There is a meme doing the rounds on social media… a picture of a vegetable patch, captioned “the time is coming when only those who know how to grow food will survive.” The idea being that, as our complex civilisation breaks down, we will be forced to return to a far simpler economy, where most people revert to roles within agriculture and food production. As with most memes, it functions as a thought-stopper… one which hides the obvious reality – backed by millennia of experience – that, in fact, “it will be the people who know how to force others to grow food,” who will be the real winners in the post-industrial economy.
At a deeper level though, the meme is an example of the way we delude ourselves into believing that a positive version of collapse – usually in the form of managed de-growth – is possible, and that those promoting such a view will be the ones who inherit whatever benefits it offers. History says otherwise, of course. Life in pre-industrial civilisations was mostly short, brutal, and often marred with chronic pain. The best most people could hope for was life in an institutional version of slavery, where at least serfdom laid some nominal responsibilities on the clergy and the nobility who ruled over them. And again, it was those with the wherewithal to protect and/or steal food by force who got to rule and to enjoy the few luxuries on offer.
Not that most of those promoting some version of the “green” techno-psychotic vision of a future of wind turbines and electric cars are likely to fare any better. Sure, the WEF neofascists and their politician acolytes are currently making a play to cling on to power as industrial civilisation collapses. But as it becomes increasingly obvious that the future they are selling cannot work in practice, and particularly as the cost of attempting it adds even more to the collapsing prosperity of the masses, their chances of remaining in control diminish with each passing week.
The problem with both visions of the future – and the spectrum of views between them – is a fundamental misunderstanding of the collapse which has begun to break over us. This is that each assumes the continuation of that part of industrial civilisation which is required to make their version of the future possible, even as the coming collapse wipes away ALL aspects of industrial civilisation. Most obviously, nobody had developed even an embryonic version of the renewable energy supply chain which is the essential first step to turning non-renewable renewable energy-harvesting technologies (NRREHTs) into the envisioned “renewables” upon which the promised techno-psychotic future is to be built. That is, until it is possible to mine the minerals, build the components, manufacture and transport the technologies without the use of fossil fuels at any stage in the process, then there is no such thing as “renewable energy” in the sense which the term is currently promoted.
But even at the dark green de-growth opposite end of the spectrum is a version of denial which assumes that it is possible to gradually shrink the global economy in a managed way which results in the least suffering possible. This though, is another version of the difference between “can” and “can” that I wrote about some years ago – the chasm between what we think we can do in theory and what we can actually do in practice. Certainly, of the two visions of a post-industrial future on offer, de-growth is the most likely, since in the course of some 250,000 years on this planet, there have only been some 300 in which humans have lived in fossil fuel-powered industrial civilisations. Indeed, most of humanity has only been living within that civilisation in the decades since the end of World War Two, while the beneficiaries have been a small minority mostly living in Europe and North America. And so, some return to an agricultural civilisation is far more likely than a future which – for the moment at least – requires energy sources which don’t exist, along with technological breakthroughs which defy the laws of physics.
Any possibility of a managed de-growth, however, died half a century ago for two related reasons. The first is that we didn’t take the October 1973 oil shock seriously. That is, geologists had already mapped out the process of “peak oil” – based on a roughly 40-year timeline between discovery and peak, which had played out as predicted in the USA… peak discovery in the early 1930s followed by peak production in 1970. It followed that since the world peak of oil discovery was in the early 1960s, then decline would begin some time in the first decade of the twenty-first century. (While broadly correct, there are some qualifications discussed below). An oppositional narrative which emerged out of the oil shock, argued that since we knew oil was a finite resource, this was a wake-up call for us to begin investing heavily in energy conservation and alternative energy sources, while planning for an economy which didn’t revolve around the internal combustion engine. Instead, the establishment narrative was that there was still more than enough oil beneath the ground, and by the time world oil production peaked, new technologies and energy sources would have been developed anyway. In the meantime, we could unlock new deposits in Alaska, the Gulf of Mexico, and the North Sea to maintain business as usual.
