This post is the longest one I’ve written to date. You might wish to make yourself a cup of tea or coffee, or pour something stronger before reading on. Indeed, you might decide to wander off and find better things to do; if so, that’s fine by me. If you’re sticking around, though, you’ll wish to know that this post is a “biggy” because I’m coming under increasing pressure from various quarters to deal with the upside of life, to look at the positives. The purpose of this post is to explain why I think we’re living on the cusp of not merely the proverbial “interesting times”, but on the cusp of extraordinary times. Only when I’ve got this off my chest will I be able to start looking more systematically at the positives, at the good life – because I need to construct my thoughts about the good life on the foundations of where I think we are today, and where I think the world is heading. So, without further ado …
A Depressing Correspondent
The pressure is mounting. Daughter Mary Moraymint is not amused with the recurring theme of this blog being preoccupied, as it is, with the downside; being focused on – well, let’s be honest – the apparent collapse of complex society (ho-hum). For some of us the evidence suggests that – in terms of the shattering of economics orthodoxy and the consequences thereof – the world would appear to be going to hell in a handcart. But for goodness’ sake when is Dad/Moraymint going to lighten up and balance the load?
To be fair, Mary and I recently spent a most enjoyable few days relaxing together in London (Mary might think differently, of course). We went to my military Club in town for the annual ‘Fathers’ & Daughters’ Dinner’, along with 200 other members and their guests. We had a good time in ‘The Smoke’ sharing a Sunday afternoon beer with a cyber-friend-turned-flesh-friend (you know who you are, Pongo) in a sunny pub garden by Clapham Common; having supper together on the Tattershall Castle, moored on the River Thames at Embankment, where we gazed up at Big Ben and the Palace of Westminster in the mellow evening sunlight; having breakfast at the Club with an old school friend of the other Daughter Moraymint (Victoria), who stopped by on her way to work at the offices of ‘The Mail on Sunday’; visiting Tate Britain’s ‘Walk Through British Art’; wandering around Covent Garden, observing the street performers, enjoying a bowl of paella and a cold beer for lunch, and buying a wee giftie for Mum Moraymint; all before the excellent formal dinner at the Club on Monday evening.
Then up pops my old friend Carlos with whom I’d lost touch for many years (probably the thick end of 30 years) before the wonders of Facebook drew us together again, much to my delight. Carlos had been reading Moraymint Chatter from time to time without realising it was me; that is the real me, so to speak. Occasionally, I post a link on my (real me) Facebook page that, if clicked, transports my Facebook friends to my alter ego over here at Moraymint Chatter. Carlos sent me a personal message recently in which he said, “It took me a while to work out that you are in fact the Moraymint man …”. Carlos went on to say, amongst other things, “but f**k you’re a depressing correspondent aren’tcha? I may have to stop perusing your posts – they always bring me down.” In the end Carlos said, “Well done on your blog, but it is terribly polemical. I can’t help wishing it had a more balanced agenda, or at least a few suggestions for solutions that are realistic.”
Mary and Carlos are right, of course. Mary wants me to lighten up; she knows I can; she sees me when I choose to look on the bright side of life; like when we went to London together; when we go shooting together; when we spend time in my favourite city, Edinburgh; when we walk the dogs on the beach, or in the woods; when I chuckle at the antics of my gundog puppy, Poppy; when I laugh time and again at Eddie Izzard recounting his ‘Death Star Canteen’ story, or whilst I’m reading the world’s best letter of complaint (from a Virgin Atlantic passenger to Sir Richard Branson); when we have friends to stay for the weekend; when we watch Michael McIntyre performing at the O2 Arena (well, on a DVD in the sitting room actually); when I deploy my own zany sense of humour over the dinner table. Meantime, Carlos exhorts me to balance the agenda, or at least propose some realistic solutions – which I take to mean solutions for coping with the sorts of ructions that I argue our society faces during the coming generation.
The Industrial Revolution, Consumerism and Economics
My vision of the lives that my daughters will lead comprises a number of themes. Perhaps the first and foremost theme is that my daughters’ lives, unlike mine, will not be defined by consumerism: that is to say, “the economic and social order that encourages the purchase of goods and services in ever-greater amounts, and the consumption of materials and resources in excess of basic needs”. Put simply, consumerism might be thought of as the rampant accumulation of “stuff”. Let’s be honest, Clan Moraymint is as guilty as the next family (certainly in the developed world) of accumulating stuff; our Victorian family home here on the Moray Firth, overlooking the sea and across to the mountains of Easter Ross, is stuffed to the gunwales.
