Consciousness of Sheep
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A little over a year ago, there was a meme circulating on social media that went something like this:
Replace ‘The Economy,’ with ‘rich people’s yacht money:’
- How can we respond to Covid without damaging rich people’s yacht money?
- How can we respond to climate change without damaging rich people’s yacht money?
Like so many social media memes, it was a thought-stopper; designed to deter the viewer from thinking about the harms which might follow the widespread disruption of the global economy. It was also demonstrably wrong, insofar as the kind of rich people who can afford yachts are precisely the people who have done very well out of the pandemic – and are making billions out of climate change – even as millions of people at the bottom have been thrown on the scrap heap. Crucially though, the meme reflects a common and dangerous misunderstanding of what ‘the economy’ actually is.
Far from being rich people’s yacht money, the real economy is the sum total of all of the things that 7.8bn humans do day-in, day-out. It is the reason – among many other things – that you have food in the cupboard; that the light comes on when you flip the switch; and why clean drinking water is readily available when you turn the tap. And the reason some of us were warning from the beginning that switching off the economy for several weeks might not be entirely cost-free was precisely because life in a complex urban environment can get pretty ugly very quickly when the lights go out, the water stops flowing and the food runs out.
It is easy to promote lockdowns in a highly connected economy which contains just enough stored wealth to stave off an immediate collapse. The pandemic lockdowns and restrictions were not though, cost-free. Not least, because of the economic context in which they occurred. As Gail Tverberg explains, the global economy was already experiencing resource constraints in the years prior to the pandemic:
“Resources of many kinds, including fresh water, energy products, and minerals of many kinds were becoming more difficult (and expensive) to extract, even before 2020. Substitution might have worked if the problem were only one or two resources, but not with several major resources. Cutting back was the only answer.
“Thus, the shutdowns for COVID-19 came at a convenient time, allowing economies that were already doing poorly to shut down… If not enough resources of the right kinds were available to enable true economic growth before the pandemic, it is hard to see how the situation would be very much improved a year later.”
Curtailing economic activity around the planet had both immediate and long-term impacts on our vital just-in-time supply chains. The immediate problem was the sudden loss of demand across the economy as businesses were forced to cease operations. To counter this, the UK government introduced a furlough scheme which paid 80 percent of workers’ wages, together with business grants and loans designed to keep businesses solvent. Other governments introduced similar stimulus packages of their own.
Although government and central bank currency creation prevented a complete collapse in demand, it rapidly created supply shortages. This was because ordinarily, a large part of our food consumption had occurred in the wholesale sector – sandwich bars, cafes, restaurants, hotels, works canteens and school dining halls. With millions of people redundant, furloughed or working from home, all of that food had to be redirected into the retail sector. But the smaller packaging requirements of the retail sector quickly created shortages of basic foods like milk, flour and eggs. Where cafes and restaurants bought eggs in cartons of 30 or more, supermarkets sold eggs in cartons of 6 or 12. These quickly ran out and we discovered that there are only three European manufacturers of egg cartons.
In the course of the first lockdown, shopping habits shifted rapidly in favour of online purchases. As a consequence, delivery drivers were overloaded. For a couple of months, securing a supermarket delivery was harder than getting a ticket to the Glastonbury festival. Supermarkets and other online retailers recruited many more drivers in order to adapt to the new conditions. Moreover, government relaxed competition rules to allow logistics companies to carry each other’s goods to ensure that deliveries remained profitable.
Further away, long term supply chain damage was already being done. Initial Chinese lockdowns generated a wave of shortages – in a just-in-time system, once a shortage occurs it becomes difficult to find the additional capacity to fill the gap while simultaneously meeting ordinary needs. In practice, ships remained unloaded or anchored at ports waiting for lockdowns to end. And when they finally set sail, the European and North American ports they were sailing to were by then on lockdowns of their own. And so, once again, ships remained unloaded and anchored up while port activity all but vanished. Eventually, the least profitable shipping companies sold their ships for scrap just to generate some cash flow. But even the more profitable companies struggled to find adequate containers which, after months of lockdown, were in the wrong regions of the planet.
