#199. An American nightmare

ENERGY, “GROWTH” AND THE LIABILITY VORTEX

“Time moves on”, at least in politics, and it should now be possible for us to examine the American economic situation without being drawn into recent controversies.

In any case, our primary interests here are the economy, finance and the environment, understood as functions of energy, and these are issues to which political debate is only indirectly connected. We cannot know whether the economic policies now being followed in the United States would have been different if Mr Biden hadn’t replaced Mr Trump in the Oval Office, and what we ‘cannot know’ is far less important than what we do.

If you’re new to this site, all you really need to know about the techniques used here is that the economy is understood and modelled, not as a financial construct, but as an energy system. Literally everything that constitutes economic output is a function of the use of energy. Whenever energy is accessed for our use, some of that energy is always consumed in the access process, and this Energy Cost of Energy (ECoE) governs the dynamic which converts energy into prosperity.

Money – which, after all, is simply a human artefact – has no intrinsic worth, and commands value only as a ‘claim’ on the output of the real economy governed by the energy dynamic. Energy, moreover, is the interface between economic prosperity and the environment.   

American dysfunction

Even without getting into the energy fundamentals, a string of dysfunctionalities in the American economic situation should be visible to anyone prepared to look. These are best considered, not within the current disturbances created by the coronavirus pandemic, but on the basis of trends that have been in place for a much longer period.

Most obviously, the aggregate of American debt – combining the government, household and private non-financial corporate (PNFC) sectors – increased in real terms by $28 trillion (104%) between 1999 and 2019, a period in which recorded GDP grew by only $7.4tn.

One way to look at this is that each dollar of reported “growth” was accompanied by $3.75 of net new debt. Another is that, over twenty years in which growth averaged 2.0%, annual borrowing averaged 7.5% of GDP.

To be sure, some of these ratios have been even worse in other countries, but schadenfreude has very little value in economics. Moreover, debt is by no means the only (or even the largest) form of forward obligation that has been pushed into the American economy in order to create the simulacrum of “growth”.     

Other metrics back up this interpretation. Within total growth (of $7.4tn) in reported GDP between 1999 and 2019, only $160bn (2.2%) came from manufacturing. A vastly larger (25.3%) contribution to growth came from the FIRE (finance, insurance and real estate) sectors.

These and other services are important but – unlike sectors such as manufacturing, construction and the extractive industries – they are residuals, priced on a local (‘soft’) basis rather than on ‘hard’ international markets.

To over-simplify only slightly, many services act as conduits for the financial ‘activity’ created by the injection of credit and liquidity into the system.

The real picture – of credit and energy

The SEEDS model endeavours to strip out these distorting effects, and indicates that underlying or ‘clean’ economic output (C-GDP) in the United States grew at an average rate of only 0.7% (rather than 2.0%) between 1999 and 2019.

In essence, reported GDP has been inflated artificially by the insertion of a credit wedge which is the corollary of the ‘wedge’ inserted between debt and GDP (see fig. 1).

Fig. 1

This much should be obvious even to those shackled to quaint, ‘conventional’ economic metrics which – bizarre as it may seem – ignore energy, and insist on wholly financial interpretation of the economy. To trace these anomalies to their cause, though, we need to look at the energy dynamic and, in particular, at the ECoE equation which governs the supply, cost and economic value of energy.

Globally, trend ECoEs are rising rapidly, driven by the depletion effect as it affects petroleum, natural gas and coal. The ECoEs of renewables (REs) such as wind and solar power are falling, but it would be foolhardy to assume that this can push overall ECoEs back downwards at all, let alone to the pre-1990s levels at which real growth in prosperity remained possible. Apart from anything else, RE expansion requires vast material inputs which are themselves a cost function of legacy energy from fossil fuels.

ECoEs equate to economic output which, because it has to be expended on energy supply, is not available for any of those other economic uses which constitute prosperity. This is why SEEDS draws a distinction between underlying economic output (C-GDP) and prosperity.

On an average per capita basis, American prosperity topped out back in 2000 (at $49,400 at constant 2020 values), when national trend ECoE was 4.5%. By 2019, with ECoE now at 9.0%, the average American was 6.6% ($3,275) poorer than he or she had been in 2000. Of course, his or her share of aggregate debt increased (by $68,500, or 71%) over that same period (see figs. 2 and 3).

Again, there are other countries where these numbers are worse. Again too, though, what’s happening in other countries is of very little relevance to a person whose indebtedness is rising whilst his or her prosperity is subject to relentless erosion.   

Fig. 2

The fading dream

Just as prosperity per person has been deteriorating, the cost of essentials has been rising. To be clear about this, the calibration of “essentials” (defined as the sum of household necessities and public services) within the SEEDS economic model remains at the development stage, but the results can at least be treated as indicative.

As we can see in the left-hand chart in fig. 3, discretionary prosperity has been subjected to relentless compression between deteriorating top-line prosperity per capita and the rising cost of essentials, a cost which, in turn, is significantly linked to upwards trends in ECoE.

Discretionary consumption has continued to increase – thus far, anyway – but only as a function of rising indebtedness in each of the public, household and PNFC (corporate) sectors. Even these numbers are based on per capita averages, so necessarily disguise a worse situation at the median income level.   

Fig. 3

The liability vortex

Back at the macroeconomic level, America is, very clearly, being sucked into a liability vortex.

Even before the coronavirus crisis, debt stood at 360% of prosperity, up sharply over an extended period, whilst the broader and more important category of “financial assets” – essentially the liabilities of the government, household and PNFC sectors – had risen to 725% of prosperity (fig. 4).

Fig. 4

Like anyone else, Americans can derive false comfort by measuring these liability aggregates, not against prosperity but against GDP, if they’re happy to buy the fallacy that GDP isn’t inflated artificially by financial liability expansion.

Another, almost persuasive source of false comfort can be drawn from the inflated “values” of assets such as stocks and property. The realities here, though, are that the only people who could ever buy properties owned by Americans are other Americans, meaning that the supposed aggregate “value” of the national housing stock cannot ever be monetized. The same, albeit within an international rather than a purely national frame of reference, applies to the aggregate “values” of stocks and bonds.  

More important still, asset prices are an inverse function of the cost of money, and would fall sharply if it ever became necessary to raise interest rates.

Debate rages in America, as elsewhere, about whether inflation is rising at all, and whether, if it is rising, this is a purely ‘transitory’ effect of contra-crisis liquidity injection. An additional complication here is that inflationary measurement excludes rises in asset prices and may, even within its consumer price confines, be an understatement of what’s really happening. The SEEDS-based development project RRCI – the Realised Rate of Comprehensive Inflation – puts indicative American inflation at 5.2% in 2020, rising to a projected 6.6% this year.  

Cutting to the chase

This debate over the reality and the rate of inflation, though, risks missing the point, which is that the in-place dynamic between liabilities and economic output makes either inflation, and/or a cascade of asset price slumps and defaults, an inescapable, hard-wired part of America’s economic near future.

Even before Covid-19, each dollar of reported “growth” was being bought with $3.75 of net new borrowing, plus an incremental $3.80 of broader financial obligations. Even these numbers exclude the informal (but very important) issue of the future affordability of pensions.

Crisis responses under the Biden administration – responses which might not have been very different under Mr Trump – are accelerating the approach of the point at which, America either has to submit to hyperinflation or to tighten monetary policy in ways that invite the corrective deflation of plunging asset markets and cascading defaults.   

The baffling thing about this is that you don’t need an understanding of the energy dynamic, or access to SEEDS, to identify unsustainable trends in relationships between liabilities, the quantity of money, the dramatic over-inflation of asset markets and a faltering underlying economy.

Confirmative anomalies are on every hand, none of them more visible than the sheer absurdities of paying people to borrow, and trying to run a capitalist economy without real returns on capital. Meanwhile, slightly less dramatic anomalies – such as the investor appetite for loss-making companies, the “cash burn” metric and the use of debt to destroy shock-absorbing corporate equity – have now become accepted as routine.

Obvious though all of this surely is, denial seems to reign supreme. Mr Trump – and his equation linking the Dow to national well-being – may have gone, but government and the Fed still cling to some very bizarre mantras.

One of these is that stock markets must never fall, and that investors mustn’t ever lose money. Another is that nobody must ever default, and that bankruptcies destroy economic capacity (the reality, of course, is that bankruptcy doesn’t destroy assets, just transfers their ownership from stockholders to creditors).  

Businesses, meanwhile, seem almost wilfully blind to the connection between consumer discretionary spending, escalating credit and the monetization of debt.

On the traditional basis that “when America sneezes, the rest of the world catches a cold”, what we seem to be nearing now is something more closely approximating to pneumonia.   

SUPPLEMENT

Here, as requested, are equivalent charts for New Zealand:

96 thoughts on “#199. An American nightmare

  1. Sums it up pretty well. Reminds me of two old sayings: “flying blind”, and “asleep at the wheel.”

  2. As I Read the Washington Tea Leaves
    Trump listened primarily to himself. Biden seems to listen to ‘experts’. And what I believe the experts are telling him is that the stagnation since 2007 (and before) is due to the relatively modest stimulatory effect of what the Obama administration did in 2009. What my county got out of the Obama ‘stimulus’ was about a mile of sidewalk…nice, but hardly a game changer. Now we have direct payments to individuals which are large enough to sway trade balances and spending on durable consumer goods. The experts think that the economy is a 4th of July rocket, just waiting for proper ignition in order to soar into the sky.

    I don’t think any significant number of the experts believe that physical limits are the obstacles. Kurt Cobb in his article today says that ‘everyone in Washington wants more spending on infrastructure’. But Kurt observes that the Limits to Growth study from 50 years ago identified the steadily increasing cost of the maintenance of infrastructure as an instigator or collapse. The infrastructure was built during a period of optimism, and the optimism was enabled by cheap energy. Nobody who is visible in Washington believes that energy (or materials) is a barrier to ‘building back better’. But I cringe any time an old sewer or water line has to be dug up…because it disrupts everything for a long period of time and the cost is exorbitant.

    If there is any hope, I suspect it will happen when everyone gets honest feedback and goes about restructuring what they are doing. As one example which is humorous on the surface, but, I think, carries a significant message:

    If a squirrel brain can foil a physicist, surely people can figure out a way to eliminate some of the obscene levels of waste. Which is the basis for adjusting to reality.
    Don Stewart

    • Thanks Don.

      Whoever is in the White House, and whoever he listens to, the striking thing is surely the extent of the irrational. For instance:

      – Everyone needs a home – so why intervene if house prices fall?

      – Corporate equity is a shock-absorber – why replace it with debt?

      John Kerry has said that half of the carbon savings needed to get the US to “net zero” “are going to come from technologies we don’t have yet”.

