THE SURPLUS ENERGY ECONOMY – CONTEXT AND CHOICE
One of the things that used to puzzle me, as a very small boy, was why the day after Christmas was called “Boxing Day”.
Did people in the classic “Dickensian Christmas” – in the era evoked by traditional festive icons like snow, holly and robins – really set aside a day for pugilism? It seemed even less likely that a day of fist-fighting contests formed any part of the first Christmas.
All became clear, of course, when it was explained to the very young me that this was the day on which Christmas “boxes” (gifts) were exchanged. In those times, people drew a distinction between the Christian celebration, on 25th December, and the giving and receiving of presents, on the following day.
This distinction is even more pronounced here in Spain, where the exchange of gifts is deferred to the “Night of the Kings”, two weeks after Christmas itself. The festive season is thus more protracted here than in, say, Britain or America, but it’s also markedly less frenetic, and culminates, in most towns and cities, with a thoroughly enjoyable Night of the Kings carnival.
Depending on where you are and how you look at it, the Christmas holidays end, and something like “normality” resumes, at some point between the 2nd and the 7th of January. My view is that the word “normal”, whose definition has, in economic and broader terms, already been stretched a very long way indeed, might soon lose any realistic meaning. A situation in which the Fed is in the process of injecting at least $1 trillion of newly-created money into the system typifies the extent to which abnormality has already become the norm.
In these circumstances, my immediate aim is to produce a guide, comprehensive but succinct, to the surplus energy interpretation of the economy.
This will cover the energy basis of all economic activity, the critical role played by ECoE (the Energy Cost of Energy), and the true nature of money and credit as an aggregate claim on the output of the ‘real’ (energy) economy.
It will move on to discuss how SEEDS models, interprets and anticipates economic trends, and to set out an overview of where we are in energy-interpreted terms. It might also – if space permits – touch on what this tells us about the false dichotomy between environmental challenges and the customarily-misstated concept of “growth”.
What I aim to do here is to close out the year with some observations about where we are as we head into the 2020s.
The best place to start is with the deterioration in prosperity, and the simultaneous increase in debt, that have already destroyed the credibility of any ‘business as usual’ narrative in the Advanced Economies (AEs).
Starting with Japan back in 1997, and finally reaching Germany in 2018, the prosperity of the average Western person has hit a peak and turned downwards, not in a temporary way, but as part of a secular process which conventional economics cannot recognise, much less explain.
This process is now spreading to the emerging market (EM) economies, most of which can expect to see prior growth in prosperity per person go into reverse within the next three years. The signs of deceleration are already becoming apparent in big EM countries such as China and India.
Thus far, global average prosperity has been on a long plateau, with continuing progress in the EM economies largely offsetting deterioration in the West. Once decline starts in the EM group, though, the pace at which the average person Worldwide becomes poorer can be expected to accelerate.
If deteriorating prosperity is the first point worthy of emphasis, the second is that a relentlessly increasing Energy Cost of Energy (ECoE) is the fundamental cause of this impoverishment process. ECoE reflects that fact that, within any given quantity of energy accessed for use, a proportion is always consumed in the access process.
ECoE is a direct deduction from the aggregate quantity of energy available, which means that surplus (ex-ECoE) energy is the source of all economic activity other than the supply of energy itself.
In other words, prosperity is a function of surplus energy.
In the past, widening geographic reach, economies of scale and technological advance drove ECoEs downwards, to a low-point (of between 1% and 2%) in the immediate post-1945 decades. The subsequent rise in trend ECoEs has been driven by the fact that, with the benefits of reach and scale exhausted, depletion has now become the primary driver of ECoEs in the mature fossil fuels industries which continue to provide four-fifths of global energy supply. The role of technology has been re-cast as a process which can do no more than blunt the rate at which ECoEs are rising.
By 2000, when World trend ECoE had reached 4.5%, Advanced Economies were already starting to face an insurmountable obstacle to further growth. Prosperity turned down in Japan from 1997 (when ECoE there was 4.4%), and has been declining in America since 2000 (4.5%).
SEEDS studies demonstrate that prosperity in advanced Western countries turns down once ECoE enters a band between 3.5% and 5%. EM economies, by virtue of their lesser complexity, are less ECoE-sensitive, with prosperity going into reverse once ECoEs enter a range between 8% and 10%. Ominously, ECoE has now reached 8.2% in China, 10.0% in India and 8.1% in the EM countries as a group.
The key point about rising ECoEs is that there is nothing we can do about it. This in turn means that global prosperity has entered de-growth. The idea that we can somehow “decouple” economic activity from the use of energy is utter wishful thinking – not surprisingly, because the economy, after all, is an energy system.
This presents us with a clear choice between obfuscation and denial, on the one hand, and acceptance and accommodation, on the other. Our present position is one of ‘denial by default’, in that the decision-making process continues to be based on the false paradigm that ‘the economy is money’, and that energy is “just another input”.
This leads us to the third salient point, which is financial unsustainability.
Properly understood, money functions as a claim on the output of the ‘real’, energy-driven economy. Creating more monetary claims, without a corresponding increase in the goods and services against which these claims can be exercised, creates a gap which, in SEEDS terminology, is called “excess claims”.
Since these “excess” claims cannot, by definition, be honoured, then they must be destroyed. There are various ways in which this “claims destruction” can happen, but these mechanisms can loosely be divided into “hard” default (the repudiation of claims) or “soft” default (where claims are met, but in greatly devalued money).
These processes mean that “value destruction” has become an inevitability. This may involve waves of asset market crashes and defaults, or the creation (through reckless monetary behaviour) of hyperinflation.
The likelihood is that it’s going to involve a combination of both.
These issues take us to the fourth critical point, which is the threat to the environment. Let’s be clear that this threat extends far beyond the issue of climate change, into many other areas, which range from pollution and ecological damage to the dwindling availability of essentials such as water and food.
Conversion to renewable energy (RE) isn’t the solution to these problems, if by “solution” we mean “an alternative which can sustain our current level of prosperity”. RE, despite its many merits, isn’t going to replace the surplus energy that we’ve derived hitherto from fossil fuels. RE might well be part of the solution, but only if we take on board the inevitability of degrowth.
This brings me to my final point, which is choice. For well over two centuries we’ve been accustomed to an energy context which has been so favourable that it has given us the ability both to improve personal prosperity and to extend those benefits across a rapidly increasing population.
With this favourable context fading into the past, we have to find answers to questions that we’ve never had to ask ourselves until now.
The faculty of choice requires knowledge of the options, and this we cannot have whilst we persist in the delusion that “the economy is a financial system”. It isn’t, it never has been, and it never can be – but our ignorance about this fundamental point has been one of the many luxuries afforded to us by the largesse of fossil fuels.
This seems pretty depressing fare to put before readers at the start of the festive season. The compensating thought has to be that the connection between prosperity and happiness has always been a falsehood.
A lack of sufficiency can, and does, cause misery – but an excess of it has never been a guarantee of contentment.
In the coming days, Christians will recall with renewed force that Jesus was born in a humble stable. He went on to throw the money-changers out of the Temple, and to instruct people to lay up their treasure, not on Earth, but in Heaven. I hope it will be taken in the right spirit if I add that He never earned an MBA, or ran a hedge fund.
The single most important challenge that we face isn’t deteriorating prosperity, or the looming probability of a financial catastrophe. Rather, the great challenge is that of how to jettison the false notion that material wealth and happiness are coterminous.
‘Value’ may indeed be heading for mass destruction.
But values are indestructible.
@ Dr. Tim,
” I don’t see how ad revenues can grow, or indeed fail to shrink, with prosperity in decline.”
One variable you might be ignoring is population. If p/capita prosperity declines in a decade by 1 or 2%, but population grows by 2% along with GDP increasing in real $s, then marketing revenues could possibly increase. Just a thought…
The problem with this is that advertising is addressed primarily at our discretionary (‘want, but not need’) rather than at our total expenditures.
Good point about discretionary vs necessity spending, Tim. There are ads targeting foods and medicines, but they are not the majority.
Thanks. In the future we’ll buy just as much food, I suspect, but fewer gadgets, fewer cars and so on.
How business adapts to deteriorating prosperity is one of the trickier questions. I suspect that few have asked themselves this question yet. I’m planning to put together something on this, and sooner rather than later. I somehow don’t think that management consultancies, etc, have yet framed any advice on ‘how to prosper in a shrinking economy’. That’s a business opportunity for someone, I expect.
@Dr. Morgan and Steven Kurtz
Contrary to your statements about food being essential and thus not drawing much advertising, just take a look at Saturday morning TV and count the ads promoting sugar-oaties for the children.
In the US, we have legal advertising for drugs. And drug advertising is now an enormous business, with patients coming in to doctors demanding a prescription for drugs they saw advertised. The great majority of the drugs are not chemo for cancer patients or the specialized drugs needed for treating a heart attack. Just counting up the obesity drug market puts us in the billions. I believe one doctor recently put the market at 4 trillion…not sure if that is worldwide or only the US.
If we have a crash to 1900 standard of living, then it is plausible that chronic disease will almost disappear…and presumably the drugs with them. But back in the 1820s Americans were drinking gallons of whiskey per capita. Around 1830 there was a revival of religion and with it came more sobriety. But don’t underestimate human addictions. In the triangular trade of slaves from Africa to the Indies, sugar cane from the Indies to Boston, and then turned into rum and sold globally, you can see how the pyramid worked.
Advertising (and corporate strategy) is an area that we really do need to look at.
I take the point about food ads, though I wonder how much of that counts as “food basics” and how much is discretionary. This said, let’s not become ‘foodies’ here! (with so many broader economic and financial issues to consider).
Businesses are one of the most important constituent parts of the current system, and the outlook for businesses is, I think, harder to assess than for other components. We have a pretty good idea of what degrowth is going to mean for government, and also for finance. Business is rather more conjectural.
There is virtually zero advertising for basic food. All food advertising is for processed food. From potato chips to fast food restaurants.
Advertising may very well go not quite, but almost, the way of the Dodo.
It all comes down to how much discretionary spending power is left in people’s pockets after they have paid for food, housing and other essentials. Much discretionary spending is on so-called luxury items, which clearly fall under “wants” and not “needs”.
I for one, would not miss the total eradication of the perfume and “other smelly stuff” market.
After all, business is going to have to re-align not only with the needs of the people but also their ability to pay for stuff. In today’s economy which is awash with money, we can see how advertising plays a role, but in a future with less of everything, there will also be proportionately less Advertising.
I’m a little cautious on this, and am aware, given my dislike of advertising, of the risk of wishful thinking on my part over this.
If the market for a product starts to shrink, a firm can either (a) decrease advertising, in order to reduce costs, or (b) increase it, in pursuit of a larger share of a shrinking market. The industry will, of course, promote the latter response.
The end result, though, seems likelier to be (a). The old adage, that “a satisfied customer is the best advertisement”, might come back to the fore.
I’ll reiterate my point that businesses, in general, face even bigger challenges than governments from de-growth. Governments, denied the possibility of perpetual growth, at least have other objectives to promote. Businesses do not. Moreover, many of the changes that will affect business performance are outside its control (and no amount of lobbying can change degrowth back into growth).
It seems to me that the outlook for business is a topic that could usefully be discussed here.
Now you are talking my bag, Tim. I agree that some exchange of views about the effects of de growth on commerce and trade would be revealing and instructive.
Many years ago I got involved in a business game managed by a computer when in each round we entered parameters to see which company succeeded and which lost market share. The outcome was quite clear, the amount of funds allocated to advertising made the difference. The winner had spent the most on advertising.