The big failure at the very beginning of the pandemic was that nobody defined the end state. Was the aim to maintain the health service, protect the vulnerable, develop a cure or vaccine, or to eradicate the SARS-CoV-2 virus entirely? Nobody knew. And since – as with climate change – economic damage was off in the future despite the damage having been done, further restrictions and lockdowns remained extremely popular; with survey after survey showing 70 percent support for even tougher restrictions than those imposed by government.
When things briefly opened up last summer, hopes of a “v-shaped recovery” were quickly dashed. With little confidence in the government’s handling of the pandemic, most of us could see further lockdowns and restrictions coming once summer had passed. In autumn last year, further attempts to keep the economy open were doomed. Despite Boris Johnson’s promise that Britain would be open for Christmas, we didn’t need a crystal ball to see what was coming. Technically, the lockdown was relaxed just a tiny bit for Christmas day. But in practice, Britain was locked down throughout winter and spring 2020-21; causing massive damage to already struggling businesses that depend upon Christmas sales to remain solvent.
Adding to retailers’ woes, the cost of shipping the Christmas goods that didn’t get sold had more than doubled as a result of the growing shortage of containers. The simplistic assumption that rising costs would translate into rising prices failed to materialise. Faced with collapsing demand, and having already advertised many items at the lower price, retailers had no choice but to take the losses themselves. This though, is not something business owners were prepared to do more than once. And so, when it came to making investment decisions for 2021, many held back; waiting to see what governments would do next. This served to exacerbate the shortages of a growing number of goods and materials across the global economy.
Clearly, with importers facing massive increases in shipping costs, and with manufacturers around the world still operating well below capacity, retail prices were going to have to rise. And while this will likely have a short-term impact, lack of discretionary income in the bottom half of the income ladder means that this will translate into changed purchasing practices – more spent on essentials, less on everything else – rather than sustained price increases… unless, of course, governments reverse 40 years of policy and begin injecting currency at the bottom via increased social security, pensions and public services and investment spending.
Shortages and rising prices resulting from the lockdowns may be beginning to make life uncomfortable, but they are also masking a far more serious problem. Global oil production peaked during 2018 and was already trending down prior to the pandemic. The lockdowns probably saved us from a big rise in fuel costs in 2020; but in doing so, they exacerbated the problem by obliging the oil industry to curb production too. Oil fields, refineries and pipelines are not like a tap that can be switched on and off at will. Some of the fields which were shut down will never reopen. Others will only reopen after expensive and time-consuming maintenance. Pipelines and refineries will have to be repaired and serviced before they can return to full capacity. Meanwhile, drilling engineers have found work elsewhere, while many drilling rigs were sent off to the scrap yard.
Slowly but surely, in the course of 2021 oil prices have crept up toward an economy-crushing $80 per barrel. And it is only the ongoing restrictions and home working which have prevented destructive price increases at the pumps. Nevertheless, in the UK petrol has risen from £1.02 per litre in January to £1.27 today; taking a big chunk out of the spending of anyone currently commuting to work. It should go without saying that as the price of fuel increases, the cost of just about everything else in the economy will follow. This includes the costs of mining and refining the minerals and metals at the base of the manufacturing supply chains. Most worryingly, it includes the cost of running the agricultural machinery which keeps 7.8bn humans fed.
Previous energy crunches in which demand greatly exceeded supply, were ultimately resolved by new energy sources becoming available. The depression of the 1930s finally came to an end when the European and Asian economies made the switch from coal to oil. The oil shock of the 1970s was ended when new – albeit more expensive – oil from Alaska, the Gulf of Mexico and the North Sea began to flow. Even the unprofitable US fracking industry managed to oversupply the global economy by 2015; bringing a degree of relief from the post-2008 depression. This time around though, there is no obvious energy resource waiting to be tapped. We have to go all the way back to 1982 to find the last time we discovered more oil than we consumed. And our appetite for oil shows no sign of slowing. In the meantime, the oil deposits which are being found are smaller, harder to extract and often too expensive to be profitable… the economic limits on oil extraction will be hit long before geology forces a halt.
