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The Real Great Reset

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In the more conspiratorial corners of the Internet, the “Great Reset” is a sinister public face of an elite plan to enslave humanity by creating a global authoritarian surveillance super-state, compete with re-education camps for those who suffer from wrongthink, and Soylent Green-style euthanasia camps for addressing the twin problems of overpopulation and an aging society.  Tracing its origins via Agenda 21, the Project for the New American Century back to the unpleasant recommendations from the Club of Rome’s Limits to Growth project in the early 1970s, the Great Reset is about securing the power and privilege of the technocratic elite in the devastating aftermath of the global pandemic.

It doesn’t help that Klaus Schwab, the co-author of the book Covid-19: The Great Reset, needs only a white cat on his lap to look for all the world like the villain in the next Bond movie.  In reality though, Schwab is a mediocre German social democrat (i.e. neoliberal) who has little understanding of the crisis unfolding around him, and who – along with the rest of the Davos crowd – is simply whistling in the dark to mask his own fears.

Far from being a masterplan for subjugating humanity, Covid-19: The Great Reset simply builds upon Schwab’s earlier and equally detached The Fourth Industrial Revolution.  As I wrote in response to that book four years ago:

“The courtiers of the modern corporate elite also danced in their version of Versailles at Davos in Switzerland.  Initially, they were emotionally deflated.  None knew why stock markets were tumbling, oil and commodity prices were crashing, the Chinese engine of growth was seized, and zero percent interest rates and quantitative easing had failed.  For a brief moment, they peered into the abyss of their own destruction.  Within the week, however, the courtiers regained their energy and confidence… technology was going to save the day after all.

“The vision that came out of Davos 2016 has been encapsulated in the spectre of the fourth industrial revolution – the internet of things, the singularity, the knowledge economy and the zero-carbon economy all rolled into one.  Where, a century ago, people laboured in mines, quarries, mills and factories, in the twenty-first century we will be working digitally.  Virtualisation will replace many of the physical products we currently consume with low-cost digital versions.  Those physical products that we do need to produce will be built in fully automated smart-factories.  Meanwhile, we humans will make our living in a new wave of tech businesses and cloud-based creative industries…

“If this all sounds a little familiar, it is because we have heard it all before.  In the wake of World War Two, as the military wanted to expand its nuclear arsenal, and as politicians wanted to increase employment, nuclear power was sold to us as a revolution that would provide ‘energy too cheap to meter.’  A couple of decades later, the development of the personal computer promised to usher in an age of leisure in which we would all be working a 16-hour week.  By the turn of the century, with smartphones, cloud computing and social media proliferating, the bright uplands of the promised age of leisure was, we were told, just around the corner.

“Far from creating an age of leisure, each of these technological revolutions served only to further depress the incomes of the majority of the population of the OECD countries – i.e. the global consumers…”

No doubt Schwab and his buddies were perplexed as to why their fourth industrial revolution failed to show up and why instead, the proles turned to the likes of Donald Trump, Nigel Farage and Marine Le Pen in search of a solution to their material and cultural decline.  But – as is the wont of the contemporary neoliberal elite – rather than “follow the science” and seek to understand the underlying material realities which underpin the political shifts, they simply doubled down on their calls for a shift to a futuristic digital economy.

Whereas those of us who still maintain at least one foot on the ground in a fast collapsing economy have viewed the responses to the SARS-CoV-2 pandemic with growing horror, Herr Schwab and his World Economic Forum chums see it as a catalyst for accelerating the transition to their imagined and wholly impossible version of the future.

Somewhere along the way, the marketing industry came up with the slogan “Build Back Better” which has since been repeated by politicians worldwide.  Again, in the more conspiratorial corners of the Internet, this is taken as evidence of their receiving orders from the true puppet masters hiding in the shadows.  It is more likely that we are witnessing are clueless 3-d printed professional politicians (i.e. people who never did a proper job before seeking election) waking up to the fact that neoliberal states long ago sold off or cut their ability to respond to even the smallest of crises, and realising that by shutting down their respective regions of the global economy back in March and April, they have unleashed the mother of all economic downfalls upon themselves.  Little wonder that they have all grasped the Great Reset and Build Back Better in the same way that a drowning man grasps at a passing stick.