      I think there’s a looming point, in the US and elsewhere, when denial f physical constraints, techno-optimism and sheer absurdity reach a ‘moment of recognition’.

    • @Don
      Thanks for the you tube link. It is entertaining and thought provoking .

      @ Dr Tim
      I heard John Kerry ( US representative to COP26 ) on Andrew Marr yesterday voicing his view on ‘new tech’.
      My immediate reaction was ; here is someone who has discovered perpetual motion and a ‘new ‘ thermodynamics.
      Alok Sharma ( UK representative to COP26) on a recent visit to a wind farm voiced some equally vacuous remarks about Net Zero.
      Add these two to the gallery of the uninformed.
      Tim Watkins has another excellent comment on his blog.

  3. Thanks again for your insights Tim! Any chance you can generate a similar chart to Figure 1 for New Zealand? Do you have the data in SEEDS yet? A while back I commented, and you intimated you might do a post on NZ at some point…

    • Two of the chart sets for NZ have now been added.

      The patterns are similar to those of the US and other Western countries, but are a great deal more benign.

      Borrowing/GDP averaged 6.4% compared with reported growth of 2.8%. Borrowing per unit growth during 1999-2019 was only 2.34:1. Underlying growth was 1.4%.

      Prosperity per capita peaked in 2004, but the subsequent decrease has been very gradual. The rise in the cost of essentials, too, seems pretty restrained. Debt/prosperity exposure is modest (there is no source data for financial asset exposure, but this can be assumed to be low).

  4. @Dr. Morgan
    Re your comment regarding John Kerry and the denial of physical constraints. Richard Heinberg has a provocative article on an Atomic Energy Commission report issued in 1953. A brief quotation:
    “this scale of activity can continue to be supported by other energy sources that haven’t yet been developed or substantially deployed. Further, we have incorporated limitless growth into the requirements for civilization’s success and maintenance—despite the overwhelming likelihood that growth can occur for only a historically brief interval.”

    The full article (about a 5 minute read):
    https://www.resilience.org/stories/2021-05-17/the-most-colossal-planning-failure-in-human-history/

    I well remember hearing Admiral Rickover talking in very sober language about all the same subjects in 1960, except that he did not mention the CO2 problem. I think we yearn for ‘morning in America’, and willfully ignore what we don’t want to see. We have 50,000 square miles of lawn, but are quite willing to believe that we will all starve unless the Amazon is destroyed. The Davos crowd is ready to genetically engineer the planet, and is reportedly set to get the UN to issue reports on the necessity for such interventions. No mention of all the wasted lawn space.

    If you will permit one behavioral science analogy…there is a well known You Tube video featuring a bunch of college students in a room passing a basketball around while moving this way and that. In the middle of the video a student wearing a gorilla suit enters the room and begins to act rather goofy. Before the video ends, the gorilla exits the room. A large majority of the people who watch the video never see the gorilla. The moving ball has them mesmerized. I hypothesize that rising GDP and more durable goods and the return of consumption of services such as restaurants has people mesmerized, and they do not want to see the gorilla and are mostly successful in blocking it.

    Don Stewart

  5. Hello ,

    I’ve been following your writing for a while now and appreciate your sober analysis of our situation. However, one issue you tend to stress which I find hard to follow is the “absurdity to pay people to borrow”. Why do you find this absurd?

    As a simple example: if I had a surplus of apples, I would be very happy if someone borrowed them and gave me back half of what they borrowed in five years. That wouldn’t constitute me paying them to borrow but simply reflects the carrying cost of apples. If I hadn’t lent them out, they would simply spoil and I would have nothing.

    In the same vein, if I believe my money will be worthless in five years, I’d be happy to lend it out – I’d get at least something, someone’s obligation, for it. Even if interest is not what it would have been fifty years ago, it’s better than losing everything. In that way, the risk outweighs the benefits of holding onto the money.

    In a third way, interest is the price of borrowing money. Since money does not have a production cost that would constitute a lower price bound and exists in wildly disproportionate amounts to potentially profitable investments, why shouldn’t interest rates sink to negative amounts?

    So I believe it’s not an absurdity that interest rates are negative, it’s a natural consequence of the current environment. And even helpful because at positive interest rates, our societies would immediately collapse under the demands of debt holders.

    I would be very interested to hear your perspective on this!

    Thanks, Jonas

    • Excellent points.

      In the interest of capital preservation, it is quite reasonable to pay someone to borrow if the borrower can return your money in the future, especially if adjusted for inflation. And if the borrower has the ability to create money, making their credit-worthiness extremely good, so much the better. This is why US government Treasury Inflation Protected Securities have negative yield. Of course, now almost every “investment grade” debt instrument has negative real yield.

      It does make one wonder why so many people are fixated on capital preservation? Perhaps there aren’t any really good investments in productive capacity out there (since the US has off-shored a lot of manufacturing)? Perhaps we are experiencing resource-based limits to growth? Perhaps it’s just too much money sloshing around with nothing to do?

      I expect the US will keep carrying on with low interest rates until non-citizens don’t want dollars. That’s when things will get interesting.

    • Speaking of inflation: in my never-ending quest to convert monetary assets into farm equipment assets, I have been noticing extreme price increases in everyday building materials and construction supplies.

      PVC electrical conduit – up 250% since prepandemic, light expanded metal stucco mesh – also up 250%, welded wire galvanized stock panels – up 150%, (but they are now rarely available, and rural real estate in my county (Hawaii, already very expensive) is seeing rapid price increases with buyers offering more than asking price. I haven’t had the courage to ask what copper wire costs.

      Is this just post-pandemic exuberance, supply chain issues, or perhaps people moving out of cities to the country? Time will tell.

    • These are interesting points, but need a bit of clarification, I think.

      The example of apples is a bit special in that these are assets with a limited life. This introduces physical constraints, just as the constraint of storage capacity pushed oil prices below zero early last year. Lending the apples makes sense, but wouldn’t you want to be repaid in five years with apples, not with money (especially if money was likely to lose part of its value)?

      Likewise, if money is likely to be worthless in five years, there seems no point in lending it out just to get the same quantity of (now worthless) money returned to you. Either you’d want a very high rate of interest, or, more probably, you’d exchange money for something which won’t be worthless in five years (perhaps property, stocks or gold).

      It seems to me that the significant point about negative real rates is really about the NEED FOR negative rates – it tells us that the system has become dysfunctional. Normally, somebody borrowing money invests it in something which earns money (otherwise, what’s the point?). Out of what he earns from the use of money, he then rewards the owner of the money for allowing him to use it.

      In short, normality requires a positive (and real) return on capital.

    • Hi Tim,

      thank you for your reply! Those are good points, I was being somewhat obscure.

      What I’m getting at is the definition of “normality” – sure, for a few centuries, getting a return on capital was “normal”. But that’s because the economy as a whole was growing at the cost of depleting natural resources. Capital owners could demand a slice of the growing pie without having to contribute themselves.

      Now that the economy is contracting because of rising ECoE, getting a return on capital is not normal and won’t be until the economy grows again. The question becomes: why would anyone invest if the economy is shrinking and the return on their capital is negative?

      Well, they still would as long as the return on capital is larger than the carrying cost (maintenance) of their capital if they’re not using it! Looking at manufacturing capacity or apples, this is easy. The carrying costs are high and it makes sense to get a negative return as long as it’s higher than the maintenance costs of keeping and not using them.

      In my opinion, what money needs is the imposition of carrying costs such as negative interest even on cash. I know that’s really unpopular but it forces money holders to get their money in circulation as credit even at negative returns. Otherwise, in a shrinking economy, credit and spending dry up and the economy collapses for the simple lack of a medium of exchange.

      This is not the same as inflation, as inflation affects the unit of measurement of all values and distorts all exchanges. It’s easier to impose because the cost is invisible at first but it tends to escalate quickly and makes monetary exchanges very cumbersome and ultimately futile.

      I’d welcome everyone’s thoughts on this!

      Jonas

    • Thanks.

      Let me suggest a somewhat oblique answer to this, and ask what you, and others, think about it.

      First, growth in any meaningful sense is most unlikely to return. REs cannot deliver ECoEs as low as those of fossil fuels back when FFs’ ECoEs were low enough to make growth possible. De-growth needn’t necessarily be a disaster, if we can change how we think about things in ways that enable us to adapt. But “growth”, as we’ve understood it hitherto, is probably gone.

      Taking this sector-by-sector, governments can adapt to de-growth (this isn’t to say that they will adapt, but it’s possible). So can individuals and households (with the same provisoes applying).

      But business (in aggregate), and the financial system as we’ve known it up till now, can’t adapt as governments and households could/might.

      Both are founded on assumed growth. We mind find growth-capable business sectors, and investments, but these are going to be minority instances – if you like, “the exceptions which prove the rule”.

      Likewise, there’s nothing to say that a new financial system can’t be created to serve the functions that we require of it. But it can’t be the current one, because the parameters and assumptions are going to be wholly different.

    • I agree with this Tim. Growth towards net zero may well be the last installment of aggregate growth expectations with growth within circular economies being the very last vestiges, unless a new high density energy source is invented.

      However, I think there is something in what you say Jonas. Negative interest on cash may increase velocity and deter hoarding with, as you say, the latter being the normal reaction in times of perceived economic hardship.

      Whether rationality can win through on biological instincts is however another matter and as such people might simply revert to storing money or gold/silver/platinum etc under the mattress.

    • Hi Tim and Steve,

      thank you for your thoughtful replies! I’m partial to the approach of Thomas Greco, Jr. who doesn’t mention demurrage (carrying costs for cash) but propagates mutual credit clearing between businesses in order to have a money supply that only facilitates exchange (no storing of value, no unit of measurement). I think it would make many transactions possible that would otherwise not happen because the official currency is too unstable or unavailable.

      But I’m not sure if you, Tim, are not after all correct and “normality”, i.e. capitalism, requires growth. John Michael Greer recently noted:

      If you have ongoing contraction in the real economy, economic activity results on average in a loss rather than a profit in real terms — not merely financial terms. That’s why all economic activity other than sheer subsistence grinds to a halt as a civilization declines: you can no longer make a profit on anything, and so there’s no economic incentive to do anything beyond keeping yourself fed and clothed and housed.

      He has a point but I get the feeling that this is not all there is to it. Making a loss is still preferable to making a bigger loss. So if I have a factory, I might keep it running at a loss in order to avoid having to scrap the factory and having nothing. However, if there’s no prospective profit ever at the horizon, I should probably rather scrap the factory and use the space for growing potatoes…

      Am I missing something? What’s the perspective for the economy? Are we headed to a subsistence economy in the short term or is there a way to keep an economy going without a profit motive?

