“Simultaneous harvest failures across major crop-producing regions are a threat to global food security”, according to a new report published by Nature. The technical jargon here references a “meandering jet stream” but, for non-specialists, what this means is that we can no longer rely on worse-than-average crop conditions in some places being cancelled out by better-than-average conditions in others.
Commenting on this in The Guardian, George Monbiot says that only five stories about this have appeared in the global media, which he contrasts with “more than 10,000 stories this year about Phillip Schofield, the British television presenter who resigned over an affair with a younger colleague”.
“In mediaworld, a place that should never be confused with the real world, celebrity gossip is thousands of times more important than existential risk”, says Monbiot.
This is a conundrum that affects issues beyond climate change, critically important though this obviously is. We can imagine busy people, with lives to lead and issues to confront, switching off in droves when the media turns to economics.
Moreover, they’re right to do this, if all that’s being presented to them is an outdated, fallacious doctrine which promises infinite growth on a finite planet, and claims that there’s a financial fix for every economic ill.
If it’s difficult for people to find time to think about a real issue like climate change, how can we expect them to take an interest in nonsense about infinite growth and the cure-all characteristics of money?
To be candid about it, I don’t know exactly what I’m going to do next, but I can tell you my immediate plan.
This is the first of two planned articles to appear here. The second will try to sum up what I think we now know about the economy, understood as an energy system.
Here, I’m going to reflect on some of the implications that we can draw from what we know about the economy.
Of reality and perception
There are, of course, two ways in which we might explain the disparity of coverage between hard and important scientific news and the doings of people in the “mediaworld”. One is that ‘the powers that be’ who control the world’s media don’t want us to hear about – or worry and get angry about – threats to global food security.
The other is that the general public is simply more interested in stories about ‘slebs’ than in the complicated science and gloomy prognostications of the experts, and the media have a commercial interest in covering those stories which attract the greatest attention.
As I’m writing this, Southern Europe is in the grip of a searing heatwave, with similar conditions occurring in the United States and China. The media have a choice about how they present this news. They can show images of people suffering from extreme heat in Rome, Athens or Malaga, or they can delve into the back-story of climate change. Some media opt for the latter, but far more choose the former.
Climate science does at least have aspects that can interest the general public, who are able to experience heatwaves and flooding at first-hand, as well as seeing images of these and other phenomena.
Economics has no such appeal. The so-called “gloomy science” is indeed gloomy more often than not, but it can’t remotely be called a “science”. Once we understand the concept of two economies – the “real economy” of products and services, and the parallel “financial economy” of money and credit – it becomes apparent that the so-called “laws” of economics are no more than behavioural observations about the human artefact of money, and are in no way analogous to the laws of science.
Orthodox economics has always promised infinite growth, an absurdity which, at least until recently, has appeared to be true, simply because we’ve been continually ramping up the use of fossil fuels. Last year, we consumed 42% more oil, natural gas and coal – and 50% more primary energy in total – than we did back in 2002. No wonder economic output has increased over that period (though a real-terms tripling of debt between those same years ought to give us serious pause for thought).
The general public seems to have been becoming aware that meaningful improvement in their own economic conditions has petered out, a process characterised, for many of them, by worsening insecurity, ever-growing burdens of debt and other commitments and, latterly, the combination of surging inflation and sharply rising interest rates.
Yet officialdom, supported by economists and reported in the media, keeps insisting that “growth” is continuing.
For many, the understandable suspicion is that, in reality, growth may indeed be continuing as the experts claim, but that they’re not benefiting because a greedy, unprincipled minority is cornering all and more of the growth in which ‘ordinary’ people do not participate. Inequality statistics strongly reinforce such suspicions.
Small wonder, then, that, in a recent British opinion poll, 38% agreed that “the world is controlled by a secretive elite”, outnumbering the 33% who disagreed. It seems a reasonable supposition that such suspicions are by no means unique to the United Kingdom, and would have been far less pronounced, there or elsewhere, had equivalent polling been conducted thirty, twenty or even ten years ago.
We cannot know whether these suspicions are well grounded, and it’s worth remembering that different elites in different countries could respond to the same issues in the same ways without a necessity for co-ordination. Moreover, if this un-co-ordinated process did happen, its effects on the experiences of ordinary people would be much the same as if central plotting did exist.
We can’t, then, know whether the conspiracy theorists are right or not – but we can conclude that ever-increasing numbers of people suspect that they are.
At the end of growth
The reality of the situation is both simpler and more disconcerting. The proper target of popular suspicion should be anyone, including but not limited to politicians, who promises them economic growth in perpetuity.
The “hoax” that we’ve been subjected to isn’t climate change, for which there’s compelling scientific evidence, but the continuity of “growth”, which, consciously or not, is being faked.
Simply stated, the fossil fuel dynamic, which has powered economic expansion ever since James Watt unveiled the first really efficient steam engine in 1776, is fading out. Naturally enough, the easiest, most accessible and lowest-cost sources of fossil fuel energy were used first, and are being replaced by ever-costlier alternatives.
This is a surprise only to those – seemingly a majority – who’ve never been prepared to recognize the obvious. The warnings set out in The Limits to Growth (LtG), published back in 1972, have been reinforced by those who have found close correlation between subsequent data and the LtG projections. Kenneth E. Boulding, co-founder of general systems theory, famously pointed out that only “a madman or an economist” would believe in the possibility of infinite, exponential economic expansion on a finite planet.
In recent times, we’ve become aware of the environmental and ecological risks posed by reliance on carbon fuels.
But we have yet to recognize the parallel economic threat, which is that, through relentless rises in energy costs, the fossil-based economy has deteriorated from growth, via stagnation, into contraction.
