Is Global Warming Hurting the Economy?

Is Global Warming Hurting the Economy?

Is global warming a question or a fact? And, if it’s responsible for the freaky weather that’s been happening around the country and the world, how will it affect us?

This spring was the warmest ever recorded in the U.S., representing the “largest temperature departure from average of any season on record”; May 2012 was the warmest on record in the Northern Hemisphere; June broke more than 3,000 high-temperature records all over America.

As Bill McKibben of Rolling Stone puts it, “This May was the 327th consecutive month in which the temperature of the entire globe exceeded the 20th-century average, the odds of which occurring by simple chance were … considerably larger than the number of stars in the universe.”

This week, an iceberg twice the size of Manhattan broke free from one of Greenland’s biggest glaciers. Although researchers can’t prove conclusively that global warming is to blame, many suspect it’s the culprit behind Greenland’s rapidly melting glaciers. The Wall Street Journal quotes a NASA glaciologist as saying, “This isn’t part of natural variations anymore.”

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Global warming isn’t the definitive culprit behind Colorado’s recent wildfires, either (though they have been fueled by extra hot weather across the central part of the country), or the epic drought that may have spread to almost 80% of the contiguous U.S. and is worse than any American drought since 1956, according to National Oceanic and Atmospheric Administration (NOAA).

But the fact that so many of these events are setting records as the worst in decades or centuries indicates to us that something, at least, is afoot.

Will This Drought Raise Food Prices?

The current drought has prompted the Department of Agriculture to declare disasters in 26 states, the largest disaster area it’s ever declared. This has had a huge impact on America’s farm production this year, especially that of corn, other grains and soybeans—the drought has pushed corn and soybean futures to record highs.

U.S. Agriculture Secretary Tom Vilsack said earlier this week that the drought would cause a significant increase in crop prices, going so far as to say, “If I had a rain prayer or a rain dance I could do, I would do it.” The U.S. is a leading exporter of corn and soy, so the shortage could also raise global prices on dairy and meat, since corn is often used as animal feed. This could have serious ramifications for countries that rely on importing these crops and animal feed, such as Mexico, China, Central America and India.

So the short-term answer is, yes, this drought will almost certainly be responsible for higher prices on food at the grocery store. Meteorologists are forecasting higher temps for the Midwest early next week, which only stresses out the situation further.

The long-term answer? That depends on whether this terrible drought really is a fluke of fate, or if it’s part of a larger cause-and-effect chain involving higher temperatures. If the drought fades relatively soon and everything returns to—and stays—normal, then this could be a blip in meteorological charts. But if this becomes part of a growing trend, then food prices may suffer a more permanent effect.

But Would Environmental Change Really Matter to Me?

Provided that global warming is true, and that it’s been happening, and that events like the drought, wildfires and glacier chunking off are all results of warming—yes, a changing global environment could have a big impact on your wallet, your politics and your world outlook.

Drought isn’t unique to the United States. Russia and Central Asia recently suffered reduced harvests due to a heat wave, EU wheat yields are expected to be down this year because Spain is going through its second worst drought in 50 years, North and South Korea are facing the worst drought in a century, crops in Pakistan are in danger because of shifts in rainfall patterns, soy in Argentina is in danger because of too little rain, and drought and other factors have led to a humanitarian crisis in Mali.

If freak natural disasters keep happening, here are some possible effects:

  • Food prices: This is perhaps the most obvious. If this drought continues, or others like it start up, the flow of food throughout the world could be forever changed, and consumers could be stuck with much higher grocery bills going forward.
  • Global unrest: As the journal Nature points out, crop failure in one part of the world can sometimes instigate instability in a totally different region. For example, the cost of bread may have been an instigating factor in the recent uprisings in Tunisia and Egypt.
  • Shifting politics: Food is a kind of diplomacy, especially since the U.S. provides about 60% of the world’s food aid through programs like the U.S. Agency for International Development’s Food for Peace or the UN’s World Food Program. Drought could limit the U.S.’s ability to dish out food aid for global disasters, which hurts the poor receiving the food, as well as American efforts at diplomacy.
  • Local economies: The wildfires in Colorado have caused more than $110 million in property damage, with an economic impact that could be “millions upon millions of dollars,” according to an economics professor at the University of Colorado in Colorado Springs. Similarly, as crises happen in isolated places around the globe, those local economies will reverberate for years afterward.
  • The broader economy: All of the factors above have a potential impact on the stock market, too. The current drought will influence the supply chain to farmers, so, for example, equipment dealers and banks that lend to farms could get hurt. The farm economy influences other sectors, so investors who put their money on commodities might shift their holdings and the stock market could react negatively. On a grander scale, political unrest has the power to shake the market. And if consumers struggle with higher food prices, that could affect consumer spending and confidence—and as we’ve discussed before, consumer confidence has the power to drive economic growth.

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