I’m not sure if the same applies now because the 1970s used entirely different models but human nature remains constant nevertheless.
Under shrinking prosperity, some business models will become unviable. I alluded to the perfumes industry being a sector that we could easily do without. People will be looking for value for money in all things, and will be spending their money cautiously.
If prosperity falls rapidly, I agree. So far it is a slow drip in the developed countries, and in some developing countries it is still rising. The internet is providing much of the advertising, along with unpaid meme spreading. This by Ugo Bardi just appeared and fits the current topic:
English is not his first language. He does quite well here. Optimistic, though, which isn’t justified IMO given the downslope of required natural resources like potable water, pollinators, fish stocks, soils, non-renewable minerals incl. FFs…
I’d suggest caution about the gradual pace at which prosperity is deteriorating.
It’s true that, in broad terms, Western prosperity has been declining at rates of about 1% annually thus far.
But the rate of decline in the EMs is likely to be twice that.
When EM decline starts – essentially, from now – World prosperity will fall, and that’s when all sorts of accelerators could kick in. Essentially, we could face a rolling loss of critical mass.
We should expect past economies of scale to go into reverse. Utilization rates will fall below viability thresholds in a broadening range of activities. Supply chains will start to unravel (and so many things can’t be made, or maintained, if just 1% of the necessary components aren’t available).
By then, too, we’re likely to have seen asset markets crash, with associated disruption to flows of capital.
Belated Christmas wishes.
Advertising. The Ad free BBC is one reason why I think it should continue in some form or another.
Also regarding advertising when I pick up the brochure for what is now my home – back in 1999 – it showed my estate full of beautiful young people either embracing or sipping champagne.
I’ve never come across any of them!
A propos a certain well-known politician, a certain government minister once remarked to me that there is a lot of downside in “believing your own press releases”….
Thanks for the erudite posts this year. Always a welcome and grounding respite from the shrill of ever increasing human expectations. I think a rational debate about population growth and population stabilisation is now needed more than ever.
Thank you, Steve. Much appreciated. There’s far too much of the “shrill”, which the rest of us can only counter with reasoned arguments.
Population numbers are a huge issue which we’ve only ever skated across here. If I can pluck up the resolve, we might look at it this year.
Thanks for the link – interesting, and I can appreciate why you are interested in some of the issues we debate here.
Best wishes for 2020.
Advertising and the Shearing of the Lambs
Here is one example of the way scientists in service of the advertising industry can manipulate populations.
“Consider this disturbing study out of the University of Toronto: People were randomly assigned to purchase items from one of two online shopping sites, identical except the products were described as environmentally friendly on one of the sites. Then, in a supposedly unrelated task, they played a computer game and were told to pay themselves out of a provided envelope of money for each correct answer. They were told no one was watching and it was all on the honor system. Who do you think acted more honorably? In actuality, the experimenters really were watching them, tallying up the actual number of correct answers, how many the subjects claimed they had gotten correct, and how much money they subsequently took. Those randomized to purchase the green products were significantly more likely to lie, cheat, and steal. Ethical acts may license unethical behaviors, and it may only take a molehill of virtue to create a mountain of immorality.”
This is one example of the larger phenomenon of ‘licensing’. As in, “You deserve a break today…at McDonalds”. Just watching athletes perform on television may license a person to drink yet another beer…as if the person sitting in the chair has exercised enough to ‘earn’ the beer.
A well-meaning amateur, though they may hold multiple PhDs in hard sciences, is no match for a skilled advertiser. The example above may give a clue as to why politicians who fail to beat their wives and dogs may feel ‘licensed’ to kill people they do not know with drones.
We will step down Maslos Pyramid as soon as ECoE hits considerably! Thus, very soon!
Maybe not. Maslow’s hierarchy of needs assumes that you have to fulfill lower-level needs before moving up his ladder. But psychology, while validating the various needs, has rejected the hierarchy. One example is Viktor Frankl’s insight which came from studying behavior in concentration camps (which he survived). Contrary to Maslow, he found that those inmates who had turned on their fellow inmates (thus failing to fulfill Maslow’s mid-level social and higher-level actualization needs, and thus failing to have a meaning to their life except survival), but whose basic physiological needs were met, very often died early. Whereas, those inmates who decided to live as long as they could in order to bear witness to the atrocities (had framed their life as having meaning beyond the moment) often lived despite being worked and starved. I’m simplifying Frankl’s work here, certainly. He went on to found LogoTherapy which argues that striving to find meaning in life is the primary motivation in human behavior.
To bring this back around to this site’s focus. Under declining prosperity it likely will become progressively harder to fulfill Maslow’s lower-level needs. If we accept his hierarchy, then all other levels are unattainable, and our well-being suffers. That leads to dark prospects. But if we take the modern psychology interpretations, where all needs are valid but not in a hierarchical relationship, then we have a chance to derive well-being despite a decline in material prosperity.
I’d maybe go one step further and say that the very behaviors that need to be adopted under an energy descent (e.g., frugality, caring for one’s neighbors, being generative: treating life as a gift to be shared) contain their own rewards. And this is, perhaps, because they are challenging, not despite that fact.
So framed, people may respond to declining prosperity not because it is necessary (although it will certainly be that), but because our individual choices will become, once again, consequential. How we adapt will matter to those we love. In Frankl’s language, our behavior can have meaning that is tangible, immediate, and long-lasting.
Thank you so much Raymond for that link to logotherarpy. I have researched this and cannot understand why my tutors during my training missed this one! I trained in Integrative Counselling and qualified in 1997, I specialise in Humanistic Counselling and found it very effective in dealing with emotional disorders. Frankl’s work is a welcome addition to my studies.
This book has been very helpful to my clients and it appears to follow Frankl’s work:
Best wishes and Happy New Year.
While this feels good, I wonder about the scientific validity of Frankl’s work. Turning on peers under hardship can bring similar responses as it does in other social mammals. Deviants in packs or herds of animals are corrected, punished, ostracized, or killed. The group is the responsible unit. It is difficult to thrive as a loner. Free will is (at a minimum) vastly overrated, and some philosophers hold that it is an illusion. Galen Strawson is excellent on this.
El mar, Raymond, Peter
This is fascinating stuff, and an area clearly worth discussing further.
I am happy to engage, thank you Tim and all.
This documentary of Dr. Sapolsky’s work is very instructive. Sapolsky appears in the Peter Joseph Films
The study of the British Civil Servants is absolutely Hilarious as well as alarming.
there might be a link between rank and stress
I mean that’s the thing about stress I think you’ve got to look at it in both
acute terms and chronic terms I think I’ve been under chronic stress
in this organization simply because I’m a square peg in a round hole
Kevin Brooks is a government lawyer, his rank
level 7 means he has little seniority in his department
Sapolsky’s lectures available on Youtube are very well worth watching too.
I believe that ‘Level 7’ was the lowest floor of the government nuclear shelter described in a fiction book of the same name.in the 1960s
North Carolina per capita consumption of whiskey
5 gallons in 1820. down to 2 gallons by 1850
Second act passed by the new US Congress was a tariff on Jamaican rum. The goal was to shift consumption to American corn whiskey. A traveller from Europe remarked that families started drinking whiskey at breakfast and continued all day.
How do you monetize a native in Africa who is producing no GDP? Make him a slave and force him to grow sugar cane from which rum can be produced. A gradient attracts an entrepreneur. How do you monetize land on the Western frontier in the US? You grow corn and distill it into whiskey which is relatively easy to transport to the eastern seaboard. How do you monetize a Chinese peasant? You have them grow and process opium for you which you can sell to Nantucket traders, who will make it fashionable in the sea-faring towns.
Food accounts for half of US CO2 emissions, according to the Drawdown project. One cannot deal with CO2 without dealing with food (the overwhelming amount of which is processed), and if one’s goal is energy production rather than energy sinks, one cannot deal with that in the absence of deep reformation of the food system.
CO2 from food supply largely mirrors energy use, I imagine.
Thus it would embrace:
– the sourcing and delivery of inputs (such as nitrogen)
– planting, harvesting, irrigation
– infrastructure (buildings, cement)
– supply of equipment used in all of the above.
My observations are that (a) this is hugely energy-intensive, and (b) I can’t see much scope for RE replacing FFs in many of these areas.
Here’s a question (rather, two questions) on which issues seem far from clear.
First, how profitable is food supply, with or without profits in indirect parts of the supply chain?
Second, how far is the profitability (or viability) of food supply dependent on subsidies?
“how profitable is the food supply?”
Are you interested in money or in energy? A Martian might assume that we grow food in order to gain energy. But at the present time, we use fossil fuel energy to grow food. If we are in a monetary adventurism scenario, then hungry people will pay whatever money the central bank has put in their pocket for food..or loot whatever they can find. I’ll give you 4 scenarios:
First, we revert back to peasants living entirely off photosynthesis and the warmth from the sun and the cooling effect of nighttime radiation to the sky. But we retain a lot of the scientific knowledge that the peasants never knew about explicitly. Gardening plus grain and nut horticulture can be profitable and the grains and nuts can be shipped by water. With a very good government, we might have land distribution routes much as the Romans built roads. There will be very limited use of grains to feed animals. Most everyone will have access to wood, which will be used sparingly. Toilet bowl water will be frozen on January mornings…or else only privies will be available.
Second, we retain some ability to manufacture climate modification devices such as insulation and shade cloth plus we have water infrastructure such as contours and dams for storage. This makes everything much easier, since we can more closely approximate our harvests to our bellies. Just because there is no sun in January doesn’t mean that we wouldn’t like to eat in January. The Plains Indians knew about ‘hunger moons’. Some other tribes were much better at storage than the Plains Indians.
Third, we retain some supply chains capable of provisioning sophisticated manufacturing. It’s just that we have to strictly prioritize where we spend what we can build. This enables what we have thought of as ‘women’s liberation’. Women do not have to spend all day, every day, gathering firewood and water and cooking.
Fourth, population crashes to 500 million or so, the land begins to recuperate, and we live as hunters and gatherers. Life is easy…’the original leisure society’ identified by Marshall Sahlins. But we won’t start with vast herds of wild herbivores, so the transition could be painful indeed.
Does that begin to answer your questions?
I wonder if we’ll get a chance to reform the food system (or any other part of the techno-industrial system). “Reform” seems to me to require time and choice. Not sure how much of either we still have. Depends on how quickly things unravel, and whether any descent is punctuated with pauses.
Others are focusing on food and energy descent. They’d benefit from learning about ECoE. But do we need repeat their work here?
A few links on food/energy nexus:
No, I do not think we need to repeat their work here. What I do believe is that a productive conversation, at this point in our trajectory, needs to be in terms of some fairly well articulated scenarios. There are so many different opinions about trajectories that it is difficult to have a productive conversation. For example, Guy McPherson will insist that the crash of the financial system and subsequently the real economy will immediately warm the planet by 1 degree centigrade because we stop putting particulates into the air which result from industrial activity. The 2 degrees will make agriculture impossible in most places.
I’m not trying to promote that particular scenario, but I suggest that it wouldn’t be very productive to try to have a conversation with Guy about trying to do the right thing ‘until the 7th Generation’.
Similarly, the UN recently came out with a report saying that we have to double the production of food calories in the next few decades. The underlying scenario is that the whole world will need to eat like Americans. I don’t want to even talk about how stupid I think that is. But I don’t think one can really have a productive discussion without examining the scenario that the UN put forward as reasonable…but with probably very little consideration of alternatives.