The second – and intimately related – reason was the collapse of the post-war Bretton Woods currency system in August 1971. If the history of money teaches us anything, it teaches us that fiat currency systems – especially debt-based ones – are extremely corrosive to functioning economies. On the other hand, currencies backed by precious metals – usually gold – are restrictive, and not easily useful as a medium of exchange between states. The gold-backed system of the inter-war years – motivated by the desire to preserve the old European empires – had seen the emergence of several currency blocs with trade barriers and tariffs restricting activity between them. As the Second World War was coming to an end, the western allies sought a solution which avoided a return to the old currency/trade blocs while continuing to anchor the emerging system to something material in the real economy. Two proposals were offered – a Bancor (similar to the emerging BRICS currency) valued against the flows of trade between states, and an international gold-backed US dollar system. And since the US economy was the only one left standing by 1944, it was this latter which won out. Thereafter, the US dollar would be maintained at a rate of $35 per ounce of gold… with the US government solemnly swearing to maintain a stock of gold equivalent to the dollars it created.
The system came to grief because – shock-horror – the US government lied. The temptation was simply too great to resist. And so, domestically, the US government overspent on social programs while internationally it deficit funded the Cold War, the Vietnam War, and a host of tied-aid packages which obliged states in the global south to purchase American goods. This was the “exorbitant privilege” which French politicians complained about in the late 1960s – whereas every other economy on the planet had to create real value to obtain a dollar in international exchange currency, the USA could print dollars at will. And the result, as US deficit spending ramped up, was that every other state began to experience inflation as the dollars they needed in order to trade were gradually devalued via over-supply.
One of the big confidence tricks sold by economists is the one which says that “inflation is always and everywhere a monetary phenomenon,” as if money has no interaction with the material economy. That is, the material economy is treated as a constant when it is always and everywhere in a state of flux. And if the real economy is fixed, then it would follow that rising prices would have to be the result of too much money and/or too rapid a speed of transactions in the system. Historically, however, there are two periods which saw a massive injection of currency into the economy with diametrically opposite results. The first, beginning in the late fifteenth century, was the sudden and massive import of gold and silver into Europe from the Americas. Far from producing the imagined wealth and prosperity, the result was a hyper-inflation which drove people into poverty and revolt, as the material economy could not keep up with the devaluation of the money supply. One result being that the Europeans exhausted their key energy source – wood – in the attempt to keep up. As historian Clive Ponting notes:
“A timber shortage was first noticed in Europe in specialised areas such as shipbuilding… In the 1580s when Philip II of Spain built the armada to sail against England and the Dutch had to import timber from Poland… Local sources of wood and charcoal were becoming exhausted – given the poor state of communications and the costs involved it was impossible to move supplies very far. As early as 1560 the iron foundries of Slovakia were forced to cut back production as charcoal supplies began to dry up. Thirty years later the bakers of Montpellier in the South of France had to cut down bushes to heat their ovens because there was no timber left in their town…”
As renewable energy-powered economies go, sixteenth century Europe was about as good as it gets – having recovered from the Black Death and having circumvented the old, tariff-ridden trade routes across Eurasia, and having restored its population to levels prior to the plague. So that introducing too much additional currency could only serve to undermine the economy. The situation in Europe, Japan and Korea in the aftermath of World War Two was very different. The prewar population had shrunk, and economies lay in ruin or were so distorted to serve the war effort that a period of major reconstruction was necessary. Less obviously – and, indeed, one of the major causes of the war – was that while the USA had transitioned from a coal-based to an oil-based economy prior to the war, the economies of Europe and Japan were still coal-based. The result being that reconstruction would also have to involve a major energy transition.
