“Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist”
Kenneth E. Boulding
Last week we have discussed the systemic background of the great unraveling. After staring deep into the eye of evanescence working slowly but steadily to put our civilization to rest, I would like to share some insights into the economic and political ramifications of the coming net energy crunch. Before we begin: let me state it clearly, I do not wish to take any political side in this. I sincerely believe that 99.9999% of our leaders (both on corporate and on government level) are utterly clueless or fatally wrong about the ills of our society. They all nurture the false hope of this whole party going on more or less uninterrupted, only painted green or served in national colors, while the world slowly falls apart around them.
Economy vs Ecology
In my previous post I made an attempt at defining the original form of capitalism and trying to uncover its ultimate source of wealth:
In a nutshell our economic system’s primary incentive is to extract as much wealth as possible from Earth at the smallest cost possible, turn it into monetary profit then re-invest it into further productive activities, resulting further profit. What we call capitalism has become a perfect positive feedback loop with only one possible outcome.
Before you ask: no, that outcome is not a ‘happily ever after’ at all. This feedback loop has resulted untamed growth: an exponential increase of material consumption, energy use — and as an inevitable side effect — the destruction of the entire biosphere; leaving the planet with everlasting pollution no one cares to mop up. Since this happened in a complex adaptive system called Earth, it inevitably destabilized the intricate stocks and flows of the whole arrangement.
Supplementing the quote on the top of this page, here is another one, this time from William Rees, Professor Emeritus at the University of British Columbia, the originator of the ‘ecological footprint’ concept and policy advisor on sustainability:
“The unconstrained expansion of any species population invariably destroys the conditions that enabled the expansion, thus triggering collapse.”
It is not only economic growth, but the prior plus population growth (as a net result of industrial agriculture) that turns our situation from a problem into a predicament. There are simply too many of us consuming too much. Before someone calls me an eco-fascist: both our current levels of population and our material consumption are unsustainable (more on the ecological aspect of our predicament in a later post). “Resolving” one or the other solves nothing — mother Nature must (and will) take care of both in the coming century. As professor Rees wrote:
“None of this is visible through our current economic lens that assumes a perpetually growing, globalized market economy. Prevailing myth notwithstanding, nothing in nature can grow forever.”
Developed countries did their great jump into industrialization with either low populations relative to their energy and resource base (USA) or by colonization (European empires sucking up energy from their colonies in form of forced labor, natural resources and food-crops). Russia and China has already had high populations relative to their energy base when their (forced) industrialization begun, and thus never managed to reach widespread prosperity. It’s all too easy to think that economic development leads to stabilized populations, when that growth happened under rather different circumstances. Since no reserve lasts forever, consumption and population growth first slows down and then turns into reverse. What seemed to be sustainable yesterday (either population, or consumption wise) will quickly turn out to be a mere transitional step tomorrow.
As always: energy was, is and will be the key in understanding success in a species life. Humans are no different in this regard: net energy per capita defines what a population (sorry, “nation”) can achieve and when that net energy starts to decline population and the economy will follow suit.
The efficiency dilemma
It would be logical to conclude that the solution to this energy problem is energy efficiency: just look at how much more efficient cars, electric machines, lighting, almost everything are now than in the past. The problem is, that by making things more energy efficient you are making the use of the product cheaper, thus making it more affordable to more consumers, who then buy more of the efficient product, ultimately ending up with an even greater overall resource consumption worldwide.
Let’s take the car as an example: by mandating twice as better fuel efficiency all you are doing is making fuel costs for the end user lower, who then needs to spend just half as much on fuel with the same distance traveled. With this lower fuel cost you can either drive more (actually more than you have saved) or save money for your next new car. While someone who could not afford fuel costs so far, can now buy a car which consumes half as much as older models used to, making its use affordable to that person — especially if the deal was sweetened with a nice looking loan. In both cases the end result is the same: more fuel is being burnt than before the efficiency mandate: now we have more cars traveling more miles. This is the famous Jevons paradox (or rather: ‘Jevons not understanding system dynamics’).
Putting our systems thinking hat on the reason for this is dead obvious: a complex adaptive system is always drawn towards higher total energy use, which it can only achieve by making its power source available to more of its parts and members. Since these systems neither have a central nervous system nor consciousness they achieve this by trial and error and through internal incentives. The profit incentive (and the ever increasing growth of it) was enough in this case: by producing cars which consume less, manufacturers could sell more of them (even in poorer parts of the world).
