This is a guest post from Prof. Don Mikulecky highlighting Richard Heinberg’s alerting us to the seriousness of our situation.
In his MuseLetter Richard Heinberg has been trying to get us to wake up and face the music, so to speak. The August 2009 edition is entitled:Temporary Recession or the End of Growth? In it he paints a very hard picture of where we are and what we can really expect. To read it and then look at the news and the things others are saying is to wonder whether he is on the same planet we are. Unfortunately he is not only here among us but seems to have been able to look around and see what so many are in denial about. He asks:
But why are both the U.S. economy and the larger global economy ailing? Among the mainstream media, world leaders, and America’s economists-in-chief (Treasury Secretary Geithner and Federal Reserve Chairman Bernanke) there is near-unanimity of opinion: these recent troubles are primarily due to a combination of bad real estate loans and poor regulation of financial derivatives.
Is this reason? Is there another answer? Look below the break and find out.
He points out that this is what the conventional wisdom says is the problem. He then concludes:
If it is correct, then the treatment for our economic malady might logically include heavy doses of bailout money for beleaguered financial institutions, mortgage lenders, and car companies; better regulation of derivatives and futures markets; and stimulus programs to jump start consumer spending.
Of course he is writing to us because he thinks there may be a problem here. It is a problem many of us have wondered about.
But what if this diagnosis is fundamentally flawed? The metaphor needs no belaboring: we all know that tragedy can result from a doctor’s misreading of symptoms, mistaking one disease for another.
Something similar holds for our national and global economic infirmity. If we don’t understand why the world’s industrial and financial metabolism is seizing up, we are unlikely to apply the right medicine and could end up making matters much worse than they would otherwise be.
He offers us an alternative diagnosis. It is not a happy one. The problem may even be worse than what they have said, if such a thing is even imaginable. It is for him. It is for me too. It is hard to talk about the matter without my socialist beliefs appearing as the cause for my thoughts. In fact this goes beyond any political ideology. It happens to have a lot in common with what I see as I look at the world as a socialist, but that really is not the point. He puts it into terms we all should understand:
Economic Growth, The Financial Crisis, and Peak Oil
For several years, a swelling subculture of commentators (which includes the present author) has been forecasting a financial crash, basing this prognosis on the assessment that global oil production was about to peak. Our reasoning went like this:
Continual increases in population and consumption cannot continue forever on a finite planet. This is an axiomatic observation with which everyone familiar with the mathematics of compounded arithmetic growth must agree, even if they hedge their agreement with vague references to “substitutability” and “demographic transitions.”
This axiomatic limit to growth means that the rapid expansion in both population and per-capita consumption of resources that has occurred over the past century or two must cease at some particular time. But when is this likely to occur?
If this is as transparent as I think it is a question is raised: Why do we act as if it will not happen? I have an answer that you may not like. My answer is that we are sticking our heads in the sand and hoping that we as individuals will make it through our lives before anything drastic happens. We talk about our kids and grandkids but we are really who we think about. That line of thinking is consistent with our over indulgence in eating, consumption, and comfort. Maybe I am wrong but if so I need to be shown an alternative explanation that makes more sense.
I won’t go into his very thorough discussion of the oil crises interesting as it is. Here is a thought in his discussion of a recent paper by Hamilton that I want to focus on here:
Hamilton notes that there was “an interaction effect between the oil shock and the problems in housing.” That is, in many metropolitan areas, house prices in 2007 were still rising in the zip codes closest to urban centers but already falling fast in zip codes where commutes were long.
He is far more cautious than I am because I see the whole thing as an interconnected system. He points out that the first house prices to fall were those with long commutes associated with them while at the same time the houses with convenient locations were still inflating. This is no accident. He has some very interesting things to say about oil prices. The one point I will mention is that instability is inherent when a crisis like this is upon us. The prices fluctuate and it is impossible to explain why.
I want to move on to his punch line(s).
Big Picture Diagnosis: Continuing the Trail of Logic
At this point in the discussion many readers will be wondering why alternative energy sources and efficiency measures cannot be deployed to solve the Peak Oil crisis. After all, as petroleum becomes more expensive, ethanol, biodiesel, and electric cars all start to look more attractive both to producers and consumers. Won’t the magic of the market intervene to render oil shortages irrelevant to future growth?
It is impossible in the context of this discussion to provide a detailed explanation of why the market probably cannot solve the Peak Oil problem. Such an explanation requires a discussion of energy evaluation criteria, and an analysis of many individual energy alternatives on the basis of those criteria. I have offered brief overviews of this subject previously and a much longer one is in press.
My summary conclusions in this regard are as follows.
About 85 percent of our current energy is derived from three primary sources—oil, natural gas, and coal—that are non-renewable, whose price is likely to trend sharply higher over the next years and decades leading to severe shortages, and whose environmental impacts are unacceptable. While these sources historically have had very high economic value, we cannot rely on them in the future; indeed, the longer the transition to alternative energy sources is delayed, the more difficult that transition will be unless some practical mix of alternative energy systems can be identified that will have superior economic and environmental characteristics.