One could also try to limit the conversation to the financial realm. Which is OK as far as it goes. But I don’t think it goes very far. The US has survived financial follies since before it was a country. What makes this time any different from all the others? And if the scenario is that energy availability was rising in all those previous panics, but will be declining during and forever after the next panic, then we need to put some sort of scenario together which marks out the boundaries of what we can do to reasonably respond…as best we can anticipate…and recognizing that Yogi Berra was right about forecasting.
“And if the scenario is that energy availability was rising in all those previous panics, but will be declining during and forever after the next panic, then we need to put some sort of scenario together which marks out the boundaries of what we can do to reasonably respond…as best we can anticipate…”
While nobody I’m aware of thinks fusion will be developed (this half century) into real world scale application, it might happen. If so, the planet will likely be destroyed more rapidly by our throughput waste/entropy. Biodiversity would take heavier losses. This is just another possible scenario.
Good point on exploring scenarios. To be clear, my interest is on crafting a “provisioning economy” (taken from Read & Alexander (2019) This Civilization is Finished. p. 39), which is a food-centric notion.
I was suggesting (poorly I think) that it’s vital to first work out what are our actual options. Knowing energy-based biophysical limits would allow quickly rejecting ridiculous scenarios (e.g., the UN food idea: ever-increasing food on a finite planet), and not getting distracted by those requiring a Pollyanna mindset.
The trajectory seems clear enough: an energy descent. But its changing slope (e.g., speed, acceleration, lack of punctuation) could make some scenarios moot. If given enough time to respond (and if all else stays the same, a big “if”) then maybe a scenario that well feeds a bigger population is worth pursuing? Likewise Steve’s comments on fusion: enough time and, importantly, enough thought about unintended effects of success (i.e., more energy might just speed up the loss of biodiversity, depletion of fossil aquifers, destruction of soil fertility) and then, maybe, fusion is worth a look.
But if we’re accelerating toward an energy cliff, then some options leave the table. It would be nice to know what are the features of a scenario that would cause it to leave the table sooner rather than later. That would provide clarity for future decision-making and planning efforts.
Personally, I come here to better understand ECoE. As Tim says, he discusses and analyzes the economy as an energy system, with energy connecting that economy to the environment. That’s a huge task. More so since so few people buy into the premise it contains. And the work on it isn’t done yet.
The answer I keep coming up with, in terms of food, is spending our fossil fuels to grow our ability to use photosynthesis as the primary ingredient in food production and cooking. Subsidiary considerations are sunshine for drying food for preservation and things like the ‘cool cabinet’ that David Holmgren built into their house. I hope we have season extension stuff so that we can eat more fresh food and that drying and canning are not the labor intensive, but essential, jobs they used to be.
I would also include human capital: gardening and farming skill and knowledge of nutrition and cooking. It seems to me that these are basics which will serve us well in a variety of scenarios.
More speculative is equipping a kitchen. Are you familiar with Wong Kar Wai’s movie In The Mood For Love. One of the plot points is when the businessman from Hong Kong goes to Japan and brings back an electric rice cooker. A rice cooker with a timer on it can cook a vast array of meals, and have them waiting for you when you wake up in the morning or get home from work. I would hate for us to go back to the notion that the wife should get up an hour early to get breakfast on the table. That all depends, I think, on supply chains. Will we have them supplying the machine and the circuitry for the controls? As the physicist in San Diego who wrote the blog Do The Math demonstrated to my satisfaction, making electricity at home is no picnic, and complex supply chains are fragile.
Have a happy new year….Don Stewart
Frankl, et al
See this very current post by the Doctors Sherzai (who treat Alzheimers and other neurological disorders)
They make the point that in a long-lasting, fairly large scale study of nuns, the nuns who kept a diary filled with purposeful activities had brains which resembled nuns who did not seem to have purpose in terms of tangles and tau and so forth, but they didn’t have Alzheimer’s. The Sherzai’s say that retirement is deadly, if people just devolve into a stress free life. The brain needs to be stressed…trying to figure out how to achieve a complex purpose. When the brain is stressed, it grows new connections. It is the new connections which the nuns who had purpose were growing that prevented Alzheimer’s. In contrast to simple tasks such as working crossword puzzles or playing Tetris, which do not have the same beneficial effects.
They make the point that they saw lots of deadly stress in Bethesda, MD and now in Redondo Beach, CA, where the people are exceedingly rich by global standards. On their assignment in a very poor place, they saw lives rich in personal relationships and the good kind of stress.
PS. I asked my children if I should have given them more white-board lectures when they were young. Since this is a family-oriented site, I won’t repeat their answers. People from the Indian sub-continent are, I think, aliens.
All very good thank you. I was taught that there are mainly two kinds of stress: beneficial stress which grows brain cells as you say and toxic stress that leads to emotional disorders. Umm, lots to learn, I learn something new every day:
I have used this to good effect during counselling sessions:
Click to access Just_for_today.pdf
Interesting article regarding an MIT program run in 1973 predictions bleak future for us :
MIT: The End of the World
It’s not just in the world of science fiction where life on Earth tends to go rapidly downhill in the 2020s. As far back as 1973, the Massachusetts Institute of Technology developed one of the first computer programs to model global sustainability and concluded that human civilization as we know it would all come crashing down around 2040.
As this contemporary report shows, the same computer model predicted that 2020 would mark the beginning of the end, as the quality of life started to decline dramatically. Despite the charmingly clunky 1970s graphics, the doom-laden data that is being crunched here now seems even more harrowing nearly five decades later:
They could be spot on. Clever chaps at MIT.
Did you see that on the BBC website ? This program is obviously what resulted in what is known as the Club of Rome report and the Limits to Growth book – a best-seller. You must read the 2012 update edition.
Yes “we knew” – since 1972-1973. At that time, Donella Meadows (r.i.p.) imagined the “sustainable development” scenario, where we would have used the still available easy to extract energy, the not yet too depleted and polluted resources to find our way.
“We chose” instead the path of the “business as usual” scenario. Now it’s too late.
Hi I don’t think it was the BBC website – it came up randomly after I typed something like 1950s predictions of the future into Google.
There was also a video showing an ancient early 70s computer displaying a gloomy looking graph projection of where we were headed.
Perhaps of interest another link showed what may have been the first televised computer graphics from 1951.
Of course it was a military computer and it displayed the trajectory of a missile on an oscilloscope once certain parameters had been fed in.
A senior army official looked on astounded.
That brings to mind the trials of the Sea Slug missile in the 1950s – it took off exponentially, and came down on an (unoccupied) farm house in Wales. So far as I know, it was the only confirmed hit by a Sea Slug SAM.
Another UK winner. I don’t think we had much luck with early missiles and rockets.
Seacat was decent of its generation, Sea Wolf a world-beater, and Sea Dart very good. But Sea Slug was poor, quite apart from being a beam-rider. It also required a very large ship to be built around it. Oddly, they took a twin 4.5 off four ‘Counties’ to fit Exocet, but left Sea Slug sitting there occupying a lot of space.
But I digress!
I probably had the Black Arrow rocket in mind which was ditched after only a few launches.
I guess British pride (and only pride) kept the Sea slug operational for so long)
Sorry back to economics – yes it is too late.
Perhaps if the World population had stabilized at around 3bn we would be ok.
I’ll look the book up
Interesting, I think.
Some posted a link to Martenson’s post of Dave Collum’s Year in Review Part 2 yesterday. He thinks global warming is a diversion from myriad problems that we have chances to address. I agree with him. Humans will not voluntarily give up energy slaves, and technology is unlikely to eliminate whatever human drivers are contributing to warming.
“I can’t see much scope for RE replacing FFs in many of these areas.”
Trying to parse this situation requires, I think, building some scenarios. I know you resist becoming a ‘foodie’, but bear with me for a few minutes:
*An instant pot can cook stews and soups from whatever you have on hand in 20 minutes using 1000 peak watts. An electric oven uses 3-4000 watts. A slow cooker uses less than 500 watts. So we need a scenario describing peak wattage, whether from rooftop or a utility.
*Will the industrial economy be able to continue to build any of those pieces of infrastructure? All of them are transportation intensive, requiring the collecting of raw materials, processing those materials, manufacturing the product, and then distributing the products globally. Will supply chains continue to function?
*If the supply chains stop working, then ‘primitive’ cooking will be required. (Humans diverged from our ape cousins in that we lost yards of gut and are now dependent on cooked food.). Wood fired ovens and stoves will be necessary. How complex the ovens and stoves will be depends on the existence of at least rudimentary supply chains.
*The supply of wood for cooking is likely not large enough to support anywhere near 8 billion people.
*Local food is probably most possible in either a truly rural economy or else in a Retro-Suburban economy as envisioned by David Holmgren. We have plenty of land…but we are not using it to produce essential foodstuffs. A re-ruralization as envisioned by any number of people would likely be required as mega-cities become unlivable.
One the other hand:
*It may be that fossil fuels will decline gradually and RE will ramp up so that the ECoE stabilizes at perhaps 15 percent. Transportation fuels get relatively more expensive, but are not critically short. We can still make steel and plastic and copper wires.
*In such a scenario, the focus will be on eliminating waste, rather than trying to transition to an economy reminiscent of the Middle Ages.
*Solutions such as The Healthspan Solution, put forward by Hever and Cronise, could drastically cut the cost of food and the cost of healthcare.
check the blog
*An Instant Pot is ideal as the kitchen utensil of choice for Healthspan style cooking. Combine it with a ‘dormitory’ refrigerator of modest size and we have an elegant solution to many problems.
I think it is essential to think in terms of scenarios…else we just end up arguing about things we may agree on and just be confusing one scenario with another. If you can put together a base case scenario, then I think you would move the conversation forward.
Back to Niels Bohr and Yogi Berra… “Prediction is very difficult, especially about the future.”
Got to love Yogi!
“I’m not buying my kids an encyclopaedia – let them walk to school, like I did”
(To his wife) “You’ve taken the kids to see Doctor Zhivago? What’s the matter with them now?!”
“When you get to a fork in the road, take it”
“Nobody goes there [that restaurant] any more – it’s too crowded”
Two more scenarios.
Fifth, China and Korea 120 years ago. F.H. King from Wisconsin went to Asia to try to find out how they were able to farm land for centuries. The US method was to farm land for a few years until it was exhausted and then abandon it and move west. King described societies which wasted absolutely nothing. There was a big difference between the first son and any additional sons. The first son inherited the farm, while the remaining sons had to go out into the world as day laborers, whose life expectancy was short. The disposable sons might spend the day digging mud out of the rivers to replenish the farmland in the coastal plain. King’s book is titled Farmers of Forty Centuries, and can be found as a scanned PDF on the internet.
Sixth, Edo Japan. This is interesting because Edo existed as a non-fossil fuel using relatively sophisticated society up until Perry sailed into the Harbor. Azby Brown, an American living and working in Japan, wrote this excellent book:
Just Enough: Lessons in Living Green from Traditional Japan
The Edo regime had taken control of a civil-war riven society with degraded ecosystem and restored relative peace and prosperity of a sort. The population of Japan approximately tripled and then leveled off. 90 percent of the people were farmers. Again, junior sons were definitely second class citizens, and most would never have a wife. If their older brother died, they might inherit his wife. And, like China, absolutely nothing was wasted. Many Samurai had an occupation of mending paper umbrellas. Forests had been restored and the penalty for cutting down a tree without a permit was death…but gathering downed limbs for firewood was legal.
