We need a global framework that follows China’s leadby Dambisa Moyo / June 20, 2012 / Leave a comment
Published in July 2012 issue of Prospect Magazine
If I ruled the world, I would address the biggest threat to economic progress and political stability over the next decade: scarcity of resources. As an economist and author, I have travelled to every continent over the past two years, and the one common issue faced by every country I visited is the coming shortages of key commodities. Although many countries have created strong economic growth and made significant strides in moving hundreds of millions of people out of poverty, the risk from commodity shortages promises to put a dent in all this good news. The world’s dwindling supplies of land, fresh water, energy and minerals—essential for food and “white goods” such as mobile phones, cars, televisions and washing machines—cannot meet the pressures rising from global demand. Three key factors drive this skyrocketing demand: the rising world population, expected to grow from roughly 7bn today to 9bn in 2050; increasing global wealth, with an estimated additional 3bn people expected to join the ranks of the middle class by 2030; and a marked trend toward urbanisation. Demographers predict that the number of urban dwellers will rise from 3bn today to 5bn by 2025, each of whom will demand better quality foodstuffs and modern conveniences that act as a draw on the world’s resources. On the supply side, arable land, drinkable water, energy and minerals are finite, scarce, and rapidly depleting. Take land—the Earth contains approximately 13bn hectares of land, or an area about 16 times the size of the United States. Of that, just 11 per cent is suitable to grow crops. With the world’s population exploding, there will be many more people looking to live on a shrinking amount of land. Water, on the other hand, accounts for 70 per cent of the Earth’s surface area. However, only 0.007 per cent of the total volume is easily accessible fresh water that can be used for drinking and sanitation. In regards to energy, today we are living off oil discoveries that date back to the 1950s. It is too early to say whether energy alternatives, such as shale gas, are a real reprieve to global energy woes, as environmental challenges to fracking could limit the promise of such alternatives. Finally, the supply of minerals such as copper is undermined by a decline in quality, a shrinking number of discoveries, and increased vulnerability to political interventions. Companies will therefore have to go into more difficult terrain and riskier geopolitical environments in order to secure these minerals. The widening imbalance between rising resource demand and falling supplies means that commodity prices are likely to continue to rise substantially, and thus hurt living standards. Moreover, the risk of conflicts will increase exponentially. There are 24 wars raging around the world today that have their origins in disputes over access to scarce resources, and there will likely be many more. Despite these severe commodity headwinds, only one country seems to have adopted a systematic, deliberate and global approach to averting a commodity crunch: China. Its global rush for resources is helped by its vast treasure chest of over $3 trillion in foreign exchange reserves, enabling it to buy assets around the world. Central to this commodity campaign, though, is a strategy of befriending the “axis of the unloved.” These are the countries across Africa and South America that have been largely ignored as investment destinations by wealthier countries but nevertheless have vast sums of mineral deposits, oil wells, and tracks of arable land. Africa has the largest amount of untilled arable land left in the world. In return for large sums of much-needed capital investment, China has gained preferential access to resources. Chinese trade with my native Zambia, for example, has skyrocketed, growing from a miniscule $100m in 2000 to almost $3bn in 2010. In 2009, China became Africa’s largest trading partner. Chinese foreign direct investment (FDI) is also steadily increasing. In 2010, China’s FDI in Zambia topped $1bn, creating 15,000 jobs, and estimates for 2011 have the figure above $2.4bn. In exchange for copper and other resources, China is providing Zambia with much needed capital investment, jobs, and infrastructure. I’ve seen first-hand what a positive impact Chinese investment has had on my country, so I’m astonished that China’s investments in Africa have garnered so much criticism in the western media. Meanwhile, much of the rest of the world has shown a predilection for military incursions in resource-rich regions, such as Iraq and Afghanistan, in a bid to gain dominion over scarce resources. Too much time and effort is being spent on addressing the forthcoming and ferocious commodity headwinds in this “every nation for itself” way. The world is much better served by a more cohesive, coherent, and explicit global framework that would define and manage competing resource interests and explore strategies for cooperation and sharing that would avert costly conflicts. If I ruled the world, I would establish such an institutional framework, before it is too late.