The world’s population is set to go on rising – at least to 2050. And as population rises, so will the demand for food. But here we come up against a potentially catastrophic illustration of the law of diminishing returns. Population is set to grow, but the world supply of land is pretty well fixed. And with global warming, some land may become unusable.
According to Sir John Beddington, an expert in population biology and lead author of a government-commissioned report, The Future of Food and Farming, there could be serious consequences of this population rise, including rapid rises in the demand for food, rising food prices, rising land prices, the degradation of land, growing food poverty in many developing countries, growing political unrest and serious environmental damage. As the report’s Executive Summary states:
The global food system will experience an unprecedented confluence of pressures over the next 40 years. On the demand side, global population size will increase from nearly seven billion today to eight billion by 2030, and probably to over nine billion by 2050; many people are likely to be wealthier, creating demand for a more varied, high-quality diet requiring additional resources to produce. On the production side, competition for land, water and energy will intensify, while the effects of climate change will become increasingly apparent. The need to reduce greenhouse gas emissions and adapt to a changing climate will become imperative. Over this period globalisation will continue, exposing the food system to novel economic and political pressures.
Any one of these pressures (‘drivers of change’) would present substantial challenges to food security; together they constitute a major threat that requires a strategic reappraisal of how the world is fed.
The report specifically looks at five key challenges for the future:
A. Balancing future demand and supply sustainably – to ensure that food supplies are affordable.
B. Ensuring that there is adequate stability in food prices – and protecting the most vulnerable from the volatility that does occur.
C. Achieving global access to food and ending hunger – this recognises that producing enough food in the world so that everyone can potentially be fed is not the same thing as ensuring food security for all.
D. Managing the contribution of the food system to the mitigation of climate change.
E. Maintaining biodiversity and ecosystem services while feeding the world.
So what can be done and how realistic are the policy solutions? The following broadcasts and articles examine the arguments
Webcasts and podcasts
Articles
Report
Questions
- Summarise the main findings of the report.
- Does increasing the output of food per agricultural worker contradict the law of diminishing returns? Explain.
- What are the current failings of the system of global food supply?
- Why are problems of food supply likely to intensify?
- What externalities are involved in global food production? What impact do these have?
- In what ways might the externalities be internalised?
- What are the benefits and dangers of new technologies as means of increasing food supply?
- To what extent do the goals of increasing food supply and environmental sustainability conflict with each other?
- Explain the main drivers of change that affect food supply and demand? In what ways do these drivers interact with each other?
- “Although the challenges are enormous there are real grounds for optimism.” Explain the report’s authors’ thinking here.
BP has just published its latest projection of energy trends – its Energy Outlook 2030. According to the press release:
World energy growth over the next twenty years is expected to be dominated by emerging economies such as China, India, Russia and Brazil while improvements in energy efficiency measures are set to accelerate.
The following podcast from the Financial Times features a discussion of the report and the factors affecting oil prices and their relationship to economic growth
Webcast
Emerging economies seen driving energy demand Financial Times videos, John Authers and Vincent Boland (19/1/11)
Articles
Energy outlook Financial Times, Lex column (19/1/11)
BP energy outlook: main points The Telegraph (20/1/11)
High energy prices need not mean doom Sydney Morning Herald, Jeremy Warner (21/1/11)
Report
BP Energy Outlook 2030 (January 2011)
Data
Power slide The Economist: Daily Chart (19/1/11)
Questions
- What are the most powerful driving forces behind the demand for energy?
- Why does the report forecast virtually no increase in energy demand in developed countries? What assumptions are made about growth rates in OECD and non-OECD countries?
- What factors would lead to a substitution of sustainable energy sources for fossil fuels? What would detrmine the size of such substitution?
- What is the role of the price elasticity of demand for and supply of oil and the income elasticity of demand for oil in determining oil consumption in different parts of the world?
- Why may high energy prices not necessarily mean ‘doom’?
