I’ve never met Jeremy Grantham, but if you read what he writes there’s some big money that believes the time has come for transformational change.

Grantham is the co-founder of an investment firm named GMO that was launched in 1977. Grantham began his investment career as an economist with Royal Dutch Shell and earned his undergraduate degree from the University of Sheffield (U.K.) and has an M.B.A. from Harvard Business School. His firm, GMO is a private partnership that employs more than 500 people worldwide and manages more than $108 billion in client assets.

Over the past six months, he has written two long letters to his clients, the first was titled, “Time to Wake Up: Days of Abundant Resources and Falling Prices Are Over Forever.”  He makes nine points that no capitalist, or for that matter, government official or NGO manager can afford to ignore. The following are some direct quotes from both the April and July 2011 letters:

  1. The rise in population, the ten-fold increase in wealth in developed countries, and the current explosive growth in developing countries have eaten rapidly into our finite resources of hydrocarbons and metals, fertilizer, available land, and water.
  1. The fact is that no compound growth is sustainable. If we maintain our desperate focus on growth, we will run out of everything and crash.
  1. We must substitute qualitative growth for quantitative growth.
  1. The prices of all-important commodities except oil declined for 100 years until 2002, by an average of 70%. From 2002 until now, this entire decline was erased by a bigger price surge than occurred during World War II.
  1. From now on, price pressure and shortages of resources will be a permanent feature of our lives. This will increasingly slow down the growth rate of the developed and developing world and put a severe burden on poor countries.
  1. We all need to develop serious resource plans, particularly energy policies. There is little time to waste.
  1. Our goal should be to get everyone out of abject poverty, even if it necessitates some income redistribution.
  1. We humans have the brains and the means to reach real planetary sustainability.  The problem is with us and our focus on short-term growth and profits, which is likely to cause suffering on a vast scale.  With foresight and thoughtful planning, this suffering is completely avoidable
  1. Capitalism, despite its magnificent virtues in the short term – above all, its ability to adjust to changing conditions – has several weaknesses that affect this issue:
  • It cannot deal with the tragedy of the commons, e.g., over fishing, collective soil erosion, and air contamination.
  • The finiteness of natural resources is simply ignored, and pricing is based entirely on short-term supply and demand.
  • More generally, because of the use of very high discount rates, modern capitalism attributes no material cost to damage that occurs far into the future.

Jeremy Grantham understands that for the sake of it’s own survival the time has come for capitalism, as we know it, to evolve. Perhaps there is reason to be hopeful when those who have so much material wealth begin to understand that all they have accumulated is at risk. At risk because the obsessively narrow outlook that capitalism currently takes, an outlook that ignores the future, radical inequity, environmental destruction and quality of life, is now threatening the very survival of those who have benefitted most handsomely from it.

The complete letters are available here.

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