In a recent Barron’s excerpt of a longer article, Jeremy Grantham, founder of asset management firm GMO, says Americans “have a broad and heavy bias away from unpleasant data” that makes us “ready to be manipulated by vested interests in finance, economics, and climate change, whose interests might be better served by our believing optimistic stuff ‘that just ain’t so.’”
He points to a few examples of propositions that are “widely accepted by an educated business audience . . . but totally wrong.” His examples include the widely held business audience assumption about “how incompetent at business the French are and how persistently we are kicking their bottoms.” The data, Grantham says, show the opposite: France’s median hourly wage is up 180% in 45 years; the U.S median wage is flat over that same period. He also points to the death rate among whites age 45-54: “since 1990 there has been a quite remarkable decline for other developed countries,” but “for U.S. whites there is a slight increase . . . caused by quite severe increases in deaths related to alcoholism, drug use, and suicides.”
Perhaps most importantly, Grantham challenges the business audience’s conception of growth as potentially perpetual: “it is also obvious how reluctant everyone is to accept the natural mathematical limits.” He says, “there simply cannot be compound growth in a finite world,” observing that “a modest 1% growth compounded for the 3,000 years of Ancient Egypt’s population would have multiplied its economic output by nine trillion times!” Pointing to “the improbability of feeding 10 billion or so global inhabitants in 50 years,” he argues that “the entire economic and political system appears eager to encourage optimism on resources for it is completely wedded to the virtues of quantitative growth forever.”
Finally, Grantham hopes “you may be a little more aware of how dangerous our wishful thinking can be in investing and in the much more important fields of resources (especially food) limitations and the potentially life-threatening risks of climate damage.” He observes that “wishful thinking and denial of unpleasant facts are simply not survival characteristics.” One example: population growth and water shortage linked with climate change have played a role in destabilizing Syria. Grantham asks us to “become more realistic, more willing to process the unpleasant, and, above all, less easily manipulated through our need for good news.” In the realm of climate politics, he suggests we must “at least include a price on carbon” and any suggestion otherwise is disingenuous. In arguing that we wait for better solutions, he contends, the vested interests profiting from a carbon-intensive economy have “‘wait’ as their main purpose, not ‘solutions.’”