Unlike sixteenth century Europe then, the economies which emerged from the ashes of the war had huge spare capacity. Moreover, with relatively little of the Earth’s oil and mineral resources having been exploited, there was huge potential for a period of explosive economic growth. It is into this environment that the USA’s first effort at dollar-printing – so-called “Marshall Aid” – had its impact. And the result was anything but the inflation that refugees from pre-war Germany predicted. Instead, the western economies experienced the largest economic boom in human history. As historian Paul Kennedy explains:
“The accumulated world industrial output between 1953 and 1973 was comparable in volume to that of the entire century and a half which separated 1953 from 1800. The recovery of war-damaged economies, the development of new technologies, the continued shift from agriculture to industry, the harnessing of national resources within ‘planned economies,’ and the spread of industrialization to the Third World all helped to effect this dramatic change. In an even more emphatic way, and for much the same reasons, the volume of world trade also grew spectacularly after 1945…”
This is the allure of a fiat currency system… in its early stages, it can stimulate growth within an under-developed economy in a way that gold-backed systems never could. And in this accelerating growth phase, the fact that the currency is losing its real value against gold doesn’t seem to matter, because overall wealth and prosperity is growing even faster. Problems only arise when growth begins to slow. In the post-war years, this was the point after the economies of Europe and Japan had made the transition to oil-power and were openly competing with the USA in world trade. The paradox for US governments was that the Bretton Woods system obliged them to provide the world with dollars even though this served to undercut their domestic economy, so that printing and exporting dollars became the only way of avoiding inflation at home. But the other side of the deal was that European governments struggled to hold down the inflation which accompanied those exported dollars. And so, in 1969, first Germany and later France asked the USA to settle accounts in the gold which supposedly backed the dollar. Briefly, destroyers ferried shipments of gold from the USA to Europe… and US inflation began to soar.
Nixon blamed it on “speculators.” But it was the inevitable conclusion of a hybrid monetary system which ended up being far more fiat than gold. In August 1971, Nixon brought the charade to an end, and the world has been on a debt-based fiat currency system ever since. And so, again, rather than take stock of the material world and design a currency based around the energy and resources available to us, as with the energy crisis, we simply continued with business as usual in the expectation that clever people in the future would develop a workable system when this one eventually broke down.
At this point in the story, we need to re-state what the economy is, and how money relates to it. This may sound odd to the casual reader, since in the establishment narrative, money and the economy are the same thing… which is why some of us have been obliged to use the short-hand distinction between a “real” and a “financial” economy. At its simplest, the “real” economy is a material system dependent upon energy for its existence. Material since it is about humans using energy to change the material world (hopefully – but not always – for the better). This describes everything from the most basic economy in which a human uses the energy from food to bash a stone to fashion a basic axe or spearhead, through to a complex, fossil fuel-powered industrial global economy in which billions of humans transact to create the goods and services of the modern world.
Money, meanwhile, has no intrinsic value. Wash up on a desert island with a suitcase full of dollars and you are still going to starve to death in fairly short order. And so, the financial economy of banks, currencies, stock exchanges, and central banks, is merely the means of ordering and allocating the various claims upon the products of the real economy. But although the system is secondary, it is a mistake to underestimate its power… you might have the best idea in the universe, but unless you can persuade someone to fund it, it will never be realised. And when the money runs out… well, as Charles Eisenstein wrote in the wake of the 2008 crash:
“What we call recession, an earlier culture might have called ‘God abandoning the world.’ Money is disappearing, and with it another property of spirit: the animating force of the human realm. At this writing, all over the world machines stand idle. Factories have ground to a halt; construction equipment sits derelict in the yard; parks and libraries are closing; and millions go homeless and hungry while housing units stand vacant and food rots in the warehouses. Yet all the human and material inputs to build the houses, distribute the food, and run the factories still exist. It is rather something immaterial, that animating spirit, which has fled. What has fled is money. That is the only thing missing, so insubstantial (in the form of electrons in computers) that it can hardly be said to exist at all, yet so powerful that without it, human productivity grinds to a halt.”
Understanding why the money runs out is central to the first phase of our unfolding collapse. After all, in a fiat system, governments and banks can create currency at will. The question then, in periods like the 2008 and 2023-24 crashes is why governments and banks do not simply (electronically) print the currency required to keep the economy growing? The answer gets to the heart of the relationship between the financial and real economies.
