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Neoliberalism’s greatest success is about to be revealed as its greatest weakness.  In the 1970s – the previous inflation that the central bank generals are trying to fight – the perceived threat came from over-powerful trade unions and a too-protective welfare safety net, which together, the neoliberals argued, had driven inflation out of control.  Neoliberalism’s solution was to use recession to break the power of the unions and to use law to break the social security system.  And it appeared to work.  By the early 1990s, the economy was booming again, and the economic and political strife of the 1980s seemed to have faded into history.

Unfortunately, this mainstream economics fable turns out to have been a myth at every turn.  The true cause of inflation in the 1970s was rising energy prices – including the 1973 OPEC oil embargo – which drove the cost of everything upward.  Even the recession – which economists and bankers credit Paul Volcker with creating – turns out to have been the result of the oil shock from the Iranian revolution and the Iran-Iraq war.  And while neoliberal governments took the opportunity to crush unions and tear holes in social safety nets, what brought a brief return of prosperity in the 1990s was the opening up of new oil deposits in Alaska, the Gulf of Mexico and the North Sea, together with a banking deregulation that generated billions of dollars, pounds and euros in debt-based derivatives, underwritten by the anticipated profits from that new oil.

So much for neoliberalism’s supposed success.  But what about its weakness?  An often-unseen consequence of the destruction of the traditional protections afforded to ordinary working people is that millions of us cultivated a wilful blindness to all of the things wrong with the way our employers were operating their organisations.  We quickly learned that workers who spoke out or blew the whistle got fired.  We also saw that once they’d been fired, they faced a lifetime of impoverishment on inadequate benefits supplemented with occasional, low-paid gig and zero-hours work.  And so, we learned to turn a blind-eye, tick the boxes and settle for picking up our wages at the end of the week.

Further up the ladder, a new middle class learned that the only way of getting a decent salary was to borrow the money to obtain a university degree.  And once you had borrowed that money and got that foot on the salary ladder, you’d better keep your head down and your mouth shut, since that was the only way of avoiding getting kicked off the ladder again.  And so, everyone from the bottom to the top of the hierarchy learned to look the other way.  As Upton Sinclair famously put it:

“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

To the technocrats charged with managing everything from businesses to nation states, our acquiescence has been taken as an endorsement of their rule and a measure of their supreme confidence.  But they are deluded.  As Margaret Heffernan explains, that weekly or monthly pay cheque is powerful:

“What all this has shown is that money may be the richest area ever discovered for the study of unintended consequences. From which it should follow, but rarely does, that managers and compensation committees need to be tremendously thoughtful when deciding how to apply such a powerful, even irrational, motivator. Because money has a more complex influence on people than just making them work longer.”

Among other things, this is why the story that nobody saw the 2008 crash coming is a myth.  Everyone from the lowliest clerk to the most senior compliance director in all of the banks involved knew damned well that they were doling out loans to people who could never repay them.  But the financial incentive to turn a blind-eye proved too great to prevent a problem morphing into a full-blown global crisis.

The same thing has been happening with energy for at least the last two decades.  Privately, physicists and engineers have told anyone prepared to listen that the whole idea of what we currently call “net zero” is pure fantasy.  Running an economy on renewable energy is simple enough.  But running this economy, with its voracious need to consume ever more energy with each passing day, using technologies which, at best, will replace around ten percent of our current energy usage, is simply impossible.  But there again, it is not physicists and engineers who are driving the policy.  And so, once again, the incentive to take the money and turn a blind-eye has proved irresistible.

So long as “net zero” was off in some undefined future, we could play this game with few immediate consequences.  If wind turbines weren’t being deployed quickly enough, then we could just move the target date.  If there weren’t enough electric car charging points, we could just provide some additional grant funding and promise that it would all work out in the end.  And sooner or later, someone would invent a super-battery to overcome the intermittency showstopper.  Provided we didn’t do anything suicidally reckless, like undermining the global supply chains or declaring an economic war on one of the world’s biggest exporters of raw materials, we might have continued playing this game for decades to come.

The problem though, is that events over the past two years have dramatically accelerated the trend of declining surplus energy to the point that non-renewable renewable energy-harvesting technologies (NRREHTs) are no longer just a sop to green protestors and a money spinner for the corporations that deploy them.  With oil and gas going away, and with the coal-based infrastructure largely dismantled, NRREHTs are becoming essential to keeping the lights on…  Except, of course, that the engineers who are supposed to make the system work – like the bankers before 2008 – know damned well that this project is a non-starter and that a coal-based Grid cannot accommodate a massive expansion of NRREHTs until or unless we have a massive expansion in storage technologies which have yet to even be invented.  And while nobody is quite saying this in public, the bright green mask is slipping as the impossibility of the task becomes more apparent and more urgent, and the true cost of attempting it is realised.  As Gill Plimmer at the Financial Times reported earlier this week:

“Renewable energy developers are facing delays of up to a decade to connect new capacity to the electricity grid, threatening the government’s pledge to shift away from fossil fuels and meet net zero targets.

“The UK recently set out ambitious new goals to more than double existing renewable generation capacity, adding 50 gigawatts of offshore wind by 2030, 70GW of solar by 2035 and 24GW of nuclear by 2050.  But developers say they are being told that they will have to wait six to 10 years to connect to the regional distribution networks because of constraints on National Grid’s network.”

The problem is reported through the lens of inadequate state funding, excessive regulation and the complex structure of the quasi-private energy system.  But as Plimmer reports, the fundamental problem is that successive governments have given the go-ahead for NRREHTs projects without thinking through how the Grid will accommodate them.  As a result, National Grid’s proposed solution is to ban any future NRREHTs projects until the Grid is able to deal with them – something which will be anathema to pro-net zero politicians:

“The company is proposing to upgrade the network on a project-by-project basis, building bigger substations and more overhead lines…  However, the industry is concerned over the cost of improvements to the network, which are needed to shift from a system designed to serve large coal-powered plants close to urban centres to more dispersed renewables developments such as solar and wind farms.

“Burdening smaller-scale projects with these transmission upgrade costs, which can be in the region of £12mn per substation, renders many projects unviable… It is also a postcode lottery as to how much they are charged.”

In the past it was possible to assume that because these problems are far off in the future, clever people somewhere else would come up with viable solutions.  But the sudden fall in supplies of oil and gas following two years of lockdown and the – frankly insane – decision by Europe to disconnect itself from one of the last suppliers of affordable oil and gas on the planet, have put us in a position where NRREHTs, nuclear and what remains of coal power are the only things standing in the way of mass hypothermia this winter. 

And when the lights go out, as they surely will the moment the wind stops blowing, the whole energy Ponzi scheme will go the way of the banking and finance system fourteen years ago.  Once again, the economists and policy-makers will be asked why nobody saw it coming.  Once again they will shuffle their feet, bow their heads and mumble something about black swans.  And only later will we come to learn that everyone on the inside from the guy who reads your electricity meter right the way up to the Grid’s technical director knew all too well that it is impossible to run a complex modern economy on renewable energy… only by then it will be too late.

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