Urban people did not have kitchens…they ate at neighborhood fast food places…except that the food was nothing like McDonalds. The communal dining makes a lot of difference in terms of investment required.
Here are two examples of what can be accomplished with some basic capabilities that we currently have. You will see that these projects were constructed with an idea toward abundance from economy of means…not reversion to the medieval. The first is Su Dennet and David Holmgren at home in Australia:
The second is a project in the terrible desert in the Dead Sea valley in Jordan:
Purists will object about the industrial materials and the excavators which were undoubtedly used. But the end result is probably a fossil fuel use about 15 percent that of the average. So these people are living modern lives but in a very different way than most modern people. These ideas first began to be talked about 50 and more years ago, when the prospect for depletion of fossil fuels was way off in the future. Well…now we may be too close to that event to actually have the time and resources to do what is necessary. In fact, we destroyed some of what had already been built. Some terracing which existed when I was a child was leveled with laser precision in order to facilitate fossil fuel powered harvesting and plowing…assuming that we would never have need of gravity again.
In the future, dissent is going to be less and less tolerated. We have a special lab, headed by the team of Swedish scientists with Greta at the helm: they are going to prove that Dissent pollutes the atmosphere eighty-seven times more than Obedience. So more and more dissenters will be be captured and recycled into into progressive people of the future, the ones who internalize the latest PC dogmas, embrace all neoliberal state policies, but who – in reward for their model behavior – are allowed to violently protest Evil Trump every week-end. That’s our model citizen of the future: a pussyhatter who pays taxes, supports military interventions, and recycles and consume his own compost after it’s been subjected to thermo-treatment at the local Whole Foods store. And, I believe our hard work at creating such a creature is already paying off!
However, the type to which you refer seems to be a plant requiring rather rarefied conditions – and might be very sensitive to the changes brought about by degrowth.
An antidote might be to read H.E. Bates’ introduction to his My Uncle Silas. I particularly like how Silas always wore his sprig of oak-leaves in commemoration of Charles II’s escape (after, I think, the Battle of Worcester).
Many thanks for your articles throughout the year.
I would be very interested in one or more articles on how de-growth will affect businesses.
Best wishes to all for 2020
Thanks Jonny, much appreciated.
The outlook for business in degrowth is high on my list for 2020 – the more I ponder it, the more vexed it looks.
There’s no business in degrowth. That’s why we see CB balances grow and the push for “FStMMT”
Fiscal Stimulus through MMT.
As soon as the narrative changes, the world changes.
I wish you all a healthy 2020 and beyond.
James Kunstler has a very droll and prescient take on 2020 – it will no doubt resonate with many on this forum: https://kunstler.com/clusterfuck-nation/forecast-2020-whirling-and-swirlin/
Happy New Year to you all!
Brilliant article, thanks for the link.
In fact, it’s extraordinarily good, so much so that I warmly recommend it to everyone.
Tim, I wrote to Jim a little while ago to recommend talking to you on his podcast.
He said he found your work very interesting. Hopefully he will make it happen if you are interested.
Thanks. I read his articles from time to time, and always like them, but this piece is extraordinarily good, in both content and style. I would certainly be interested in discussing things with him.
To select just one sentence, here is the kernel of the economic issue:
“Eventually, either asset prices fall (perhaps crash), or the increasingly desperate measures needed to prop them up will degrade the value of money itself”.
This is something that we’ve discussed here before, and are sure to return to again. In this ‘either/or’ situation, degrading the value of money itself would be a far worse outcome than letting market prices fall.
Let’s use market-speak here and call a fall or crash “a correction” (from “an over-bought position”).
Mr Trump and the Fed, whilst they mightn’t agree on much else, do both seem to see the prevention of a correction as a very high priority. I cannot agree with that, because the medicine (huge liquidity creation) looks worse than the condition (a correction, which in some ways is no more than a reset).
I can see why Mr Trump wouldn’t want a correction, politically. But I don’t understand why the Fed is so worried about it. Likewise, though, I cannot understand why the Fed hasn’t deflated the asset bubble, long before now, by “taking away the punchbowl”.
A frightening set of possibilities but the fact that he wants to sell us his latest book gives me hope that he still expects – at least some of us – to still have some purchasing power in 2020
Nothing pays for itself, and very few books about economics make much money. Some use “premium” content and subscriptions, and others use advertising.
I don’t use either. I can’t imagine myself ever having advertising on here (!), and “premium” content would only make sense if it was (a) of commercial value to specialists, but also (b) not something that that readers would miss out from not having.
What do you make of this:
The reference to an “extended pamphlet/book” actually refers to a research report, Dangerous Exponentials (June 2010), from which this is an extract (page 5):
“From time to time, most of us must have puzzled over a gift suitable for a friend or a relative who works in the financial markets. One obvious choice would be Niall Ferguson’s magisterial history of finance.
“But our top selection would not be a book, but, rather, a DVD produced by Chris Martenson. Also available for viewing on-line – and intended for publication at a later date – Crash Course presents an outside-the-box take on what the future might look like. If Mr Martenson’s slant on “the three Es” – the economy, energy and the environment – is on target, the world of the near future is going to bear very little resemblance to the world as we know it today”.
I have to say that this, followed by at least twenty references later in the report, sounds, to me, like attribution.
I checked the research report (available online). I concur with Tim that it adequately makes attribution to Chris Martenson’s work. In fact, if grading it as a term paper, it might mention Chris’s work a bit too often (not a criticism, just an observation). But its overall style is typical of research reports. It well presents and attributes Chris’s work for the reader.
Maybe Chris was looking for an academic citation, or a link to his webpage? We’d never do that form of referencing in the research reports that I’ve helped to prepare. We kept that info “in house” as a way of maintaining our Q&E reputation (helping with “future business development).
In contrast, the book “Life After Growth” does have academically-formatted endnotes. They cite, among others, Hall, Cleveland, Hirsch, and Murphy (i.e., Dave Murphy’s mentioned in endnote #10 on p. 72).
I think that Tim did a superb job of getting the work of these academic researchers a much wider audience.
Fair enough, Tim, at least with regard to the ‘extended pamphlet/book’ ‘research report’, but what about the other ostensible issue with Dave Murphy (and publisher) and with reference to Chris’ passage, ‘My work too, as well as others.’?
Let me try to clarify this for you.
The research report (2010) brought Chris’s work to a new audience. To the best of my knowledge (though I’m open to correction), this was the first time that the energy economics interpretation had been endorsed by any leading financial firm (I was Head of Research at Tullett Prebon at the time).
The book, as first published (2013), did not include all of the footnotes and acknowledgements that are in it now. The reason for this was that I did not know what should be attributed to whom. When Charles Hall brought this to my attention, it was my decision to pull it, immediately, and reissue it after making changes discussed with him.
If you look back to a blog article here in October, you’ll find this passage:
“This idea [that the economy is an energy system] is by no means a new one and, though I’d prefer not to particularize, it’s been pioneered by some truly brilliant people. If those of us who base our interpretations on the energy-economics paradigm can see a long way into the future, it’s because we’re “standing on the shoulders of giants”.”
Thanks for the elaboration, guys.
It is hoped that Chris and others reading it may appreciate it as well.
I’ve always tried to be clear that we’re building on the foundations laid by some truly inspired people. I’ve no hesitation in describing EROI, in particular, as the critical insight into how the economy works – and, if we’re to crack the environment/economy conundrum, EROI will be the key piece of knowledge that enables us to do so.
I would just add that, if I had a clear, agreed list of ‘who contributed what’, I’d be happy to include it here.
Tim: Not sure if this is a clear and agreed upon list of who did what when with regard to EROEI. But it’s current and does a nice review of the history.
R. E. Melgar-Melgar & C. A.S. Hall (2020) Why ecological economics needs to return to its roots: The biophysical foundation of socio-economic systems. Ecological Economics, 169, March 2020, 106567.
Thank you, extremely helpful, and to be recommended to anyone interested in the background to the study of the economy as an energy system.
This is particularly helpful at this moment, as I’m putting together my Brief Guide, which might be a good place for acknowledgements.
For present purposes, might it be a permissible simplification to say that ‘Charles Hall, building on the work of Howard Odum, developed and named the concept of EROI/EROEI’, adding that ‘notable contributors have included Cutler Cleveland and Dave Murphy’?
I believe – though I’ve not found this in the document, as yet – that Euan Mearns created the “cliff chart” portrayal of EROI – am I right?
Perhaps you could run this by Charlie Hall.
“For present purposes, might it be a permissible simplification to say that ‘Charles Hall, building on the work of Howard Odum, developed and named the concept of EROI/EROEI’, adding that ‘notable contributors have included Cutler Cleveland and Dave Murphy’?
I believe – though I’ve not found this in the document, as yet – that Euan Mearns created the “cliff chart” portrayal of EROI – am I right?”
Thanks, good idea. I was corresponding with Charlie just before Christmas.
Full Story of the energy CLiff chart here in Euans own words.
The Net Energy Cliff
Many years ago during a late night blogging session on The Oil Drum, and following a post by Nate Hagens, I came up with a way of plotting ERoEI that for many provided an instantaneous understanding of its importance. The graph has become known as the net energy cliff, following nomenclature of Nate and others.
Figure 1 The Net Energy Cliff shows how with declining ERoEI society must commit ever larger amounts of available energy to energy gathering activities. Below ERoEI = 5 to 7 such large numbers of people would be working for the energy industries that there would not be enough people left to fill all the other positions our current altruistic society offers.
The graph plots net energy as a % of ERoEI and shows how energy for society (in blue) varies with ERoEI. In red is the balance being the energy used to gather energy.
I do believe that Euan Mearns developed the “cliff diagram.” He’s written the following (from euanmearns.com/eroei-for-beginners):
“Many years ago during a late night blogging session on The Oil Drum, and following a post by Nate Hagens, I came up with a way of plotting ERoEI that for many provided an instantaneous understanding of its importance. The graph has become known as the net energy cliff, following nomenclature of Nate and others.”
Thanks, most helpful, and you are obviously very well informed.
I agree with Steve about asking Charlie Hall. Although, as with any of these energy/economy/environment issues, “the order of discovery” will always be open to interpretation. My own approach steps back from EROI/EROEI/ECoE and looks at the systems approach as preceding any specific application area.
Of course, the systems approach has it’s own problem of who to cite. But Dana Meadows is who I use for environmental/ecological issues. Certainly the Limits-to-growth is a starting point. Although, you could precede that with her mentor’s work at MIT: Jay Forrester, the founder of system dynamics.
A very readable introduction is: Meadows, D.H. (2008) Thinking in Systems: A Primer. Chelsea Green Publishing, White River junction.
Thanks, again very helpful.
I believe that much of this work originated in what I might, loosely, call environmental sciences. My background, on the other hand, is in finance and economics.
Excellent review. I’m just a dilettante in the field, but have read some of the history. I recall Lotka being mentioned before Odum, whom I met in 2000 in Toronto when I presented my paper on over/optimum population. There were many who built on their work. I learned a lot from Bill Rees in the late 90s. But this is about more than just energy to me; it is whole-system analysis.
Well, it’s because of your background in finance and economics (and ECoE) that the work of environmental systems science may finally have a broad policy impact. Certainly, in understanding the mess we’re in; maybe in helping us out of the mess we’re in.
That’s very kind of you, though I’m not sure about what impact I, or we, can have. Looking, albeit briefly and as a non-scientist, at the sources of some of the ideas which have led us to where we are now is very humbling. Economics may or may not be “gloomy”, but it certainly isn’t a “science”. What we’re following on from, on the other hand, is, and most impressively so.