Prior to 2008, most people – including the politicians who rule over us – believed a fairytale about money in which governments created all of the currency, while banks acted as no more than intermediaries – profiting from the interest rate spread between savers and borrowers. Since 2008 though, far more people have become aware of how domestic currency is spirited into existence when banks make loans. As the Bank of England explains:
“Money is more than banknotes and coins. If you have a bank account, you can use what’s in it to buy things, typically with a debit card. Because you can buy things with your bank account, we think of this as money even though it’s not cash.
“Therefore, if you borrow £100 from the bank, and it credits your account with the amount, ‘new money’ has been created. It didn’t exist until it was credited to your account…”
Less well understood is the way international banks do the same thing in the global “Eurodollar” system. Even now, most people apply the fairytale that it is the US Federal Reserve Bank which creates all of the dollars in circulation around the world when, in fact, banks simply create dollar denominated debt out of thin air when they make loans to one another, to national governments or to multinational corporations.
Crucially, the currency created comes with interest attached so that, hypothetically, if all of the currency in existence could be gathered up and paid back, there would still be outstanding debt. Not that anything this dramatic has to occur. All that is required to trigger a recession is that the rate of new bank lending slows down. For financial growth to be maintained then, banks – domestic and international – must continuously increase the amount of debt they issue. So why don’t they?
The answer – which the central bankers get partially correct – is confidence. Put simply, banks lend when they are confident of getting a return on their investment. This though, is about so much more than the psychology of bankers. Rather it is about material conditions within the real economy. The event which triggered the cascade which resulted in the 2008 crash, was the global peak of conventional oil production in 2005. The ensuing oil price rises filtered through the economy, as everything made from, made with, or transported using oil increased in price accordingly.
In such circumstances, as the old adage has it, “the answer to high prices is high prices.” Faced with rising prices, consumers must either increase their own (wages) price or change their spending habits to accommodate the new circumstances. In 2005, this meant less money being spent on discretionary items in order to accommodate the rising cost of essentials like fuel and food. This, in turn, spelled a fall in business profits and a corresponding rise in unemployment. Left to its own devices, this slowdown would have resulted in falling demand for oil, and ultimately to the price of oil falling back. But the misery was worsened by the central banks responding to this “supply-side” shock as if it was monetary inflation. And so, rather than seeking to maintain the supply of currency, they sought to lower it by raising interest rates. In this, at least, they were spectacularly successful – rising interest rates left millions of borrowers unable to service their debts, leading to a massive housing crisis which morphed into a banking crisis as the collateral – people’s homes – used to secure loans turned out to be worthless. Yes, banks could – at considerable cost – repossess houses. But at a time when nobody was buying, they could not translate those houses into “liquid” currency with which to repay their own borrowings.
The 2008 crash simply could not have occurred had it not been for the halt in oil production growth and the ensuing price increases. That is, if – hypothetically – someone had opened up another large and cheap to extract oil deposit prior to 2005, the energy to underwrite real economic growth would have been available and prices would not have increased. To some extent, this also explains why the economy has not been in freefall ever since. I said above that the broadly correct peak oil narrative was more nuanced. This is because US peak oil in 1970 was partially artificial. The corporations which did the drilling within the USA were the same ones that drilled for oil around the planet. And since in 1970, there was plenty of cheap oil to be had elsewhere, there was little point investing in more difficult and expensive – including “unconventional” – deposits within the USA. Indeed, once the 1973 shock had served to raise the price of oil to a new level, deposits off Alaska, the North Sea and the Gulf of Mexico became viable and, from the late 1980s, underwrote another debt-based boom (albeit at a lower level of general prosperity than in the post-war years).
By 2005 few cheap and easy deposits remained. The last big deposit – Kashagan in Kazakhstan – came to be known as “cash all gone” because the oil turned out to be so sulphurous as to be toxic to the drillers and local residents, and costs spiralled as a result. Meanwhile, the post-2008 low interest rate financial environment provided sufficient speculator funding to develop the large deposits of unconventional oil in North American shale and bitumen sands. This provided the world economy with one final oil boom before a final peak was reached in November 2018.