Now, there’s nothing innately wrong or immoral about consumerism, per se, especially if you believe, as does my good friend Carlos, “that nothing can ever ‘run out’ because the market system exists precisely to stop that happening.” We’ll come back to this issue of the infinite omnipotence of market forces later, but for now let’s keep looking at consumerism.
The consumer society, as we recognise it today, emerged in the late 17th century, intensified in the 18th century and largely coincided with the advent of the Industrial Revolution. The Industrial Revolution was itself the manifestation of mankind’s discovery of techniques for unlocking 2 billion years’ worth of sunlight energy stored in fossil fuels buried in the earth. Any physicist will tell you that energy is the ability to do work; what happened 250 years ago was that mankind discovered the ability to do work in ways which transcended human muscle power (one’s own and that of one’s servants or slaves, the latter being the time-honoured technique for getting work done at low/no cost) and the employment of beasts of burden. The Industrial Revolution, by fuelling (literally) extraordinary rates of economic growth, slowly but surely allowed millions and then tens of millions and eventually hundreds of millions of people to, inter alia, accumulate stuff.
Finally, at just about the time the Industrial Revolution fermented consumerism, the Scottish philosopher, Adam Smith, emerged as the father of modern economics. Now, the purpose of this particular post is not to offer a treatise on economics, sometimes referred to as “the dismal science”; Carlos is better qualified than me to do that, and indeed I’m minded to offer him a Guest Post on the subject. However, it’s important to understand that the very essence of this blog, of my thesis about how my daughters’ lives will unfold compared to how mine unfolded, is that the dismal science as we have come to know and love it this past 250 years is on the rack.
Specifically, the critically important phenomenon of economic growth is under the microscope. We’ve reached the stage in modern economics where the most widely held conviction is that economic growth is the be-all and end-all of society; economic growth is the answer to all the problems of mankind. Indeed, the central theme of the theory and practice of economics today is the relentless search for economic growth. Whether we like it or not, we’re addicted to doubling our wealth every quarter century or so, which is pretty much the stage we’ve reached today – at what is transpiring to be the fag-end of the industrial age.
However, all of a sudden, in case you hadn’t noticed, economic growth has become an unusually indistinct target; gripping and sustaining growth is becoming ever more elusive. The general trend in forecasts for the coming years (from the likes of the UK’s Office for Budget Responsibility (OBR), the World Bank, the OECD, the IMF and so on) is one of lower rates of economic growth and in some cases – heaven forfend – of economic contraction. Since the global financial crisis blew up, those organisations concerned with forecasting economic growth keep finding themselves revisiting and revising down their predictions as reality intrudes and they’re forced to squint again into the future.
Mankind’s unprecedented consumption of energy over the past 250 years – and the economic growth it facilitated – has brought with it almost unimaginable societal advantages as well as enormous societal complexity. The availability of vast amounts of ‘net energy’ (that is the excess energy available for consumption over and above what is needed to harvest that energy) has also led to the development of a profoundly integrated globalised economy and with it – for the first time in history – a globalised society. Today Londoners are as intimately connected to, say, Afghan peasants, one way or another, as they are to New Yorkers, Tibetan Monks or the activities of the China Merchants Group. Great civilisations have arisen and collapsed before, of course. However, never before have so many diverse societies been so intertwined economically, technologically, environmentally and politically … to the extent that today we exist in what is, to all intents and purposes, a “world civilisation”.
That said, viewed against the span of human history, economic growth is a relatively new phenomenon, really only dating from the Industrial Revolution itself; in the centuries prior to that economic growth had been negligible. Between 1300 and 1750 the UK economy hardly grew at all in per capita terms. Between 1000 and 1820 global wealth per capita grew by a barely noticeable 0.04% per annum on average; the wealth of all human beings on earth doubled every 1,750 years or so.