My much more modest aim is to use these principles, and to develop some techniques, which help translate this thinking into the ‘field of debate’ which, whether we like it or not, is a debate conducted in financial language.
For the year ahead, I think we need to start with a (reasonably) Brief Guide to how SEE works. I’m planning to look at what I might call ‘constituencies’ here. One of these is government, and another is business, both of which face unprecedented challenges if the degrowth analysis is correct. Finance itself faces challenges every bit as big, and it, too, is entering (rather, has already entered) uncharted territory. We’ve already examined what this approach might tell us about environmental issues, but we need to keep doing this. Additionally, it might be a good idea to look at individual country or regional economies, perhaps providing supplementary data on these.
I always appreciate constructive input, of which there is so much here, and will try to respond to areas which readers think important.
on January 2, 2020 at 12:28 pm said:
In the past century, the global economy has experienced un-
precedented growth largely due to the abundance of cheap fossil en-
ergy. However, the obsession with GDP growth since the 1950s has led
to unsustainable policies that are overwhelming the natural capacity of
the planet to absorb its waste outputs. Max-Neef (1995) provided em-
pirical evidence about the threshold hypothesis to explain that there is a
limit where economic growth does not increase the quality of life and in
fact it can decrease it. In the face of uneconomic growth, some are
calling for economic degrowth by rethinking our consumption patterns
and the need to downscale our economies (Kallis et al., 2012; D’Alisa
et al., 2014).
More Max Neef Here.
Click to access 6360154.pdf
Exchange rates is one thing another is actually positive Interest Rates without Demurrage.
The Work of Magrit Kennedy building on that of Helmuth Kreutz is really the last Taboo of Financialised conceptions of political Economy but a Stable Unit of account defined by a falsifiable measure is key.
Positive Interest Rates are the greatest Driver of the Growth imperative, not Population Growth, The Elitist habit of always blaming the victim is every present in Woke Progressive PC circles.
Drilling into debt is another piece of the evidential jigsaw that shows that Debt/Credit is a cause of problems and not a solution to them, the basic fault in their design is Positive Interest rate that is usury.
If this blog still exists in 2030 I wonder what we’ll be looking back on:
A decade of gradual deterioration of living standards.
A financial crash.
Massive destruction of the World’s eco system leading to mass famine and water shortages .
Perhaps a mixture of all three.
Let’s see + I’m setting a reminder for 1st of January 2030 referencing this post.
None of the above, the Fed has our backs and the ‘turn’ passed quietly into the night. All is well on the Repo front so we can look forward to a stunning year of growth and prosperity!
It wasn’t the expected crisis though, so far so good; the witching hour has passed: :
A Happy New Year to all in this marvellous university of life; Thanks Tim for hosting an amazing receptacle of learning, knowledge and wisdom.
At the moment I’m not thinking beyond 2020, but I’m sure there’s a great deal to discuss.
I think we can take a financial crash, eventually, as a given, because the financial system has been inflated to a size far exceeding the underlying economy. It’s not the crash itself that concerns me so much as what might be done in an ultimately-futile effort to prevent it. It seems to me a tragedy that asset prices have been allowed to rise to such vertiginous levels.
As prosperity erodes, it seems likely that ‘bread and butter’ economic issues will rise up the political agenda, reframing the debate.
Happy New Year one and all!
“As prosperity erodes, it seems likely that ‘bread and butter’ economic issues will rise up the political agenda, reframing the debate.”
i wonder if this will happen. As times get harder power structures deflect attention to avoid the ascription of blame to them. I think it’s more likely that we’ll get increasing bellicosity; increased xenophobia and more culture wars as distraction techniques. Elites only have a right to power if they are competent; if they are not they forfeit that right and therefore they must blame something or someone else if things go badly. Of course this won’t help matters but helping matters isn’t really the point: survival is.
Thanks Bob, and Happy New Year to you too.
If I’m perhaps slightly more optimistic, it’s because I believe that economic growth hasn’t been a wholly unmixed blessing. It has had tendencies towards dehumanisation.
As for the elites, I’m inclined to wonder if they’re not – as they might think – climbing ever higher up Jack’s pantomime beanstalk to the skies, but at the top of a tree which is swaying in the wind, and don’t know how to climb back down. If a ladder can be provided, perhaps it should be?
Tad Patzek Class in Saudi
Tad’s current writing in his blog Life Itself may interest some. Here is an excerpt from a Saudi student’s essay:
“This course made me realize that everything is connected to everything and that my present actions will affect people in other countries and will affect the subsequent generations.
Thus, in my opinion, successful teaching is not about delivering knowledge, but it is about the way of delivering the knowledge. In order to make change, school teachers must be trained to simplify the message in a way that makes it stick in the younger generation’s minds, rather than delivering random facts about the environment and global warming.”
Another excerpt from an engineering student:
“In this course, I learned about the embodied energy and I realized that it would require around 40-80% of proven oil reserves to replace oil and coal energy by solar and wind energy. However, solar cells and wind turbines would last for 30 years at best, then what? Renewable energy is the delicious and the “reassuring LIE” that people would like to hear instead of the “inconvenient TRUTH.” While it is obvious (to a rational person) that fossil fuels are limited and finite, our consumption behaviors toward Earth and the environment made things that once considered “Infinite” to be “Finite” such as clean air. CO2 emissions and their impact was stressed in this course. ”
A final note from my personal experience, taking off from the story of the donkeys and remembering Su Dennet’s reflections on her goats. Two of us were visiting the student farm at North Carolina State. It borders a marsh which is a public park with a long wooden bridge across some open water. There were hundreds of water birds. People fishing off the bridge, etc. A parent with two boys in tow, both buried in their phones. The parent approaches me and asks if there is any place she can go with her bored boys.
Check out Tad’s two blog pieces.
I have now officially made it to 2020. In college, I never thought I would actually make it to 1984, which some of you may remember as the fictional book describing a dystopian world. So happy new year to all.
Happy New Year (dreadfully flat, blank and grey here in Eastern England) to everyone, but above all our host for the unrelenting stream – it seems – of stimulating and well-reasoned articles.
If inclined to be gloomy, think of the newspaper headline writer who recently came up with:
‘Now For The Roaring Twenties!’
It’s hard to conceive of someone so sublimely ignorant of what came after the Roaring decade, and still more so of the position we actually find ourselves in.
Whatever transpires in 2020 will clearly take most people by surprise, which is perhaps merciful.
And remember, if you feel at all pessimistic, it’s only because a RUSSIAN BOT got to you (according to the BBC) ……
Thank you, Xabier!
The “roaring twenties” didn’t end well!
Question : With our massive debt and little hope of real organic growth could our somewhat savage cuts to social services and the Police have been avoided.
Raising taxes for the rich and Middle classes?
I take it that your question is about the UK, though this is part of a pan-Western issue. The answer, as I see it, is relatively straightforward (though the politics of it are anything but).
First of all, deteriorating prosperity means that the overall tax base is shrinking. The impoverishment process is “bottom up”, in that the poorest feel the pain first. Taxes are already pressing most heavily on the poorest, and this pressure, as well as increasing, is rising up the income curve. Those who say that the “middle class” are at risk are right, though not necessarily for the right reasons.
There are three main implications from this.
First, taxes will need to be more progressive. The requirements here are that flat taxes (where the same amount is paid by all, like parking charges, passports and that sort of thing – and, in the UK, the BBC licence fee!), and taxes not linked to income (sales taxes, like VAT) are most in need of reform, meaning reduction.
Second, it is becoming imperative that “the rich” pay more. This isn’t a matter simply of equity, but of practicality. People whose prosperity erodes towards survival level can’t afford to pay tax. We’re seeing this effect in France. The balance between asset values and incomes has tilted, making at least a philosophical case for wealth taxes, and higher taxation of capital gains, and, perhaps, inheritance . Wealth taxes are pretty commonplace in the Euro Area, typically something like 1% on assets in excess of EUR 1 million.
Third, governments are still going to have to spend less. That’s what decreasing prosperity means. Historically, governments have been poor at spotting the necessity to reduce the tax burden on ‘ordinary’ people in economic hard times. Unfortunately, too, politicians are still guided by GDP, seemingly unaware that it has become a worsening overstatement of public prosperity.
‘How can people be poorer, if GDP per capita has risen?’ is something we’re likely to hear. The answers include ‘measure popular dependency on credit’ and ‘count the food banks’.
Progressive taxation is certainly a good idea and I am sure that some sort of wealth taxes will have to be introduced – perhaps before the 2024 election.
They’ll be howls of protest of course but eventually the reality of what is really happening beneath all the monetary manipulation will sink in.
I’m really trying hard to find something positive to say, this Jan 01st.
With decreasing prosperity all around, and human nature being what it is, I do not see much chance of this being “managed”. I still see a sudden shock to the system leading to uncontrolled collapse as the most likely outcome.
Increasing taxation on anybody that has got any money left, ( ie the Middle Classes ) will not go down well at all. Especially as the super-wealthy will just move their money offshore.
At the bottom end, I foresee welfare cuts for all, more so pensioners than for single Mums with children, but this will need to coincide with a much smaller scale of government.
Jonny Foreigner will of course be blamed for all this, so we can expect a rise in xenophobia as an unavoidable result.
I recall in a much earlier article Dr. Tim, ( was it “the end of growth ?) you had mentioned that the government needs to enter into a new social contract, with less surveillance and less intrusion into people’s lives.
Unfortunately, I expect the government to do the exact opposite !
Why is Politics Dysfunctional?
I’d like to use a few items from today to explore the challenge of actually using politics, as currently practiced, to effect change.
The first exhibit is some science:
In a nutshell, animal protein gives you fatty muscle which gives you insulin resistance which gives you everything from obesity to diabetes to Alzheimer’s.
The second exhibit is an article in The Guardian
In a nutshell, a just-retired British farm official argues for converting animal pasture and corn and soy land to carbon farming, effectively cutting animal protein consumption pretty substantially while also sequestering carbon. The rejoinder by the animal ag interests is that they have a plan to achieve carbon neutrality at some point in the future, and animal protein will simply be imported if it isn’t produced in Britain.
The third exhibit is from Christof Koch’s book The Feeling of Life Itself, which explores in some detail the nature of consciousness. Koch makes the point that the cerebellum cannot generate consciousness, despite having ‘tens of billions of neurons’”:
“Important hints can be found within its highly stereotyped, crystalline-like circuitry. First, the cerebellum is almost exclusively a feedforward circuit. That is, one set of neurons feeds the next one that, in turn, influences a third one. There are few recurrent synapses that amplify small responses or lead to tonic firing that amplify small responses or lead to tonic firing that outlasts the initial trigger. While there are no excitatory loops in the cerebellum, there is plenty of negative feedback to quench any sustained neuronal response….The cerebellum is functionaliy divided into hundreds of independent modules. Each one operates in parallel, with distinct, non overlapping inputs and output.”
I submit that Koch has inadvertently given us a pretty good description of our current political system.
The last exhibit is the quote from the young lady on Tad Patzek’s site
“I realized that everything is connected to everything else”
The Guardian fails to connect any of the dots. Therefore, it is operating much like the cerebellum….just feedforward and give people 6 seconds to explain with no common understanding and no linkage. You will not find in the Guardian (at least that I have seen) any connection between land devoted to growing corn and soybeans to feed cattle so that they develop lots of fat in their muscles (marbling), the unhealthy nature of such animals, and the unhealthy conditions of the humans who eat them (the creation of marbling in the humans). The Guardian will not connect that with the crisis in the National Health Service. You will not be reminded that achieving zero emissions off in the future does not solve the problem of climate change. And the political Powers That Be will do their best to keep all those neurons we call citizens disconnected from each other.
