What Happens When the Economy Stops Growing?
What's the main goal of our economy? Is it to grow, create jobs for everyone, be fair, keep prices stable, or ensure safety or a good life? Or maybe it's to make the richest 1% even richer at the cost of everyone else? If it's the last one, then our economy is doing really well. If you think that's too negative, pick any goal from the list. Or none. With people's money buying less and less, energy systems not doing as well as before, and not-so-great leadership, I think the main goal left is safety or focusing on a good life for all of us.
We're entering a time of big changes because we're running out of fuel for transportation. Yesterday I was asked what I think money is. I think money is a transactional tool to do certain things with it. It does not have any explicit value. She answered that money is used to move things like resources and labour around. That’s true to a certain point, but without energy, we can not do something like this at all. somewhere we wrote about that as well, let me come back to fuel and energy. Without a good way to move things long distances or do farming and mining without oil and gas, our living standards will drop as we use less carbon-based energy. This is all happening while we're damaging the environment too much. We're likely to face big problems and shortages, like not having enough water, heating fuel, food, or electricity.
If you have a lot of energy resources and can keep them safe, you'll be wealthy. If not, but you can offer expensive services, you can still buy a lot of energy. But in both cases, all the energy will be used up quickly. When rich countries use up all their fuel and lose their advantages, they can only go downhill.
Our leaders, elected or not, are who we look to for answers in these tough times. But remember, these powerful people are just humans, and they're not always kind. John Kenneth Galbraith once said, "Rich people will risk everything rather than give up any part of their wealth. They may be short-sighted or even stupid. But they believe their wealth is their absolute right."
A NASA-funded study called "Human and nature dynamics: Modeling inequality and use of resources in the collapse or sustainability of societies" explains more. The rich don't feel the effects of environmental problems until much later than ordinary people. This wealth buffer lets them keep doing things as usual, even when a disaster is coming. This might explain why big societies have collapsed in the past, like the Romans and Mayans. Even when some people warn of a coming collapse and suggest changes, the rich and their supporters who don't want change can point to how things have been okay so far.
Long-time readers know this pattern isn't new. Ever since people figured out how to grow and store lots of food, societies have had people who think they're better than others. They often used religion to justify their higher status and controlled energy sources, like food and later fossil fuels. They kept a tight grip on power and used force against anyone who resisted.
Human nature and the way we use resources tend to follow a pattern of seeking maximum power. We find a new resource, use it up, and ignore the problem until it's too late. After a period of darkness or a "dark age," the cycle starts again. But this time, we've used up so much of nature's resources that it's unlikely a high-tech civilization could start again. The raw materials we need, like high-quality ores, easy-to-get fossil fuels, and big forests, are mostly gone.
What can our smart leaders do now, before things fall apart? Just watch as things get worse. They need to make sure they stay in power. One way is to make people focus on threats from other countries. When people are worried about their own economic, energy, water, or food security, they're more likely to believe these threats. It's easy to turn different groups against each other as we see with the rise of far-right movements in the West.
Sadly, the so-called "democratic" forces aren't much better. Backed by big businesses, these leaders benefit from moving between government and corporate jobs, doing what their rich supporters want. It seems we have to choose between openly harsh leaders on the "right" and an uncontrolled corporate government on the "left". In reality, it's like choosing between two similar bad options in a fight between imaginary countries.
We're dealing with technologies, like oil or renewable energy, that lead to more control by a few. When people's peace depends on cheap energy, any rules or regulations that stand in the way of new energy sources will be removed. We'll see areas in places like the Balkans, North Africa, or Latin America where natural resources are taken and pollution from factories is ignored. Here, the harsh truth of modern "clean" technology will be clear to locals but not to people in wealthier places.
As the best mining and drilling spots run out, new ones will need more land, energy, and water. Eventually, we won't have enough resources for everything. We're pushing our economy to its limits to see how much we can get out before it collapses. Take AI, for example. Big AI models like Chat GPT are creating content on a huge scale. They're praised as saviours, but they don't make new energy or resources. They just use them more efficiently, which can use them up faster.
AI is making our world more complex and needs more energy. It already uses a lot of electricity, and that could increase a lot by 2028. This doesn't even include the energy and water needed to make chips or "green" energy equipment.
Our infrastructure, meant to support all this, is reaching its limits. Europe's electric vehicle boom is already causing problems for the power grid. We might have to limit electricity for charging cars and running heat pumps as early as 2024. Isn't that ironic? Plus, central banks want digital currencies and identities, needing even more electricity.
High-interest rates are hurting "clean energy", and new solar policies in places like California could be problematic. A new rule reduces the value of solar energy credits by a lot, pushing people to store their solar energy instead of sending it to the grid.
In reality, there's no free lunch. A power grid made for a stable electricity supply can't handle too much weather-dependent renewable energy. Trying to make our fossil fuel-based economy run on electricity is hitting a dead end. But energy advisors keep pushing for more of the same, trying to speed up the "energy transition". However, this might be too expensive. As the saying goes, "Physics always wins."
Trying to electrify everything might be another failed attempt to save our ageing civilization. We've built infrastructure that brought growth, like electricity, water, and sewage systems. But now, the grid needs not just maintenance but a huge expansion for all the extra electricity from solar power and electric vehicles. We're spending a lot of money without seeing any increase in taxes or services. This same process contributed to the fall of past empires, like the Romans and Mayans.
Growing costs with no returns… What could go wrong?
When I say money, I mean energy. Replacing and expanding our infrastructure requires a lot of digging and burning fossil fuels. With energy supplies dwindling, trying to electrify everything without enough fossil fuels is a huge problem. We need a different plan, like a "Brown New Deal". This would use some remaining fossil fuels for alternative energy, like wind and solar, but not to grow the economy. Instead, the energy would be used for important things like healthcare or water treatment. We'll have to focus on essential work, like growing food and transporting important goods.
Will this plan be adopted? Maybe in some Nordic countries, but not worldwide. Governments will wait until the last minute to cut energy use and keep things looking normal. How people will react after being told infinite growth is possible is anyone's guess. Scary stories, like cyberattacks or banking collapses, will be everywhere, blaming everything except the real problem: using too many resources and polluting too much.
The fight over limited resources will be intense. Different industries will have conflicting needs. They don't realize they're all part of the same system. When the system fails, everything fails.
If we were rational, we would have chosen a different path long ago. We might have stopped relying so much on agriculture as we saw the damage it caused. But we didn't. We keep debating about fossil fuels while emissions rise.
We'll keep pushing our limits, turning to leaders who promise security for themselves first. Public funds will dry up, along with social services. Everything but the military will stop working. The system is unsustainable and needs an exit strategy, but we'll likely see more foolishness until people decide to try something completely different. More on that next week. Stay tuned!
Until next time,
Malte