In this context, profound questions arise for us as citizens of a globally connected society, addicted as we are to economic growth: what happens if we cannot now go on doubling our wealth every quarter-century; what happens if economic growth falls back to pre-industrial age rates enhanced slightly, perhaps, by the technical skills and knowledge we’ve accrued over the past 250 years; how do we go on servicing the needs and meeting the inexorably rising costs of our complex societies if we cannot guarantee robust, industrial age rates of economic growth stretching indefinitely in to the future; from where do we obtain the truly breathtaking amounts of net energy (offering all of the facsimile benefits of fossil fuels, especially oil) required to double the size of the global economy every 25 years, indefinitely?
Prior to the releasing of 2 billion years’ worth of fossil fuel energy (which mankind has achieved in the blink of an eye in anthropological terms), the global economy grew at a rate ultimately determined by energy falling on the earth from the sun in real time. The Industrial Revolution accelerated the doubling of the wealth of human beings by an extraordinary 70-fold in less than one-hundredth of one per cent of the time that modern humans have existed on earth. Economic growth as we’ve come to know it, love it and exploit it for the past 250 years isn’t normal. Orthodox economists, on the other hand, will tell you that industrial age rates of economic growth are indeed normal; they’ll tell you that the ‘market system’ will prevail and that there’s no reason at all why, any day now, the global economy will not be firing again on all cylinders (by which they mean growing again at industrial age rates). Mainstream economists hold the view that anybody (like me) who thinks we’ve somehow reached the end of growth is naïve; is ill-informed; people like me (a physicist by university education, as it happens) really don’t know what we’re talking about.
Chris Martenson – who is not an orthodox economist (he’s also a physical scientist by university education) – sums up our situation today as follows:
“Our [complex society] operates as if no physical limits exist. I don’t mean growth is ‘required’ as if it’s written in a legal document somewhere, but it is ‘required’ in the sense that our economy only functions when it’s growing. With growth, jobs are created and debts can be serviced. Without growth, jobs, opportunities and the ability to repay past debts simply and mysteriously disappear, causing economic pain and confusion … Now, humanity as a species [is facing] a condition it has never faced before: less and less energy will be available each year. In the past there was always another continent brimming with energy resources to tap; another well that could be drilled; more hydrocarbon wealth [to] be brought up from the depths. We have had access to increased resources whenever we wanted them. During [this relatively recent] run of history, we’ve fashioned an enormously complex society and global economic model around the idea that there would always be more.”
Indeed, to reiterate my friend Carlos’s point, “nothing can ever ‘run out’ because the market system exists precisely to stop that happening.” I agree with Carlos, up to a point. We’ll never ‘run out’ of oil, for example. However, what’s happening now is that the cost of extracting oil is rising steadily and is, therefore, inching up the price of oil to the point of it becoming prohibitively expensive. As demand for oil collapses so, in theory, should the price fall. In practice, the price of oil has fallen (since it hit $147 per barrel in 2008), but the cost of extracting oil remains as high as ever, getting higher over time (it’s a geological thing); so, even less oil gets extracted, the oil companies then lack the revenues to operate and invest, supply is further constrained and so the price of oil rises again, destroying demand still further, and so on (this particular phenomenon is a symptom of ‘peak oil’). So, we’re not running out of oil as such, we’re just struggling to afford it; the pricing mechanism is working, but metaphorically it’s killing us at the same time.
The paradox, in terms of orthodox economics, is that lowering the price of oil does not – and cannot – stimulate a concomitant uplift in the supply of oil (like I said, it’s a geological thing). So, the ‘market system’ is forcing mankind to find other sources of net energy (substitutes for crude oil) like, for example, shale oil and shale gas. Unfortunately, these shale-based sources of energy are simply nudging mankind’s energy problem forward in to the future a little; in the great scheme of things we still face an unprecedented and intractable energy problem.
An Energy Crisis
The root cause of our global economic woes and the reason why forecasters are being forced constantly to revise down future economic growth rates is that mankind is at the leading edge of an energy crisis. Interestingly, orthodox economists generally do not accept this proposition. For example people like Tim Worstall who is, inter alia, a Senior Fellow at the Adam Smith Institute – and whom my friend Carlos admires – asserts, “infinite growth on a finite planet [is] easy-peasy”. Mr Worstall may be right, of course, insofar as infinite growth at a rate of, say, around 1% per annum might well be achievable. However, the consequences for mankind of making the descent from energising a doubling of global prosperity every 25 years to energising a doubling of global prosperity every 70 years (which is what economic growth of 1% per annum means) hardly bears thinking about. It means truly savage reductions in incomes and economic activity over the next two or three generations (or much quicker if some analysts are right) which, as Chris Martenson observes, mankind has never experienced before.