The global economy was already entering a recession before SARS-CoV-2 embarked on its world tour, although this has been obscured by two years of economic lockdown followed by a self-defeating economic war with Russia. Nevertheless, as the economy re-opened, with oil production at some 4 million barrels-a-day below the November 2018 level, oil and gas prices quickly began to spiral upward. At the same time, broken supply chains resulted in generalised shortages, which also drove prices up across the economy. These processes though, were obscured by the emergency currency printing during the pandemic, as governments sought to prevent lockdowns from causing an immediate depression. The problem was that, with most of the discretionary economy on lockdown, the additional currency had nowhere to go. And so, savings built up, creating a situation similar to the USA in the immediate aftermath of World War Two, when a brief period of inflation occurred as the pent-up savings were spent.
It is this additional currency – which has now mostly gone – which caused central banks to abandon their – correct – initial view that the inflation was temporary. As we have seen, in supply-side shocks, the answer to high prices is high prices. So that as demand slumped, the economy could rebalance. Because of the additional pandemic currency creation though, central banks have acted as if the price increases of recent years are the result of oversupply of currency. And so, just at the point when falling demand is causing a global disinflation – which looks set to be followed by a deflation – central banks are adding to the problem by removing even more currency from an already currency-starved financial economy.
Crucially, in these circumstances banks become seriously concerned about the future state of the economy. This is why, for example, higher interest rates are not being passed on to savers, as banks seek to shore up their fragile balance sheets. Perhaps less obviously, but with far more serious consequences in a debt-based fiat system, banks have tightened down their lending standards… taking us back to the bad old days of the late 1970s when people used to joke that the only people the banks would lend to were those who didn’t need the money.
The banks, however, are correct to doubt the likely future growth of an economy increasingly starved of the energy that it needs to function. In the 2020s, it is not just that we are out of cheap oil, but we are rapidly running out of more accessible oil entirely. And since none of the alternatives to oil – fossil and non-fossil – is viable without oil, then the only possible economy in future is a shrinking one… and nobody has figured out how to operate one of those. And given the division of labour in an economy as complex as ours, the bankers might be forgiven for pointing out that that isn’t their job anyway.
The point of a bank is to make loans in a way that guarantees a return. And collectively that means that the real economy of energy and materials must grow. Now that the material growth has come to an end, banks have little incentive to keep lending. And so, the amount of currency in circulation is falling. This, in turn, guarantees a sustained deflation once the immediate crisis is over… and that isn’t a good thing, because it doesn’t mean that all of today’s consumer goodies are going to be available at a cheaper price – your gym subscription or TV package isn’t going to get cheaper, it is going to disappear entirely because the supplier is going to go bust. And the end result is that you are going to be working harder, for a lower income, with which you will be buying far fewer goods and services.
Large swathes of ex-industrial, rundown seaside and smalltown Britain – along with their equivalents across the western world – already understand and experience this, as their prosperity – the amount of income left after the essentials have been paid for – has been steadily declining since the early 1980s. Back then, with vast amounts of North Sea oil and gas revenue filling government coffers, we used to talk about relative poverty. Nobody – at least, nobody without serious social or mental health problems – was going hungry. Since 2010, that has changed dramatically, as Colin Drury at the Independent reported last winter:
“There are more children coming in hungry or in unwashed clothes or not feeling well because they are living in cold, damp houses, and the consequence of that is you have a cohort of young people who cannot concentrate properly and who are less healthy…
“Fifteen years ago, a food bank wasn’t a thing… Now you see politicians cutting ribbons to open them as though it’s a good news story that people are starving. What? The same with warm banks. What kind of country are you when people can’t heat their own homes?”
