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Musings Report 2017-26 6-30-17 The Outlines of a DeGrowth Economy
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For those who are new to the Musings reports: they are basically a glimpse into my notebook, the unfiltered swamp where I organize future themes, sort through the dozens of stories and links submitted by readers, refine my own research and start connecting dots which appear later in the blog or in my books. As always, I hope the Musings spark new appraisals and insights. Thank you for supporting the site and for inviting me into your circle of correspondents.
Welcome to June's MUS (Margins of the Unfiltered Swamp)
The last Musings of the month is a free-form exploration of the reaches of the fecund swamp that is the source of the blog, Musings and my books.
The Outlines of a DeGrowth Economy
Even though we don't know precisely how the future will unfold, we know a few things about the future.
Most importantly, the "good" kind of energy--high-density, easy to transport--will become more expensive as the cheap, easy-to-extract energy sources are depleted.
There are lots of alternative energy technologies in development, but the reality is few make financial sense and few scale up rapidly enough to replace oil/coal/natural gas.
Take thorium reactors. Everyone agrees this form of nuclear energy is ideal and safe. Yet not a single working thorium reactor is in operation.
Wind and solar make up roughly 2% of all energy consumed globally. These could double, triple, quadruple and then double again, and they wouldn't even begin to replace oil.
These alt energy sources are intermittent, and that's a big problem for two reasons:
1. Batteries are currently costly and rely on scarce resources (lithium, etc.)
2. Utilities need to maintain significant power generation capacity to replace these sources during night, cloudy days, when the wind dies down, etc.
This means the entire infrastructure of fossil-fuel generated electricity must be maintained--a very costly requirement.
The other problem is much of our transport system can't be switched to electricity--aircraft, container ships, etc.
Virtually every optimistic vision of a cheap, abundant energy future overlooks these problems, or assumes each will effortlessly be solved with some new whiz-bang technology.
But not all technologies are affordable and not all technologies scale from the lab to production on a global scale.
Maybe some lab will invent a battery based on a cheap, abundant resource like silicon, but the process of manufacture may still be horrendously expensive, i.e. require a lot of energy and costly machinery.
If we accept that energy will get increasingly scarce and costly, that means the global economy is in terminal trouble. As this chart from Chris Martenson shows, energy consumption per capita and GDP track each other with near-perfect correlation:
If GDP/ economic expansion reverses, the global financial system--dependent as it is on the permanent expansion of debt and income to service that debt--has a problem.
Analysts Gail Tverberg and Chris Martenson, among others, have been discussing the causal connections between energy, debt and the financial system, for example:
The Looming Energy Shock
2017: The Year When the World Economy Starts Coming Apart
Simply put, the extraction of fossil fuel energy and the development of alt energy on a vast scale both require an equally vast expansion of debt.
A collapse in energy prices, while welcome to consumers, destroys energy companies' ability to seek /develop new sources (exploration and production) or build out new alt energy facilities.
On the other hand, soaring energy prices crush consumer spending, guaranteeing stagflation and recession.
The solution is a Goldilocks price structure--not too high, not too low.
But as the costs of extracting hard-to-get or quickly depleted energy (i.e. fracking) continues ratcheting higher, the Goldilocks solution becomes untenable, as the price that must be charged is higher than consumers can afford, given their stagnant wages and high payments on debt.
There is no viable solution within a status quo that is dependent on cheap, abundant energy and expanding debt.
Technological solutions are always the "answer," but the actual costs in scaling up new technologies is glossed over.
If a new energy source bankrupts consumers and producers alike, is it a solution?
This forces rational, fact-based observers into pondering a future that consumes less energy and generates less income and debt per person--a DeGrowth economy.
A very basic, common-sense assessment of the high-debt, high-energy consumption lifestyle the status quo needs to remain glued together yields a great many instances of horrendous waste of energy and resources.
-- 40% of our food in America is thrown away. All that food took a great deal of energy to produce and transport.
-- tens of millions of vehicles idling in traffic.
-- tens of millions of vehicles weighing 1.5 to 2 tons each transporting one person.
-- employees who could do their digital work at home forced to go to a central location.
And of course the Big One: an economy that requires endlessly expanding consumption to generate the income needed to service its astounding debt loads and pay the high taxes needed to fund a costly centralized government.
The main critique of a DeGrowth economy is this: if we reduce energy consumption and debt-funded consumption, who will employ the tens of millions of people laid off from their jobs?
The answer is obvious but we are blind to it because we assume the status quo is the only possible economy: we need a system for paying people that doesn't rely on either the central state (government) or for-profit corporations.
Right now, everyone looks to these two sectors for answers: the state and for-profit corporations.
But there is a Third Economy, what's known as the social economy by many, and what I call the Community Economy. The Community Economy operates by different incentives and structures than either the state or corporations, and it can be structured to distribute money (currency) that is created in communities directly to people working in the community economy, without the intermediaries of central banks and states controlling the creation and distribution of this new currency.
Such a structure would upend the centralized power of central states and banks, and so of course they will resist this development.
The status quo will collapse under its own financial weight for the reasons outlined above, and creating trillions of dollars, euros, yen and yuan in an effort to keep the whole machine from coming apart will only speed its demise. Creating currency is essentially free, creating new energy is not free. Since currency is a proxy for energy, creating trillions in new currency will only destroy the currency--it can't generate more energy.
We could all get by rather nicely on 50% or less of the energy we currently consume chasing a high-consumption, high-waste lifestyle.
A DeGrowth Economy requires a new incentive structure and a new decentralized structure for creating and distributing currency.
This is the foundation of my CLIME proposal for a DeGrowth Economy--the Community-Labor Integrated Money Economy. This is the subject of my book A Radically Beneficial World.
From Left Field
Myths of Job-Killing Robots Obscure Real Causes of Inequality (via Jim P.)
Agents of Inequality: How Wealth Managers to the Super-Rich Undermine Society and What We Can Do About It --they're just following the incentives in the status quo....
Anxiety Dream: In bed with late capitalism-- lack of sleep a killer...
Disrupt the Citizen: Against ride-sharing -- a false dichotomy, IMO, but worth reading...
Global Debt Hits A New Record High Of $217 Trillion; 327% Of GDP -- no problem, debt can become infinite...
Factories May Be Coming Back To The U.S., But The Jobs Aren't: McKinsey --painfully obvious--automation is global...
The Rise of the Thought Leader: How the superrich have funded a new class of intellectual -- self-serving elites at work...
As Climate Changes, Southern States Will Suffer More Than Others-- already hot places get hotter...
Drought in Northern China Is Worst on Record -- huge sums spent on combating desertification, all for naught...
Thinking Correctly About Bitcoin -- worth reading...
Closures, overcrowding, rats: New York City commuters face 'summer of hell' (via Joel M.)
Why Self-Help Guru James Altucher Only Owns 15 Things (via Maoxian)
"No one is useless in this world who lightens the burdens of another." Charles Dickens
Thanks for reading--
charles |
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