    • My immediate thought is that money serves pimarily as a medium of exchange.

      Money has no intrinsic worth. It would be of no use to anyone adrift in a lifeboat or stuck in a desert. It is, so to speak, ‘validated by transaction’.

      For the same reason – validation by transaction – money is only a very limited store of value. A million dollars would have value to you in a place where someone would accept it for goods and services. It would have no value in a place where they would not. Moreover, currencies such as USD and GBP have lost c-85-95% of their value over the past fifty years.

      As for a unit of account, it depends what you’re trying to measure. Does measuring money help us measure anything other than money?

    • I’d just add Jonas, that low impact.org are looking at a blockchain/networked mutual credit system.

      Saving and investment in a mutual credit world
      https://www.lowimpact.org/saving-investment-mutual-credit-world/

      Dave Derby is based in London.

      For me, it is not impossible to imagine that people can cooperate and self organise around voluntary work.

      I haven’t fully thought it through but perhaps in theory, everyone could do exactly the same working/buying routine without the exchange of money.

      Of course, if this became suffused with competition then the moneyless system will quickly break down as opportunism and freeloading destroys cooperative trust.

      For sure, the status quo could not be maintained because of the ECoE but in theory cooperative trust could sustain the current system and be moneyless. It would just be directed towards maintenance rather than growth.

      Similarly, there would be elements of the current system that would quickly be redundant, especially financial sectors. So the only overarching difficulty is what would these people do?

    • The financial system, certainly as we know it today, is wholly predicated on growth in perpetuity, so it’s hard to see how it could be adapted (though it might be replaced) in a post-growth/de-growth world.

      Then we have the issue that we might term “entitlement”, or even “petulance”. If we imagine a government decreeing that – on environmental, economic or other grounds – ‘each person is limited to one return flight annually’, or ‘no household can have more than one car’, I think we can imagine the anger which, at the least, would get that government voted out of office.

    • Unless of course the voting population are aware of the rising energy costs of energy, oil and gas depletion, hard limits to critical RE materials and the human growth crisis.

      Within this context, the voting public will no doubt feel assured that the government understands the Commons Dilemma.

    • Indeed so – but how are the public going to become aware of this, when everyone from businesses and governments to economists and the media tells them otherwise?

    • @Steve Gwynne
      I would ask the question a little differently:
      “When is the public going to begin to perceive that the current system is not working and that fundamental change is required?”
      And I submit that the answer is:
      “When they start getting strong feedback that doing more of what we have been doing is creating pain for ourselves and even more for our children and grandchildren”

      We can add another series of questions:
      “Why are TPTB obscuring the feedback process?”

      I will suggest that the answer to that question is:
      “Because accurate feedback would destroy the current power structure, and they are not unaware of that”.

      Recall that in 2008 some Wall Street people admitted that things were insane leading up to the collapse, but that:
      “As long as the music plays, you have to keep dancing”.

      Now I will veer off into some REM sleep-induced conspiracy theory, which is not inconsistent with what I said above:
      “How did the Colonial Pipeline pay-off the hackers?… With bitcoin!”
      “So what is the next logical step?… Ban bitcoin!!!”
      “Does that block the exits and keep TPTB safely in their positions? Well… probably better than doing nothing.”
      “So was the whole thing a hoax? Is this like the Tonkin Gulf…unfortunate to have to kill some people, but necessary for the ‘greater good’”

      Don Stewart

    • Not sure what you are suggesting Don.

      Should the Conservative government abandon growth towards net zero, abandon the quest for productivity and efficiency gains, abandon the quest to reduce spatial inequalities, abandon levelling up, abandon building back better in favour of voluntary simplicity, oil and gas depletion, agrarianism, reducing standards of living and reducing quality of public services.

      Should the latter come with or without open borders?

    • @Steve Gwynne
      It seems to me that the whole project as envisioned by Ambrose depends on hydrogen. But I read people like Ugo Mardi who worked on hydrogen, and people like Alice Friedemann who point out all the problems, and my enthusiasm is much reduced compared to Ambrose. If the Conservative government wants to pursue it, then they should raise taxes in order to fund the transition. I think both the US and the UK are at the end of the debt path. In order to fund the transition, consumption must be curtailed. If the transition turns out to be a mistake, then it was just a gamble that failed. In the meantime, there are lots of ‘no brainer’ things which need to be done, such as the total reform of the food system and the sick-care system. Personally, I prefer to tackle the no-brainers and wait for some concrete demonstration that the hydrogen economy is actually feasible….Don Stewart

    • I guess the paradox of the current situation is that progress towards net zero will include innovation producing productivity and efficiency gains which if distributed correctly will reduce spatial inequalities. This is the current policy choice to theoretically boost prosperity, job growth and deal with secular stagnation.

      Of course all of this is dependent on the ECoE which will be reflected in surplus energy availability and energy prices.

      Within this policy framework, politically there isn’t a need to be explicit about prosperity degrowth until such a time that it is obvious that the rising ECoE is derailing political ambitions associated with Net Zero.

      As I said before, it isn’t politically expedient for the Tories to explicitly raise awareness about the critical importance of surplus energy and the fact that we have already passed peak prosperity since this will put them on the back foot in relation to Labour.

      As such, all hopes are on the green transition to create a sustainable, resilient and sufficient future which is more important for most people than the sole idea of growth.

      Brexit for example was won on the basis of having the necessary independence to create a sustainable, resilient and sufficient future for Britain. I for one did not argue once for growth. And to my knowledge only certain Brexit factions were arguing that Brexit would generate growth.

      In this respect, I think most people, especially the working class, were more concerned about the race to the bottom in terms of wages due to mass immigration and the fact that a growing population was reducing the quality of public services and inflating house prices and putting pressure on our agricultural land and ecology.

      In this respect, prosperity degrowth directly led to Brexit with current economic policy the attempt to sustain reasonable living standards which is predominantly being led by narratives about post Covid recovery.

      When this bubble bursts then I imagine this will be the start of the paradigm shift which may be as soon as the next election cycle. It is then that a government’s competence will be measured by how they implicitly and explicitly manage prosperity degrowth. However, at present, the hope is that the ECoE of RE will improve assisted with productivity and energy efficiency gains since these will help to sustain surplus energy availability.

      In the meantime, I’m focusing my attention on orthodox economic think-tanks in order to highlight the deficiency of their models as well as create bridges with more heterodox economic think tanks like Rethinking Economics and Core, when I have some time and energy!

    • I would add that some of these issues, certainly in the financial area, are fast moving from the theoretical to the ‘actual’.

      For instance, if governments and central banks carry on pouring new credit and money into the system, the result is the hyperinflationary destruction of the value of money. There’s plenty of scope for debate about where this point is reached, but not about the principle itself.

      Likewise, if we stop pouring new liquidity into the system, asset prices crash and the degradation of collateral causes cascading defaults. Again, we can debate the point at which this happens, but the principle seems unarguable.

  6. The moral problem and danger is that much of this credit has been re-hypothacated using the same assets on multiple occasions, and is based on credit created by banks ‘ out of thin air’. Why should those who have benefitted from such a Ponzi be allowed to continue, whilst those who have created wealth through more productive, traditional capitalistic means of creating value and wealth, then not receive any returns from their investment and hard work ? Politics is always a zero sum game, with wealth being redistributed to one group at the expense of another, and it seems particularly egregious that the financial manipulation should continue, warping the natural time value of money and allowing future wealth to be dragged forward in time to the present, to the detriment of future generations, who are left holding the empty bag.

    • This also raises the question of cross-collateralization, as experienced in Japan in the 1980s.

      In Japan then, you could borrow to invest in stocks – their value rises and you use the resulting equity as collateral to invest in property. This rises, creating new equity which you use as collateral to invest in, say, works of art (or more stocks, or more property). The whole thing becomes a cross-collateralized pyramid. At one point, prices per square metre were such that the grounds of the Imperial Palace in Tokyo were, in theory, worth more than the entirety of land in California.

  7. Money being a claim on future energy is an easy concept. I’m left wondering if the disconnect isn’t started right at the first transaction. The same dollar gets to make a claim on future enrgy time and time again. The energy only gets one pass.

    • @Red
      The words of Nate Hagens ( already mentioned in this blog but well worth repeating ) succinctly illustrate the situation you describe.

      “Our culture is energy blind.
      We draw down the principle and consider it the interest”

  8. Reading this had my hairs standing on end.

    When the interrelatedness of the ENERGY, “GROWTH” AND THE LIABILITY VORTEX are seemlessly woven together, we are going to experience a big bang.

    Well done Tim getting this far 😊.

    This piece comes with great timing and so was able to inform several economic development think-tanks that their modelling is currently deficient and without an understanding of the economy as an energy system, modelling and the policy prescriptions associated with it will be unmatched with the energy conditions of the real world.

    For anyone that might be interested ….

    To begin we have the ever relevant Dani Rodrick, despite still ignoring surplus energy economics, who dismisses grand narrative macroeconomic models and instead considers the key principles of contingency, contextuality, and non-universality as the basis of a truly useful economics.

    https://www.project-syndicate.org/commentary/economic-policy-must-abandon-universal-paradigms-by-dani-rodrik-2021-05?referral=271986

    This builds on the work of
    https://www.core-econ.org/

    and so at least we are moving in the right direction.

    In a separate thread, the Resolution Foundation are launching their ‘The Economy 2030 Inquiry’ which entirely ignores surplus energy availability and instead appears to imagine a future world with infinite abundance of surplus energy and as such infers that decreasing economic prosperity is solely a product of bad governance and market failure.

    https://economy2030.resolutionfoundation.org/

    Their emphasis is on productivity gains, unleashing growth towards net zero and spatial inequalities which increasingly appears to be the new economic consensus.

    In combination with contingency, contextuality, and non-universality, these laudable prosperity goals seem to be the right prescription but clearly need to be contextualised within an environment of decreasing per capita surplus energy.

    In this respect I took it upon myself to inform the above people and organisations with reference to the Economy 2030 Inquiry, including Onward, a centre right think tank similar to the Resolution Foundation, the critical importance of surplus energy economics.

    As follows …

    Without acknowledging that the economy is predominantly an energy system and not a financial one, this report fails to identify that it is the rising energy costs of energy (or reducing energy return on energy invested) that underlies the reduction of overall material prosperity.

    https://t.co/PoCiU4Wojs

    https://t.co/HlzONnEq3P

    https://t.co/7IXczogyg3

    In particular, the rising energy costs of carbon energy is decreasing the amount of surplus energy to drive material prosperity gains and is set to further reduce in the coming years with renewable electricity unable to provide for high energy density activities.