It is this growing reality which is fuelling a populist backlash against the neoliberal “green” energy fantasy, and which threatens to deny climate change itself – if there was really a climate emergency, surely our self-identifying elders and betters wouldn’t be flying around in private jets or being driven around in massive oil-powered convoys:
“US President Joe Biden arrives [at COP26] in a cavalcade of 21 vehicles from Edinburgh airport, and then appears to fall asleep in the conference chamber – surely the most carbon-intensive afternoon nap in history…”
It matters not one iota that economists are generally wrong. The economy matters. Because strip away the imposed ideological froth and the one thing common to all revolutions is that they were preceded by rumbling bellies. Rumbling bellies, that is, which are growing louder by the day across the formerly prosperous working-class districts of the western economies. It can only be a matter of time before this turns nasty – most likely when one or more of the political psychopaths finally realises that a return to burning fossil fuels provides the easiest route to power – and the political violence we used to associate with banana republics comes home to roost. And it is for this reason that the unfolding economic crisis, despite being the least serious of the “Three E’s” – economy, energy and environment – is going to strip us of the means to carry out either the disruptive science required for an alternative energy transition or for the reasoned management of a shrinking economy in line with the depleting energy and resources available to us.
Energy though, is the true driver of the process. In this at least, the climate sceptics have a point. Attempting to maintain an advanced, complex, and globalised industrial economy by expanding the tiny fraction we currently generate from wind and solar, while simultaneously removing the eighty percent that we currently derive from coal, gas, and oil, is simply impossible – there is neither the energy nor the mineral resources to come even close. And yet – coming back to that logical misunderstanding of the difference between can and can – there is neither a shortage of energy nor mineral resources. We have, for example, only scratched the surface of the potential energy which might be derived from splitting the neutron bonds of atoms… a potential that is orders of magnitude greater than the energy derived from splitting the electron bonds. Its just that nobody has figured out how to do it, and too much of our limited grant funding has been squandered on the false promise of NRREHTs and nuclear fusion.
Similarly, if only we could find a way of filtering the minerals in sea water, we would have the means of providing centuries of real economic growth. Except, again, nobody knows how to do it. Or rather – and this is also true of energy technologies – nobody has figured out an affordable means of doing it. This sounds mean, since we are accustomed to think about the economy as a financial system and we are conditioned to believe that technology develops along an exponential curve. Thus, if only governments and banks could allocate sufficient funds, expensive prototypes would quickly be superseded by efficient updates so that processes which were too expensive to begin with will surely become profitable later on.
This though, is not how the real economy works. Currency derives its true value as a means of allocating material resources – which include energy, minerals, but also human labour and human ingenuity. But these material economic inputs impose physical limits on what is possible. A western human worker, for example, can provide around half a kilowatt hour of work per day. It is relatively easy to squeeze this by cutting the amount of energy the worker expends on leisure activities – workers in less developed economies might provide one kilowatt hours of work, although only at the cost of poorer health and an earlier death. And despotic regimes might force a worker to provide two kilowatt hours of work in slave labour camps, but only over a very temporary period. But no matter how much we may wish it, humans cannot exceed this, even if – as happened in the Soviet gulags and the Nazi slave camps – the alternative is death.
The same thermodynamic limits apply to all sources of energy. Which is where technology comes in. The early life of an energy-harnessing technology generally does follow an exponential curve, as developers make a raft of simple and cheap improvements which greatly enhance the productivity. But soon enough, all of the cheap and easy improvements have been done and all that remains are expensive and difficult improvements that come with greatly diminished returns. And eventually, technologies reach a stage where there is no further benefit to the improvements that are made. (This, by the way, is why recent NASA attempts to recreate its moon landing program have fallen foul of problems experienced and understood back in the 1960s – there are only so many things you can do to improve a rocket… and most of them had been done prior to July 1969).
In thermodynamic terms, technological development – and productivity more generally – is really about lowering the amount of energy wasted as heat so that more can be directed to useful work. And sadly, the laws of physics leave even the most efficient technologies wasting more heat than they are able to convert for useful work… which rules out any possibility of a technology becoming permanently exponentially more efficient.
This applies to energy itself, of course. There is always an energy cost to producing energy for useful work. Productivity improvements such as better technology and economies of scale can lower this cost. But high cost and high waste is inevitable. For example, most of the energy powering an internal combustion engine is lost as heat or in powering cooling systems. Similarly, around a third of grid electricity is lost in transmission, and more again is lost as heat from the appliances using it. Ironically, this means that a heater is the most energy efficient technology humans have ever created.