In the US, two of our political highlights were the Federalist Papers, which astonishingly today read like adult literature, and the Douglass-Lincoln debates, which tied everything together as illiterate farmers listened intently. I don’t know how we might recover some sense of functionality in governance. In this post, I have just tried to be diagnostic. Our politics has lost consciousness.
I suspect that you are overestimating homo superstitious, Don. Short term -ism dominates as well. Reptilian brain controls much behavior.
I admire your analytical ability, but you are an exception to the rule in my opinion.
Dr Tim, I was rather depressed after reading your clear-sighted and logical assessment on taxation in the United Kingdom. I was depressed not due to the notion that taxation will have to become more progressive, nor that wealth should be taxed more heavily. I’m a TEBB, a Tail-End Baby Boomer, and I readily acknowledge that I’ve been incredibly lucky rather than smart, and I’m open to the idea that much of my ‘gains’ so-to-speak have been due to chance and favourable public policy! My depression arises from the fact that the sort of analysis and discussion you offer is almost completely absent from much of the main political parties and the mainstream media. I fear that since much of the populace believe that we’ve reached or are pretty close to the limits of direct taxation the government will resort to additional taxation, duties and levies on consumption. As we know the ruling elite will not acknowledge that we’re at the limit of growth, let alone the notion of de-growth. They are in thrall to perpetual, exponential growth and maintaining BAU. None of our institutions, or systems are configured for de-growth. In short, the ruling elite will be engaging in policy that is highly likely to make a bad, deteriorating situation considerably worse – and that terrifies and depresses me in equal measure.
I rarely get emotional, preferring to be analytical – but I do feel for decent people, struggling to pay the bills, who are being taxed at levels that make their struggle harder. It’s deeply worrying that decision-makers still believe that taxes are somehow ‘reasonable’ or ‘fair’, on the false basis of GDP, inflated, as it has been, by financial manipulation.
I have SEEDS numbers on this for most of the 30 countries on the system, though the per capita data is necessarily average rather than median. In the UK, as an example, prosperity per person was £1,960 (8.1%) lower in 2018 than it was in 2008. But tax increased, by £1,095 (10.3%), over the same period. This translated an 8% fall in prosperity into a 22% fall in discretionary (‘in your pocket’) prosperity.
It is, of course, more extreme than this in France.
This situation requires that governments spend less, and make taxation more equitable. The Conservatives, to their credit, have increased the income tax threshold markedly. But more needs to be done, in Britain and elsewhere, to make the tax burden less onerous for those ‘just about managing’. The dramatic change in the relationship between asset pricing and incomes suggests that taxation be adjusted accordingly.
Ultimately, goverrnments need to ‘wise up’ to the gap between incomes/GDP and prosperity, and work out how to spend less money, more efficiently.
would a tax on buying and selling shares and bonds not be a good wealth tax?
On the theme of Tax George Monbiot made an interesting point here about land
Basically describing the current vastly inflated land prices as a form of private taxation which of course also leaves the financial sector massively exposed
Tim, thank you for the SEEDS figures relating to the UK. They really are quite sobering. A couple of points, if I may. First, for the last 5 years or so the deterioration in prosperity for many households has been ameliorated, or perhaps camouflaged, by PPI-redress. That is now coming to an end. Second, the government is engaging in scalping as many payments they make to citizens are mostly linked to CPI, while payments taken from citizens are invariably linked to RPI. The long-term difference between the two statistical measures is around 0.7%, which pretty soon mounts-up to a considerable sum. The press recently reported that the cost of essentials has risen far more than the rate of CPI – and that is one of the reasons that I support the idea of an Essential Prices Index (EPI). Third, we have endured over a decade of Severe Financial Repression which, to coin a phrase, has lifted all yachts while sinking an awful lot of dinghies. The more I look at things the more apt seems J. A. K. Galbraith’s observation: ‘If there must be madness something may be said for having it on a heroic scale’.
There are not many documentaries from recent years that are so tantalisingly near and yet so far as this one. I have added French Subtitles which can be auto-translated now to any of the languages supported by YouTube.
The Upload is restricted viewing in some areas but I think my Bittubers channel will allow it to be viewed anywhere, The English Version of the film is not easily sourceable online any longer, I have looked but drawn a blank.
The Wok of Kirk Sorenson on Thorium is very important.
Euan Means who draughted the Energy Cliff graphic had this guest post from Throcon on his Blog.
Euan Mearns’ work is superb, so I shall read the linked article with great interest.
“The productivity of debt in most major economies is already below 1, meaning that it takes several dollars in new debt to create a dollar of GDP. This is particularly the case with government debt, and consequently in order to sustain even meager economic growth debt loads as percentage of GDP will continue to growing strongly, following Japan’s path”
In other words, we’re faking “growth” using debt – a long-running theme here.
I would add that, if we’re faking growth, and hence reported GDP, then we are, by definition, understating the ratio of debt to GDP.
On the same article “Sustained crude oil price rallies above $100/bbl would very likely put a nail in the coffin of the financial house of cards concocted by Western central banks” interesting forecast. On the supply side, underinvestment due to cheap oil prices almost guarantee a bust in the next 5/7 years, which may trigger the GFC II.
*boom (instead of bust)
Good analysis of the near f of oil market, worth watching
First, Happy New Year to everyone! Tim, thanks for a great year of articles and thanks for providing the comment section as a forum for discussion.
Tax reform faces monumental structural headwinds. First and foremost, the tax system enforces social hierarchy and the elite status of “capital.” Tax systems force labor to pay for almost all of the cost of government. The lowly worker must not only support himself out of his/ her $15/hour “living” wage, but carry the Federal, state and local government.
Multinational corporations pay very little, and some, like Apple, actually receive checks from the U.S. treasury. Companies make deals to pay little to no real property taxes because they “bring jobs” to the location, so their workers can pay the taxes.
Dividends and capital gains are taxed at much lower rates than worker compensation. Why? Why should there be any difference? Isn’t money, money, income, income? The rationales for favored treatment are all BS (scarcity of capital, encouragement of investment and risk taking rather than hoarding), the more so in our current era where “capital” is essentially meaningless, because commercial banks and central banks can spew trillions forth in near-zero interest rate loans, while the individual officers, directors and shareholders have no liability if the loans can’t be repaid (the company just goes bankrupt, which is the plan for all companies, and will be the end result of the massive LBO of company shares that’s been undertaken since the financial crisis.)
Universities are tax-exempt despite the fact that most of the best universities now are little more than real estate developers, large holders of commercial and residential real estate and private hedge funds (using their endowment for speculation, rather than providing education), running semi-professional sports teams from which they collect millions in broadcast fees and tickets, while the participants get nothing other than “glory” and a lottery ticket for a spot in the professional leagues.
(Steve Kurtz can tell you how much higher his property taxes are in Amherst MA, compared to non-university towns in western MA, because the university doesn’t pay property taxes. Amherst requires Steve, a retiree I gather, to do his part to help Amherst further its noble “mission.” Or you can just go to Zillow and check for yourself.)
It’ s not going to be easy to counterthese forces i.e., the very structure of society, to make taxes more “progressive.” Elites do not act from a position of “enlightened self-interest.” The whole point of government is, sorry, not the common good, but to create and enforce legal privileges and legal immunities, i.e., to create a favored class, carried and subsidized by everyone else. (Think feudalism, which never ended, just changed its form, also known as “civilization,” a system for harvesting surplus for elites) The amount of in-fighting that will occur to make even modest changes will be epic. It will be far easier to simply continue crushing labor and middle class wealth, such as remains.
For anyone who’s interested, the fairest, broadest, and cheapest tax system – in terms of administration, enforcement and actual financial burden to the taxpayer – is a transaction tax levied on ALL transactions. Dr. Edgar Feige, a Professor of Economics Emeritus at the University of Wisconsin-Madison, has developed this idea. You can read all about it at apttaxDOTcom.
“Since the volume of all transactions is estimated to be 100 times larger than the current tax base, the flat tax rate needed to raise the same amount of revenues is just a hundredth of the current average tax rate of roughly 30%. So if transactions stayed at their current level, the APT tax rate would be three tenths of one percent (0.35%) on each transaction. Even if total transactions fell by 50%, the revenue neutral APT tax rate would only be six tenths of one percent (0.7%) split equally between the buyer and seller in each transaction so each would pay 0.35%.”
Because most transactions in the Western world are now cleared through banks, banks would simply collect a very small piece of each transaction, and make periodic remittances to the governments. As applied to financial transactions, it would dampen speculation, and encourage investment.
It’s not that we don’t understand what could and should be done, it’s just that the whole point of “the system” is to create a favored class that lives off of everyone else. My guess is that tinkering around the edges of that system to ameliorate its worst excesses, without wholesale abandonment of that 10,000 year human experiment, will not be enough for survival. It’s not just an economy premised on “growth” that has to be abandoned, it’s the whole idea of the “civilization economy,” with its classist ideas of labor and capital, and ideas of which jobs “deserve” and are “entitled” to more, that has to be revalued.
Yes, indeed, Tagio, property taxes here are steeper than surrounding towns as UMASS is a huge property owner (State School) and Amherst College also benefits. (high end small private school) However, the town is extremely safe, reasonably clean, well run, and has good ethnic restaurants an an art cinema! There are deer, fox, occasional bear & moose, wild turkeys, hawks, owls, rabbits, many song birds, trout is the streams and rivers…So I like it!
As to eliminating hierarchy, I’d not hold my breath. Rare exceptions exist like small isolated tribes, maybe co-ops like Mondragon, small intentional eco-villages…
Excellent overview Tagio, thank you, and all so true. Have you considered our European system of Value Added Tax (VAT)? This system not only taxes all consumers but provides government with a monitor of gross/semi-net profit results for all registered businesses. Others would say it is a devilish tax conceived in the bowels of the Luciferian elite, but that is another argument.
When will the pendulum swing again? From fiat currencies to sound money? The fiat system is dead, what needs to be saved is an intermediate of exchange so some trade (food for example) can be maintained. What will be saved; the financial assets or the trade system? They took a sneak peak while drawing the first straw.
It turned out to be a very long rope, on which society hung itself.
The second straw, the last one, will be very short.
I’m curious about the next draw.
The Good, the Bad and the Ugly.
Dr Tim, thank you for your excellent work, I have enjoyed reading your blog over the past couple of years and having been immersed in studies of energy, environment, economics and politics for the past 15 years or so, I have to say your posts really get to the heart of the issues we face in a clear and understandable way. I often forward links to friends and family in the hope that your work will reach a wider audience.
Following the recent general election here in the UK, I’ve taken the time to find out more about Boris Johnson’s senior special advisor, Dominic Cummings, as he is now firmly ensconced in No10 and pulling a lot of the strings it seems. His blog (dominiccummings.com) is not what I was expecting at all, and paints a picture of someone desperately trying to drag the machinery of government, and its associated decision-making processes, into the 21st century (he makes the observation that arranging colour photocopying is a major technical challenge within Whitehall….) in order to tackle the significant challenges ahead. I won’t attempt to repeat his writings here (post #33 is worth reading in relation to how poorly governments make data-based decisions), but one observation is a discussion of the energy challenge we face, particularly in relation to declining EROEI, is conspicuous by its absence. Clearly someone of his current position and influence should be made aware of the concept of EROEI and its relation to economics and prosperity.
