The Future of Work in a Collapsing Energy System
Recently, I was in Spain, and not only is the weather different there compared to Germany, but the people are also much friendlier. Fortunately, we were able to stay with friends, and we had some pleasant evenings. On the way home, I looked at Spain's GDP and wondered again what we were measuring. As has often been said, GDP does not care whether we are at war, our health is deteriorating, or we are exploiting our natural resources. GDP grows and grows. But something else puzzled me. Labour productivity has nothing to do with labour. It rarely involved an average worker finding a clever way to produce more things per hour. Instead, the productivity gains of the last two centuries mainly came from machines that produced things faster and increasingly replaced workers. (This creates the impression that an average worker who managed to keep their job can suddenly produce ten times as much as before.) As long as energy and raw materials—needed to build and operate these machines—were cheap, this approach predictably led to higher profits, eventually replacing almost all highly skilled manual labourers with automated production lines and robots. However, this trend will soon end or even accelerate initially.
Mainstream economists, stuck in their fantasy world of infinite GDP growth, monetary theories, interest rates, and stock markets, are completely unable to recognize what is coming. Don't get me wrong, I was once there too, and this was exactly what was explained to me at university until I read a book about complexity economics and MMT. Then I began to understand what it means to see the entire system holistically. As energy costs for energy production constantly rise, it will soon become impossible to increase labour productivity by using more electricity or fossil fuels. Economically, this process can be described as resource extraction becoming more expensive for producers every year. Out of fear of not being able to sell their raw materials at a high enough price to maintain operations, mining companies have started to postpone new investments and instead focus on buying each other's assets. The lack of investment in resource extraction is good news for nature conservation but has far-reaching impacts on everything we do.
Adding to the difficulty, almost all resource extraction activities require fossil fuels—from mining lithium, copper, or nickel to refining these metals and processing them into solar cells or electric vehicles. The energy density of coal, oil, and gas, as well as the great heat and carbon atoms they provide for necessary chemical reactions, simply cannot be replaced by electricity, at least not to any significant extent. I have an article on this. Just a quick note: climate change is creating new opportunities to extract oil in areas that were previously not worthwhile (Greenland, regions in Russia, etc.). This means we can extract cheap energy again to satisfy our constant hunger for more cheap energy. I'm sorry, but no carbon means no industry. In recent years, billions have been invested in renewable energies, yet every year we consume more and more fossil fuels. The constant increase in energy demand for fossil fuels has thus marked the end of annual labour productivity growth across all sectors of the economy. The increasing amount of drilling, shovelling, pipelines, refineries, water pumps, etc., needed to bring the same amount of coal, oil, and gas to the market has started to cannibalize energy that could otherwise be used elsewhere. From a neoclassical economic perspective, this all seems unproblematic. We just need more resources, and all our energy problems will be solved! And if not, so what? We can simply outsource these activities and become a service economy with lawyers and investment firms, buying everything we need on the market.
While this may sound convincing and even make GDP statistics look good, the high salary of a corporate CEO has very little to do with real productivity gains. Ultimately, they still spend their money on real things: real cars, real houses, real appliances—made from real resources and using real energy. They are not the only one, you and me are doing the same. However, as more and more energy is diverted to maintain global fossil fuel and mineral extraction, the "real" economy that converts these resources into things will face increasing competition for energy. For example, in many cases, grid access permits are already being denied. This can only lead to one outcome: shortages and rising prices. Everywhere.
Funneling more money into the economy thus does not solve a thing. It just fuels inflation at home and speeds up resource drawdown elsewhere.