There is another problem with efficiency increases called the law of diminishing returns: while the first 20% of decrease in energy use is easily achieved with some cheap tweaks the next 10% is a bit harder (costlier) to achieve, the next 5% even more costlier and so on, till you hit the theoretical efficiency of an engine at an exorbitant cost per unit (yes, physical limits do apply here as well). In our automotive example: while it was easy to reduce the fuel consumption of huge cars with a big engine by simple downsizing, now you need a super complex hybrid system with its batteries, electric circuitry, multiple engine control units etc. to achieve a little better mileage. The next efficiency standards can mostly be met by (at least partially) electric cars — not to mention the proposed complete ban on the sale of internal combustion engines from 2035 onward. This will be certainly a detriment to nature with an increased mining activity for lithium, which is another finite resource, not to mention copper, cobalt, battery grade graphite and so on.
In today’s tooth and nail economic competition you can be sure that every known trick has been implemented to make not only cars themselves (as well as other products) the most energy efficient at a given cost, but their manufacturing, including the entire supply chain too. Today every manufacturing company has to use its ultra-thin file to shave off 0.01 cent of cost from its products.
Decreasing consumption via efficiency measures only was never possible in a growing world due to ‘Jevons not understanding system dynamics’ — in fact it only resulted further growth. The problem is that by now there is not much left to improve on current technologies... So when (and not if) the annual decrease in net available energy outpaces the ever shrinking annual efficiency gains, we will have no other choice, than to get rid of more and more of our beloved technologies and habits: giving up commuting by cars, flying, exotic or unseasonal fruits and so on.
Actually governments have already made proposals and enacted policies to get a little bit ahead of the crunching net energy curve peacefully: like travel restrictions (due to COVID of course), rationing and trading energy quotas (China). The next step could be progressive energy pricing, or an extra tax on… hm, for example carbon…? Saving the planet from global warming… you know the rest. Just look at what happens in China today under the dual-control target scheme or what is being proposed in Europe — don’t forget to take off your green sunglasses though. Remember: the future is here… just take a look around.
Diminishing returns has already have a great effect on our everyday life. It is not only affecting fuel efficiency, but finance as well, where an ever increasing amount of debt is needed to keep the economy afloat… Or engineering work, where an ever increasing number of engineers have to be deployed to solve the next problem. Just compare Edison working on his first electric power plant to the army of engineers and scientists working on the world’s absolutely most expensive water boiler (the hydrogen-fusion or Tokamak-reactor of the “future”). The same principle holds true in almost all aspects of our lives: from inflation to working ever more to earn the same money; it makes us run faster and faster in order for us to stay in the same place.
This is how the classic theory of diminishing returns — described by Joseph Tainter in his seminal book: Collapse of complex societies — will slowly put an end to growth first, then start a race towards ‘who can give up the most in the shortest period of time’. Climate change just arrived on time [sic] to give a nice political framing to this goal… Too bad, that it is was on the table for more than 40 years now, and today — I’m afraid — it has already turned into a self reinforcing feedback loop.
Barring aliens coming to Earth and teaching us how to harness “the infinite energy of the Universe” humanity will have no other “choice” than to simplify its global civilization in the coming decades and centuries to the point where it ceases to qualify as such; and thus become truly sustainable.
With this coming partially voluntarily simplification the economy will run into a number of “unforeseen” problems, turning progress on the top of its head. The following trends are already at work — they’re just not visible through the dogmatic lens of human progress (that everything has to got better with time) and the green future narrative.
- Less automation: I believe it is self explanatory that in order to automate a task you need energy (mostly electricity), while human labor needs food and water only in order to operate. The problem with automation is thus twofold. The first part is diminishing returns: the easiest to automate tasks were handed over to machines first. As you move up in complexity however your machines will require ever more energy, maintenance and “care”, while becoming less precise, more expensive and ever more specialized. The second and increasingly more pressing issue is and will be the 24/7 availability of electricity. As fossil fuels begin (continue) their inevitable decline in electricity production, renewables will make electric grids increasingly unstable — not the best news for manufacturing especially if they had a lot of processes automated.
- Less space travel. Needless to say: in order to launch something into space you need a lot of energy. (Actually it costed $2720 per each kg of payload in 2019, which could buy you 900 gallons of gasoline per each useful kg of yours… Multiply this with your weight and your car’s mileage and see if you can consume that much fuel during your entire life (I’ve got 3.5 million km-s as a result). Is this affordable when you have to ration energy? Hardly. Nevertheless it will be tried in an attempt to maintain at least a facade of prosperity.
- Less purchasing stuff. Costs of higher inventories, together with higher commodity prices (and later the cost of backup electricity) eventually will do trickle down to consumers (unlike wealth from the top). In the meantime there will be an increasing pressure to reduce labor costs, and since automation will be less and less an option, the only way — barring the assembly of your car IKEA-style — to remain profitable will be to inflate wages away (i.e.: not paying enough to compensate real world inflation). Government statistics bureaus will play along nicely: continuing the now systematic undervaluing of the true cost of living increase, optically you will earn more money compared to the previous year, but the increasing food and energy prices will leave less and less budget for discretionary spending (entertainment, services and products you want but not need).