The root of our predicament is simply this, to quote economist Steve Keen: “capital without energy is a statue, labour without energy is a corpse.”

The energy cost of the energy which underpins everything we do, began to increase in the 1970s.  From that moment on, the discretionary purchasing power of the developed states has been in decline.  The opening up of the last major oil deposits in the late 1970s and early 1980s allowed for one final, debt-fuelled blow-out between 1995 and 2005, before peak conventional oil extraction called time.  The remorseless rise of oil prices after 2005 created price increases across the economy as everything made from or transported using oil went up in price accordingly.  In an attempt to control the price increases, central bankers increased interest rates; causing the entire debt-based financial house of cards to fall apart in 2008.  Only a massive influx of new currency coupled to zero-percent (in real terms) interest rates stabilised the system so that emerging market economies like China and India could provide the global economy with one final blast of output growth before – sometime in 2018-19 – those economies also ground to a halt.

I stress that it is the energy cost of energy, not the quantity of energy that matters.  The fact that there is more oil beneath the ground than humanity has extracted to date or that there is enough wind and sunlight to power the global economy to a new age of prosperity is irrelevant.  What matters is how much energy we would require to recover that oil or to build out that renewable energy infrastructure versus the amount of energy we recover in return.  And the sad answer – in the absence of some yet-to-be-invented alternative – is that the energy cost of the imagined future energy landscape is too high for more than tokenistic projects (such as Britain’s offshore windfarms) to be developed.

In a recent article, Tim Morgan explains how a rising energy cost of energy plays out in the real world:

“This can best be done, not by looking only in a ‘top-down’ way at institutions, systems and enterprises, but by following a ‘bottom-up’ rationale which starts with the circumstances of the ‘average’ or ‘ordinary’ person…

“There is a sequence of hierarchy in how the ‘average’ person spends his or her income. The first calls are taxation, and the cost of household essentials. Next come various liens on income owed to the financial and corporate system – these are the household counterparts of the streams of income on which so much corporate activity and capital asset value now depend. ‘Discretionary’ (non-essential) spending – everything from leisure and travel to the purchase of durable and non-durable consumer goods – is funded out of what remains, after these various prior calls have been met.

“Putting these two facts together leads to some striking conclusions. Because discretionary consumption comes last in the pecking-order of spending – and because a large and growing slice of apparent ‘income’ is no more than a cosmetic product of financial manipulation – then it follows that the underlying and sustainable level of discretionary expenditures is far lower than is generally assumed.

“In essence, discretionary sectors of the economy are now on life-support, kept in being only by the drip-feed of credit and monetary stimulus. Additionally, the ability of households to sustain the stream-of-income payments to the financial and corporate sectors is hanging by a thread.

“This means, first, that, as and when credit and monetary adventurism reach their practical limits, whole sectors of the economy will contract very severely.”

The response of governments and, indeed, by technocrats like Schwab, serve to make matters worse because they focus on nominal incomes rather than the proportion of incomes remaining after essentials like food, housing costs and debt servicing have been paid.  This results in a gross overestimation of the amount of taxation which can be levied on the population.  It is no accident that one of the populist strands of Brexit and MAGA was the pledge to reduce the burden of taxation on ordinary people.  In the same way, an apparently modest additional levy on diesel fuel triggered the widespread gilets jaunes protests across France.

The currency price of the non-renewable renewable energy technologies that are intended to provide the power for Schwab’s Great Reset are low because they enjoy massive subsidies and because the quoted prices are only what supply companies bid during auctions.  Their energy cost is far higher.  This is a particular problem because that energy cost – which includes eye-wateringly expensive nuclear power plants for baseload and the fleet of gas and diesel powered plants needed to overcome intermittency – is loaded onto consumers’ bills in a manner that disproportionately impacts the poor.