A quick look at the wind and solar energy sector says it all. "Renewable energies" are not renewable at all: they are just another material-intensive method of converting sunlight and wind into electricity. And these materials still come from a fossil-fuel-driven pipeline of mines, smelters, cement plants, cargo ships, trucks, and cranes. This high share of materials and fossil fuels makes them a losing proposition when it comes to the "energy transition." Adding to the problem is that ore grades (i.e., the ratio of metal to rock in mines) are declining as rich deposits are depleted and increasingly replaced by lower-quality ones. As a result, metal production (not just fossil fuels) will require more energy, labor, and machinery year after year. It's no wonder, then, that the electricity demand for Chilean copper production is expected to increase by 53.5% between 2015 and 2026, while the planned increase in copper production in this period is only 7.5%. And that's just electricity. Coupled with a similar increase in energy demand for coal, oil, and gas extraction (all important inputs for copper production), the question of increasing labor productivity becomes moot. The relentless rise in energy demand throughout the supply chain of "renewable energies," from fuel to metals, will ultimately negate any technical achievement aimed at genuine productivity increases. While adding robots and automated production lines certainly increases the number of solar panels produced per worker, it also leads to a considerable rise in kilowatt-hours consumed during the process—further worsening the energy return. The problem is that this applies to every technology we use, as they all require metals, concrete, oil, and gas—the essential building blocks of this civilization. (Yes, this also applies to nuclear reactors and fusion.) So even if we ever manage to fuse hydrogen atoms in a commercially sustainable way (which I highly doubt), we would still face an exponential increase in energy demand for constructing these reactors.
However, the process of exploitation has no practical upper limit. As one mine after another is depleted, worse deposits must be "developed." Although we certainly have a lot of copper, niobium, or whatever in the Earth's crust, extracting the amount needed to build a fusion reactor would force us to dismantle an entire mountain, which would still bankrupt us energetically. (At a certain point in the resource depletion process, a new power plant will eventually require more energy for construction and maintenance than it could ever return.) More importantly, this path would also lead to the rapid destruction of the remaining life on this pale blue dot.
But who cares?
Fusion cannot save the planet. It can only make its destruction even more comprehensive.
As a result, we have fallen into a productivity trap where further gains would require a disproportionately high increase in energy and resource consumption. Without measures to increase productivity, both resource extraction and production could soon become unprofitable. As rich deposits of fossil fuels and metals run out and the energy needed for further extraction exceeds our energy supply, it will become impossible to maintain civilization in its current form. So, what is to be done?
The power grid, along with other infrastructures, is particularly vulnerable to collapse in such an energetic/economic environment. As older components of the grid fail and depletion drives up the cost of replacement parts year after year, making it increasingly difficult to find replacements, maintaining a coherent and resilient grid made of steel, copper, aluminum, concrete, etc., will gradually become impossible. (And we haven't even talked about doubling grid capacity to accommodate more battery storage, renewable energies, and electric vehicles—not to mention artificial intelligence, whose electricity demand rivals that of entire countries.) When increasingly frequent and devastating hurricanes, heatwaves, or wildfires are added, the immense challenge faced by engineers responsible for maintaining a stable power supply becomes evident. A telltale sign is that the grid is already suffering from a chronic shortage of transformers, a device that requires tons of copper and electrical steel to manufacture.
The collapse of the grid, however, will not come in the form of a single massive blackout but as a series of planned (and sometimes unplanned) power outages and voltage drops that last longer and longer. First, an hour here and there. Then a day. Then everything returns to normal for years, as an overdue repair is finally made. Then something happens at a major power distribution station, and you receive a calendar in your mailbox informing you of rolling blackouts for the next three months or until the station is repaired. Then the power comes back on, only to be switched off arbitrarily... And so on, for years and decades, until you realize you haven't turned on the lights for a month. Then you talk to a friend from another city and find out that the power supply in their area is more or less fine—so you decide it's time to do some bus-surfing.
Naturally, this slow farewell to the power grid will also lead to a massive loss in labor productivity. Remember: no electricity, no (mechanical) automation. Should power outages occur frequently enough, tasks that were previously performed by machines will (again) have to be done by people. So much for the immense progress made over the last century...
