This is my thirteenth blog related to the COVID-19 pandemic, and a few of the previous blogs had an underlying theme that the pandemic was a warning, possibly the last one before an all-out attack, of Mother Nature, telling man to stop its overexploration and start to live within his means. Why does man overexploit nature? A couple of days back, I read an article which stated that Jeff Bezos, the mercurial founder of amazon.com and the richest man in the world, would become the first-ever Dollar trillionaire — USD 1000,000,000,000 — of the world in 2026. Not leaving behind, other billionaires like Jack Ma and Mukesh Ambani are on track to achieve the trillion-dollar status in 2030 and 2033 respectively. In the Indian currency, it will be ₹76 lakh crores. The article pushed me to think a bit deep to find out the answer for the question: why does man overexploit nature?
There are many other manifestations of this question. Why does man need two mobile phones when he can use only one phone at a time? Why does man have an array of pairs of shoes when he can wear only one pair at a time? Why a collection of watches when a pair of hands can carry one ? Why many cars when only one can be driven at a time? Though the seemingly-right answer to these questions is money, it is not because all rich people do not have the habit of having these extra possessions marking extravagant lifestyles. And that line of thinking brings us to the correct answer of greed. Yes, man’s greed, which is the irrepressible trait of longing for ostentatious living that defies the law of Diminishing Marginal Utility, is the culprit. Greed, however, is immobile unless gets bankrolled, and barring a few exceptions, this financing is done by something called speculative demand.
It is very difficult for a layperson to understand the concept called speculative demand and its monstrous stranglehold on the way we live. Let me explain it with a few examples. Imagine that you want to buy a plot to build a house in Kochi in Kerala, India. The transaction is supposed to have only two players: you, the buyer, and land-owners who have plots to sell. Nonetheless, in the corporatized and highly leveraged real(estate) world of commerce, a third player creeps in many a time with or without your conscious reckoning. It is speculators. Unnatural demand — speculative demand — created by them generates lots of extra money to finance man’s greed. How does it work? Real estate companies, the speculators, temporarily buy plots, hold and resell them when market conditions are favorable to make a killing on the price-front. These companies do not buy plots for end user purpose but to create an artificial demand. In this process, they stand between original sellers and end user buyers thereby blocking the view — manipulating the understanding — of buyers to know the actual strength of supply. The speculative demand thus created, along with end user demand, spikes up land price, forcing end users to dish out extra money for the plots they wish to buy. As prices go up due to the artificial scarcity created by speculative demand, speculators sell to make quick profits. For example, instead of, say, ₹50 lakhs — USD 65,000 — for a 10-cent — 4356 square feet — plot, you may end up in paying, say, ₹65 lakhs to either an original seller or a speculator who temporarily holds the plot. An extra ₹15 lakhs is generated.
Millions of such speculation-induced steroid-transactions create billions of dollars of extra money for both original sellers as well as speculative sellers across the world in a day. This happens in almost every segment of the global economy, making millions of people sitting with fat bank accounts. What do they do with this extra money? Buy an extra phone, load their shoe racks with many shoes, many collections of watches to wear with matching attires and so on.
The best example of speculative demand’s power play is the share market. Let us consider an imaginary situation: you bought 10,000 shares of ExxonMobil @ USD45 per share. Subsequently, the company discovers a crude oil deposit of 2 billion barrels in the Gulf of Mexico. The share price surges to, say, USD50 on hearing the news, so your shares are worth USD500,000. You sell the shares and make a profit of USD50,000. But a cyclone in the Gulf of Mexico or a skirmish in the geopolitical fault lines of oil producing counties can bring down the share price the very next day. But thousands, including you, already made extra money out of the hype made on an asset that is still a still-asset! Share markets across the borders create such unnatural wealth based on speculative hypes and fill the pockets of many. What do they do with this extra money? Go on a spending spree and buy more and more than they can consume.
The most recent example of speculative demand creating unnatural wealth is the trading of the shares of Moderna, the American biotech company that reported encouraging results of the vaccine trails for COVID-19. On May 18, 2020, its share value jumped by as much as 30%, taking the share price to USD87 — swelling its market value to USD29 billion — before settling at USD70 by the end of the trading week as experts downplayed the significance of the early trail results. But during the 5-day trading week, speculators created a hype and made millions of dollars. The most notable among those who gained are the company’s Chief Financial Officer and Chief Medical Officer who executed their stock options and sold nearly $30 million of shares, making a combined profit of USD25 million. The best joke is that Moderna has no marketed products as of now. The vaccine trials may or may not succeed, but the speculative hype already created artificial wealth for many, including the two executives of the company. What do they do with this extra money? They will use this bonanza to finance their greed — extra cars, additional farmhouses, private jets, cruise tourism and many such extravagant purchases and outings.
These are only a few examples of how speculative demand creates unnatural wealth that does not have any realistic moorings. Such wealth powers man’s most insatiable trait of greed to fly in breadth and depth, actualizing its manifestations in extra and over-extra possessions that overexploit nature. Every extra phone, additional car, added pairs of shoes and extension of living into extravagant living are equivalent to overexploitation of nature’s resources like clean water, soil, clean air, carbon sequestration, etc., thanks to the extra pollution created during their production.
Mother Nature teaches us many things, and the most powerful and pervasive one among them is the lesson of counterbalancing — every force is neutralized by a counterbalancing force. For centrifugal force, there is centripetal force; positives have negatives to counter; protons for electrons; intuitive thinking and counterintuitive thinking; friction to motion; alkalinity for acidity; and so on. This fundamental counterbalancing act by nature is not just-avoidable but inevitable. So when man’s greed, fueled by the unnatural money from speculative demand, overexploits nature, nature ought to counter it for its own existence. How does it do it? By bringing in measures to debilitate man from rampaging nature, cooping him at his home and making him leery of even doing little things like going out to enjoy fresh air and sunlight.
Will Jeff Bezo and other billionaires become trillionaires at those timelines? Well, I do not know if the author of that article contemplated nature’s counterbalancing principle while fixing the timelines? But one thing is certain that nature is determined to stop man from overexploiting it by denying opportunities to spend the EXTRA money to satisfy his greed. A pandemic like COVID-19 had brought the share markets down, real estate and property sales crashing and almost all economic sectors facing bleak futures. No room for speculators to hype, forcing them to lie low. Hence, end users will be able to see supply strength without speculators standing in between, resulting in prices curving to their natural value, not market value. Natural value gives you money to have one phone, not two; one house, not an extra holiday home; one car, not an additional sport car to relish speeding; and so on. Stability is nothing but controlled instability. If man lets loose his uncontrolled greed to destabilize nature, then nature will counteract to bring the balance back.