Bank rate in the UK has been at the historically low level of 0.5% since March 2009 and the MPC decision on 13 January was to leave the rate unchanged (see also). But inflation has been well above the Bank of England’s target of 2% since December 2009 and it could well rise further as international commodity prices are soaring. Some economists are thus arguing that Bank rate should rise. This is crucial, they say, to dampen inflationary expectations.
Other economists, however, argue that aggregate demand is likely to remain depressed and that the economy is operating with a large negative output gap. What is more, house prices are falling, as are real wages (see Bosses gain – workers’ pain)
In the following extract from BBC Radio 4’s Today Programme, two economists, Charles Goodhart and Willem Buiter, both former members of the MPC, debate the issue.
Podcast
Should interest rates rise? BBC Today Programme (13/1/11)
Data
Economic and Labour Market Review, Office for National Statistics (For inflation data see Tables Chapter 3, Table 3.01; for interest rates see Tables Chapter 5, Table 5.08)
Monetary Policy Committee Decisions Bank of England
Questions
- What are the arguments for a rise in Bank rate at the current time?
- What are the arguments against a rise in Bank rate at the current time?
- What information would you require to decide which of the arguments was the more powerful?
- Why is it difficult to decide the size of the output gap?
- To what extent do the arguments for and against a rise in Bank rate depend on the factors determining expectations, and what expectations are important here?
- To what extent are exchange rates relevant to the effectiveness of interest rate policy?
A two-week international climate change summit opened in Cancún, Mexico, on 29 November. But will the talks make any progress in tackling global warming? Will mechanisms be put in place to ensure that the previously agreed ceiling of 2°C warming is met?
After the largely unsuccessfuly talks in Copenhagen a year ago, hopes are not high. But a likely rise in global temperatures of considerably more than 2°C could have disasterous global consequences. Indeed, new evidence suggests that even a ceiling of 2°C may be too high and that, as temperatures rise towards that level, domino effects will start that may become virtually unstoppable. As Andrew Sims in the Guardian article notes:
This is the problem. Once the planet warms to the point where environmental changes that further add to warming feed off each other, it becomes almost meaningless to specify just how much warmer the planet may get. You’ve toppled the first domino and it becomes virtually impossible to stop the following chain of events. Honestly, nobody really knows exactly where that will end, but they do know it will end very, very badly.
The following podcasts and articles look at the importance of reaching international agreement but the difficulties of doing so.
Podcasts and webcasts
Post-Copenhagen, a Cancun compromise? Reuters (30/11/10)
Climate change ‘Dragons’ Den’: What are the options? BBC News, Roger Harrabin (29/11/10)
Cancun climate change summit seeks new emissions deal BBC News, David Shukman (3/12/10)
Can nudge theory change our habits? BBC News, Claudia Hammond (29/11/10)
Articles
Cancún climate change conference 2010 Guardian, (portal)
Q&A: Cancún COP16 climate talks Guardian, Shiona Tregaskis (8/10/10)
72 months and counting … Guardian, Andrew Simms (1/12/10)
Cancún climate talks: In search of the holy grail of climate change policy Guardian, Michael Jacobs (29/11/10)
Cancún and the new economics of climate change Guardian, Kevin Gallagher and Frank Ackerman (30/11/10)
Facing the consequences The Economist (25/11/10)
UN climate talks low on expectation BBC News, Richard Black (29/11/10)
Expect little from Cancun talks The Star (Malaysia), Martin Khor (29/11/10)
Don’t let us down: UN climate change talks in Cancun Independent, Jonathan Owen and Matt Chorley (28/11/10)
Cancun and Climate: Government Won’t Act, But Business Will Time Magazine: The Curious Capitalist, Zachary Karabell (28/11/10)
At Global Climate Change Talks, an Answer Grows Right Outside Huffington Post, Luis Ubiñas (29/11/10)
Cancun climate change talks: ‘last chance’ in the snakepit The Telegraph, Geoffrey Lean (29/11/10)
Climate Change Talks Must Deliver After Record Weather Year Scoop (New Zealand), Oxfam (29/11/10)
World climate talks kick off in Cancun DW-World, Amanda Price and Axel Rowohlt (29/11/10)
On international equity weights and national decision making on climate change Vox, David Anthoff and Richard S J Tol (29/11/10)
Climate treaties all bluster, no bite The Age, Dan Cass (10/12/10)
Conference website
UNFCCC COP16/CMP6: Mexico 2010 Official site
Questions
- What would count as a ‘successful’ outcome of the climate change talks? Why might politicians interpret this differently from economists?
