The Coming Resource War

The other morning, I was making coffee at the crack of dawn, as I do each day. As I stood there watching the coffee percolate, I began to think about how difficult it would be to survive in a world where we were fighting for resources everyday. We take so much for granted, especially as Americans. After all, electricity is just a light switch away, groceries are usually in abundance just a few miles away and gasoline, while costly, is cheaper than many other liquids we buy each day, including some fancy bottled water.

Let’s face it. Most of us have never had to kill our own food or forage in the forest to find enough wood to heat our home for the night. What would that be like? Would we be prepared? I highly doubt it.

The battle for global resources has already begun — the borders are being drawn and the players are suiting up. The grim reality is that commodities are being gobbled up around the globe, and as Earth’s population surges past six billion, resources are being stretched to the limit.

Six Billion Reasons to Worry

Some scientists predict that the planet can sustain only 8 billion people; there simply are not enough natural resources to handle any more than that. Nobody knows for sure, but it’s a pretty good indicator that at 6 billion, we have worldwide clean water problems, pollution, strife, disease, etc. At 8 billion, there will likely be even more problems.

There are only two remedies for this situation: Mother Nature and human nature. Mother Nature has a way of regulating itself, regardless of what Al Gore says. The great plagues and pandemics throughout history have wiped out millions of people in the blink of an eye. It could well happen again. Many believe we are overdue for a pandemic, and SARS, AIDS and bird flu have all been candidates, but none has done the job yet.

As medical science has improved, many diseases that used to be fatal are now nonexistent. The planet is a victim of its own success. But if a pandemic or other natural catastrophe doesn’t come along, then man usually steps up to the plate. This is nothing new — it’s been going on since the beginning of time.

So Easy a Caveman Could Do It

The struggle for survival is human and animal nature. As resources become scarcer, the superior “animal” will seize the resources from the lesser species. It’s the law of natural selection, or survival of the fittest. In our modern world, the fittest are already taking from the least fit, and it’s just going to get worse.

According to Agence France-Presse:

At Belgium’s initiative, the U.N. Security Council on Monday turned the spotlight on the link between illegal extraction of natural resources and armed conflict in trouble spots around the world, particularly in Africa.

Opening a daylong debate on the issue, Belgian Foreign Minister Karel de Gucht said his goal was to generate awareness that “good management of natural resources is important not just for development, but also for peace and security.”

The struggle for control of natural resources such as diamond, oil, timber and other raw materials has been a key factor in civil wars in Liberia, Sierra Leone, the Democratic Republic of Congo (DRC), Ivory Coast, Sudan’s Darfur region and Angola.

Keeping up With the Chens

According to Wikipedia, the old saying, “keeping up with the Joneses,” is “a popular catchphrase in many parts of the English-speaking world. It refers to the desire to be seen as being as good as one’s neighbors or contemporaries using the comparative benchmarks of social caste or the accumulation of material goods. To fail to ‘keep up with the Joneses’ is perceived as demonstrating socioeconomic or cultural inferiority.”

In China, that problem is really starting to rear its head. According to BBC News,

In a report published in 2006, the World Bank estimated that 8% of the Chinese population — about 106 million people — lived on less than $1 a day. Most of those are in the countryside.

This does not mean that Chinese farmers are not benefiting from the economic boom — they are.

Last year, average rural incomes grew by more than 10%. The problem is that urban incomes are growing faster.

China’s government is doing what it can to keep the problem under control, but so far, it’s not working so well. The reality is that major “social problems…can arise if the income gap continues to widen,” and it will.

Survivor Earth

A growing population in a world with fewer resources is a race that only a few can win, and to do so everyone will have to play a real game of Survivor.

In the coming years, the countries that are strategically positioned to survive are the ones with the most resources and a growing army to protect them. Countries that come to mind are Russia, China and even Venezuela. In my estimation, the best targets are Africa, Canada and our very own Alaska.

Only time will tell if the U.S. would actually go into World War III to protect Ontario or Alaska.

One thing is for certain: Global conflict based on a fight for resources is a growing problem without any immediate solution. In the meantime, the investors who are able to see opportunities where others see only problems will make a good amount of money.

They’ll realize that commodities — everything from corn to cocoa to gasoline to gold — are in lower supply and higher demand. It’s as simple as that, at least for now.

Yours for resource profits,

Kevin Kerr

August 3, 2007

The Daily Reckoning