    As such, the main barriers to sustainable and resilient growth is the production of high density energy and the global competition for diminishing per capita critical material resources as the global economy transitions to net zero and the human population continues to grow.

    Without contextualising these macroeconomic effects, this report fails to highlight that material prosperity degrowth is a direct product of reducing surplus energy and as such, fails to note that future growth is inherently dependent on the global availability of surplus energy.

    In this respect, the Economy 2030 Inquiry needs to contextualise the constraints of surplus energy and how these constraints will affect the ability and agility to enact productivity gains and the transition towards net zero within a degrowth world.

    This means any inquiry will need a specific focus on ‘transition efficiencies’, so rather than a national and global rush towards net zero which will result in a rapid increase in carbon energy consumption and the consumption of critical materials, product longevity for example, including the use of carbon energy transportation, will be an important factor along with other circular economy considerations. In this respect, monitoring the efficiency of surplus carbon energy use is a critical consideration in terms of investment, productivity and net zero.

    Currently this Inquiry appears to be predicated on the erroneous belief that surplus energy availability is increasing when in reality it is decreasing and is set to further decrease as carbon energy is progressively made redundant.

    End …

    We are definitely making headway and as we better understand the likely economic dynamics of per capita surplus energy degrowth, we’ll be able to formulate novel concepts like ‘transition carbon energy efficiencies’, decomplexification, delayering etc and other attributes of degrowth and circular economies 😊.

    That is until we invent an alternative to high density carbon energy.

    • Thanks Steve

      The situation as I see it is at once disturbing and frustrating.

      The disturbing part is that – ‘though I say it myself, who shouldn’t’ – I really can’t see anything that disproves the kind of interpretation that we discuss here.

      The frustrating bit is that these basic tenets and associated observations don’t seem difficult to grasp, yet we’re surrounded by what seems like wilful ignorance or self-delusion on so much that seems obvious.

    • There’s an important ECoE dimension to the carbon issue.

      CO2 emissions are linked to the total FF energy that we use.

      But prosperity is a function of surplus (ex-ECoE) energy.

      Therefore, rising ECoEs, by driving a wedge between total and surplus energy, creating a worsening relationship between carbon emissions and economic prosperity.

      The same also applies to the FF energy that we use to create renewables capacity.

    • I certainly share your feelings Tim.

      If after my recent share, energy economics is not incorporated into their models, then the wilful ignorance of the rising energy costs of energy will be interpreted by me as naked politicking in that the lack of real growth can be used as a political stick to beat the opposition for economic mismanagement.

      This means the Conservatives will have to incorporate surplus energy economics if material prosperity continues to degrow per capita despite some productivity gains, realisation of net zero or reduction of spatial inequalities.

      Thus, if there is wilful ignorance, this or the next election cycle will reverse that.

      So one could argue that wilful ignorance is due to the inherent weakness of Democracy in that vulnerability can be exploited for political point scoring.

      For example, if the Conservatives admit to surplus energy economics and material Prosperity degrowth, they would in effect be admitting that people have been getting poorer in real (energy) terms which would allow Labour to continually bang on about it.

      This would admittedly shift the conversation towards surplus energy and how to mitigate prosperity degrowth but will put the Conservatives on the back foot.

      By not publically surplus energy, Labour can still get a step ahead of the Conservatives in terms of policy which potentially explains their recent announcement that their policy framework is going to make a paradigm shift. Resolution Foundation is left centre so no doubt they will be creating policy for Labour.

      In other words, surplus energy is the next quantum leap and it will be the next policy battleground either in this election cycle or the next. Probably the next.

      In sum, the Left will need to make that shift to distinguish themselves apart from the Tories since both are currently on productivity gains, growth towards net zero and spatial inequalities with the Left favouring State Welfarism in balance with Corporate Welfarism alongside global Wokeism and the Right favouring Corporate Welfarism in balance with State Welfarism alongside national ecological rationality. Something like that anyway.

      So the Tories aren’t going to go public with because it allows Labour to exploit that natural vulnerability and Labour aren’t going to go public because it effectively let’s the Tories off the hook.

      So it is more a question of who will benefit the most and at the moment I/we are ensuring Labour need to distinguish themselves beyond the current economic consensus by presenting a policy framework that is able to go beyond this consensus as well as undue the damage and the deterioration of trust as a result of dogmatic Wokeism.

      This in my mind is the only advantage Labour has so if they want to be seen as a credible government, they will need to play that card with the Tories closely monitoring the situation along with potential policy proposals.

      That’s where we come in with our novel policy concepts and considerations with your most recent being the inverse relationship between carbon emissions and prosperity as ECoEs increase.

      The law of diminishing surplus carbon energy and the direct relationship with material prosperity and the inverse relationship with carbon emissions within the context of human population growth!!!

      Overall, I agree, we need All heads on board otherwise it is too overwhelming for the few of us so really we are just waiting on the next policy move so, for me, critiquing (holding to account and scrutinising) think tanks for their highly deficient modelling is a part of that democratic process 😊🏵️🌍🏡

    • Looking at this neutrally (in a party political sense), probable changes are so profound that neither side can take ownership of the new, or foist responsibility on the other for the ending of the old. In politics, as in business, the prizes are likely to go to those who get there first, and the brickbats to those who get there either late, or not at all. It’s going to be difficult in the UK, and even worse in the US.

      For the “right”, the challenge will include de-linking the values of aspiration from dependency on growth. The Conservatives do at least talk about “Building Back Better” rather than “Building Back Bigger” (presupposing the distinction is recognized, and intended).

      The Left may have bigger opportunities, but also even bigger obstacles to change, because they’ll have to go to, or maybe that’s “back to”, the prioritization of economic over other issues, much in the same way as ‘old’ Labour highlighted issues of economic inequality. In UK terms, Boris might be able to adapt to this, but Labour would fare better under an Attlee or a Hardie than under any of the current leadership.

    • Yes I agree Tim. For me, underlying the Conservative ethic is the maxim, survival is work which in the modern economy translates as aspiration on the basis that survival is work is taken for granted. Hence, equality of opportunity and the tolerance of soft hierarchies and soft (vertical and horizontal) inequalities.

      As you say, Labour has a harder job since one of its goals is survival is freedom which translates into the desire to create fully automated communism for example or create equalised prosperity at middle class standards of living. Thus, as you infer, the Left will need to lose a lot of its material idealism in order to accept the hard limits of surplus energy. It is interesting that Marx had very little to say about the energy basis of the economy, only the social relations around production. Not that I have read him in any detail.

      That said, at present, despite the energy constraints underpinning the economy, there are expectations of growth towards net zero with perceptions of growth as spatial inequalities are reduced and productivity gains and efficiency gains are made.

      I’m presuming a lot hinges on the oil price and other base effects driving inflation.

      What do you consider to be the corollary to surplus energy. Cost energy, sunk energy???

    • On the latter point, my term is ‘cost energy’. This can be considered under the two categories of ‘capital’ and ‘operating’, conventionally stated financially but needing to be understood as energy costs.

      In the UK (and elsewhere), the original aims of the Labour movement were economic, as in “workers” versus “bosses”, “labour” versus “capital”. The policies resulting from this ranged all the way from redistribution to collectivism, and included terms and conditions of employment, safety at work, security of employment, opposition to “truck”, sick- and holiday-pay, support for “collective bargaining” and so on. All of these fall into the “economic” category of policy. If you look at the UK “Left” during the inter-war years – including the General Strike and the Jarrow March – the focus was very much on economic issues.

      As de-growth sets in, there’s a plausible case for the Left re-emphasizing these economic issues.

    • Net zero means no new oil and gas fields, warns IEA –
      International Energy Agency calls for abrupt halt to fossil fuel era and warns demand must fall by 75pc to meet climate change goals.

      https://www.telegraph.co.uk/business/2021/05/18/net-zero-means-no-new-oil-gas-fields-warns-iea/?WT.mc_id=e_DM1424094&WT.tsrc=email&etype=Edi_FAM_New_ES&utmsource=email&utm_medium=Edi_FAM_New_ES20210518&utm_campaign=DM1424094

      Executive director of the IEA Dr Fatih Birol says

      “Doing so requires nothing short of a total transformation of the energy systems that underpin our economies. We are in a critical year at the start of a critical decade for these efforts.”

      On the same page but with a different narrative 🤔

      ….

      Yes I’m sure economic issues will be the bread and butter of politics for both the Left and the Right.

    • I guess as a species that had the privilege to grow exponentially on the back of cheap carbon energy we should be thankful for the technological development we achieved.

      This means at the very least we can have a comfortable level of subsistence living as long as we can keep in check the human growth crisis.

      Obviously we will have a lot of adaptation to do and at present we have little idea of the fate of the human species beyond net zero 2050 but we still do have agency and the ability to shape decisions.

      In that respect, Democratic feudalism doesn’t sound so bad 😊

  9. Another toxic aspect of ‘smoke and mirrors’ speculative practices enabling a non-productive minority to live for free, is that those who would start businesses, or invent, anything useful really, are put off trying because it seems easier to lie, cheat and steal in a kleptocratic system. This mentality once pervasive is very very hard to reverse, leading to cartels, monopolies in general and rentierism. The entrepreneurial types will take their efforts elsewhere that they can get traction and the resulting brain drain will entrench the negative attitudes. Also, ordinary people will give up any efforts at investment to help their future resilience if the risk in investing continues to escalate to the extent that investment is associated with glorified gambling. Anecdotally, most people I know give this answer when asked why they don’t invest more of their savings as a hedge against adversity.

  10. Context
    We can never rule out dumb luck, but I think that putting our current situation into a larger context may yield some insights. There have been two ‘golden ages’ for humanity. The first was hunter-gatherer culture with low population density. People could hunt and gather in a couple of hours per day all that they needed. They spent a lot of time lounging around and telling tales around the campfire. The second golden age was the age of horticulture. It wasn’t agriculture as we now understand it, or even as European peasants and the people who settled the Americas (displacing the native Americans) understood it. It was essentially managing the forests and grasslands by selection of species, periodic burning of the forest, and strategic burning of grasslands. We can still find the vestiges of horticultural societies in the Pacific Northwest with careful studies of what superficially look like virgin forests, and there are still Aborigines in Australia who know how to use fire. There are very few hunter-gatherer societies left, but they have been intensively studied in recent decades. Both golden ages made strategic use of energy. Hunters and gatherers do more work in a day than the average American couch potato does in a week, but burn exactly the same number of calories because the human body can radically increase the efficiency of energy use. The horticultural golden age basically steered the energy of the forests and grasslands and fire in ways beneficial to humans.