- Less work to be found. As a result of the trend above (as less and less products will be purchased) a lot of manufacturing companies will go bankrupt — smaller automotive firms will be one of the firsts to go. A lot of people will loose their jobs — unable to find a new one in town. Thanks to automation in the previous decades, these people are now lacking any useful skills (other than performing simple tasks beside the assembly line) making it even harder for them to make a living. On the other hand high-end skilled labor will be experiencing a shortage (e.g.: welders). There will be a widening gap between the un-skilled jobless class and those who are still working.
- Less paid labor. It comes from the continuous decline in automation due to its high energy input requirement, that more work will have to be performed by hand (and yourself). Don’t expect all of it to be paid though — more and more of the work will be unpaid: think of DIY projects done for the community (which used to be performed by professionals working for utilities and or public services) or growing food crops for own/community use. This process has been started by IKEA with its ‘assemble yourself’ products (effectively outsourcing assembly to the end user) then it was continued by self-checkout at the supermarket and self-service car wash (with greatly simplified equipment and no staff compared to conveyor washes). The bad news is, as energy gets more and more unaffordable for companies, they will be more and more inclined to use child, forced, or prison labor. Have you ever wondered how did solar power manage to become so cheap recently (besides being heavily subsidized by fossil fuels and governments)? Just take a look at where the polysilicon comes from for those panels.
- Less traditional wars. In order to fight a good-old-war you need a lot of young men, tanks, jets, ships, helicopters — and yes, fossil fuels to power the army, smelt steal, manufacture bullets and so on. None of the above will be in ample supply in our ageing societies though, and where these resources are still at hand will be quickly burned through by conflict. Non-traditional warfare with hackers and unmarked special forces performing precision strikes on critical infrastructure will do a much better job forcing another nation to cooperate. Nuclear war? I can but hope that no one will think that this is “great idea”. There is a chance however that if (when) Pakistan fails completely to remain an organized state, terrorist groups would like to put their hands on some of the nukes, or a crazy dictator would try to take revenge on India. One possible prevention measure could come from China: if (when) the government in Islamabad fails the Eastern Empire can turn Pakistan into a puppet state of some sort. For a preview look at Afghanistan.
- The rise of China. It comes from the above, as well as its prior activity, that China will be the next superpower. However they will not mimic US tactics due to their conscious awareness of energy: instead of embarking on expensive military adventures they will aim to strike “win-win” deals with local leaders. What we have seen across Eastern-Europe, Africa and Latin-America will be the model for the future: “we will build you a nice highway, a hydroelectric dam, a railway, or a surveillance system — but you have to take an overpriced loan from our banks and have to use our companies as main contractors— don’t worry though, we will not interfere with what subcontractors you use and how many pockets you line in the process.” Everybody wins — except the taxpayer of the recipient country who will then be turned unwillingly into a debt-slave of the new Empire. (Note: China will continue to deny that it is building an empire — just like the USA did in the 20th century).
- Travel restrictions. Due to “the omega variant of COVID has caused a serious outbreak in… we must close our borders” will be the news headlines in years to come. In reality this will help to keep people inside the boarders (rather than out) in order to prevent them from moving to more fortunate areas of the world. As a side-effect a lot of jet and other fuel will be saved making gas prices at the station look better — all to the unfortunate detriment of mass-tourism. RIP.
- More government intervention. Four-day workweeks will be increasingly popular, because of their ability to save on fuel costs (commuting) while potentially providing work for more people (for less money of course). Working from home will be added to the Universal Declaration of Human Rights for the same reason. Universal Basic Income will be experimented with widely to compensate the loss of purchasing power — only to fuel price increases further. If a company has so much (actually less and less) raw materials and energy to produce goods, no money on Earth can make it produce more. Since people will have “money” again and finished goods stocks will continue to remain low, firms can (and will) increase prices. What could actually work (and thus will be experimented with) is making basic foodstuff (wheat flour, rice, sugar, corn, beans, oil, etc.) essentially “free” for citizens to prevent food riots (an ultimate cause of governments falling). Bread and circus — again.
- More propaganda and magical thinking. “Surely someone must know what to do!” — is a common response to the claims I made in my previous posts, insisting that this civilization is headed for the great garbage dump of history. Herein lies a major part of the problem: our leaders (both of corporations and of left/right/’you name it’ governments) are still wearing their green / pink sunglasses of eternal growth. According to Kenneth E. Boulding’s definition they must be either madmen or economists — which pretty much fits the bill for becoming a politician. Another explanation is, that at least some of them understand how grave the situation is (and that it’s not only the climate), but play along with the others in order to keep their offices and to avoid unpopular actions to be taken under their watch.
