The great unraveling — Part 2

“Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist”

Economy vs Ecology

“The unconstrained expansion of any species population invariably destroys the conditions that enabled the expansion, thus triggering collapse.”

“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.”

The efficiency dilemma

Diminishing returns

Ramifications

  1. 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.
  2. 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.
  3. 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).
  4. 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.
  5. 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.
  6. 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.
  7. 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).
  8. 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.
  9. 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.
  10. 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.
  11. 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.
  12. 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.
  13. 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.
  14. 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.
  15. 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

“Whether or not it is clear to you, no doubt the universe is unfolding as it should.”

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A critic of modern times - offering ideas for honest contemplation.