His most recent post is a call to anyone with deep expertise in a given specialisation to get in contact directly and work with government in a radically new way, and it struck me that this could be a rare opportunity for you to get the right information in front of the right people at a time of great change within our government.
For the record, I have no particular political leaning or connection with Mr Cummings or anyone within government, as an engineer I’m just interested in finding solutions to (usually technical) problems.
Keep up the good work
Thanks Andy, very helpful and worth a shot. If our political people were engineers, we wouldn’t have the problems we are suffering today – they would have solved them decades ago. We have the wrong skills in government in order to solve problems but unfortunately the selection process favours the lowest common denominator.
I love and respect engineers, I have worked alongside them on lots of projects and learned a great deal (I’m a retired accountant and counseller). In an ERP project team I worked with a black-belt, 6 sigma, production engineer – what amazing insights he gained me!
IMO Engineers are very much underrated and many more should be in charge at the highest levels; but of course they are so busy solving problems they can’t be incentivised to look at politics which must be an anathema.to them .
While I am not an engineer, clearly an engineers skill should be in producing something that works.
It would be hard to imagine any system more dysfunctional than the UK at the moment in terms of producing unwanted and unintended outcomes.
To paraphrase a beer advert that ran here some years ago, what about the phrase ‘If Toyota made……’
Thanks for the link to Cummings’s blog, Andy and I have skimmed it. The first thing I noticed is that he is intending to recruit economists – a fatal decision IMO. It is because of economists that we are in this extreme trouble at present, after decades of mismanagement by the dismal ‘science’ (and science it is definitely not).
So, whilst I applaud his aspirations to improve expertise in government, the first step, as any businessman will tell you; is in the beginning of aproject get your team around you and make sure they are the right people for the job. IMO economists will foul the nest before he kicks off!
As you say, there is no recognition of even the most fundamental structures regarding EROEI or understanding of the real economy as exemplified by Dr Tim’s work. I suspect that even if Tim were to approach him, he wouldn’t see the relevance.
Hi just in case you’re not familiar with some of my past posts – in 2014 on the basis of Tim’s research I wrote a letter to my MP pointing out the danger we are all in.
He forwarded it to the Treasury who replied that they did know what the acronym EROEI meant.
I quickly responded but the only reply I ever received was from my MP who stated that the response from the Treasury wasn’t good enough and he had contacted them again.
And that was basically that.
I also would urge Dominic to be contacted as it might just be possible that he will understand and use his influence to enforce the urgently needed changes to our economy
Somebody brought Mr Cummings’ initiative to my attention this morning, before I read mentions of it here.
First of all, I commend the idea, and wish him all the best with it.
In the past, some very bright people have been tasked with “thinking the unthinkable/outside the box”. From recollection, one such was Frank Field, and another was Steve Hilton, and I’m a great admirer of both. I hope that Mr Cummings is successful – which, since he’s reporting to Mr Johnson (rather than to Tony Blair or David Cameron), he might be.
Well Tim – although not mentioned in your reply – I would hope your work reaches Dominic.
I certainly hope that the energy interpretation of economics reaches Mr Cummings. I notice that, a couple of days before him, Prince William announced his “Earthshot” prize for new thinking on environmental repair – and this, too, would benefit from making the right energy-economic connections.
On the former, the character of Mr Johnson, and the scale of his majority, give me some cautious optimism that Mr Cummings might get somewhere.
I applaud both initiatives (though I won’t be sending my CV to Mr Cummings).
When I was training with Xerox in the 1970s we were encouraged to remember Mark 11:24:
“This is why I tell you, all the things you pray and ask for, have faith that you have received them, and you will have them”
Illustrating the power of faith and positive thinking: act as if you have already received it, and it will be so. Actions speak louder than words etc etc. It’s not what happens to you, it is how you react to it. Xerox were full of positive energy in those days, not so much today I fear.
All power to your elbow, Tim, I am sure we are all with you in promoting what is but common sense in the real world.
He were you a part of Xerox PARC?
I was with Rank Xerox (UK) Ltd but worked closely with the PARC using their Delta computer over the line. We were working on document processing (Xerox is a ‘document’ company), at least that was true in the 1970s. They supported me in founding a software company here in UK in 1985, originally, LaserLogic Ltd, driving laser printers at transport speed producing export documentation.and other multi-format document systems.
I retired in 1995 and my family took over – it has since morphed into a tech company driven by my son Adam: He has recently sold out to SGS: https://www.i2i-infinity.co.uk/
I went back to consulting; left to South Africa for ten years and worked with the Standard bank there among other things. Returned to UK at 65 in 2009 and spend my time researching and writing about Tim’s favourite subject!.
My book, The Financial Jigsaw, has been serialised weekly at The Burning Platform website over these last 18 months; it is just coming to an end:
Thanks for the informative reply Peter – I’ll certainly have a look at the links.
I remember seeing a documentary – maybe in the late 90s which featured the PARC.
I was amazed at how advanced they were in their thinking (driven if course by the worry that they would go out of business due to the soon to arrive paperless office).
We all know that the founders of Apple saw much which inspired them.
A few years ago I came across an illustration of the office of the 21st century from the late 1950s.
To my astonishment it featured people sitting at desks using computer terminals with computer aided designs on them.
They had the foresight to see what was coming and how computers could boost productivity.
Yes, I remember when we had a presentation in 1979 on the release of Ethernet. Xerox said that offices would be paperless in five years – we continue to use more trees than ever 50 years later.
Not everyone remembers that Steve Jobs originally worked for Xerox and left with the GUI to set up Apple, with Xerox’s blessing! They did the same with me; saying that they weren’t a computer company and I would be helpful to them to drive their lasers at speed in multi-format, which at the time was difficult.
Perhaps ultimate lack of resources will force us into a paperless office although digital storage is not as reliable as paper.
That verse from Mark is hugely informative. I find it interesting that, in each of the Biblical miracles, Jesus is reported as giving thanks, not after the miracle had happened, as one might expect, but before it.
Let me hasten to add that I don’t mean this in any religious sense. Rather, it emphasises the role that expectations may play in outcomes. Somebody who takes on a challenge in the expectation of failure is very likely to fail. Tackling something with confidence of success often results in success.
Yet more aphorisms from Xerox:
“The secret of success is knowing how to fail.”
“Failure isn’t falling down, it’s not getting up again.”
“Failure is success turned inside out”
Oh dear, they did drill me well! They were very fond of quoting the Bible as they said that it was a book that most people knew and respected and it is always a good start to a speech or presentation to get people’s attention.
I received notice of Cummings’ post earlier as well. It was from John Raven, of Edinburgh, whom I met around 23 years ago after reading his _The New Wealth of Nations_. He is an educational psychologist and socio-cybernetician. He has a website: eye on society DOT co DOT uk
We can but try, I for one will take up the challenge. I’ve spent six years trying to get those in power to understand the idiocy of fiat currency – central banking systems – but:
“It is difficult to get a man to understand something, when his salary depends upon his not understanding it!” – Upton Sinclair
I wish you all the very best with that, Peter.
If I could persuade Mr Cummings about three things, it would be these. (In doing so, I’m noting that not even he can change things like the fiat currency system – like all of us, all he can do is cope with it, for as long as it lasts).
1. Understand the energy basis of the economy, and the dysfunctional nature of a financial system predicated on false assumptions.
2. Recognize the reality of degrowth – not as a cause for pessimism, but as a challenge for new thinking.
3. In policy terms, understand that, whilst government may not be able to make the average person wealthier, it can and should make him or her ‘happier’.
To elaborate a bit on 3, I’d advocate tackling controllable stresses or, colloquially, ‘worries’. People with insecure housing tenure, insecure jobs, worries over money and debt, and discontent over harassment, can be helped. Government can legislate over things like tenant security, proper treatment of employees and customers, and the provision of debt that people cannot realistically afford. It can take away the ‘incentives to bullying’ which exist wherever public employees get a bonus for penalising people.
Part of the solution lies in the redrawing the boundary between private and public sectors. But another part requires a change of ethics. To paraphrase, ‘greed isn’t good’, and ‘the means’ requires more validation than ‘the end’ alone.
I cant agree more with your 3rd point.
There is an awful lot we cant prevent but so much going wrong in the UK at the moment is entirely avoidable and which if we did deal with it would leave us in a much better position to deal with situatios we cant control
Let’s hope that government, in Britain and elsewhere, gets this.
I very much agree with your objectives, Tim, and thank you for articulating them so clearly. We seem to be in a Catch 22. The last thing the government wants to acknowledge is that our prosperity is gradually eroding and has been for many years. And although the people know this in their hearts, the government does not wish to confirm it, which they will have to if any significant changes are to take place. First, identify the problem and acknowledge it. (First step of AA)
Regrettably our society dysfunction is so deep seated that only by admitting the fundamental errors can we begin to heal the damage. Of course, it will be forced upon government eventually after a great deal of damage has been done.
That’s a great quote – but please give it a go.
:-))))) will try!
Peter and all, pertaining to Cummins’ idea:
We lived in Ottawa 99-07, and became dual citizens. I had a lunch meeting in 2000 with a top manager at The Bank of Canada (introduced by a mutual friend (diplomat/arms negotiator). The $C was near .60 vs $US. Gold was under $300. I offered to advise them for $1/year on techniques to strengthen the $C and to create profits doing so.
I explained how selling naked (uncovered) puts both on exchanges and interbank would support the $C in addition to traditional intervention of buying the $C interbank. The buyers of the puts were paying premiums to speculate on further declines. If they decided to hedge themselves at any time, they would buy $C themselves. Meanwhile, the Bank of Canada would keep the premiums and be contingent buyers via the exercise of the puts if the $C declined further. There is less risk to this strategy than buying $C outright!
I also explained that gold (it was around 280) presented a good use of the same strategy as it diversified reserves. I wrote an invited guest piece for the most successful Investment letter in Canada that year recommending gold, natural resources, and health care. (ContratheHeard, Oct 2000) His response: We are only permitted to sell gold, not buy it!
I was not contacted again by them. They obviously were uncomfortable with new ideas. I urge Tim to respond to Cummins.
Excellent advice Steve, thank you. I was using covered options in the second half of 1990s to boost my dividend income and it worked well on fairly stable utilities shares. I understand your logic and also understand why they chose not to act. I’m afraid in the great way of things TPTB are all bought one way or another. I have always advocated 10% of my portfolio in PMs for insurance not income – if they increase in value all good and well.
I will tackle Cummings anyway, you never know, nothing ventured and all that.
Happy New Year BTW and many thanks for your feedback, very reassuring!
My memory failed me. I wrote the contratheheard DOT com commentary Oct 2001 It is still on-line. Title: “Growth, Salvation, Addiction, Cessation
Thanks Steve. I, too, have had some experience in the government sphere.
This is part of why I can’t see myself sending my CV to Mr Cummins.
What I think the UK (and, of course, others) really needs is to commission a project on this stuff from some person or group, rather than getting a government employee (even if, to quote him, a “weird” one) to do it. There are problems to doing it that way.
The issues – even before we take in the environmental dimension – couldn’t be bigger.
1)The price/cost of debt (interest rate) is the most important factor in determining the value of claims on energy(debt/money). The fact that interest rates are near all time lows would then imply that people or TPTB don’t value claims on energy. 2)Due to supply/demand dynamics, the value of energy trends lower in an environment in which the surplus energy available to each person is rising. 3)There is a point in time where the available surplus energy peaks and then begins it’s decline. Debt is the mechanism that increases the length of time from where surplus energy begins its decline to the point in time where people begin to respond by putting a higher value on energy.
