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Grantham: Fewer Babies, More Windmills ‘Our Last, Best Hope’

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Jeremy Grantham sees a glimmer of light amid the overarching gloom that is dooming civilization to collapse and disorder.

The good news, as he sees it in his quarterly letter to shareholders, is a declining fertility rate and progress in alternative energy.

The new shareholder communication, written as the final piece in a six-part series of special reports with a distinctly dystopic theme, does not offer any specific investment guidance.

But the hedge fund manager’s success at foreseeing the credit crisis and focus on predicting other market bubbles has won him a respectful hearing among many market watchers.

Indeed, a recent Wall Street Journal article noted how many financial advisors closely follow Grantham’s writings as leads to emerging investment themes. One advisor also mentioned their tendency to be a somewhat “depressing” as well.

And so it is with “The Race of Our Lives,” Grantham’s current letter, which posits that avoiding “the near certainty of our running off the cliff” depends on the success of “two extraordinarily lucky…gifts that were not available to any prior stressed civilization.”

(It is the decline in babies and progress in alternative energy, set against our economy’s “reckless…use of all resources and natural systems,” that he terms “the race of our lives.”)

Grantham considers it a lucky and ironic thing that in the world’s growing affluence, wealthy people—who until the early 20th century routinely had eight or more children—now view offspring as “inconvenient and desperately expensive.”

Asian nations, whose fertility rates not long ago reached six children on average, have fallen to below replacement rate, as have Western nations including the United States, albeit from a lower starting place. Except for “failed states” in sub-Saharan Africa, other developing nations have joined the West and East Asia in producing fewer children.

Grantham seems to acknowledge the eccentricity of his viewpoint in urging economists  to “stop discussing lower population growth as if it were a dire economic threat rather than our last, best hope.”

He merely hints to, and minimizes, a looming pension crisis, noting “an added burden to workers of carrying more non-workers for one generation as the changes flow through the system,” after which “things stabilize again.” But to Grantham fewer people are a good thing “in a world of finite resources.”

Jeremy GranthamThe other trend Grantham (left) celebrates is a move to energy sources that are not quite so finite. Specifically, he says that renewable solar and wind sources are becoming increasingly competitive with nonrenewable sources like coal, and he forecasts they will be cheaper than coal by 2025 to 2030.

Grantham proposes a scheme wherein China solves its and the world’s energy problems by leading in alternative energy. “The Chinese government has inexplicably failed to snatch up my idea,” he jokes, though monumental pollution in China’s cities has encouraged China’s leadership to increase its solar energy production target.

Suspended over the race against civilizational collapse, Grantham writes, are “rising temperatures, slowly rising sea levels, ocean acidification, and, above all, destabilized weather for farming.”  Progress in alternative energy is thus “one of two most critical inputs into our future viability as a civilization.”


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