We’re assured that a solution exists to climate hazard in the form of renewable energy, principally from wind and solar power. We’ve addressed this issue here before, but many critical questions remain unanswered in the wider world.
Here are some of them:
1. If transitioning to renewables is undoubtedly going to be costly – USD 130 trillion seems a reasonable estimate – what are we going to do without in order to pay for it?
2. This sort of money equates to enormous amounts of raw materials, most obviously steel, copper, lithium, cobalt and other minerals – do they even exist in the requisite quantities, and how much environmental damage are we going to cause by mining and processing them?
3. What source of energy are we going to use to access and utilize these raw materials, and, again, what other uses of energy are we going to relinquish in order to make this possible?
The economics of process
The critical issue here is the nature of the material economy itself. Essentially, the economy functions by using energy to extract raw materials and convert them into products, most of which are destined rapidly for landfill. The necessary parallel thermal process involves the conversion of energy from concentrated into diffuse forms, the latter being waste heat.
In short, this dissipative-landfill system relies on the availability, not simply of energy itself, but of dense energy. To replace fossil fuels without suffering economic contraction, alternatives would need to match, not just the quantity of energy sourced from oil, gas and coal, but the density of these fuels as well.
This is something that wind and solar power simply cannot do. Accordingly, a transition to renewables will truncate the dissipative process on which material production depends, the result of which will be a smaller material economy.
This doesn’t for one moment mean that we should scale back the pursuit of sustainability, still less abandon this quest altogether. Barring some wholly new discovery in the field of energy supply, wind and solar are the best options on the table.
The problem, rather, lies with unrealistic expectations. A “sustainable economy” may be feasible, but “sustainable growth” is not. Our lives may become cleaner, and might also become immaterially ‘better’, in a post-carbon, post-consumerist economy, but we’re also likely to be materially poorer.
Can we handle this reality, and stop deluding ourselves that we can ‘fix’ economic contraction? How is the world reacting, or likely to react, to the ending and reversal of “growth”?
And what, come to that, will the future economy look like?
A future unfolds
For large and increasing numbers of people, economic hardship has already arrived. For many, the “cost of living” has been rising more rapidly than incomes. This problem is compounded, not just by rises in the costs of mortgages and rents, but also by the debts and other financial burdens that households already carry.
Promises that conditions will improve if people ‘just hold their nerve’ are ceasing to convince. We’re told that inflation was triggered by war in Eastern Europe, but – quite apart from the fact that inflation took off before the invasion – the immediate effects of the conflict have now dropped out of the year-on-year figures. There’s scant evidence of a wage-price spiral, but plenty of support for the concept of a margin-price effect, a phenomenon known as “greedflation”.
As you’ll read in the companion article when it arrives, we know a great deal about the unfolding energy dynamics of the material economy. Rises in trend ECoEs – the Energy Costs of Energy – are making it ever harder to strike prices which meet the needs of producers and consumers. This makes it likely that the availability of energy will decrease, led downwards by fossil fuels.
Analysis of prior trends makes it clear that the rate of conversion between energy and material economic value is remarkably invariable. This means that, if energy supply decreases, economic output goes into decline. At the same time, rising ECoEs are widening the gap between output and prosperity, the latter being a function of the surplus energy that remains after ECoE has been deducted.
This has two specific consequences. The first is that, just as prosperity declines, the costs of energy-intensive necessities will carry on rising. The world’s average person is, according to the SEEDS model, going to be 10% less prosperous by 2030, and fully 27% worse off by 2040, than he or she was back in 2019.
Rises in the real costs of essentials are likely to mean that the average person’s PXE – Prosperity eXcluding Essentials – will have fallen by 20% by 2030, and 50% by 2040.
The outlook for discretionary (non-essential) products and services, and for those businesses and employees who provide them, is almost unrelievedly grim. The employees affected might be absorbed into a more labour-intensive economy, but this transition will undoubtedly be disruptive. This trend is already emerging, as consumers cut non-essential spending as the costs of necessities rise.
The second implication is that the financial burdens carried by households – including mortgages, rents, credit commitments, staged-purchases and subscriptions – are going to become impossible to sustain as PXE, the equivalent of disposable incomes, contracts. The “real economy” of products and services is already 43% smaller than the “financial economy” of money and credit. We seem to be heading straight towards a cascade of defaults and a crash in asset prices.
Tantrum time?
How is the public, already highly suspicious of the leadership cadres in government and beyond, likely to react to a relentless deterioration in prosperity which is so strikingly at odds with so many promises of “growth”?
I think we can get some idea by imagining a youngster returning home from school to find that all his shiny toys are being dumped into a skip. Unless he’s a remarkably philosophical child, his reactions are likely to be tantrums, outrage, grief and denial.
The adult world seems to behave in much the same way. The ultra-rich are determined, at all costs, to hang on to the trinkets and trappings of wealth and power, irrespective of what that might mean for everyone else, or for the climate.
But ‘ordinary people are likely to react in very similar ways. Anyone doubting this should try standing for election on a platform of ‘saving the planet’ by replacing cars with buses and trams, and restricting or prohibiting overseas flights.
We might, collectively, want to tackle environmental and ecological hazard, but very few, whether wealthy or not, seem willing to make real sacrifices to this end.
This could very easily become a home run, not just for conspiracy theorists but for agitators as well. There are numerous historic examples of economic hardship, particularly when allied to perceptions of unfairness, leading to social unrest.
Governments, whose own resources face relentless compression, could try to tough this out, though history, again, suggests that this won’t work.
A more rational course, it seems to me, would be to find out what the economic outlook is likely to be, and start to prepare the public accordingly.
Surplus Energy Economics 