Incidentally, perhaps to make my point about the significance of oil in our lives today, I note as I write this post that Rupert Murdoch has just tweeted the following message: “Don’t look for early peace in Syria. Putin determined to keep Middle East on boil to sustain oil prices essential for sick Russian economy.” 
The human species has never before had to cope with a sustained, globalised reduction in net energy and, therefore, in global wealth and all the consequences that flow from this. I want my children to understand this profound challenge faced by humanity; I want them to understand that their generation, that is people living in the prime of their lives over the next 30 years, are going to find their existences being shaped by fundamental resource scarcity in ways that we’ve never experienced in history. Before we look at what my children’s generation is supposed to do under these circumstances; before we look for the upside of potentially seismic civilisational change and for realistic solutions for coping with slowing economic growth, if not economic contraction, we need to look at two more characteristics of 250 years of abundant net energy: population growth and debt.
At the time of Jesus’s birth just over 2,000 years ago the human population is thought to have been around 150 – 200 million souls, which rose to about 300 million by the year 1000. Incidentally, the population of the US today is just over 310 million people. From 1000 for the subsequent seven or eight centuries the human population grew at an average rate of just 0.1% per annum. Then, at the dawn of the Industrial Revolution the world population grew suddenly to 700 million; by 1800 the population was a billion. Just over 100 years later, by 1927, the world population had grown by a further 100% to 2 billion people. During the 20th century the human population grew exponentially and reached 6 billion; that’s a 400% increase in just one century. Over the 250 years of the Industrial Revolution to the present day, the global population increased by 6 billion to 7 billion human beings.
We can think of the population situation like this. Imagine you’d moved in to a house 10 years ago and there were 3 of you renting that space. If the occupation of your house grew at the same rate as the population of human beings on earth has grown, 8 years later there would be 10 people sharing your house; more than one new tenant moving in every year. Just one year later the number of occupants in your house would have doubled to 20 tenants; and just another year after that the number of occupants in your house would have tripled again to 60 people. We shouldn’t be too surprised to learn, then, that since the period between the two World Wars, the population of the UK has grown by some 16 million citizens. It’s also not surprising, perhaps, to observe the energy grid, the buildings, transport and water infrastructure, the food supplies, the public services and the cities and countryside of our small island nation all struggling to cope with the migration trends that inevitably accompany a burgeoning human population.
Finally in this section bear in mind that orthodox economists argue that economic growth (and what they really mean by that is industrial age rates of economic growth) is both normal and can extend to infinity. In other words, by definition, there was nothing abnormal about the human population growing by 400% in one-hundredth of one per cent of the time modern humans have existed on earth.
The Marvels of Mainstream Economics
If the orthodox economists are right, there’s no reason at all (is there?) why over the next 250 years the global population shouldn’t keep growing; remember, “infinite growth on a finite planet is easy-peasy”; or, as Carlos says, “nothing can ever ‘run out’ because the market system exists precisely to stop that happening.” Everything human beings will ever need – energy, water, food, minerals – is infinitely substitutable; nothing will ‘run out’ because everything can be substituted by something else offering the same benefits. The fundamental question is, however, whether on the basis of economics orthodoxy, mankind can sustain that which it has created this past 250 years for the next 250 years, or dare I say even the next 25 years?
According to Jeremy Warner (Assistant Editor of the Daily Telegraph and one of Britain’s leading business and economics commentators) “what’s really driven growth over the past 250 years [are] capitalism, fractional reserve banking and free enterprise”. No mention there of the critical role played by cheap net energy since the mid-18th century; just good old-fashioned mainstream economics – by and large devoid of any reference to the laws of physics – has got us where we are today and will no doubt get us to where we’ll be in another 250 years. The dismal science trumps natural science. The UN predicts that by 2050 the global population will reach almost 11 billion human beings. I wonder what you’re take is on the likelihood of that prediction becoming reality?