Now a political question comes to mind. We have a significant portion of the political power in this country dedicated to prolonging the status quo as long as possible. We are seeing how effective they can be by simply throwing wrenches into the gears of government. So how do we use these warnings and these declarations of urgency? If you have an answer please let me know. Here’s the nitty-gritty:
My conclusion from a careful survey of energy alternatives, then, is that there is little likelihood that either conventional fossil fuels or alternative energy sources can be counted on to provide the amount and quality of energy that will be needed to sustain economic growth—or even current levels of economic activity—during the remainder of this century.But the problem extends beyond oil and other fossil fuels: the world’s fresh water resources are strained to the point that billions of people may soon find themselves with only precarious access to water for drinking and irrigation. Biodiversity is declining rapidly. We are losing 24 billion tons of topsoil each year to erosion. And many economically significant minerals—from antimony to zinc—are depleting quickly, requiring the mining of ever lower-grade ores in ever more remote locations. Thus the Peak Oil crisis is really just the leading edge of a broader Peak Everything dilemma.
In essence, humanity faces an entirely predictable peril: our population has been growing dramatically for the past 200 years (expanding from under one billion to nearly seven billion), while our per-capita consumption of resources has also grown. For any species, this is virtually the definition of biological success. And yet all of this has taken place in the context of a finite planet with fixed stores of non-renewable resources (fossil fuels and minerals), a limited ability to regenerate renewable resources (forests, fish, fresh water, and topsoil), and a limited ability to absorb industrial wastes (including carbon dioxide). If we step back and look at the industrial period from a broad historical perspective that is informed by an appreciation of ecological limits, it is hard to avoid the conclusion that we are today living at the end of a relatively brief pulse—a 200-year rapid expansionary phase enabled by a temporary energy subsidy (in the form of cheap fossil fuels) that will inevitably be followed by an even more rapid and dramatic contraction as those fuels deplete.
This is a time when blind faith in any political entity is suicidal. That includes our own beloved administration and its pundits.
What Not to Do: Prescribe Punishingly Expensive Placebos
If the physical scientists who warn about limits to growth are right, confronting the global economic meltdown implies far more than merely getting the banks and mortgage lenders back on their feet. Indeed, in that case we face a fundamental change in our economy as significant as the advent of the industrial revolution. We are at a historic inflection point—the ending of decades of expansion and the beginning of an inevitable period of contraction that will continue until humanity is once again living within the limits of Earth’s regenerative systems.
But there are few signs that policy makers understand any of this. Their thinking appears to be shaped primarily by mainstream economists’ assurances that growth can and must continue into the indefinite future, and that the economic contraction the world is currently experiencing is only temporary–a problem that can and must be solved.
His message is not all negative. He has some suggestions:
What To Do: Adapt to the New Reality
If the Alternative Diagnosis is correct, there will be no easy fix for the current economic breakdown. Some illnesses are not curable; they require that we simply adapt and make the best of our new situation.
If humanity has indeed embarked upon the contraction phase of the industrial pulse, we should assume that ahead of us lie much lower average income levels (for nearly everyone in the wealthy nations, and for high wage earners in poorer nations); different employment opportunities (fewer jobs in sales, marketing, and finance; more in basic production); and more costly energy, transport, and food. Further, we should assume that key aspects of our economic system that are inextricably tied to the need for future growth will cease to work in this new context.
Rather than attempting to prop up banks and insurance companies with trillions in bailouts, it would probably be better simply to let them fail, however nasty the short-term consequences, since they will fail anyway sooner or later. The sooner they are replaced with institutions that serve essential functions within a contracting economy, the better off we will all be.
Meanwhile the thought-leaders in society, especially the President, must begin breaking the news—in understandable and measured ways—that growth isn’t returning and that the world has entered a new and unprecedented economic phase, but that we can all survive and thrive in this challenging transitional period if we apply ourselves and work together. At the heart of this general re-education must be a public and institutional acknowledgment of three basic rules of sustainability: growth in population cannot be sustained; the ongoing extraction of non-renewable resources cannot be sustained; and the use of renewable resources is sustainable only if it proceeds at rates below those of natural replenishment.
I think we have enough here to get you the idea. it is not a pretty picture. Nor is this something to read and then file away in your data bank. It is as close to a manifesto as you are going to get from someone like Heinberg. We are watching our democratic process being torn down by the very people who will do even more to stop any action on these crucial issues. I don’t know about you but I have a big lump in my throat. I want to scream at the top of my lungs. Worse than that, even as a pacifist I feel that I have to be ready for something that I never dreamt would be possible. The side effects of what is being described here are catastrophic. The instability a potential change in the health care system has provoked is a symptom of widespread instability and a forsaking of the social contract that has bound us to solving our problems in an orderly way.
The Bush Cheney administration did more than most are willing to acknowledge. They destroyed a belief in the rule of law. What replaces that? I think you are beginning to see it. this civilization can come crashing down rapidly as it did in other places in history.
Slow decline is not what I see. I see the beginnings of catastrophic change.
I hope I am wrong.