Living on our planet
more difficult to expand the supply of commodities -especially in the short term. Long-term marginal costs are increasing for many resources as the rate of depletion accelerates and new investments are made in more complex, less productive locations.
With tight supplies of resources, countries that grow faster and richer can heavily impact global commodity prices, which in turn will put pressure on poorer countries and the relatively poor in every country
The result has been soaring commodity prices, from historic lows to new highs in little more than a decade. A recent report shows that during the past eight years alone, commodity prices have reversed the decline in prices during the previous century, rising to levels not seen since the early 1900s (McKinsey Global Institute 2011) 5. In addition, there is great volatility because commodity prices are increasingly interlinked. If current trends hold, the economies of the world will face increasing challenges as global resource markets fluctuate in response to surging global demand and inelastic supplies. The world faces a win-lose proposition quite unlike the win-win we are accustomed to in global trade. With tight supplies of resources, countries that grow faster and richer can heavily impact global commodity prices, which in turn will put pressure on poorer countries and the relatively poor in every country. Countries with relatively fewer resources and lower resource efficiency, such as many in the Asia and Pacific region, will suffer the most from higher and more volatile prices for resources. This will heavily impact the most vulnerable, and will impede progress towards achieving the Millennium Development Goals6. Perhaps most significantly, there are growing concerns about both the adequacy and stability of food supply. Food supply is being affected by a number of factors, including rising material and labor costs, competing demands for freshwater, and loss of farmland for housing and industry (McKinsey Global Institute 2011). A key challenge will be how to meet the needs of expanding and increasingly affluent populations, while reducing poverty and staying within environmental limits. Countries will need to adopt new models of growth that have much lighter impacts on the planet’s resource base. Overexploitation of natural capital must be replaced with efficient and sustainable use. Over the long-term, efforts must go beyond improving the efficiency with which we use resources, to include systemic and structural changes, such as changing the mix of resource supply sources, building new green industries, cleaning up polluting sectors, and transforming consumption patterns.
5 McKinsey Global Institute’s commodity price index is based on the arithmetic average of four commodity indexes: food, agricultural raw materials, metals, and energy. 6 The Millennium Development Goals (MDGs) are eight international development goals that all 193 United Nations member states and at least 23 international organizations agreed during the Millennium Summit in 2000, to achieve by the year 2015.
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