Grantham said the driving force of the imminent commodity crunch is the use of hydrocarbons, which enabled the human population to prosper and grow on an unprecedented scale. Until about 1800, humans lived with no safety margin of food or wealth, and the population grew and subsided with the availability of food. But the advent of hydrocarbons brought an explosion in energy use and economic productivity. In time, humans amassed capital surpluses, which helped generate a dramatic increase in wealth and furthered scientific progress. In the two centuries to 2011, the population grew from 800 million to 7 billion, and at a current growth rate of 1 per cent, is closing in on 8 billion. Now, with a 10-fold increase in wealth among developed countries and the rapid emergence of India and China, humanity continued to eat rapidly into the earth’s finite supply of hydrocarbons, metals, fertiliser and available land and water. But compound growth – of any kind – is not sustainable, and society must act immediately to preserve finite resources and learn to use them more efficiently. “Rapid growth is not ours by divine right; it is not even mathematically possible over a sustained period,” Grantham wrote. As a species, humanity was eroding the margin of safety gained little more than two centuries ago. “How we deal with this unsustainable surge in [resources] demand and not just ‘peak oil,’ but ‘peak everything,’ is going to be the greatest challenge facing our species. “But whether we rise to the challenge or not, there will be some great fortunes made along the way in finite resources and resource efficiency, and it would be sensible to participate.” crunch tim e Grantham said that governments, companies and investors that were not planning for the resources crunch were living dangerously. Those who own scarce resources, or learn how to use them most efficiently, would be poised to prosper. Among the major economies, the US was most likely to adapt and thrive: as a resources glutton, it had much to gain from implementing sustainability practices. “The US is notoriously bad at using resources efficiently. That means there’s a lot of low-hanging fruit.”

The US is not known for its long-term sustainability efforts, but is for its ferocious response to price signals, Grantham said, “and it’s getting the mother of all price signals.” “We are the most profligate or wasteful developed country and this fact, paradoxically, becomes a great advantage. But as the prices of resources increase, the people of poorer nations will be priced out of the market. “The irony that they suffered the most after having used up the least will probably not make their misery less.” He said it would be a “sad coincidence” that the US and other countries that consumed resources the most voraciously could be chief beneficiaries of the coming resources squeeze. The US would enter this time of resources austerity as a rich nation, both in wealth and income per capita, while also being endowed with the two most important long-run resources: agricultural land and a good water supply. Grantham’s investment recommendations to hedge the end of resources abundance were simple: buy resources – from hydrocarbons to potassium, which is used to make fertiliser – and timberland, plus the stocks of businesses adapting to the new world. “Owners and controllers of all limited resources, certainly including water, will benefit. But everyone else will be worse off.” He was particularly favourable of timberland, an asset class in which GMO specialises. “The sun suns, rain rains and trees grow. It’s a wonderful way to play this game.” However he shuns investing in water rights on fundamental solidarity grounds. “I think it should belong to everybody. The idea that corporations own water doesn’t sit well with me.” In his letter, Grantham stressed that the end of abundant resources could become humanity’s greatest challenge. “It’s a gloomy topic. Suffice to say that if we mean to avoid increased starvation and international instability, we will need global ingenuity and generosity on a scale hitherto unheard of. “Slowly running out of these resources will be painful enough. Running out abruptly and being illprepared would be disastrous.” But the short-termism that dominates human activity made it unlikely that society could willingly slow its consumption of resources until the point of no return, Grantham believed. This was as true of politicians as everyday individuals deciding how much electricity they will use. “The problems of compounding growth in the face of finite resources are not easily understood by optimistic, short-term oriented and relatively innumerate humans – especially the political variety.”