The energy cost of energy sets an important system-level boundary too. The economy as a whole must set aside a proportion of the potential energy available to producing energy. This means that only the energy left over is available to power the much larger non-energy economy. Prior to the Industrial revolution, when energy was limited to wood, food, animal fodder, and small-scale wind and water power, the non-energy economy was tiny – primarily the few luxuries available only to the very wealthy. Everyone else, one way or another, was involved in the production of energy – either directly growing food or engaging in the many peripheral trades required to allow farming to operate.
It is a measure of the raw power that fossil fuels – first coal, and later oil and gas – provide, that while as late as the 1930s, one in four of us was working the land, today it is less than two in a hundred. And today’s massive consumer and public services economy is the result. In the event that another Carrington Event were to strike the planet, almost all of the global economy would come to a possibly irreversible standstill in a matter of hours.
It is not only some external catastrophe that might spell disaster for the global economy though. Because of the way we have harvested fossil fuels – like technology, beginning with the cheap and easy before moving on to the expensive and difficult – the energy cost of energy has been growing remorselessly since the oil shocks of the 1970s. The impact upon the wider economy was partially offset by the neoliberal revolution, through such things as offshoring production to countries with lower wage rates and fewer environmental regulations, and by using debt to bring consumption forward from the future… that is, today! But throughout the period the energy cost of energy has continued to rise so that the only economic “growth” remaining is the shuffling of numbers within the banking and financial sector Ponzi scheme. In the developed states, real economic growth stalled prior to 2008. And there are growing signs that states like China and India are now also struggling to maintain real growth.
Again, this is why the first wave of our collapse is experienced as an economic crisis. As the energy available to the wider economy declines, so there is simply not enough to maintain what already exists, still less provide the power for new goods and services. But other than the ever-louder complaints about the cost of electricity and gas, most of us experience the crisis via general price rises and falling incomes. And our individual common-sense response is to rein-in our discretionary spending in order to maintain essentials like housing, food, transport and utilities. The result is a retail and services recession – particularly in businesses operating subscription models – along with a growing risk of business failures, unemployment, and widespread debt defaults.
Less obviously, as tax receipts fall, debt servicing costs rise, and demand for public services and benefits increases, government – local and national – comes under increasing strain. This is a particular problem in countries like the USA and the UK, where infrastructure has been allowed to crumble, since any chance of widespread repair or replacement is lost once the money runs out… particularly since – with the wage bill by far the biggest cost – it has proved notoriously difficult to cut the size of the public sector, despite most of its functions being devolved to the private sector.
Because this energy crisis manifests as a monetary problem, it is unrealistic to imagine that most people – including politicians, economists and establishment journalists – will recognise it for what it is. Rather, we are likely to be beset by a replay of the stuck-record debate between those urging the government to print more currency and those urging cuts in public spending. Meanwhile, all manner of economic policy rain dancing is likely to be attempted to appease the gods of economic growth. But the only thing that might save us is discovering a means to unlock a new energy source cheaper and more powerful than the fossil fuels which are now in irreversible decline… and currently, no such alternative is in sight.
Awareness of the energy crisis, then, is most likely to come to public awareness only when rationing by price morphs into full-blown rationing. That is, when it is clear to all that there is no longer enough to go around. Clearly this will be a lot worse in places where there is a high level of intermittent capacity, since your electricity hour may be cancelled if the wind isn’t blowing… so, again, even if the nature of the energy crisis is recognised, there is plenty of scope for social and political violence in its wake.
Beyond the energy crisis component of our predicament is what I refer to as “the bottleneck” – a series of environmental consequences of the industrial economy which have been looming like storm clouds on the far horizon. While climate change/global warming is the most widely publicised of these, it is far from the only one… nor the only one likely to prove fatal. The impact of petrochemical agriculture on our soils, for example, leaves us dangerously exposed to famine in the event that chemical fertilisers, pesticides and herbicides are no longer available or are too expensive for common use. And while regenerative agriculture might mitigate global food shortages, it takes time to rebuild soils that after intensive agriculture are no more than thin and worn-out sponges devoid of natural life.
