[R-G] [BillTottenWeblog] The Economics of Decline

[Bill Totten]

The Archdruid Report (May 20 2009)

Druid perspectives on nature, culture, and the future of industrial society


I opened last week's post by pointing out that many people nowadays fail
to grasp some of the most basic realities facing us as the industrial
age comes to an end. That turned out to be a rich irony, for a great
many of the comments I received in response to the post displayed a
blind spot even bigger than the one I attempted to address. It's a
convenient irony, though, as it offers a useful way to start talking
about an underexplored dimension of the predicament of our time.

The post in question pointed out that today's much-hyped "information
superhighway", far from being the wave of the future so many of its
promoters claim it to be, was a temporary product of the last hurrah of
the age of cheap energy and can't be expected to survive for long as
that age winds down. Instead, as the economic burden of the internet's
immense energy usage begins to bear down, other technologies less
dependent on huge energy inputs will become more economical, driving a
spiral in which rising costs and restricted access will cut into
internet service while simpler technologies absorb a growing range of
its current economic roles. Finally, when economic contraction and
social disintegration have proceeded far enough, the internet will
simply drop out of use altogether because the economic basis for its
operation will have gone away.

Most of those who objected to this sketch of the future, in turn, relied
on a very curious logic. The internet will remain viable and widely
accessible, they claimed, because the economic advantages of keeping it
are so great. Those few who addressed the issue of costs at all simply
insisted that technological progress would allow the internet to use
less power than it does at present, and left it at that. The same
arguments, interestingly enough, were deployed in earlier discussions
about railroad technology: most critics simply insisted that railroads
were efficient and economically advantageous, while a few suggested that
they could be run more efficiently than they are now.

All this is true, but it misses the central issue I've tried to raise in
the last few posts - the impact of energy and resource scarcity on the
relative costs and benefits of different technologies - and it also
dismisses the even broader issue of whether such energy-intensive
technologies are sustainable at all in the future ahead of us. It's a
dizzying departure from reason to insist that the advantages conferred
by the internet mean that the internet must continue to exist. The fact
that something is an advantage does not guarantee that it is possible.

An example from one of the most famous cases of social collapse is
relevant here. On Easter Island, as I think most people know by now, the
native culture built a thriving society that got most of its food from
deepwater fishing, using dugout canoes made from the once-plentiful
trees of the island. As the population expanded, however, the demand for
food expanded as well, requiring more canoes, along with many other
things made of wood. Eventually the result was deforestation so extreme
that all the tree species once found on the island went extinct. Without
wood for canoes, deepwater food sources were out of reach, and Easter
Island's society imploded in a terrible spiral of war, starvation, and
cannibalism.

It's easy to see that nothing would have offered as great an economic
advantage to the people of Easter Island as a permanent source of trees
for deepwater fishing canoes. It's just as easy to see that once
deforestation had gone far enough, nothing on Earth could have provided
them with that advantage. Well before the final crisis arrived, the
people of Easter Island - even if they had grasped the nature of the
trap that had closed around them - would have faced a terrible choice:
leave the last few big trees standing and starve today, or cut them down
to make canoes and starve later on. All the less horrific options had
already been foreclosed.

Further back in Easter Island's history, when it might still have been
possible to work out a scheme to manage timber production sustainably
and produce a steady supply of trees for canoes, this would have
required harsh tradeoffs: one additional canoe per year, for example,
might have required building or repairing one less house each year. Both
the canoe and the house would have yielded significant economic
advantage, but it wouldn't have been possible to get both. In a world of
limited resources, in other words, it's not enough to insist that a
given allocation of resources has economic advantages; you must also
show that the same resources would not be better used in some other way
or for some other need.

The survival of the internet in an age of dwindling energy supplies is
subject to the same hard logic. The internet demands huge inputs of
energy and resources. Those were easy to provide during the quarter
century from 1980 to 2005, when the price of energy was artificially
forced down to the lowest levels in human history, and the same glut of
cheap energy made it possible to build and power the internet without
impacting other sectors of the economy. As energy becomes scarce and
costly in the not too distant future, on the other hand, the demands of
the internet will begin to conflict with the demands of other economic
sectors. The task of managing those conflicts will likely be the supreme
economic challenge of the century ahead of us, not least because we are
so utterly unused to thinking in terms of hard tradeoffs; we assume,
blindly, that we can have it all.

Now it's true, of course, that the internet could be operated more
efficiently than it is today. Efforts to increase efficiency, however,
are subject to a law of diminishing returns; a range of limits
ultimately rooted in thermodynamic laws put a ceiling on just how
efficient any process can get. Such gains also have costs of their own;
research and development does not come cheaply these days, nor does the
construction and installation of more efficient equipment, and the
budget cuts currently sweeping through companies and universities
worldwide - themselves the harbingers of much greater cuts to come - do
not exactly support the act of faith that claims infinite technological
improvement as the answer to this and all other problems.