There are days when I conclude that if you believe the workings and predictions of mainstream economics, you’ll believe pretty much anything. Mainstream economists tell us that it’s only a matter of time before we’ll be back to economic growth rates that characterised the past 100 years or so (just look at the mid-term forecasts made by the OBR, the World Bank, the OECD, the IMF etc … that is before they keep revisiting their forecasts and revising them down). Fear not, we can all double our wealth every 25 years if we keep faith with capitalism, fractional reserve banking and free enterprise.
Look, I’m not really bothered if mainstream economic theories are declared to be as sound as a pound (forgive the irony in that one); if the consensus is that orthodox economists know what they’re talking about; if the political class hangs on every word of the aforesaid economists; if the received wisdom is that the next 250 years stand every chance of being much like the last 250 years, if not better; indeed if economists and politicians believe that man’s ingenuity will prevail and technology will ensure the doubling of global prosperity every quarter-century or thereby despite the Second Law of Thermodynamics; for me the prognostications of economists have become a little too fantastic to believe.
Richard Heinberg puts it like this:
“The past 3 decades, and especially the past 3 years, have seen an explosion of discussion about alternative ways of thinking about economics. There are now at least a score of think tanks, institutes and publications advocating fundamentally revising economic theory in view of ecological limits. Many alt-economics theorists question either the possibility or advisability of endless growth.
The fraternity of conventional economists appears to be highly resistant to these challenging new ideas. Governments everywhere accept unquestioningly the existing growth-based economic paradigm, and this confers on mainstream economists a sense of power and success that makes them highly averse to self-examination and change.
Nevertheless, alternative thinking is still useful because as growth ends the managers of the economy will sooner or later be forced to try other approaches and it will be extremely important to have conceptual tools lying around that, in a crisis, could be quickly grasped and put to use.”
The final characteristic of having had 250 years’ worth of surplus energy at our disposal is the recent explosion in indebtedness. The Bank for International Settlements (BIS) pointed out just this month that “public [sector] debt in most advanced economies has reached unprecedented levels in peacetime. Even worse, official debt statistics understate the true scale of fiscal problems. The belief that governments do not face a solvency constraint is a dangerous illusion.” In other words, short of printing money, most advanced nations are going bankrupt. Remember that we exist in a system in which all money is created through bank loans. At any given moment, there is never enough money in existence to pay back all debts with interest. Our system only continues to function as long as it is growing. So what happens to the existing debt mountain in the absence of economic growth? Answer: a debt crisis; and that’s what we’re experiencing in advanced economies now, which – because we live in a “world civilisation” – is in reality a global debt crisis. 13
The story of economic growth that has shaped the past 40 years was heavily dependent on, and financed with debt. Our experience of “normal” economic conditions (per the deliberations of orthodox economists) was actually an unsustainable illusion, albeit a very pleasant one (I’m looking around me at all the “stuff” here in Castle Moraymint). The BIS also calculates that on current policies, by 2040, the UK’s national debt will exceed 500% of Gross Domestic Product (GDP), higher than any other major economy they studied.
Meantime, the Taxpayers’ Alliance (TPA) recently calculated what it called the “real national debt” by looking at substantial liabilities in relation to unfunded public sector pensions, unfunded state pensions, the Private Finance Initiative, Network Rail, nuclear decommissioning and a number of other items, as well as the considerable additional liabilities arising from bailing out insolvent banks.
The TPA discovered that during the last decade the real national debt had tripled, soaring from 230% (£2.3 trillion) of GDP to 560% (£7.9 trillion) of GDP today (so, no need to wait until 2040 for the BIS’s prediction to manifest itself). The official national debt – the one quoted by the Chancellor in his budget – hugely understates taxpayer liabilities; the declared national debt only constitutes one-tenth of our real national debt.
I suspect you’re getting the message about the debt thing, and I could go on and on about it. For example, we haven’t touched on the fact that, in the UK at least, private sector or household indebtedness is an even bigger problem than public sector indebtedness. But we don’t want to go there for now.
Recently, MoneyWeek (“the UK’s best-selling financial magazine”) published a sobering analysis entitled, “The End of Britain” (sorry, Carlos, we’re almost there). In it, the MoneyWeek team said that:
“The seeds of our current predicament – essentially a profound debt problem – can be traced back over 100 years (well, we know that don’t we). The outcome of our debt problem is inevitable – and the recession, joblessness and instability we see right now is only the first stage of it. Many people think the slump we’re in now is as bad as it will get. But the truth is, it’s only the start.
