The Illusion of Limitless Growth: Unraveling the Economic Web
The Great Illusion
In a world driven by forecasts and predictions, a dangerous illusion persists: the belief in indefinite growth. Economists, actuaries, and even politicians paint a rosy picture, assuming the status quo will prevail forever. But here's the catch: they ignore the very real possibility of decline. It's a risky game of pretend, and the consequences could be devastating.
Promises Made, Promises Broken
Between the end of World War II and 1973, a period of low oil prices and endless optimism, promises were made that could not be kept. The assumption was that oil supply was infinite, a temporary blessing that blinded us to the reality of finite resources. Debt bubbles loomed, a ticking time bomb waiting to explode.
My Recent Talk: Unveiling the Truth
In my recent presentation at the Minnesota Degrowth Summit, I delved into this very issue. I've provided a link to the PDF and a Vimeo recording for those eager to explore further. Joseph Tainter kicked things off, and I had the honor of speaking last, starting around the 1:55 mark. Get ready for an eye-opening journey.
The Golden Age of Oil: 1920-1970
During this period, the US experienced a rapid growth in oil supply. The early oil was a gift, easily accessible and close to eager consumers. Physicists like M. King Hubbert warned of the impending end, but most chose to ignore the signs, assuming the good times would last forever.
The US wasn't alone in its oil production. Other countries contributed, allowing the illusion of endless supply to persist. But as the easy oil dried up, the US was left with more complex operations, from the cold climates of Alaska to the long pipelines and shipping routes.
The Benefits of Low Oil Prices
Low oil prices were a boon to the economy, a temporary windfall that masked deeper issues. We often overlook the impact of affordable food on our personal finances. Imagine a world where food consumes half your income; necessities like clothing and housing would leave little room for anything else. But with low oil prices, the economy thrived, allowing for discretionary purchases and a sense of financial freedom.
Oil, like food, is the lifeblood of the economy. During the low-priced oil era, the economy could afford all sorts of "extras," from vehicles to school tuition. Small businesses flourished, and there was little need for complex organizational structures or energy-efficient devices.
The Complexity Conundrum
As the economy evolved, it demanded more complexity. The middle class, the backbone of consumer power, began to shrink. Young people earned less, and the prices of essential energy products started to rise. The economy needed a delicate balance, with prices high enough for producers but low enough for consumers. When oil prices rose, recessions followed, and governments were forced to intervene with debt-fueled bailouts.
The Debt Spiral
Since 2008, US debt has skyrocketed, with a significant portion dedicated to supporting the poor and the elderly. The current debt level is a cause for concern, with some analyses suggesting that a government debt-to-GDP ratio above 90% inhibits economic growth. The US has surpassed this threshold, and the interest payments on the debt now exceed annual defense spending. Taxes must rise to keep up with the debt, a vicious cycle that threatens to unravel the economy.
Secular Cycles: A Long-Term Perspective
Researchers studying long-term secular cycles, which span centuries, have identified a pattern. Groups of people acquire land, often through deforestation or war, leading to a temporary population surge. As the population reaches its limit, a period of Stagflation sets in, marked by wage and wealth disparity, and debt. According to Turchin and Nefedov's study, populations tend to collapse over decades, a grim reminder of the fragility of complex societies.
A Worrying Future
If my analysis is correct, the road ahead is fraught with challenges. The illusion of indefinite growth has lulled us into a false sense of security. As we extend the life of fossil fuels with wind, solar, and nuclear energy, we merely delay the inevitable. The system will reach its limits, and collapse will follow.
For My Regular Readers:
- My presentation consisted of 51 slides. Feel free to explore the full PDF for a deeper dive.
- While I didn't mention it, a rapidly growing energy supply with a high EROI wouldn't be enough to prevent collapse. Population growth and pollution would still pose significant challenges.
- I included EROI as a familiar concept for some, but I didn't define it or delve into its intricacies.
- My analysis suggests that extenders of fossil fuels need extremely high EROIs, but even then, they are unlikely to provide a long-term solution.
This article was originally published on Our Finite World by Gail Tverberg.
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