Those elements of the failed Fourth Industrial Revolution which had already emerged in the years after 2008 – summed up as the “gig economy” – are already accelerating as a result of the technocracy’s appalling mismanagement of the pandemic.  Unemployment is rising, home working has increased, commercial property rents have plummeted, while online corporations have gone from strength to strength.  This new landscape is a kind of digital feudal system in which, instead of land, access to space on one or more corporate platform becomes the means by which the digital peasantry gets to eke out a living.

Even this though, is only temporary.  The modern global communications network along with all of the critical infrastructure we depend upon can only survive so long as it can access cheap energy.  This has always been the technocracy’s blind spot because – until recently – energy has been viewed as just another low-cost input to production; costing much less, for example, than even the wages of a minimum wage worker.  Rather than understanding that technology is both shaped and limited by its energy source, the technocracy has always mistakenly believed that technology is the driving force behind the economy.  But here’s the rub; cheap energy is only cheap because its costs are spread widely across the 8bn humans residing on the planet.  Consider, for example, the life-blood of the global economy – diesel fuel.  For all of the nonsense spoken about electric cars, we still depend upon diesel to power heavy trucks, heavy mining and plant machinery, agricultural machines and shipping.

Although different oil deposits vary, broadly an average barrel of oil will provide 43 percent petrol, 23 percent diesel and heating oil, nine percent aviation fuel and four percent heavy shipping oil.  The remaining 21 percent is used to create a plethora of important by-products such as lubricants, asphalt for road surfaces and chemical feedstocks for a host of products from toothpaste to paint and pharmaceuticals.

Now consider what would happen if we could wave Schwab’s magic wand and swap all of the petrol-powered cars and light vehicles for electric and hydrogen ones.  Suddenly, 43 percent of every barrel of oil we extract would have gone from being a valuable product which can be widely sold, to an expensive waste product that we must somehow dispose of; presumably in an environmentally-friendly way (so not burning it).  Some, perhaps, might be mixed with heavy oil from tar sands – as is currently done with fracked shale oil – to create an approximation of diesel.  But the lost revenue from the petrol together with the cost of safely disposing it must now be loaded onto the price of the remaining 57 percent of the barrel.  This, in turn, means that all of those other products must more than double in price.  The result – assuming central banks don’t repeat the catastrophic error of 2006 – is that consumer demand for the products which use or are transported by the remaining 57 percent of each barrel must also fall until, in the end, mining, farming, transportation and even oil extraction itself becomes so costly that bankruptcy becomes inevitable… a recipe of mass starvation!

If we were talking solely about replacing an energy source that provided a tiny fraction of our primary energy, this might not be a problem.  In strictly energy terms (i.e. setting aside the impact on climate) if all of the wind turbines and solar panels on Earth were to disappear overnight, we would barely notice that they had gone.  Oil, in contrast, is still the single biggest fuel source driving the global economy.  And much as you might not like the environmental consequences of burning it, you are going to dislike the material consequences of its disappearance far more.

Peak oil extraction had already occurred before SARS-CoV-2 put in an appearance; and the pandemic may provide politicians and economists with an excuse to ignore it.  With a large part of the developed world still subject to restrictions and lockdowns, demand for oil has fallen and extraction curtailed; allowing the illusion that when it is over we will simply go back to where we were at the end of 2019.  Unfortunately though, much of the resource that was shut down will be too expensive to bring back on line at a price that a severely depressed post-pandemic economy can afford. 

The future shortages that Herr Schwab would accidentally inflict upon humanity in the belief that he was saving us from a climate emergency are built into the system anyway.  There is no currently available energy mix which allows us to continue to grow the industrial economy in the aftermath of the pandemic; and the attempt to do so risks an even greater humanitarian catastrophe than it aims to prevent.  If there is to be a viable reset of any kind, it will be akin to what I have called a “brown new deal” in which we use what remains of the energy available to us to de-grow, de-materialise and re-localise our economies while saving some, at least, of the benefits of our current way of life such as basic healthcare and access to clean drinking water.  Unfortunately, as the old adage has it, people would much prefer Herr Schwab’s reassuring fantasies to my inconvenient truths.

As you made it to the end…

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