In fact, you will see the consequences of this deep-rooted problem unfold across the cities, towns and villages of Britain. No one will escape the fallout. In all recorded history, no country has ever recovered from the financial position we find ourselves in today. No government has ever been able to reverse this trend. No emergency action has ever come close to a solution. This inescapable problem has only ever had one outcome: financial collapse.”
So says MoneyWeek (but see my postscripts below).
OK, OK, I’ve done it again. I run the risk of Carlos heading off to top himself and Mary refusing all further interactions with Dad Moraymint. However, I wanted to leave you in no doubt that – according to the evidence as I see it – we live in truly extraordinary times. Neither the political class nor the BBC (which are pretty much one and the same thing, but that’s the subject of another post) will ever tell it like this, for fear of frightening the horses. The mainstream media generally, within which I include the broadsheet and the tabloid newspapers, is also failing to join the dots as far as I can tell. Either that, or there’s one almighty conspiracy in hand to prevent word getting out that we could be f****d. Since I don’t do conspiracy theories (honest) then I suspect the reality is more prosaic.
Our complex society and the politicians who (purport to) run it has so much baggage, so much history, so much momentum, so many vested interests that any suggestion that we might be on the cusp of collapse – which itself could extend over decades, even centuries (according to John Michael Greer, for example) – is deemed to be fantastic nonsense.
My conclusion is that we are indeed living at the leading edge of the collapse of our complex, global society. Future posts will, I promise, look at how this could present marvellous opportunities for my children, even if it’s all getting bit a late for me and my own generation. And talking of it getting late: it’s past 10.00 pm on a Tuesday evening and so I’m going to bed. Here’s to the upside! And thanks for hanging in with that post; normal (brief posts) service will be resumed shortly.
PS Here’s another interesting tweet, this time from Jeremy Warner this morning (26 June): “I perhaps shouldn’t give this rubbish the oxygen of publicity, but if you want a good “end of days” laugh, read this http://bit.ly/135HsCi ” … “this” being MoneyWeek’s ‘End of Britain’ article to which I referred in my post above. I’m conscious that MoneyWeek has an angle in publishing its thoughts on the state of the UK economy (doesn’t any newspaper/magazine?), but it would be helpful and interesting to have Mr Warner take apart the MoneyWeek analysis and explain where they’ve got it hopelessly wrong, to the point of the report being, well, laughable rubbish. In the physical sciences this would be referred to as ‘peer review’.
PPS It’s all go today. Ed Conway (Sky News’ Economics Editor) has just tweeted: “Paul Tucker of [the Bank of England] says rise in govt bond yields & recent market fluctuations are an “amber light” for the financial system”. But I thought MoneyWeek’s reference to potential financial collapse was laughable rubbish according to Jeremy Warner? Do these economists know what they’re talking about?
. ‘Consumerism’, Wikipedia.
. ‘Energy – Reality Intrudes’, Moraymint Chatter, 19 February 2013.
. ‘The Collapse of Complex Societies’, Joseph Tainter, Cambridge University Press, 1988.
. Ian MacFarlane (economist and Governor of the Reserve Bank of Australia 1996 – 2006) in his Boyer Lecture (2006).
. ‘Is US Economic Growth Over?’, Professor Robert J Gordon, Centre for Economic Policy Research, Policy Insight No 63, September 2012.
. ‘The Crash Course: The Unsustainable Future of Our Economy, Energy and the Environment’, Chris Martenson, Wiley, 2011.
. Rupert Murdoch, Tweet, 0917 hrs, 23 June 2013.
. The Second Law of Thermodynamic states that entropy (that is, disorder) always increases or remains constant in a closed system. The entropy of a closed system can never decrease within that system. Since the universe can be modelled as a closed system the universe is considered to be entropic – that is, running down.
. ‘The End of Growth’, Richard Heinberg, New Society Publishers, 2011.
. 83rd BIS Annual Report 2012/13, 23 June 2013.
. ‘The Real National Debt: A Decade of Reckless Growth’, The Taxpayers’ Alliance, 19 October 2010.
. ‘The Long Descent’, John Michael Greer, New Society Publishers, 2008.