Returning to 'normal' is not an option

Dominic Waughray, Straits Times 19 Jan 09

WE KNOW that 2008 will go down in history as a bad year for the world economy. In the first half of the year, volatile commodity prices, especially for food and oil, hit the world's poorest people hard. In the second half, there was the global financial catastrophe.

Yet, could the crises of food, fuel and finance that we experienced last year simply be three canaries in the coal mine? What if these are just the early warning signals that our current economic system is not sustainable at a much deeper level?

The World Economic Forum convened over 700 international experts in Dubai last November to discuss the world agenda for this year. Among them were more than 120 leading experts in environment, sustainability and human security.

Their conclusions were startling. We face an environmental security problem that is deeper, more fundamental, more complex and much more systemic than the financial crisis. 2008 could merely be the precursor to a perfect economic storm, the like of which we have never seen.

Over the past 50 years, we have amassed unprecedented financial wealth, but we have also chronically underpriced risk in terms of our natural resource base. We have financed our extraordinary growth in aggregate living standards by systematically under-pricing the goods and services we derive from our planet's natural resources, the negative externalities we create by polluting them, and the future risks we face from our cumulative depletion and degradation of them.

Those of us in middle age today in richer countries are the third successive generation to benefit from the natural resource bubble that our first world economy has exploited since the mid 20th century. It is highly unlikely - unless we make some deep, structural changes - that our children and their children will experience the same sense of progress and wealth.

Here are just a few chilling observations from the experts who met in Dubai:

# If present trends continue, nearly four billion people will live in areas of high water stress by 2030. As we try to feed and fuel a growing and a more affluent world, the water situation shows every sign of getting much worse. Simply augmenting water supply is no longer possible in most places. Historical approaches to water use will not work in the future.

# The International Energy Agency (IEA) predicts world energy demand to increase by 45 per cent by 2030, with coal accounting for more than a third of this rise. About 87 per cent of the increase in demand will come from countries outside the Organisation for Economic Cooperation and Development where energy poverty is currently highest. The IEA say these energy trends are 'patently unsustainable, economically, environmentally and socially'.

# The world will need to double food production in the next 40 years to meet projected demand. Over one billion people today - one-sixth of the world's population - do not have access to adequate food and nutrition. Our ability to meet current and future production needs is seriously challenged by increasing water scarcity, climate change and volatile energy costs and supplies.

# Humanitarian assistance will increase to unprecedented levels if, as commentators foresee, climate change and water scarcity result in large-scale migration. The International Red Cross estimates there are 25 million to 50 million climate change refugees already, compared to the official refugee population of 28 million. The Intergovernmental Panel on Climate Change suggests that there could be 150 million environmental refugees by 2020. In international law currently, there is no such thing as an environmental refugee.

The Global Risks 2009 report from the World Economic Forum reinforces the scale of all these challenge. Economic strategies that follow the same industrial trajectory as before will not bring the resilience that is needed for long-term job creation, wealth generation and sustained economic growth into the future. Oil prices will rise, commodity prices will become more volatile and energy, food and water security issues will grow. We will breach the emissions limits scientists tell us that we must keep within if we are to avoid dangerous climate change.

It seems that the world can ill afford to 'return to normal'. The financial crisis gives a stark warning of what can happen if known economic risks are left to fester. These fundamental environmental risks need to be addressed if we are to survive and thrive.

In this context, arguably the most serious World Economic Forum Annual Meeting in years will be held in Davos, Switzerland, later this month. More political, business and civil society leaders than ever before are due to take part. In these unprecedented times, can government and business leaders forge a new coalition to develop a set of practical global actions, which can stimulate economic growth in the short run and create the foundations of a more sustainable, low carbon economy for the longer run?

2008 gave us the stern warning that current trends cannot be continued. We face a perfect economic storm if hidden sustainability challenges catch up with our so called real economy challenges.

Can 2009 be the year when we find innovative new collaborations to help shape the post crisis world? We must, as returning to 'normal' is not an option.

The writer is Head of Environmental Initiatives in the World Economic Forum.