The climate supercycle

Climate breakdown risks a supercycle where the price of goods - including food - rises as supply breaks down. So who is going to pay?

Climate breakdown erodes people’s lives. It doesn’t arrive with a bang or a whimper but a steady, crushing squeeze.

To be clear, climate breakdown is already driving devastatingly spectacular crises, overwhelmingly in the Global South - impacting those least responsible for it.<

But we need to be attentive to the slower, more insidious forms of climate violence as well as the attention-grabbing firestorms, super cyclones and locust plagues.

Supercycle

Climate breakdown is putting the squeeze on living standards around the world. The cost of the basic necessities of life is increasing.

This is not only intensifying the ‘end of the middle classes’ – those working people who have secured more than the bare minimum and some semblance of income security – and producing a deepening crisis amongst the poorest.

This squeeze is where climate breakdown will be most felt over the coming decade, and sets the terms for what our hotter future will look like.

The current squeeze is a boon for investors and extractive industries. It’s not called a squeeze in the financial press. Rather, it goes by the name of a commodity supercycle.

A supercycle describes a period of time where commodity prices – food, ore, oil, coal, etc – rise above the longer-term price trend for decades at a time.

Defaults

It’s generally accepted that there are long-term economic trends that affect commodity prices, driving them up and down based on the cyclical expansion of industrial capacity.

The last supercycle, driven largely by China’s rapid industrial expansion in the 1990s, ended a decade ago with the financial crisis of 2008 and the Great Recession.

It coincided – or rather, produced – the largest ever increase in global greenhouse gas emissions, and generated enormous profits for primary industries - profits that in term fuelled speculative real-estate and share price bubbles.

It not only ended with the financial crisis; it triggered it.

The massive increase in the price of oil, of raw materials and food, combined with stagnant incomes and wages, meant people in the US were unable to pay their mortgages or debt payments, leading to a cascade of defaults starting in 2006 and accelerating through the crisis.

Commodity

Drought, combined with rising oil prices massively drove food prices up in 2008. Foreshadowing the later 2011 food crisis, there were protests and riots around the world.

After oil prices briefly collapsed, they returned to similar highs in 2009, again driving food prices higher.

This time the rise is the cost of living provoke a series of revolts and revolutions, most famously across North Africa in the Arab Spring.

The volatility of food, oil and commodity prices appeared to end by 2015, marking the close of the supercycle. The current signs all signal the start of another, more pernicious squeeze however.

Climate breakdown is driving a new commodity supercycle, putting the squeeze once again on those least able to afford it.

Industry

It is driving prices higher in two ways. The first is through the most commonly known effects of climate change: drought, disaster and declines in crop yields.

Climate change is already producing drought around the world: at the time of writing Madagascar, Somalia and Afghanistan are all facing food shortages due to drought, and a number of crucial food producing regions around the world such as California are also in drought.

A range of foods are already seeing declines in yields, and disasters (floods, fires, storms) have affected food production around the world, and the price of food is rising quickly.

As water becomes more scarce, rainfall patterns shift, and yields decline the price of food will rise, meaning we will see even more people slip into food poverty and malnutrition, and more money from people’s wages being spent on basic food stuffs.

The second impact is more insidious. As governments and industry start the slow move to ‘green’ energy and industry, demand for raw materials is increasing.

Investments

There is currently not enough supply for many of the raw materials for a green transition available, creating the conditions for boomed ore and mineral prices.

Given the long lead in time for developing new mines and supply chains, this means for the foreseeable future – that is, as long as the transition lasts – commodity prices will ride high on government and business investment.

To be sure there are other factors at play here. China is buying in more corn to feed livestock. There are the impacts of last year’s swine flu pandemic - resulting in the deaths of hundreds of millions of pigs.

And there are the the material requirements of China's massive belt and road project. This sits with the hunt for new investments by banks and hedge funds fat with government subsidies and bailouts.

But the bigger picture is this supercycle will continue as long as resource availability continues to fall short of demand.

Neoliberalism

This will last at least a generation, given the impacts of climate breakdown and the need to transform almost all of the global economy.

What this ultimately means is that people face increased prices for a wide range of basic goods, including energy and food - and this in turn will reduce living standards.

We’ll likely see increasing debt defaults, more demand for social services, and increased food and fuel poverty.

This will deepen the current squeeze on the world’s middle and working classes, already under attack as conditions and wages are supressed, and trade union and protest rights are reduced.

Neoliberalism had already reduced the size of the middle classes, and increased poverty amongst the poor - working or otherwise.

Revolts

Climate breakdown risks deepening the polarisation between the wealthy few, and the rest of us. And the question is – and will continue to be – who will pay for climate breakdown? Will the majority quietly watch as their living standards are eroded? Will people accept less as their lot?

The turn to xenophobic nationalism is a worrying indicator of a desire to make ‘other people’ – non-European, non-white – pay for a crisis they did not produce in order to protect ‘our’ standard of living. But there are alternatives to this kind of green ‘paranoid nationalism’.

During the food crises of 2008 and 2011 people rose up against corrupt and violent government regimes, and opinion turned against the suicidal capitalism driving us towards catastrophe.

Protest, riot and revolution have long been the answer given by populations to the collapse of their standard of living.

Recent years have seen massive revolts against police aggression, systematic racism and misogyny, and against the climate crisis. The climate squeeze could well tip things over the edge once more.

This article was originally published by The Ecologist. (c) Nicholas Beuret.