The next big migration wave won't be caused by war or hunger. It will be caused by environmental disasters. People will be fleeing cities and countries to escape environmental pollution that makes life short, sick, and unbearable.
The global consequences of environmental disasters are enormous for everyone, including for investors in global markets. For the countries most affected, this massive migration wave will undermine economic growth, property values, and financial asset valuations—a risk investors must factor into their calculations when they buy into financial and real estate assets in highly polluted countries.
Like China, India, and Pakistan --which already suffer from high pollution rates.
Pakistan’s economic growth would, for instance, be much lower if it was adjusted by the “negative externality” created by pollution; and so would be its equity markets.
World’s Ten Most Polluted Countries
|8. United Arab Emirates|
Environmental refugees aren’t new in history. The historic record is littered with examples of environmental disasters that caused mass population movements, as graphically described by Jared Diamond in Collapse.
What's new is that these disasters aren't caused by ignorance any more. Instead, they’re caused by greed and failed government policies.
In China and India, for instance, environmental disasters are caused by corruption and cronyism fostered by cozy relations between governments, business managers and labor unions.
In some cases, the polluters are governmentally owned entities that keep polluting factories running for the purpose of saving jobs, often ignoring court orders that call for shutting them down.
That’s the case of China, the worlds top producer of carbon dioxide, the chief greenhouse gas - a situation that isn’t expected to change any time soon, as China’s government is part of the problem rather than part of the solution.
In contrast to the US and other advanced economies-- where the polluters are private companies -- in China, by and large the polluters are government companies… state owned enterprises and town village enterprises.
This means that the government, as owner and manager of these enterprises, is part of the problem it is called upon to address.
That’s why China’s property sector may be worthless one day, if pollution continues at the same rate. Younger generations will opt to leave the country rather than move into polluted cities, depressing demand for real estate, and aggravating the problem of excess capacity in the sector.
To be fair, China’s pollution is, in part, the consequence of the country’s rapid industrialization, a problem every industrialized country confronted at one point or another in its development history. This means that pollution could ease as the country eventually transitions from an industrial to a service-based economy.
But that may be years away, as China faces strong headwinds in making this transition.
Meanwhile, Chinese citizens will pour money into the assets of countries with low pollution, getting ready to migrate there, as soon as conditions allow for it.