Out of the countless problems, for example, cows will have to be milked by hand. Every day. Sure, one might say, emergency generators will be used... but how energy-efficient is that? Ten, maybe fifteen percent? Only a small portion of the energy in a gallon of gasoline can be converted into electricity with a generator, the rest is lost as waste heat. No wonder natural gas is burned in large turbines to power the grid, as these massive plants utilize up to fifty percent of the energy released by the fuel. Or how about nuclear power plants? These massive facilities require a stable grid to operate, but once resources prove insufficient to maintain the grid in a functioning state, they too must be shut down one by one... What remains is tons of nuclear waste and a series of less energy-efficient options, leading us back to the good old generator in the basement...
At least until these too break down en masse due to overuse, making the search for spare parts a real ordeal, and one is left without power until the missing components are finally found. Sure, rooftop solar panels can and will help, but only during the day and when it’s not completely overcast outside. Otherwise, reliance on batteries is necessary, whose production is not only energy- and resource-intensive but also requires replacement every ten years or more. Not to mention the panels themselves: In a collapsing economy that once imported everything from China, these will also become increasingly difficult to obtain.
Again, do not think of losing a stable electricity supply as a one-off event that can be endured with a barrel of gasoline and a few cans of corned beef. Initially, one might be able to coast through the first few blackouts and then resupply. But collapse will take much longer than one can imagine, increasingly wearing down everything around—including the corned beef industry.
By the end of this century, on the other side of the collapse, all productivity gains achieved by industry through automation will be lost. By then, manual labor will have almost completely replaced machines. Not all at once, but gradually: first during power outages, then increasingly as power outages and fuel shortages become more frequent. And finally, when all generators, transformers, and other electrical devices permanently fail. In the coming decades, people will have to relearn how to do things manually: how to knead bread, grow food, wash clothes, etc., without the magic of electricity. This will also leave much less time for office jobs, forcing more people to stay home to tend to gardens and do housework. And as the economy stagnates due to power shortages and productivity losses, the need for more locally produced goods and services will rise—requiring even more people to work outside the current economic system. First slowly, then all at once, as one critical point after another is exceeded and global supply chains finally break down. This is not to say that one will be living in a Matrix film or an episode of the Hunger Games in ten or twenty years—most likely not—but that is the direction we are heading. Due to many variables like financial crises, wars, natural disasters (worsened a thousandfold by climate change), drastic geopolitical changes, the pace of resource depletion, etc., it is impossible to provide an exact timeline for the complete deindustrialization of the (formerly) developed world.
The return to the land and a low-tech, low-energy lifestyle will not be brought about by a rational decision to reduce energy consumption. As long as electricity flows from the socket and one has a job to pay the electric bill, very few people will give up their comforts and the efficiency gains achieved by using external energy sources. If anything, a low-tech economy will be extremely inefficient—at least by today’s standards. It will require enormous amounts of human labor and produce far fewer goods per worker—just think of harvesting wheat with scythes compared to a combine harvester. Sure, a low-tech economy will ultimately consume much less resources and fossil fuels, but there will also be less time and energy for wasteful activities and pointless jobs.
However, this lies far in the future. Many of you will likely not live to see this process fully unfold. The path to this future, however, has already been taken: The gradual depletion of rich deposits of minerals and fossil fuels will leave us no choice but to increasingly simplify our lives and adopt more low-tech solutions until we eventually reach a more or less sustainable state. But as the saying goes, life is not about the destination, but the journey.
Therefore, once again, the invitation to join our thesis at heliogenesis.io on how we can produce materials like nature does. Be it glass through diatoms or solidifying building materials through bacteria, instead of in energy-intensive processes. This is our way out of the whole dilemma. How can we use the sun and natural processes to bring our civilization into a new era? We have weekly talks about this on YouTube, and it’s pretty clear that all this is possible if we focus on it. Also to make sure that in this civilisation our main focus is maintaining the system and relationships. That is the purpose of our society, not buying stuff and doing stupid things nobody wants to great a brief moment of happiness….
Until next time,
Malte
enjoyed this read, great take on labor productivity and energy.