    But, as human populations grew and land grew scarce, the temptation to intensify agriculture became a powerful motivation. When an intensive agricultural society met a hunter/ gatherer or a horticultural society, the intensive agriculture people, who had invented sky gods, felt it their moral duty to either convert the unwashed to their version of God’s Will, or else exterminate them. At any rate, it is clear that the Native American culture could not peacefully co-exist with the culture brought by the Virginia colonists seeking gold and, failing to find that, turned to slaves. Nor could they co-exist with invisible lines drawn on maps by the likes of George III and Thomas Jefferson.

    The world we are living in right now is the culmination of the slave economy…now we have energy slaves in the form of fossil fuels. But, as noted above, the dark side of using those slaves is that they pollute the world which sustains us and they cause us to lead sedentary lives eating food we are not designed to eat and creating stresses we are not designed to deal with. Richard Heinberg’s essay (the link I posted) tells us that population has increased by a factor of 8 and energy intensity has also increased by a factor of 8, meaning a 64 multiple in terms of power. Leaving aside any quibbles about exactly what the number is, it is clear that practically nothing we have built is directly useful in the world our grandchildren are likely to experience. So while a hunter/ gatherer’s “wealth” largely consisted of a healthy body, encyclopedic knowledge of the environment, and good social relationships, our current notion of wealth as either money or capital goods is doomed to failure.

    The insight that the current system is doomed, and the effort to save what is best while also selecting what is still viable from, particularly, the horticultural past is not new. The realization was the impetus for the work of Bill Mollison and David Holmgren in Australia, and the invention of Permaculture. Nevertheless, there are enormous barriers to the success of any reversion to horticulture. For example, one recent article stated that ‘all Permaculture starts with the management of water’. But water must be managed on a watershed basis. The arbitrary lines on maps drawn by King George and Thomas Jefferson and even the surveyor Henry David Thoreau, are inconsistent with unified management of water.

    My guess, based on my experience, is that 3 decades ago it was still possible to make a fairly smooth transition to an ‘advanced horticulture’ system. But since that time, the degradation of land, the changes in climate, the pollution of water, and the increase in population have made everything very much harder—as the Limits to Growth predicted. As a simple example, almost all of the local small farms now use plastic tunnels to grow vegetables…partly because the weather has become so erratic. In the absence of plastic, weather control mechanisms are very much more labor intensive (e.g., trenches for below ground planting in Ukraine and the masonry walls which surrounded Parisian gardens).

    My reluctant conclusion is that I am not smart enough or wise enough to see how my grandchildren are going to get through this. The center of gravity of my advice has shifted from variants of regenerative agriculture and kitchen gardens to restoring health. I think that escaping from the clutches of the forces promoting disease is easier than figuring out how to get back to the golden age of horticulture. Health is the form of ‘wealth’ that I know enough about to possibly be helpful (I’m part of the 3 percent). But I also know a little about kitchen gardens.

    Don Stewart

    • My reluctant conclusion is that I am not smart enough or wise enough to see how my grandchildren are going to get through this.

      The details their lives are unknown, but broad brushstrokes are clearly visible. Your grandchildren will not be living in a city because cities, as we now know them, require massive imports of resources for which there will be insufficient energy supply. They may live on the outskirts of (the remains of) current cities if they can still be close to where food is grown.

      They will probably be directly involved in the growing of food. Food growing societies can be organized in any number of ways, from rather egalitarian societies of yeoman farmers to feudal lord/serfs to landowners/slaves. We won’t know what system will prevail in any particular location until those societies self-organize.

      They may live as predators, who take resources from those who create them. It is likely that some form of militarism will pervade all of the societies that form in the aftermath of modern civilization. Only a return to nearly universal hunting and gathering would forstall widespread military conflict, but that would mean the surviving population would be extremely small, so small that the odds are very high that our grandchildren will not be among the few folks who might join those hunting and gathering bands.

      In sum, overshoot will mean a significant population dieback (for humans anyway). If you grandchildren are lucky, they will survive and scrape together a living for themselves in the countryside. Low energy availability will mean the odds are good that they will be among the 90-95% of the population directly involved in growing food.

      Climate change will make everything more difficult, so they will be profoundly grateful for places which make growing food easier. The best legacy we can leave our grandchildren’s generation is really fertile soil, lush pastures surrounded by strong fences, and reliable, low-energy sources of drinking water. Add on a small woodlot for fuel and building materials and they will be given the best chance possible.

      Creating these kinds of spaces for our grandchildren’s generation is the best thing my generation can do for them, so that’s what I’m doing. I encourage others to do the same. It would best for this kind of effort to be organized by states, but I see little chance of that happening, unfortunately. Good luck to all our grandchildren!

    • @Red,

      Great post from Murphy! I had not yet seen this recent post, so thank you for the link. I hope he does a follow-up post on what the actual collapse might look like. It will be chaotic and horrific but still something that can be planned for, at least a little.

      Since any reasonable plan will involve moving out of a city, I wonder when the exodus will begin (if it ever does)? We’re all preppers now, whether we know it or not, but doing nothing is very poor prepping.

  11. Collapse of the Reserve Currency?
    The current Max Keiser and Stacy show is a fairly hysterical take on the current debacles. Since they are neighbors, they are experiencing the same gasoline shortages I am experiencing…which brings back images from the 1970s and makes all the other problems loom larger.

    The guest in the second half of the current show ends with a prediction of hyper-inflation, quoting John Williams current figure of around 7 percent inflation, which I think is not too far from Dr. Morgan’s number. The guest notes that if the real interest rate were to rise to 4 percent above the real inflation rate (as it did under Paul Volker in the 1970s), the US government would be bankrupt very quickly because the debt is much higher than it was in the 1970s. So does Powell at the Fed think he can continue to create money, avoid hyperinflation, keep real interest rates negative, preserve the reserve currency, and pay people not to work?

    I hadn’t heard this stated quite so bluntly. But it adds another wrinkle to the current dis-ease.

    Don Stewart

  12. Hi y’all,
    just a heads up that Nate Hagens has released a new video talk,
    it’s his 2021 Earth Day presentation,
    it’s essentially a revision of the reality 101 series with extra stuff that he’s developed since,
    at 2hrs 52mins it’s a bit daunting but if you watch it on youtube and expand the description below the video it’s broken up into 35 segments with a shortcut to each segment,

    it’s presented as a list of myths to be busted, it does cover GDP, growth, money and the possibility of continuing BAU using renewables without fossil fuels,
    it ends with some suggested interventions and wild ideas to consider,

    if there was ever a public conversation between Tim and Nate I’d love to be able to sit in on it.

  13. @Red
    It is good to have Tom Murphy back in action. It is a crime to assign someone with his gifts to an administrative job for 5 years. Kind of like a prison sentence….Don Stewart

    • I’ve not yet looked at this, but assume it has a lot in common with the IEA plan published earlier this week. If so, it would share a lot of the same fallacies.

      In fairness, the British government deserves credit for recognizing the environmental imperative. Also in fairness, they can hardly come out and say that current lifestyles, not just in detail but in fundamentals, are inconsistent with the prevention of environmental disaster.

      My view, as you know, is that decision-making is hamstrung by reliance on economic models which assume, wrongly, that the economy is wholly a monetary system. The falsity of this predicate means that these models cannot work.

      The challenge is to develop and promote models which are based on the reality of the economy as an energy system.

    • Dr Morgan,

      Your assertion, The challenge is to develop and promote models which are based on the reality of the economy as an energy system. is correct, but numerous models have been developed and promoted that are based on the energy component of the economy. Most of them are from ecological economists who have gained little traction in governing circles or with conventional economists.

      But even politicians who are in thrall to conventional economic models recognize the importance of energy, the dangers of CO2 emissions, and the imperative for an energy transition. Hence the proposals for Green New Deal type programs for conversion to renewables and all the talk about Net Zero 2050.

      The real challenge is getting people to understand the risks inherent in a civilization that uses too much energy, whatever the source. Getting people to accept an economic model that is based on energy will be far easier than getting people to accept models that place the human economy subservient to the health of the global ecosystem. That kind of acceptance would mean accepting plans for massive reductions in human economic activity, energy consumption and human population.

      Getting people to accept economic models based on energy would be just the first turn of that Sisyphean boulder at the bottom of the mountain. There’s a long way to go to the top and I expect the end result will be the same as it was for Sisyphus. In the end, it will be Mother Nature doing some ‘model promoting’ of her own.

    • I agree with all of that, Joe, but let me come at this in a slightly different way. My perspective, of course, is influenced by the fact that I come from a finance rather than an ecological economics background.

      Net Zero/Green New Deal has become the orthodoxy (in the West, anyway), and politicians are to be commended for grasping the importance of the environmental challenge. The new report from the IEA will reinforce this orthodoxy. I share the environmental and ecological concern.

      But the problem with this is the claim that, far from curbing our economic expectations, transition away from fossil fuels can drive “growth”. The most depressing aspect of the IEA report is the reliance, yet again, on GDP. The environmental ambition is commendable, but the economic interpretation is gravely mistaken. Far from growing rapidly in the ‘green’ future, underlying output per person isn’t even growing now (beyond a partial, problematic and cosmetic “recovery” from covid). The official number – showing that global economic output fell by just -3.3% last year – shows how misleading GDP-based interpretation has become.

      We don’t even need to look at equations such as borrowing/growth ratios, or into issues like ECoE, to confirm this. The situation NOW is that we’re in a ‘stimulus trap’. If we carry on pouring stimulus into the economy, inflation takes off. If we ease back on stimulus, we get asset price crashes and a cascade of defaults, which would be nearly as bad – and even more immediate – than hyperinflation. Decision-makers may think they can finesse this trap, but this ignores the fundamental issue of an economy now so weak, over such an extended period, that it’s become stimulus-dependent. The methodology is still one which makes assumptions about the future size of the economy, and only THEN works out how much energy, and in what form, will be needed by a future economy of the assumed size.

      In other words, we’re combining laudable determination on the environment with false, self-deluding interpretation of the economy within the common factor of energy.

  14. The latest from Ambrose.

    The IEA’s Damascene conversion: net zero makes us richer and cuts energy costs for the poor.

    The era of oil and gas will soon be over – the industry must now reinvent itself to find a place in our new world order

    https://www.telegraph.co.uk/business/2021/05/20/ieas-damascene-conversion-net-zero-makes-us-richer-cuts-energy/?li_source=LI&li_medium=liftigniter-rhr

    The International Energy Agency has switched sides. It has carpet-bombed the fossil incumbency that it once defended so doggedly.

    The shibboleths of the last decade suddenly fall away. The economics of climate change turns upside down. The future headache becomes the risk of failed petro-states with collapsing revenue streams and an obsolete business model.