- More surveillance. In order to uphold the increasingly fragile social order against all odds, governments will deploy more and more surveillance cameras and other digital technologies to filter out problematic individuals. ‘Bread and surveillance’ could be the name of the game this time.
- New political structures. Less net energy inevitably leads to less hierarchy levels and thus less social layers — which is very good news for aspiring populist dictators. Don’t be surprised if the leader of your favorite party start to sound like a fascist or communist insisting that only a strong leader (i.e.: a middle aged white man with a strong paternalistic demeanor) can bring back the glory days of the past.
- More political infighting. As a direct result of the ‘overproduction of elites’ a term coined by Peter Turchin we will see spectacular political battles. This is due to a systemic delay: while the whole arrangement with its economy and universities was in its growth phase the freshmen could find jobs and everybody lived happily ever after (a.k.a. the American dream). Even though the former started to deteriorate, the latter still produced graduates like there is no tomorrow. This eventually lead to increased competition for leadership positions with more and more desperate battles both in company boardrooms and around government offices.
- More hoarding and speculation. As the flow of raw materials dwindle further governments and companies around world will try to build up safety stocks to ensure business continuity (in fact this is exactly what is going on today behind the scenes). This has a knock-on effect on pricing though, by making the materials in question ever more scarce (look at copper price breaking its 30-year high for example). This price increase seen by “investors” will immediately push them into speculative buying (in hopes of further increases in prices). This naturally leads to bubbles then crashes — making even the smallest disturbance in supply into a global shock-wave. As we have seen it during the first wave of COVID-19 this happens on all scales: from household stocks of toilet paper to steel. And it happens to oil as well — the lifeblood of the world economy. As it was demonstrated in the 2005–2008 period: when crude prices skyrocket it inevitably sends the economy into a recession. I wonder how high oil-prices can rise this time before sending the economy into another round of recession.
- More criminal intermediaries. As traditional services will slowly go out of business, more and more honest intermediaries (merchants, traders, loaners etc.) will be replaced by criminal or terrorist organizations (see what happened in the Middle-East).
The great re-calibration
This is how the end begins for a civilization. Ours is not the first, nor the last to step on this path. There is still a long way to go however: the ongoing unraveling of our complex systems, spiced with multiple minor collapses, will be a long process, lasting for many decades to come. Neither the end of the world, nor a hiccup on the way to a galactic empire. Rather a sometimes painful, sometimes revelating transition back to true sustainability. As Max Ehrmann wrote in the Desiderata:
“Whether or not it is clear to you, no doubt the universe is unfolding as it should.”
The end of civilizations can almost be formulated as a natural law derived from the law of entropy. Every one of them has burned condensed energy and dispersed concentrated raw materials (mineral ores, top soil) to unconcentrated mixed waste, while destroying a part of the living world in the process. Due to the finite nature of these resources this, by itself is a self terminating exercise. No exceptions.
The process is so slow however, that people — like us — living through such a change might not even realize that it has already begun. Not until we grow old and look back on our lives wondering: “How much life has changed…! We used to send people to the Moon… we used to ski in the winter… we used to fly for a vacation… not to mention the many bugs on the windscreen on a summer drive…” — “Grandpa! Grandpa! What’s a bug?”
This is what worries me the most: all the while we are busy saving / transcending our civilization the living world around us is literally dying on the wine. Humanity has wreaked havoc on nature and not only by causing climate change, but by using pesticides on an industrial scale, removing forests and mountain tops, polluting rivers and the atmosphere, while killing off hundreds of thousands of species in the process. We have started the 6th mass extinction in the planet’s 4.5 billion year history — quite a feat. This is something no one really wanted, yet it emerged as a summary outcome of nearly 8 billion of us (plus our ancestors) minding our own business. Similar to our civilization’s inevitable end this is beyond any human being to stop or even mitigate. What you can do is to plant seeds for the future and protect what is still remaining — hoping that life will endure on this planet after this civilization is over.
We were born into the middle of this — as this has been going on for centuries now. We, who happen to live today, have seen a peak of a civilization with all its ills and blessings. Chances are that we might have already seen the peak of the entire human experiment. When I saw the Matrix 22 years ago, where Agent Smith called the world then “the peak of your civilization”, I thought it was mistake. After all, maybe he was right. We, today are living through “the single biggest event in human history” — to quote Sam Mitchell — “and no one wants to hear it”… At the time of writing this post I have 8 followers — what a beautiful irony.
Nevertheless, I feel lucky to be alive today. After becoming aware on a visceral level that everything is temporary I feel an extreme amount of gratitude for all what I have: a family, a beautiful house, a comfortable life. Life is short and fragile, not unlike civilizations. By accepting that nothing is for granted and you can wipe your arse with your entitlements everything becomes a gift. Your intelligence. Your skills. Your open mind. Your friends and followers — every single one of them.
It’s like Christmas — all year around.
Until the next time,