Nor is it valid to put the possibility of increased efficiency for the
internet on one side of the balance and ignore the equivalent
possibilities on the other side. After all, other technologies - some of
which are already simpler and more efficient than the internet - are
just as liable to see gains in efficiency as the internet. Even a more
efficient internet is unlikely to be the most economical way to use the
sharply constrained energy and resource flows of the deindustrializing
future; if another technology or suite of technologies can provide
something like the same services at a lower cost, that technology or
suite of technologies will outcompete the internet. Thus if it costs
less, all things considered, to send messages over shortwave radio,
order products by mail from a catalog, and get pornography from a local
adult bookstore, than to do the same things over the internet, then the
internet will fall by the wayside, or at best will be propped up for
noneconomic reasons as long as economic realities make it possible to do so.

It's crucial to remember that the entire supply chain that keeps the
internet and its potential competitors running has to be factored into
these calculations. It's easy to see the internet as uniquely efficient
if all you take into account is the energy going into your home
computer, or even if you consider the gigawatts used by server farms.
Putting those gigawatts to work, however, requires an electrical grid
spanning most of a continent, backed up by the immense inputs of coal
and natural gas burnt to put electricity into the wires, and a network
of supply chains that stretches from coal mines to power plants to the
oil wells that provide diesel fuel for trains and excavation machines;
the server farms draw on a vast array of supporting services and
manufactures, from the overseas mines that produce rare earths for
semiconductor doping through the factories that turn out components to
the colleges that turn out trained technicians, and the list goes on.

All told, a fair fraction of the world's industrial economy helps
support the internet in one way or another, and many of those support
functions can't be done at all in a less centralized way or at a lower
level of technology. Most of the potential replacements for the internet
don't suffer from that limitation. It's entirely possible to build a
shortwave radio by hand, for example, using components that can be built
by hand from readily available materials; there are radio amateurs alive
today who did precisely that before the postwar electronics boom made
manufactured components cheap and easily accessible. In a world where
the cost of energy is a major economic burden, these differences will
matter, and give a massive economic advantage to less energy-intensive
ways of accomplishing things.

One useful way to assess the vulnerability of any current technology in
a world on the far side of Hubbert's peak, in fact, is to note the
difference between the direct and indirect energy inputs needed to keep
it working and the inputs needed for other, potentially competing
technologies that can provide some form of the same goods or services.
All other factors being equal, a technology that depends on large inputs
of energy will be more vulnerable and less economically viable in an age
of energy scarcity than a technology that depends on less, and the
bigger the disparity in energy use, the greater the economic difference.
In turn, communities, businesses, and nations that choose less
vulnerable and more economical options will prosper at the expense of
those that do not, leading to a generalization of the more economical
technology. It really is as simple as that.

You might think that this sort of economic analysis would be an obvious
and uncontroversial part of peak oil planning. Of course it's nothing of
the kind. Most discussion and planning around the subject of peak oil
these days pays no more than lip service to economics, if it deals with
that dimension at all, and a great many of the plans being circulated
these days look very appealing until you do the math and discover that
the most basic questions about resource inputs and economic outputs
haven't been addressed.

Now part of this blindness to the economic dimension is hardwired into
contemporary culture. It hardly needed the mass exodus into delusion
that drove the recent real estate bubble to prove that most people in
the industrial world nowadays think that getting something for nothing
is a perfectly reasonable expectation. We have lived with such abundance
for so long that a great many of us seem to have lost any sense that
there are limits we can't borrow or bluster our way around. To a very
great extent, indeed, the last three hundred years of economic expansion
have been driven by a borrowing binge even more colossal, and ultimately
more catastrophic, than the one imploding around us right now. Instead
of borrowing from banks, we borrowed from the Earth's stockpile of
fossil carbon, and squandered most of our borrowings on vaster
equivalents of the salad shooters and granite countertops that absorbed
so much fictitious value during the late boom. By the time Nature's
collection agencies get through with us, in turn, they may just have
repossessed everything we bought with our borrowings - which is to say
nearly everything we've built over the last three centuries.

Yet there's another source feeding into this blindness, because the
theories of economics that have been used to try to make sense of the
flows of natural and manufactured wealth in our societies are hopelessly
inadequate to the task. It's difficult to construct a meaningful
economic analysis of the future within a paradigm that insists that
resources magically appear whenever there's money to pay for them, for
example, or claims that damage inflicted by human economic activities on
the natural systems that allow our economy to function in the first
place are "externalities" that need not be considered in cost-benefit
analyses. Current economic theory commits both these howlers, and others
as well.

With next week's post, we'll begin a more detailed exploration of what
an economic vision relevant to a deindustrializing future might look
like. That exploration will start from the work of E F Schumacher, who
was one of the most thoughtful (and heretical) economists of the last
century, as well as an early (and rarely remembered) peak oil theorist.
Using his ideas as a springboard, I hope to take today's discourse about
the future of industrial society into unexplored territory, and - not
incidentally - provide some unexpected but practical tools for coping
with the arrival of the deindustrial age.

_____

John Michael Greer has been active in the alternative spirituality
movement for more than 25 years, and is the author of a dozen books,
including The Druidry Handbook (2006) and The Long Descent (2008). He
lives in Ashland, Oregon.

http://thearchdruidreport.blogspot.com/2009/05/economics-of-decline.html


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