- What can governments do to internalise the externalities of greenhouse gas emissions?
- What insights can game theory provide into the difficulties of reaching binding climate change agreements?
- What are likely to be the most effective mechanisms for getting people to adapt their behaviour?
- Can nudge theory be used to change our habits towards the environment?
- Explain the use of equity weights in judging the effects of climate change. Are they a practical way forward in devising environmental policy?
In the post of the 17th November, Greece 2: This time it’s Ireland, we looked at the problems of the Irish economy in servicing its debts and whether it would need a bailout. Well, despite protesting that such a bailout would not be necessary, in the end events overtook the Irish government. International loss of confidence forced the government to accept a bailout package. After a weekend of talks, a deal was reached on 28 November between the Irish government, the ECB, the IMF, the European Commission and individual governments.
The deal involves loans totalling €85 billion. Of this, €35 billion will go towards supporting the Irish banking system. The remaining €50 billion will go to supporting government spending. The loans will carry an average interest rate of 5.8%, which is more than the 5.2% on the bailout loans to Greece, but considerably below the rates that Ireland would have to pay on the open market. Being loans, rather than grants, they only delay the problems of dealing with Ireland’s large debt, which has been rising rapidly and is predicted to be around 80% of GDP for 2010 (see Annex Table 62 in OECD Economic Outlook Statistical Annex). They thus provide Ireland with liquidity while it implements policies to reduce its debt.
Ireland itself has contributed €17.5 billion to the loan fund; of the rest, €22.5 billion will come from the IMF, while the European Union and bilateral European lenders, including the UK, Sweden and Denmark, have pledged a total of €45.0 billion, including £3.25 billion from the UK.
One of the main purposes of the loans is to reduce the likelihood of speculation against other relatively highly indebted countries in the EU, such as Portugal, Spain and Italy. The hope is that, by granting Ireland loans, the message would be that similar support would be made available to other countries as necessary. ‘Contagion’ would thereby be halted.
Podcasts and webcasts
Ireland’s €85bn bailout is best deal available, says PM Guardian webcast (29/11/10)
Interview with Jim O’Neill BBC News (29/11/10)
Irish deal ‘better than market rate’BBC Today Programme, Ajai Chopra (29/11/10)
Ireland bailout ‘doesn’t stop pressure building’ BBC Today Programme, Tony Creszenzi and Brian Hayes (29/11/10)
Articles
EU/IMF Irish bailout – the details FT Alphaville, Neil Hume (28/11/10)
Ireland rescue is not a game changer Financial Times, Mohamed El-Erian (29/11/10)
IMF insists Ireland got a ‘good deal’ Irish Times (29/11/10)
Can the eurozone afford its banks? BBC News blogs: Peston’s Picks, Robert Peston (29/11/10)
Irish bailout leaves markets nervous for good reason CNN Business 360, Peter Morici (30/11/10)
Eurozone debt crisis deepens Times of Malta (30/11/10)
Will the Irish crisis spread to Italy? Vox, Paolo Manasse and Giulio Trigilia (29/11/10)
Questions
- Distinguish between liquidity and solvency solutions to sovereign debt problems.
- Is Ireland’s debt problem purely a sovereign one? Explain.
- What will determine whether the bailout for Ireland will halt contagion to other countries?
- Why might the implementation of an austerity package make the sovereign debt problem worse in the short to medium run?
- Will the Irish crisis spread to Italy?