the part of consumers.

What will remain, however, are the seven scarcity: people, spirit, (usable) soil, (clean) energy, water, time and power.

Paradoxical globalization

In short, demographic developments are causing the proportion of people of productive age to shrink, while at the same time the number of people with poor education who participate in the international division of labor is increasing. Overuse and climate change lead to soil erosion, water shortages and the breathtaking growth of metropolises. The accelerating global warming requires a complete overhaul of the energy systems. Politically speaking, it is time to act; Seen individually, we will have to work more hours and years, so we will have less free time.

All of this takes place against the background of a world order that lacks the ability to steer, because its former center of power (the USA) has lost its dominant role and power has diffused - paradoxically thanks to globalization that the USA itself promoted to have.

All of these shortages will determine the G20 summit (from

Saturday

) and the UN climate conference (from

Sunday

).

The present is difficult enough.

The further future doesn't get any easier.

Of the three major trends, demographics and climate change are so sluggish that course corrections only have an effect over very long periods of time.

Globalization, on the other hand, keeps making surprising twists and turns.

The proportion of people of working age is now falling worldwide. The rich economies already passed their demographic peak in 2010; since then the proportion of 15 to 64 year olds has fallen on average. This development is currently beginning in middle-income countries, as the UN population projections show. The decline will be particularly severe in China, where a currently favorable demography will turn into its opposite: the proportion of people of working age will fall from over 70 percent today to under 60 percent in the coming decades.

For Germany, the Institute for Employment Research (IAB) is forecasting a decline in the potential workforce by around two and a half million people by 2035 - and the researchers are already assuming a retirement age of 74 years and immigration will continue to be quite dynamic.

The labor shortage is already evident.

Especially in smaller cities there is hardly a shop or restaurant that does not advertise vacancies in the shop window.

The overall economic job vacancy was 1.16 million positions in the second quarter of 2021.

That is 30 percent more than a year earlier.

(Watch out for new labor market numbers on

Thursday

.)

Chaos in the greenhouse

How - and if - the world economy can increase its creative productivity with fewer and older people is an open question.

In any case, the challenges are great and complex.

Standstill is not an option: If the current climate policy course remains unchanged, the average temperature will rise by up to 2.8 degrees by 2100 - and then probably even further.

The International Energy Agency (IEA) recently stated that "a new global energy economy is emerging", but that there is still "a long way to go".

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Globalization, in turn, has spun fine global supply chains that are now reaching the limit of tearing. Last week's surprise was the sudden shortage of magnesium, which is used in aluminum production, which in turn is an important material in car manufacturing. The markets were startled by a report by the rating agency S&P about the Canadian metalworker Matalco, who announced production cuts because deliveries from China did not materialize. "Matalco's warning shows how the energy crisis in China is affecting global value chains, driving up prices for key raw materials and fueling inflation concerns," commented the S&P analysts.

As I said, it gets full and warm on earth - a greenhouse that is sometimes quite erratic.

The most important business dates of the week ahead

Open assembly area

Munich -

Mood: subdued

- Publication of the ifo business climate index: The economic

barometer has

recently fallen three times in a row.

The reasons lie in factors restricting production, not a lack of demand.

Reporting season I

- business figures from Michelin, Facebook, HSBC.

Expand Tuesday area

Luxembourg -

Price shock

- Extraordinary meeting of EU energy ministers.

The topic is the rapidly rising energy prices and possible countermeasures.

Reporting season II

- Business figures from Symrise, Orange, Faurecia, Thales, Kion, UBS, Novartis, Reckitt Benckiser, Alphabet (Google), Microsoft, UPS, Lockheed Martin, General Electric, Eli Lilly, Visa, 3M.

Expand Wednesday area

Berlin -

Schwarzer Peter

- Economics Minister Altmaier presents the autumn forecast of his house.

Reporting season III

- Business figures from BASF, Deutsche Bank, DWS, Banco Santander, Schneider Electric, Heineken, Iberdrola, Electrolux, GlaxoSmithKline, Harley-Davidson, Ford, Coca-Cola, Boeing, General Motors, Bristol Myers Squibb, McDonald's.

Expand Thursday area

Frankfurt -

Dans

Quelle Direction?

- Governing Council meeting with decision on further monetary policy.

Then President Lagarde will face the press.

Wiesbaden -

German Inflation

- The Federal Statistical Office announces an initial estimate for the inflation rate in October.

Nuremberg -

Jobs, Jobs, Jobs

- The Federal Employment Agency presents the labor market statistics for October.

Washington -

American Turbo

- First estimate of US GDP growth for the third quarter.

Reporting season IV

- business figures from VW, Porsche, Traton, Lufthansa, Beiersdorf, Drägerwerk, Linde, Kuka, Takkt, Stellantis, Airbus, Dassault, Valeo, Saint-Gobain, Anheuser-Busch InBev, Nokia, UniCredit, Sanofi, Lloyds, Shell, Samsung, Apple, Merck & Co, Caterpillar, Mastercard, Starbucks.

Open area Friday

Wiesbaden -

German brakes

- First estimate of GDP growth in the Federal Republic in the third quarter.

Luxembourg -

Euro inflation

- Eurostat publishes a first estimate of inflation in the euro area in October.

Reporting season V

- Business figures from Daimler, BBVA, CaixaBank, BNP Paribas, Air France-KLM, ENI, Holcim, Swiss Re, Glencore, Exxon Mobil, Colgate-Palmolive, Chevron.

Expand Saturday area

Rome -

who rules the world?

- Start of the G20 summit (until Sunday).

Top topics: climate, corona, world trade.

Open Sunday area

Glasgow -

Heat Exchangers

- Opening of the United Nations World Climate Conference in Glasgow (COP26) with the participation of representatives from around 200 countries (until November 12th).

Top topic: How do we manage to reduce methane emissions quickly?

Source: spiegel

All business articles on 2021-10-24

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