No single crisis is permanent — it is a series of them which will cease to end. It looks increasingly safe to say, that now we are already knee deep into the ‘long emergency’ — which has raised its ugly head in 2008 then, after a couple of years, went back to sleep… only to return with a vengeance. It is a fast deepening series of crisis though, one, that now threatens the West with the deepest recession in living memory and with a complete collapse of Europe’s economy — together with the West’s global hegemony.
However, it will be China who will take the brunt of the damage made to the world’s production facilities, as it was producing a myriad of goods for Europe and for the States to consume and built their products from. Even if the West would enter a decade long depression though, China would still recover after going through its own round of deepest recession in living memory. They would eventually reorganize their economy to fit the needs of the BRICS states, serving them with products instead of Europe and the US. They could do this on the back of a yet to be released common currency of the block (replacing the Dollar in international trade) and based on resources suddenly becoming relatively cheap and abundant, as the West would consume a fraction of what it used to.
BUT, and this is the biggest ‘but’ you can imagine, this rebound for the East — no matter how big or small it will be — cannot last very long. It would be bio-physically impossible. Yes, there will be growth again for the BRICS states, ‘showing the way out of this economic mess’, but only up until the point where resource limits would hit them too. Even if the West would stay economically depressed forever, the physical cost of energy, and as a result the extraction cost of mineral resources, would put an end to growth for even the strongest of developing nations.
This is what most people refuse to understand. As resources deplete — even though half of them are still underground — they become exponentially more energy intensive to get. And since we still use petroleum products (namely diesel) for mining, building and transporting almost every product — and food — around the world, as oil becomes ever more energy intensive to get, so will the energy intensity of everything we build and eat grow. Yes, this includes ‘renewables’ as well. Their EROEI is not a fixed number, or something that can be improved by technology for so long. Their effectiveness in contributing to world energy supply will degrade hand in hand with the energy resource what makes their production possible: fossil fuels.
Now, that we have left the transition (which haven’t even started in earnest yet) to the very end of the oil age, and used up all the cheap copper and other minerals needed for their deployment in other projects, it seems increasingly likely to me that we will never be able to replace humanity’s best energy resource so far — oil — at all. Quite the contrary: we are rapidly heading towards an economic conundrum, where the extraction of oil and other vital minerals becomes so energy intensive (and thus expensive) that soon there will be no energy left for maintaining current levels of consumption, let alone leaving room for a transition of any sorts. (Other than a transition to simpler, much less resource intensive ‘permaculture’ way of life — but that is completely off the menu for our technocratic elites.)
Stir in climate chaos — already threatening not only the biosphere and life in general, but mining and the industry itself — and you have got the perfect storm working against industrialism and the ongoing plundering of this planet. Torrential rains and floods are already lowering production levels of mines and factories around the world.
Aridification will be a slow killer though — and not only for growing crops. Mining minerals with less and less metal in them, means more and more water must be used for separating the rock powder from metal. And when most of our copper production (which is vital for electrification) comes from the Andes in South America, an area already dry as a bone, you have mining companies resorting to desalinating seawater and pumping it miles uphill — pushing the energy cost of mining even higher, and leaving even less energy for the rest of the economy.
How will the world economy react to this ever increasing energy cost of energy and resources?
The true cost of energy — measured in EROEI or energy return on energy invested — has to be reflected in actual energy prices eventually, otherwise investments in the sector would dry up, resulting in an even more severe crisis than what we have today. In our current case, if the combined EROEI of all energy resources indeed approaches 1:10, then the economy must spend a similar portion (10%) of its gross domestic product (GDP) on energy ‘production’ in monetary terms as well.
No matter how we wish to mask this phenomena with an unprecedented use of debt, this amount of energy expenditure means economy crushing levels. Remember: economists are talking about 3–4% growth as a goal here. A similar increase in energy costs would permanently eat up all economic growth across the entire planet. Back in the heydays of fossil fuels we have spent around 2–4% of the GDP on energy, and thus maintained a relatively stable growth trajectory up until the first global energy crisis in the 1970’s hit. If this expenditure really must increase to 10% or more of the GDP, and ever higher after that as physics suggests, then sustained GDP growth becomes virtually impossible in the future.
The crux of the problem is, that the high energy costs of energy products (and minerals) is not a temporary thing. It is a trend which can only get worse. As resources continue to deplete and climate change will show more and more of its teeth, resources will require exponentially more (and never less) energy to extract. More rock will have to be physically moved, crushed, then disposed of to get the same amount of metals. Resources has to be transported over ever greater distances. All this extraction, conversion and movement has a physical energy cost, which has to be provided if we are to continue modern civilization.
Humanity is really trying to walk up against a landslide. We would need to produce more and more energy every year just to be in the same place and keep the level of mineral extraction high enough to keep our economies buoyant, not mention making a transition affordable.
If in the coming decades we will be forced to spend 15% then 20% and so on of our economy’s income on energy and other resources, then this would permanently lock us into ‘negative growth’ territory, where the ever increasing cost of continuing business as usual would drag all GDP figures down… well below zero.
How will it end?
Obviously this cannot go on forever. Soon enough mining and transporting energy and other resources would take up more energy than what we can afford. People will simply be unable to pay for such costs and stop buying things. This would leave us with using up the last remaining bits and pieces of cheap resources, then close entire industries, factory after factory.
This is not the fault of the West or the East for that matter. These are the rules of physics and geology. This is the nature of things: a finite planet with an ever growing material economy superimposed on it. A failure to recognize this early on as a society (despite many scientific warnings in the past) led us to where we are at the moment, and leaves us with no other trajectory than to contract our economies — continuously, and at an ever faster rate to keep track with resource depletion.
So will the East survive the fall of the West? I increasingly tend to think that the answer to this question is less than irrelevant. High consumption will go down the drain no matter what, and it doesn’t matter on which hemisphere it happens first. The economy of the future will be increasingly local, with much less products, services and trade — and that is not necessarily a bad thing.
Until next time,