Clean drinking water is also emerging as a major issue – particularly in areas which have been emptying subterranean aquifers faster than they can be refilled. But even regions which had been able to depend on regular rainfall to top up reservoirs are now experiencing droughts more often. And as access to energy declines, areas which currently rely upon desalination plants may rapidly become dead zones.
Meanwhile, the oceans are dying as a result of both operating as a heat sink for atmospheric warming, and as a global sewage tank into which we have been pumping all kinds of refuse, effluent and agricultural run-off. Pink water, de-oxygenated zones are increasingly common, with the catastrophic result all too obvious in the form of thousands of dead fish washing up on beaches where, once upon a time, similar numbers could have been hauled out with rod and line without denting the once abundant fish stocks.
Note that these have nothing – at least directly – to do with fossil carbon, and so would remain a threat to human survival even in the – extremely – unlikely event that we were somehow able to address global warming… which, of course we won’t, because someone would have to invent a time machine to take us back to the early 1970s – the last time a managed change was viable – to implement the changes needed to avoid collapse.
The symbolic moment when our problems became a predicament was the day Ronald Reagan ordered the solar panels to be removed from the White House roof. Prior to that point, a sizeable part of the population had been grudgingly accepting that lowering speed limits, making smaller, fuel-efficient cars, purchasing local goods, and wearing an extra sweater in the winter, were necessary. After Reagan and Thatcher, we were back to drill-baby-drill and let the future reap the consequences.
That future is now breaking over us. The gathering economic collapse – and the accompanying social unrest – will soon remove the resources that we would need even to mitigate the worst of what awaits us. And economic hardship is only the first tsunami wave to break over us. In the course of the 2020s, energy failures will worsen. Beginning with people being priced out of access to energy, soon enough we will be faced by absolute shortages. Again, this will inevitably be accompanied by unrest as the wealthy cling onto their ill-gotten gains in the face of growing public hostility. If we are lucky, the worst IPCC projections will not be realised simply because the collapse in available energy along with a rapidly simplifying economy will prevent us from burning that much fossil carbon – although there is a nightmare scenario in which humans revert to coal as the last energy source available to us. Either way, future generations are going to have to adapt to the mess, and the possibility of more than a tiny fraction of the current human population still living in the next century is very slim indeed.
With all of this said, two problems remain. The first is that we have a tendency to conflate inevitability with imminence. In 2008, commentators at the doomier end of things announced that the big collapse was upon us and it would surely be just a matter of months before we were reduced to eating grass and throwing spears at one another. Few saw either quantitative easing or fracking coming to provide the system with another decade or so of anaemic stability. And while those tricks can only be pulled off once, we ought not underestimate the ability of the elites to find ways of keeping their system on life support… even if the end destination is ever more visible to the rest of us. What impact, for example, would some form of debt write-off associated with the introduction of central bank digital currencies have on the system?
The second problem is our inability to discern the fine detail. While we can understand the broad sweep of economic, energetic, and environmental decline, second-guessing the ways in which the various actors will respond is at least extremely difficult. How many of us back in 2005, when conventional oil production peaked, would have seen the rise of Donald Trump or Britain leaving the EU as two of its consequences? Neither development was inevitable, but rather a product of the interplay between the steps the elite took to bail out their system and the impact on the mass of increasingly impoverished masses beyond the walls of the favoured metropolises.
All we can say with some certainty is that tipping points are being crossed, and that the scope for us to respond meaningfully is fast shrinking to zero. We will still respond, of course. But our responses are likely to become ever angrier and more impotent as the crises engulfing us remain unmoved by our feeble attempts to respond… and even this “certainty” might quickly fade in the unlikely event that clever people somewhere discovered a new, cheap, and energy dense (so not NRREHTs) alternative to fossil fuels (I’m not holding my breath).
Absent the appearance of this energy unicorn, we must conclude that the age of solutions has passed… the age of consequences is just beginning.
As you made it to the end…
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