At this point, non-renewable renewable energy-harvesting technologies (NRREHTS) – which need fossil fuels in their manufacture, transportation, deployment and maintenance – are a tiny fraction of our global energy consumption. Meanwhile, fourth generation nuclear and nuclear fusion are little more than expensive laboratory experiments, while conventional nuclear cannot be expanded to fill the gap:
A key problem – even assuming that these technologies could be operated at scale – is that current research and development is aimed at overcoming a climate change crisis which is still far off in the future (even if its early effects are already visible). As Gail Tverberg explains:
“Conveniently, climate change seems to have some of the same solutions as ‘running out of fossil fuels.’ So, a person might think that an energy transition designed to try to fix climate change would work equally well to try to fix running out of fossil fuels. Unfortunately, this isn’t really the way it works…
“The issue that most people fail to grasp is the fact that with depletion, the cost of producing energy products tends to rise, but the selling prices of these energy products do not rise enough to keep up with the rising cost of depletion.
“As a result, production of energy products tends to fall because production becomes unprofitable.”
With oil extraction already in decline, we simply no longer have time to wait while physicists, engineers and material designers figure out how to make potential future technologies work. And as the entire global economy tips into a permanent recession there are not many years left before further work is both economically and politically unacceptable. An increasing part of our economy will have to be diverted into energy production – which includes food production – and other genuinely essential activities. The corollary being that a great deal of what we were doing – including having more leisure time than any previous age – prior to the pandemic is going to have to disappear. And one thing we can more or less guarantee will disappear is the current metropolitan liberal concern with climate change – together with a raft of fashionable celebrity activist causes – and, especially with a particular narrative which claims that all can be solved with faux green technologies that just happen to benefit the usual corporate suspects at the expense of the poor. As John Michael Greer anticipated last year:
“For the last few decades, celebrity activists have been busy giving new relevance to the word ‘hypocrite’ by loudly insisting that we all have to do something about climate change, while continuing to lead the kind of personal lifestyle that dumps more CO2 into the atmosphere each year than the entire population of a midsized African city. The hypocrisy reached fever pitch as celebrity environmentalists flew in their private jets to high-profile meetings on climate change, where they waxed rhetorical about how the world had to use less carbon, while demonstrating their utter unwillingness to use less carbon themselves.
“Where celebrities led, inevitably, the comfortable classes followed… Once the raw hypocrisy became so blatant that it started attracting critical attention, I predicted here and elsewhere that the comfortable classes would doubtless dump climate change as a fashionable issue and find some other issue that they could use to play virtue-signaling games and load more costs onto working people.”
For a quarter of a century, a particular – “bright green” – version of climate change has been allowed to drown serious discussion of a predicament in which 7.8bn humans are attempting to continue growing on a planet that could not sustain an eighth of that population without the energy we derive from fossil fuels. Those who warned that technological solutions could not work – not least because the technologies are themselves dependent upon fossil fuels – were ostracised and censored. Nothing, it seems, can be allowed to hurt the feelings of those who – with no grounding in physics or engineering – insist that we can run a modern industrial economy solely on sunlight and wind. And so discussions about the true sacrifice and hardship involved in weaning ourselves off fossil fuels were pushed to the fringes; even as we continued to increase our fossil fuel consumption. And as a result, the gathering storm which we now see looming before us – of a rapid economic simplification – is going to be far harder than it need otherwise have been.
It is all too easy to be a vegan in an economy in which the supermarket shelves are overflowing. It is just as easy to protest fossil fuels in an economy which has more than enough energy to go around. Being a social media activist is easy when there is enough surplus energy to free you from the drudgery of non-industrial food production. And virtue signalling about green new deals is easy while industrial agriculture still ensures than people’s bellies are full. As the disintegration of the global economy gathers pace though, these will be overtaken by more visceral concerns. Already we have seen that as the costs of climate policies exceed people’s ability to pay, they rebel. From Australian voters rejecting an overtly green Labor Party manifesto to French workers violently opposing a rise in diesel duty and the polite Swiss public voting against environmental policies in a referendum, the trend is clear; ordinary working people are increasingly unprepared to pay the bill for implausible responses to climate change.
Climate change is, of course, real and already baked in. And that is something that future generations are going to have to adapt to… or not. But as we enter an age of shortages, economic depression and unplanned de-growth, people’s concerns will be more local and immediate. And so the current climate change infrastructure of special committees, expert working groups and conferences in Swiss ski resorts or Mediterranean islands will be relegated far below more immediate policy concerns.
As you made it to the end…
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