    Slashing CO2 emissions and switching to renewable energy is not a ‘cost’ or a constraint on rising affluence: it lifts global GDP growth by 0.4pc a year over the course of this decade. World output is 4pc bigger in real terms by 2030.

    That is the verdict of the IEA (with the IMF) in its encyclopedic roadmap on global energy on the way to a 1.5 degree world. Net zero by 2050 is the closest thing we have to catechism. The report is the bell that tolls for the fossil age. Not even natural gas escapes the cull.

    “We have never seen anything like this before in the history of the IEA. There’s been a universal thumbs up from the climate community,” said Dave Jones from the anti-coal group Ember.

    Net zero does not cost jobs: it replaces five million lost in oil, gas, and coal with eight times as many jobs for engineers, electrical experts, offshore operators, solar technicians, or lithium and rare earth miners, whether directly or indirectly.

    It does not raise energy costs: it cuts the average bill for households on heating, cooling, electricity, and car fuel from $2,800 to $2,300 a year by 2030 in advanced countries. From then on it is a canter. The energy share of disposable income halves from 4pc to 2pc by mid-century. It is tantamount to free energy.

    It enables hundreds of millions of people in mid-tier economies to join the middle class, to buy cars and share Western living standards at no net increase in the percentage of their take-home pay.

    Renewables are not virtue-signalling by Davos Man, as the IEA’s director (an ex-Opec official) used to relish saying with a finger-wag every year at the Alpine Mecca of green pieties. Net zero does not leave the world’s poor behind: it saves them. It is the cheapest way to reach 800 million people with no electricity, and a further 2.6 billion people with no clean cooking option.

    Rural Africa leap-frogs beyond the old model. It does not need coal plants with a centralised grid and miles of pylons, or diesel driven hours into the bush at ruinous cost. It goes straight to micro-grids based on solar power and batteries, getting cheaper by the day.

    Emerging market and developing economies

    Net zero does not require technology yet to be invented, contrary to the claims of philanthropist Bill Gates, who persists in stating two falsehoods: that “using today’s technology, it will be virtually impossible to meet our goals”: and that “nearly all of today’s existing zero-carbon technologies are more expensive than their fossil-fuel counterparts”.

    Mr Gates long ago fell under the spell of Vaclav Smil and the late David MacKay, who got the renewable cost curve wrong by orders of magnitude but remain pin-up professors for the sceptics.

    Nor does net zero mean the demise of oil and gas companies. They can ride the next boom because they command the engineering and project skills needed to produce green hydrogen and synthetic fuels –rather than talking about it – or to capture CO2 and turn it into a lucrative revenue stream.

    The proviso is that they must reinvent themselves in time as Total, Equinor, Repsol, Shell, and BP are already doing. A defiant ExxonMobil has less of a place in the IEA’s post-combustion world: the report calls for a halt to all new oil and gas projects as of this year, and forever.

    Global oil demand falls from 100m barrels a day before Covid to 24m by 2050, mostly for plastics and hold-outs such as aviation jet fuel (I dispute that – none will be needed for jets). The price slithers to $35 in 2030, and $24 in 2050. The $100 plus levels of the glory years become a memory.

    This scenario does not preclude a final triple-digit swansong for crude in the early 2020s as economic recovery collides with a seven-year drought in oil investment. Indeed, the greener we go, the greater the immediate oil spike, since Big Money will not fund drilling when they know that the game is up and that a regulatory sledgehammer is about to hit.

    A crude bull market over the next two or three years will raise the pump penalty on petrol, quicken the switch to electric vehicles, and therefore be the last hurrah. The IEA says EVs will make up 60pc of new car sales by 2030 under net zero. I think the wipe-out comes sooner.

    You could say the IEA’s Damascene conversion was forced upon it. The agency is supposed to speak for the OECD bloc of rich democracies, and nearly all preach net zero. It would have been institutionally suicidal to resist the Green Deal politics of Biden, Johnson, and von der Leyen.

    It is alleged that the first drafts were less evangelical, and less fatal for fossils. The final draft, post-Trump, is diplomatically aligned with the thinking of US climate envoy John Kerry, the big beast of net zero. This was wise.

    That said, the agency still fails to ‘get’ renewable technology (or feigns not to). This has always been its blindspot, the source of so many forecast errors since the dawn of wind and solar. “They have been heroically bad,” said Kingsmill Bond from Carbon Tracker, a forum of ex-City bankers.

    The IEA stated as recently as 2019 in its World Energy Outlook that the levelised cost of solar was $95 MWh, to the consternation of those who install it. A year later it had to slash the figure to $50 MWh, and that is already history. Desert solar in Abu Dhabi is being developed today at under $14 MWh.

    Mr Bond says the IEA is repeating the mistake, this time by assuming that the annual fall in solar costs will abruptly slow from 18pc to 5pc in the 2020s and to 1-2pc thereafter. The compound effect of that little tweak radically changes the projected energy landscape.

    It slows electrification and creates more space for the survival of coal and gas, fitted with carbon capture (CCS). “The IEA is manipulating the figures because if it put in realistic estimates, it would finish off fossils even sooner,” he said.

    In my view, fossils may hang on in power plants, but if so it will be because of a step-change reduction in the cost of CCS, perhaps using the British-invented Allam cycle. The default setting we should assume is that ever-cheaper solar will sweep the board unless something just as clean and cheap can match it.

    Seifi Ghasemi, veteran head of the US industrial group Air Products, put the net zero case succinctly at this year’s CERAWeek, explaining why he was betting $10bn and the firm on ‘green’ hydrogen made from renewables via electrolysis.

    “The way we see the future, in 20 to 40 years from now, all the energy that mankind uses will come from wind, solar, and hydro. 40pc of this will be used directly to power EVs, heating, light, air conditioning, and cooking. The rest will be used to break down water and produce hydrogen. That will be the source of energy to drive trucks, ships, trains, and industries like steel,” he said.

    That is becoming the market orthodoxy. Free enterprise is pulling forward net zero and is a step ahead of the IEA. But at least the agency has done the world a service. It has yanked the rug from under the feet of those with a vested interest who keep repeating that we cannot afford to stop global warming.

    Reading the report, you could conclude if we did not have a climate crisis, we would need to invent one in order to make humanity richer, healthier, safer, more self-sufficient, and less vulnerable to hostile geopolitics. And yes, we crack CO2 emissions as well. Hallelujah!

    • this sounds like a technotopian fantasy, the pinnacle of human folly, it’s what I anticipated and it terrifies me.

    • The future, it seems, is fantastic. The economics of this transition are so good that we’ll have no problem paying for it. GDP is going to grow dramatically. Energy will get cheaper despite sharp increases in the numbers employed supplying it. Provided we can find the money, finding the raw materials is just a matter of paying for them.

      The problem is that, over twenty years pre-covid, each $1 of growth came with nearly $3 of new debt, plus upwards of $3 of net non-debt financial commitments. If that relationship holds, and GDP does indeed grow rapidly, what happens to what I call ‘the liability vortex’?

      Meanwhile, as of right now, the economy is enmeshed in a stimulus trap – if we carry on with stimulus, we trigger soaring inflation, but if we ease back on stimulus, we trigger asset price crashes and a cascade of defaults.

      Don’t get me wrong – I’m all for optimism and positivity, and I see no alternative to renewables.

      But I’m not persuaded by this IEA road-map.

      Next project here – spell out what SEEDS is saying, and why it’s saying it.

    • I think part of the transition matrix is monetary stimulus and as such, there aren’t huge concerns about the debt as long as interest rates are held down and inflation does not run out of control.

      We literally are in the realm of MMT and it is being used to finance the post carbon transition.

      Liabilities are no doubt a concern but the real concern is providing people with at least a sufficient standard of living.

      Money is simply energy tokens and yes money and the financial sector will hit material limits but these are factors to manage with tools we have not yet invented.

      The alternative is a sharp contraction of material prosperity and a roll back of modernism which will produce high density social instability which we haven’t got the tools to deal with either apart from the violent State.

      This social situation exactly mirrors the catch 22 of monetary stimulus.

      So yes the IEA are going to talk optimistically because they need to convince the markets and shareholders that their money is safe.

      Lastly, it needs to be understood that the post carbon world is not one that is trying to achieve perpetual growth, it is one that is trying to achieve a sustainable, resilient and sufficient future for All.

    • Hi Matt. Do you think you’d be feeling the same at the juncture of the original Industrial Revolution too as it replaced Feudalism and Agrarianism.

    • It is sheer nonsense. But “impressive” that they managed to reach this pinnacle. And nobody is laughing out loud at it…

    • The one piece of truth here buried amidst the happy talk is that global oil consumption is likely to fall from 100M bpd to 24Mbpd by 2050, but not for the implied technotopian reasons . The rest is sugar-coating to hide the terror.

      IMO

  15. 2Steve Gwynne…from Tom Murphy’s current blog…Don Stewart
    Also, beware of the fact that we go for the low-hanging fruit first, giving a distorted sense of broader suitability. Some folks at UC San Diego are evaluating ways to retire the campus’ methane-burning infrastructure for electricity, heating, and cooling—ideally generating and storing all its own renewable energy via solar. It’s very hard—both practically and economically. UCSD is an affluent land-rich campus in an affluent, progressive state in an affluent country; free of the political rancor typical of state and national governance; benefiting from guidance and leadership by sage academics rather than elected politicians; situated in a sunny and mild location; and not even trying to solve the thornier problems of transportation, shipping, or manufacturing. Yet it seems extremely unlikely that we can pull it off. If transitioning away from fossil fuels is prohibitive for UCSD, then who, exactly, could we expect to succeed in making a clean break to fossil-free renewable energy?

    • Hi Don. In the background the race is on to build modular nuclear reactors and at present, hydrogen, despite its high ECoE is currently the only viable alternative to gas.

      Other energy sources are being investigated, such as geothermal energy sources at the Eden Project in Cornwall.

      The key is a wide spectrum of sources so that the varying ECoE and varying energy density can be distributed and balanced throughout the energy system.

      I also see in farming sector news that mRNA is being investigated as an alternative to pesticides, think Covid vaccines for predatory insects.

      Like the original industrial revolution, this is a time for blue sky thinking with some ideas proving more productive and valuable than others.

      The survival of our species will be determined by the extent of our ingenuity, not our cynicism.

    • @Martin….the concentration of copper in mined ores has fallen by more than half in recent decades. No amount of adaptability is likely to be able to build a society based on electricity and scarce copper…at least any society which looks like our own. Contrast that pie in the sky with a simple project like forbidding the feeding of animals in confined animal feeding operations. That doesn’t prevent small farmers from using animals as essential partners in farming…but it huge reduces CO2 emissions, increases food availability, and reduces disease and the associated medical expenses. In my opinion, many of these technocratic ‘solutions’ are not able to see the elephants in the room….Don Stewart

    • @Steve Gywnn:

      “How do you replace all that copper wiring?

      https://www.autonews.com/technology/how-do-you-replace-all-copper-wiring

      I used to work with Carbon Nanotubes in my previous research area.