When people experience a crisis sufficient enough for them recognize that energy is becoming scarce, they begin assigning a higher value to energy. When they discover that the claims on energy (debt) have been partially responsible for not only the quantity of energy available, but also responsible for the distortion of its value, they begin positioning themselves to have direct access to energy sources and somewhat disregard the claims on that energy SINCE THEY HAVE NO METRIC BY WHICH TO ACERTAIN THE VALUE OF SUCH CLAIMS.
In this understanding, deteriorating prosperity will cause people to prefer sources of surplus energy with low embodied risk. The people who have a basic understanding of this energy dilemma will not value the claims on energy because:
1) it is only a matter of time until the masses experience and then recognize decline in surplus energy in real terms.
2) Even though under “normal circumstances” it is wise to accumulate money when it has little value and exchange it for something else when its value rises, having more direct access to the energy they need for survival is the best hedge against MONEY THAT INHERENTLY DISTORTS THE VALUE OF THAT WHICH IT CLAIMS.
What all this means for businesses and governments is hard to project. Business and government are dissipative structures of surplus energy. Humans beings are as well. The entities that survive will be the ones that efficiently externalize the cost of their own energy consumption onto others. In the natural realm this phenomenon is observed by humans to be mutually beneficial. This particular time around, the only humans who will see it in such terms will be the ones who survive.
Thank you for some very interesting points. I think this is your first comment here – welcome.
Now that we have our core ideas established, a sizeable and well-informed community and a working model, I’m optimistic that we can carry the debate forward into a lot of interesting and important areas, including those that you mention.
I’d like to suggest, with due humility, that, in the time that I’ve been doing this, I’ve seen plenty of evidence that our shared line of thinking is the right one, and the conventional one is not.
Prosperity is eroding; there’s been no meaningful economic “recovery”; ‘conventional’ interpretations and tools have failed; and the ‘financial economy’ has become ever more dysfunctional.
I am with you 100% Tim. I am planning to publish my book this quarter and will join you and support you in all your endeavours.
Best wishes, Peter
Heres Dominic Cummings giving evidence to the Treasury Committee on Exiting the EU.
Heres Cummings in full flow against the Process governance of Whitehall
Cummings often quotes the work of Tetlock, regarding the abysmal record of Experts and their predictions. Cummings is a natural opponent of the old Aphorism/Comfort Blanket of the Bureaucrat
” You Never get sacked for buying IBM ”
It remains to be seen how the Dynamic between Sedwill and Cummings develops. Sedwill is the most powerful man in the Permanent Bueracratic machinery of State Process Government and is a Creature of the Surveillance Capitalist and Security State.
Cummings declared intentions and Sedwills very Existence seem on their face to be Matter and Anti-Matter, what prophylactic membrane has prevented MAD to break out between these two opposites tells us two things, Perhaps the surface appearance is mere camouflage, or secondly the reaction of the two opposites is not instantaneous.
“There are deep problems with the global financial architecture, from China’s shadow banking system to the recurrent flash crashes driven by high frequency algorithmic trading. There are deep problems with the euro financial architecture. Since 2008 global debt has increased enormously. There has been a huge distortion of debt markets with investors holding massive quantities of government bonds that offer very little future reward and great future risk. CDO’s, CDS’s, all sorts of synthetic credit derivatives that contributed to the 2008 crisis are back and being sold to idiots who don’t understand them by some of the same people who used such complicated scams to cheat the figures for Greece’s euro entry. Bureaucrats keep bailing out financiers. The public quite rightly rages that ‘us idiots on PAYE are bailing all these crooks out’. Politicians largely ignore them. In Britain, Cameron even defended the indefensible non-dom rules and has done nothing about the grotesque abuse of executive pay by hired managers paying themselves as if they are successful entrepreneurs, with institutional shareholders happily pushing the merry-go-round and getting their kickbacks. Everywhere one looks one sees insiders ripping off the public and politicians either colluding or helpless spectators.”
From 1999 to 2002, Cummings was campaign director at Business for Sterling, the campaign against the UK joining the Euro
Cummings wrote an essay titled “Some thoughts on education and political priorities”, about transforming Britain into a “meritocratic technopolis”; the essay was described by Guardian journalist Patrick Wintour as “either mad, bad or brilliant – and probably a bit of all three”.
In 2014, Prime Minister David Cameron described Cummings as a “career psychopath”, although the two had never met
(Thats high praise coming from Cameron who is wrong about just about evrything.)
He is reportedly an admirer of Otto von Bismarck, Richard Feynman, Sun Tzu, and U.S. fighter pilot and military strategist John Boyd. Journalist Owen Bennett claimed that Cummings “is a Russophile, speaks Russian, and is passionately interested in Dostoyevsky” while Patrick Wintour in The Guardian reported that “Anna Karenina, maths and Bismarck are his three obsessions.”
I do not think Dominic Cummings would have much trouble understanding EROI or ECOE, He might though prefer the more abstract financial approaches to Government storytelling which are social control mechanisms prioritised over Systems control efficiency.
Make no mistake Cummings is a Bright Spark as well as a class operator, That Sedwill has not managed as yet to cull him begs the questions posed above?
Informative and helpful, thank you.
I’d add, though, that I don’t doubt the good intent of civil servants who disagree with Mr Cummings. Constructive debate and the civilized process of disagreement are positives. “Thesis”, “antithesis”, “synthesis” seems a useful process in the advancement of understanding.
Excellent summary Roger, thank you. As regards ‘experts’, Xerox used to say: Never claim you are an expert, always say a ‘specialist’ because an ‘ex’ is a has-been and a ‘spurt’ is a drip under pressure!
Thanks Dr Morgan, another thought provoking and engaging read.
Is there absolute proof that ECOE is driving falling prosperity?.
There is correlation in the trend lines but this doesn’t seem like absolute proof of causation ?.
If I could somehow quantify bad governance and plot this against falling prosperity I could show an equally convincing trend.
It seems intuitive that eventually a population in any environment will grow until a bottleneck is found in a particular resource. Beyond that the wellbeing of individuals is diminished. Why is energy selected as the bottleneck and not water, factory space, land for habitation or good organisation ?.
Perhaps there is an optimum size for a population that will maximise prosperity. It doesn’t matter if it’s a pride of lions or the population of the world.
Above or beyond the optimum population level, inefficiencies erode prosperity. The reasons could be resource related or cultural. In an increasingly competitive world, the western world’s obsession with implementing a cultural revolution since the 1960’s, could be having a profound effect on our ability to create and store wealth?.
The elites favourite obsession, climate change, is part of the ‘divide and rule’ agenda of mass immigration. This agenda of the blaming of settled white communities for all the ills of the world coupled with financial mismanagement on an epic scale must have a negative effect on prosperity that cannot be ignored?.
The PC agenda is very convenient for the globalist elites when they have destroyed their currencies, need to maintain a power base, and gain acceptance of much greater controls on personal freedom.
Thank you Ken for raising these important issues of which some have occurred to me over the years. It is always difficult to ascertain cause precisely and often it is not just one single item so I spent a long time examining, not only Tim’s propositions, which grabbed me when I read his book, but other things like population collapse, banking and finance, Brexit, government funding et al. and many websites such as Gail Tverberg’s https://ourfiniteworld.com/ which confirm the case for EROEI.
I have written a book about it all which I plan to publish early this year and you are welcome to a PDF copy of my manuscript. I would be honoured if a person of your obvious intellect would take some time casting your eye over my offering, contact: firstname.lastname@example.org I value critical feedback especially now that I will be committing to paper,; it seems sort of permanent some how.
Re “but other things like population collapse” as a possible cause of declining prosperity… it seems to me that:
If there is debt to pay, fewer people chipping in means more obligation p/capita. If looked at as a % share of physical (natural?) wealth, then fewer people results in everyone being wealthier. There probably is a minimum number required in given environments to maximize cooperative work, beneficial exchanges, and division of labor.
Yes, I do agree Steve, thank you. Perhaps there is an optimum population beyond which dysfunctions creep in? I will need to do more study on demographics and population models. If the animal world is to be acknowledged, there is of course a natural balance between predator and prey but the human animal has no such option.
There is an interesting article in todays Financial Times’ Alphaville section entitled “Was Germany right to ditch nuclear?” It quotes a paper recently published by the National Bureau of Economic Research entitled “The Private and External Costs of Germany’s Nuclear Phase-Out”:
“We find that the lost nuclear electricity production due to the phase-out was replaced primarily by coal fired production and net electricity imports. The social cost of this shift from nuclear to coal is approximately 12 billion dollars per year. Over 70 per cent of this cost comes from the increased mortality risk associated with exposure to the local air pollution emitted when burning fossil fuels.”
Presumably Energiewende is increasing Germany’s ECoE?
Thank you for those kind words Peter. I’d be delighted to read your work.
Have to say I greatly admire Dr Morgan’s work and don’t doubt there is a relationship between ECOE and prosperity. But where does ECOE sit on the scale between headwind and something of first order magnitude ?. Causation is extremely hard to prove in my view.
I can’t claim to have any great insight except from what I have studied in science and my work as an industrial engineer, typically identifying ‘bottlenecks’ in processes that lead to inefficiency. I see parallels in what I see around me.
A friend that works in education tells me that in her pre school intake of 3 year olds, 22% out of the 70 children are where they should be developmentally the rest are functioning at 8-20 months or 16-22 months so over a year, 18 months behind where they should be…
This is a deprived area where many children have English as a second language.But it does demonstrate how increasing complexity in the modern world drives huge increases in the resources needed – in this case 1 to one teaching. I cannot even begin to calculate the future costs of the IPAD generation parents that are increasingly looking at their electronic devices instead of reading to their children.
That’s another level of complexity the state will have to deal with when these children start school. Then there are the ‘bottlenecks’ caused when these children become young adults and employers find they lack basic skills…. Yet another drag on prosperity..
Transport systems, health, food distribution – perhaps all have maximum load capacities that if exceeded tend to start to break down. In my own area A & E ambulance provision where ambulances queue to enter the hospital this winter is a good example.
So much in real life seems to reflect the scientific world. Turbulence theory for example illustrates how something seemingly mundane is almost infinitely complex ..
‘Big whirls have little whirls that feed on their velocity,
and little whirls have lesser whirls and so on to viscosity’.
So much of policy making seems to fall on the assumption that there is a linear relationship between demand and the resources needed to maintain it. But could the situation be a whole lot more complex ?
Perhaps the linear relationship holds, then when a threshold of complexity is reached, the relationship follows an exponential path ?. Maybe that’s where we are today – an increasing complex globalised world that is breaking down…
That’s a good point about predator and prey – perhaps in our world the natural balance will be provided by our own foolishness ?. Australia has experienced hot and dry periods before but has not seen the near extinction of species in recent times . What has changed is that society’s have started to listen to the green zealots that have prevented the controlled burning necessary. Similarly catastrophic floods have occurred in the Uk as routine dredging of rivers has ceased and flood plains built on.
Politically correct truth has displaced the factually correct truth a , this must have a profound effect on everything from debt, money, GDP etc. ?
Enough rambling from me!
Excellent observations Ken.thank you, and I look forward to your email. In my book I talk a little about complexity theory as I think it applies to economic systems which, as you say, are under stress and likely to break down soon as we reach the tipping point or phase shift. There’s no way IMO of being able to forecast when this will occur but I do know that it must happen one day.
It is those who recognise this, as it is happening, reading the runes, and preparing for it, who will have a better chance of transcending the worst effects.