      Procuring was very expensive, due to the energy intensive processes involved in manufacture, and also the complex scientific instruments needed to ensure quality. Not to mention the stringent handling and safety requirements – more cost!

      They were deemed technically superior, but commercially unviable for use in consumer applications, so we were researching how to achieve the same results with good old silicon.

      Unless something has radically changes in the past few years I cannot see how CNTs can be viable for any mass market applications.

      Although I admit I am out of date on the literature. A quick look doesn’t reveal any significant developments, none that are proven anyway.

    • Hi Kevin.
      This link was simply an example that material science is aware of natural resource constraints and hence looking for alternatives.

      As you say, this technology is technically feasible but not commercially viable within the context of conventional economic models.

      If our economic system is based on sustainability, resilience and sufficiency, rather than perpetual growth, and as such we have an economy that is operating within a safe energy load, then the calculation is not profit but opportunity energy costs.

      ….

      The latest from New Scientist

      Rules of attraction: Strange chemical bonds that defy the textbooks.
      Our most fundamental ideas about how atoms and molecules stick together are changing. That is great news for creating new materials, but brings fresh challenges to understanding the world around us.

      https://www.newscientist.com/article/mg25033350-600-rules-of-attraction-strange-chemical-bonds-that-defy-the-textbooks/#ixzz6vUoA1XL6

  16. @Steve Gwynne, I think that “the solution to the problems created by our technology is more technology” doesn’t have a lot more runway. Moreover, portraying a vision of the future – as I take it that the IEA does – without ANY real feasibility assessment, solid details, facts and figures about how we would get there or what it would take to do so is in itself unhinged and irresponsible.

    The very short, non-technical portrayal of the hubris of, and unfounded soi-disant (“although I say it myself”) faith in human ingenuity is Goethe’s poem, The Sorcerer’s Apprentice. (Die ich rief, die Geister, / Werd’ ich nun nicht los – The spirits that I summoned / I now cannot rid myself of again). Immortally popularized and rendered psychedelically vivid in Disney’s Fantasia. Prior “ingenuity” got us where we are, but current and future ingenuity will lead us to even brighter days. Uh-huh. Optimism and cynicism are not the only alternatives here: in addition there are skepticism and realism. I can see though why no one would take the words of a poet as any kind of basis for understanding, guidance, caution or self-restraint. It’s so unscientific.

    Technical assessments of the possibility of a brighter techno future would be Alice Friedmann’s new book, Life After Fossil Fuels: A Reality Check on Alternative Energy, and Tom Murphy’s new textbook, Energy and Human Ambitions on a Finite Plant, which is available online as a pdf, downloadable for free. I am just beginning Tom’s book and look forward to reading Alice’s.

  17. After posting this I briefly watched most of the Disney adaptation again. Lol, so perfect. The master gives the apprentice the task of fetching water to fill up the cistern, then departs. The apprentice uses the spell book to conjure energy slaves, in the form of broomstick carriers, to do the job for him, then relaxes, falls asleep and dreams of wielding great power, enchanted with the idea of his own wizardry. He wakes to find the studio flooding, As the flood gets higher as the result of the tireless efforts of his multiplying energy slaves, he struggles to find a new spell to end it all while he and the spell book float on top the ever rising pool of water. Shortly after the water sucks him down a vortex, the wizard appears and ends it before the apprentice drowns.

    I wonder who Goethe thought our wizard would be, if any.

  18. @ Steve Gwynne

    “ ….. what is your alternative?”

    Is there an alternative set of physics? Just one, and implacable and indifferent at that.
    @ Steve Gwynne

    “ ….. what is your alternative?”

    Is there an alternative set of physics? Just one, and implacable and indifferent at that.

    • Pozzi. What is your alternative within the scope of thermodynamic laws, the constraints of available resources and the safe operating space of the planet?

  19. @Steve Gwynne
    I keep harping on feedback, while you keep wanting a ‘program’ that a political party can include in their platform and seek to tax people or regulate people in order to achieve certain goals. Albert Bates sent his message today (to his Patreon subscribers) outlining his underwhelm at John Kerry’s very modest climate goals. He begins with a Howard Odum speech which became the book A Prosperous Way Down, published in the year 2000. As a matter of interest, I see that the price of the book, which was a couple of dollars a few years ago, can now be bought for considerably more money. Which I suppose indicates renewed interest. But it is also available as a PDF for free. Here is Albert’s summary of what Howard told us, shortly before his death:

    “In describing the patterns of ecosystems, systems theorist Howard T. Odum said that “in the self-organizational processes, systems develop those parts, processes, and relationships that maximize useful empower.” By that he meant that ecosystems function as myriad parts, operating at all scales, coming together out of interest in their own preservation, but advancing that goal much better as a combined whole. For a biological system to work well, each separate part needs to be empowered for its own unique purview. Odum went on to say:
    If the maximum empower principle is recognized as also applying to human economies, then its statement for policy is: ‘Choose alternatives that maximize empower intake and use.’
    Applying that principal to the need to mitigate and adapt to climate change, Odum advised against imposing sacrifices on individuals because that disempowered them, with damaging repercussions. His advice was to clean up the economic feedback signals by trueing costs, subsidies and penalties. For example, better insulation for houses and more efficient refrigerators should have a price advantage rather than costing more. Today, if you burn a gallon of gasoline, the CO2 you emit will remain in the atmosphere for upwards of half a million years, penalizing your distant descendants, but costing you nothing more than the gas station’s sell-for price.

    According to a trio of biogeophysicists from the University of Chicago and Michigan State University, over the time that greenhouse emissions from one burned gallon of gasoline reside in the sky and trap heat from the sun, they will warm the surface of the Earth the equivalent of one Hiroshima A-bomb. Every gallon burned does that. We need to true those costs.”

    My point is that no Nanny State can bring about the needed changes (although perhaps a truly stupid Federal Reserve or Military might inadvertently accomplish it). I agree with Odum that the best thing to do is give people accurate feedback and not try to micromanage them. So, for example, all health insurance could be privatized and one’s health records made public for the insurance companies to see. Bad behavior at mealtime and sedentary habits would be obvious, and the cost of insurance would force everyone except the very wealthy toward more life affirming behavior. While we could quibble about the details, the principles are very simple and straight forward.

    Can we predict exactly how people will adjust to the new reality? I doubt it. But I suspect that people will not be running the air conditioner very much and that long drives to work will die very quickly. I would not promise my grandchildren that the way I have lived my life will seem primitive compared to their fabulous world. It’s a little like being drafted into the Army…one day you were free and the next day your were essentially a captive. Get over it and do the best you can.

    If you are correct that we can actually develop a program which makes everything better while saving the planet from destruction and gaining enthusiastic public acceptance, then I will have been wrong.

    Don Stewart

    • Hi Don. In my opinion, the democratic interface is the positive and negative feedback loops in operation.

      Sure, not all knowledge, information and data is perfect but empiricism and liberal values such as freedom of expression are in my opinion, empowered feedbacks in operation. This would also include individual consumption choice on the basis of knowledge, information and data.

    • @Steve Gwynne
      There are lots of problems with Democracy. We know that herds are fickle. We know that socialism is about spending other people’s money. We know that capitalism is about ‘me first’. We know that the biggest ‘democracy’ the world has ever seen has driven right off the cliff in terms of the environment…for example, Biden’s “aggressive” emissions targets…
      “Thunberg is right to carp because the lack of ambition in the US roadmap is disgraceful. Reducing emissions by half by 2030 would mean that US emissions would still be 30% higher, on a per capita basis, than the EU’s are today. They will still be 25% higher than China’s today. In 2030, US emissions by Kerry’s targets will be 20-30 times higher than two thirds of countries’ are today. Disgraceful.” From Albert Bates.

      The data I see is that about 3 percent of the population can go against the grain. For example, about 3 percent of the adults in the US are in a truly healthy weight range. Why should that 3 percent be taxed to support the horrendous costs being caused by the 97 percent and the industrial food system? The system as it is will surely collapse under its own weight as Degrowth rolls over all of us. But the 3 percent need to conserve their energy to find their own tribe, not be taxed and regulated to death by a democratic nanny state.

      If you are really interested in governance, I suggest taking a look at Herman Pontzer’s description of the Hadza, in his book Burn. You will find an explication of how it is sharing that made us human. Other apes either never share food or else only with infants and only rarely. No gorilla has ever been observed sharing food. Bonobos do share food occasionally, but chimps almost never. The practice of specialization of husband and wife in getting the food (hunters AND gatherers) plus the routine sharing of food in the group gave food security and minimized work and permitted strong social bonds. But the feedback loops are powerful. No food is stored, there is little fat on the body, so survival of the Hadza for thousands of years means that they are very focused and attentive and know a vast amount about how food in their harsh landscape can be found. Sharing is so much a part of the fabric that they never say ‘thank you’ when someone shares food with them.

      Trying to sell me on ‘sharing’ the cost of someone’s fifth bypass surgery because they are either ignorant or just don’t care or are the victims of corporate food and medicine is a completely different question.

      My experience lines me up with Howard Odum. We are going to have to change radically in the OECD countries, and, “let a thousand flowers bloom”. Many of those flowers will be in the wrong place at the wrong time and will wither and die. That’s just the way ecosystems work. ‘Democracy’ as practiced in the US, and from what I can see in Britain, is very likely just not the vehicle which can deliver very much.

      But I will also agree that democracy might stumble along if it morphs into socialism and somehow our society stabilizes free energy at a high level. But eventually, the emissions are very likely going to have to go to zero and I can’t see large scale socialism working at all. It’s going to take the ‘Hadza scale’ communitarian organization to do the job.

      Don Stewart

    • Two exciting job openings at CES Surrey as part of a new ‘Institute for Sustainability’:
      1️⃣ Professor of Net Zero Carbon Energy Systems → https://jobs.surrey.ac.uk/Vacancy.aspx?ref=024021
      2️⃣ Reader/Professor of Sustainable Food and Nutrition Systems → https://jobs.surrey.ac.uk/vacancy.aspx?ref=025121

      https://m.facebook.com/story.php?story_fbid=1772325732946725&id=403409563171689

      Human adaptation is happening.

      Small scale communities tend to have one ecological disadvantage, they tend to narrow human genetic diversity hence the need to beg/borrow/steal females within ancient small scale community systems.

      In another related way, small scale community systems tend to balkanise culturally which often leads to inter-community rivalries especially in relation to Commons Dilemmas. Hence why small scale community systems tend to federalise or confederalise in order for them to remain stable.

  20. An interesting clue is explained as to why inflation has been selective so far and restrained in proportion to the money-printing, in Tim Watkins’ latest update to our situation. His article is based on the UK, but that is helpful as it is a more extreme case and so a warning of what will follow elsewhere if others chose to ignore further warnings. Essentially businesses can’t pass on increasing costs because customers either can’t or wont pay more, so currently the most vulnerable are dying off, while the stronger ones eat the losses for now, knowing that they’re increasing market share, so can increase prices later.

    In the short term then, there could be good deals, in the stock clearances, but then cartelisation will claw back any remaining non-essential spending. He notes that even before the various pandemic-related state subsidies have stopped being disbursed, ~10% of hospitality outlets have already gone bust. New trade agreements may of course ease things, but they take relatively long to negotiate (although any new partners may not tolerate the ‘hostile environment’ now extending to traumatising foreign nationals at the borders) and that doesn’t solve the underlying problem of diminishing energy and the means to pay for it.

    A perhaps unintended experiment has resulted from the pandemic situation in that state intervention in the form of wage subsidies plus rent and various loan payment postponements amounted to a period equating to UBI extending beyond the elite to a significant part of the population. (eligible and inclined to vote) This will have lessons on how people might behave if UBI were instituted in the future by rulers under duress, as a last resort to keep the peace.

  21. @Steve Gwynne,

    I owe you a response. Like you, I have a “vision” of what our future could be. I do not have a program or way to achieve it. Nevertheless, widely-shared “visions” of the way our future can serve as organizers for individual and group action. This makes it all the more important that the vision be feasibly achievable, not a fairy tale.

    Suffice it to say, that my “vision” is living within the organic solar budget on a local basis, without any need for fossil fuels. Commons ownership of all local resources in local populations so that localities can live/hopefully thrive with sufficient resources providing the water, food, shelter, clothing they need. NOT absentee ownership by governments, corporations or wealthy individuals seeking a rentier existence or extracting the surplus for their own use. Supply chains for fundamentals would likely be in the range of 100 miles and under. Little to no international trade. Hopefully, we would be able to preserve the scientific knowledge amassed during our fossil fuel era including chemistry, medicines, soils, metallurgy, etc., so that we can end up with a late 18th century pre-fossil fuel lifestyle but improved upon with our better knowledge. You get the picture. Idyllic in a different way than your vision. Probably not achievable and also probably a fairy tale in light of our primate fixation on hierarchy, which has led to our fixation on property and ownership, which is just a system of fealty made fixed and transferable especially to heirs (who will thereby acquire the accompanying social status) via a legal regime.

    Like Don, I don’t think we can adopt a program that will get us there by a centralized authority with the power to enforce programmatic behavior on those under its control. Human society and “lifestyle” are an “emergent property” of millions of interrelationships that are not, ultimately, planned, any more than the evolution of human language is the result of dictates or planning.

    I agree with Don that providing honest feedback and information is far more likely to do good than propagating fairy tales about the wonderful new space-age future we will be living in.

    My problem with your vision is that I don’t think that the resource and energy limits we are now subject to, courtesy of our prior “ingenuity,” combined with human proclivities, will permit it. Tom Murphy’s latest post on May 18, “Why Worry About Collapse,” at dothemathDOTucsdDOTedu is a succinct overview. As but one factor, he states:

    “We face an energy trap (Section 18.3 of the textbook), in that the ease and cheapness of fossil fuels will likely delay large-scale migration to renewable energy until declining availability of fossil energy forces our hand. But then we learn that a massive build-out of renewable technologies (panels, turbines, concrete, installation) takes a tremendous amount of energy that can’t be conjured (financed) like money. Redirecting diminishing energy flows into a new infrastructure results in available energy declining even more rapidly as a result, for the few decades it takes to accomplish a transition. Such a “voluntary” energy decline is politically difficult to initiate and maintain, which may bind us to a path toward reduced capacity and resource scarcity. Successful navigation, in other words, requires decade-scale sacrifices for a better “far” future outcome—not something we are particularly talented at accepting.”

    I note that you appear to use the term “democracy” un-ironically, as having a positive role in collectively dealing with our current predicament. My own assessment is that government is not what you appear to think it is, and its primary purpose is not what you appear to think it is. It is not and has not ever been a director of society toward its own self-preservation, health, vitality and a “common good.” In America, at least, we certainly do not have a democracy. See the University of Princeton 2014 study, “Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens.”

    Sorry to be so long winded, but anyone who is interested in trying to make sure that we end up with “civilization” on the other side of our bottleneck should, IMO opinion, at least study the approximately 400 year history of Edo Japan. AFAIK, it is the only historical example of a “steady-state” civilized society and economy. As an island nation, it was not dependent on territorial expansion or growth for access to resources. Little to no population growth over hundreds of years. Excellent soil and water management practices so that they could sustainably feed themselves. Yet, they had cities, social classes, artisans, art, literature, music, etc. How was this accomplished?

    • Steve,
      As to the hierarchical structures that currently pervade our “civilisation” , I think that the blockchain structure will eventually enable the sharing of energy and food
      In an honest, fair and balanced way. I notice you mentioned “lowimpact.org “ site. When time permits I intend to look at their site.
      I did mention in an earlier blog the book by Casey and Vigna “The Truth Machine” which is a very good read about the blockchain concept.

    • Catching up, reading recent posts first, so excuse if I’m duplication. I scanned the low impact and related site, looking at the people involved and the history. I’ve known similar smaller efforts in New England which were permaculture oriented some 30-40 years ago. The numbers involved globally are tiny. (%-wise) I learned some of the organic gardening techniques from a member when we did ‘hobby gardening’ for a decade. 90-99. Great to know, but in the big picture (even regionally) it doesn’t hav much impact. Globally it is near meaningless. In the 3.5 decades from the mid 80’s until present we’ve added 3 billion humans. If that were the total global population, there might be a chance of converting to low impact agriculture and lifestyles, but in my opinion we’re a half century too late. We were already 4 billion when our son was born in ’73. Now nearing 8.

    • Currently there are an estimated 500 million smallholder farms in developing countries of the world alone, supporting almost two billion people.[3][4]

      https://en.m.wikipedia.org/wiki/Smallholding

      Back to the land movements are obviously no where near this scale although Amish communities and the like are thriving.

      This recent article in unHerd
      https://unherd.com/2021/05/woke-communes-are-doomed-to-fail/?tl_inbound=1&tl_groups%5B0%5D=18743&tl_period_type=3&mc_cid=56ccefaa34&mc_eid=e744d92f00

      argues that successful intentional nommunities need a high degree of cultural cohesion which historically has been achieved by religious unity.

      Maybe this is the missing ingredient for western back to land movements to be more successful as well as needing to overcome the paradox that back to the land low energy lifestyles means less tax and so less public services and less State investment in critical infrastructure.

    • @tagio

      The Edo example probably entailed no significant immigration over the 400 years. A homogenous society with common cultural and religious characteristics, and a common language foster communitarian behavior. The natural wealth and climate likely abetted cooperative endeavors. It is hard to find other historical examples because I expect there are few like it. Presently, global migrations to where the grass is greener are continual and growing. To replicate Edo seems highly unlikely.

    • @Steven Kurtz
      If you have time and the inclination, read Azby Brown’s book Just Enough. It tells the story of how Japan came out of centuries of bitter civil warfare with something like 10 million people and a degraded environment and then achieved relative peace and prosperity and the population stabilized at about 35 million. Edo (Tokyo) had a far better sewage system than Paris or London. The government was not by any means a nanny state. If you had a child, you had to feed the child…very likely on your own farm. Forests were nationalized and the penalty for stealing a mature tree was death. Brown is an architect working in Japan, and he is sensitive to design issues.
      Don Stewart

    • Thanks for sharing your vision Tagio.

      Regarding initial thoughts

      What if local Biomes are in ecological debt in relation to the human population size now.

      Regarding Why Worry About Collapse. The energy trap is a known unknown hence the drive towards productivity and efficiency gains. The energy trap is also what will lead the human species towards a safe energy capacity that corresponds with the global safe operating production space.

      As such, national energy quotas will be distributed in order to balance high, medium and low impact survival activities. The more an energy system is weighted towards low impact living, the more humans it can support.

      Of course this Malthusian logic is somewhat avoided by inventing an alternative high density energy source.

      The use of carbon energy to create a non carbon energy system will involve work and therefore jobs but unless an alternative high density energy source is created, the Green Industrial Revolution can only lead to a steady energy capacity state.

      What that steady energy capacity state will be is as of yet unknown.

      The choice thereafter is how to distribute energy quotas on the spectrum between cooperation and competition.

      Governments and by extension the State are required to mediate the Commons Dilemma and especially so under conditions of a territorial ecological deficit which consequently requires import dependencies and the means to communicate with other States.

      Collectively, States monitor the development, adaptation and evolution of the human species which requires accurate knowledge, information and data.

      Accurate knowledge, information and data is especially important within Democratic States whereby governing elites have a vested interest in good governance otherwise they will be elected out.

      The problem with America is that it has become overrun by political activists that have reified Critical Theory.

      Therefore rather than being self reflexive and self critical, American politics has taken a self defeating dogmatic turn.

      Once America releases itself from reification, then it will resume the ecological rationality’ of adaptation and meet squarely with the ecological challenge of being one of the most ecologically indebted nations in the world.

  22. This is beyond my pay grade, but I do find it interesting. It’s from Tad Patzek, in his blog Life Itself. I think he is correct, but my sense is mostly just from watching life go by. I haven’t seen his equation. I have commented here that if we actually want a ‘green’ economy, we will have to abandon almost all of the ‘wealth’ we have built, and build everything new. As, for example, an economy running on interruptible electricity would look quite different and would require different equipment and practices. At any rate, his gloomy predictions regarding debt are relevant to many discussions on this blog…Don Stewart

    “It turns out that cumulative debt diffuses into current efficiency of GDP generation that is an always decreasing function of the debt. There are three major conclusions from this diffusion equation:
    The more debt you accrue the slower you will grow, and this is a universal law.
    If you want to change your economy to a new mix of resources (“Green Revolution”), you will have to forgo your cumulative investment in the old resources, build a stock of new resources, and only then you will be able to grow again from a much lower level. This is a multidecadal process that no politician will be able to stomach, and the disinterested, uneducated public will refocus on the conspiracy theories and other lies.
    Current rampant borrowing will translate into GDP generation with a low and ever lower efficiency. And that’s a universal law again!”

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