A measured response to surveillance capitalism

Also published at Resilience.org.

A flood of recent analysis discusses the abuse of personal information by internet giants such as Facebook and Google. Some of these articles zero in on the basic business models of Facebook, and occasionally Google, as inherently deceptive and unethical.

But I have yet to see a proposal for any type of regulation that seems proportional to the social problem created by these new enterprises.

So here’s my modest proposal for a legislative response to surveillance capitalism1:

No company which operates an internet social network, or an internet search engine, shall be allowed to sell advertising, nor allowed to sell data collected about the service’s users.

We should also consider an additional regulation:

No company which operates an internet social network, or an internet search engine, shall be allowed to provide this service free of charge to its users.

It may not be easy to craft an appropriate legal definition of “social network” or “search engine”, and I’m not suggesting that this proposal would address all of the surveillance issues inherent in our digitally networked societies. But regulation of companies like Facebook and Google will remain ineffectual unless their current business models are prohibited.
 

Core competency

The myth of “free services” is widespread in our society, of course, and most people have been willing to play along with the fantasy. Yet we can now see that when it comes to search engines and social networks, this game of pretend has dangerous consequences.

In a piece from September, 2017 entitled “Why there’s nothing to like about Facebook’s ethically-challenged, troublesome business model,” Financial Post columnist Diane Francis clearly described the trick at the root of Facebook’s success:

“Facebook’s underlying business model itself is troublesome: offer free services, collect user’s private information, then monetize that information by selling it to advertisers or other entities.”

Writing in The Guardian a few days ago, John Naughton concisely summarized the corporate histories of both Facebook and Google:

“In the beginning, Facebook didn’t really have a business model. But because providing free services costs money, it urgently needed one. This necessity became the mother of invention: although in the beginning Zuckerberg (like the two Google co-founders, incidentally) despised advertising, in the end – like them – he faced up to sordid reality and Facebook became an advertising company.”

So while Facebook has grandly phrased its mission as “to make the world more open and connected”, and Google long proclaimed its mission “to organize the world’s information”, those goals had to take a back seat to the real business: helping other companies sell us more stuff.

In Facebook’s case, it has been obvious for years that providing a valuable social networking service was a secondary focus. Over and over, Facebook introduced major changes in how the service worked, to widespread complaints from users. But as long as these changes didn’t drive too many users away, and as long as the changes made Facebook a more effective partner to advertisers, the company earned more profit and its stock price soared.

Likewise, Google found a “sweet spot” with the number of ads that could appear above and beside search results without overly annoying users – while also packaging the search data for use by advertisers across the web.
 

A bad combination

The sale of advertising, of course, has subsidized news and entertainment media for more than a century. In recent decades, even before online publishing became dominant, some media switched to wholly-advertising-supported “free” distribution. While that fiction had many negative consequences, I believe, the danger to society was taken to another level with search engines and social networks.

A “free” print magazine or newspaper, after all, collects no data while being read.2 No computer records if and when you turn the page, how long you linger over an article, or even whether you clip an ad and stick it to your refrigerator.

Today’s “free” online services are different. Search engines collate every search by every user, so they know what people are curious about – the closest version of mass mind-reading we have yet seen. Social media not only register every click and every “Like”, but all our digital interactions with all of our “friends”.

This surveillance-for-profit is wonderfully useful for the purpose of selling us more stuff – or, more recently, for manipulating our opinions and our votes. But we should not be surprised when they abuse our confidence, since their business model drives them to betray our trust as efficiently as possible.
 

Effective regulation

In the flood of commentary about Facebook following the Cambridge Analytica revelations, two themes predominate. First, there is a frequently-stated wish that Facebook “respect our privacy”. Second, there are somewhat more specific calls for regulation of Facebook’s privacy settings, terms of sale of data, or policing of “bot” accounts.

Both themes strike me as naïve. Facebook may allow users a measure of privacy in that they can be permitted to hide some posts from some other users. But it is the very essence of Facebook’s business model that no user can have any privacy from Facebook itself, and Facebook can and will use everything it learns about us to help manipulate our desires in the interests of paying customers. Likewise, it is naïve to imagine that what we post on Facebook remains “our data”, since we have given it to Facebook in exchange for a service for which we pay no monetary fee.

But regulating the terms under which Facebook acquires our consent to monetize our information? This strikes me as an endlessly complicated game of whack-a-mole. The features of computerized social networks have changed and will continue to change as fast as a coder can come up with a clever new bit of software. Regulating these internal methods and operations would be a bureaucratic boondoggle.

Much simpler and more effective, I think, would be to abolish the fiction of “free” services that forms the façade of Facebook and Google. When these companies as well as new competitors3 charge an honest fee to users of social networks and search engines, because they can no longer earn money by selling ads or our data, much of the impetus to surveillance capitalism will be gone.

It costs real money to provide a platform for billions of people to share our cat videos, pictures of grandchildren, and photos of avocado toast. It also costs real money to build a data-mining machine – to sift and sort that data to reveal useful patterns for advertisers who want to manipulate our desires and opinions.

If social networks and search engines make their money honestly through user fees, they will obviously collect data that helps them improve their service and retain or gain users. But they will have no incentive to throw financial resources at data mining for other purposes.

Under such a regulation, would we still have good social network and search engine services? I have little doubt that we would.

People willingly pay for services they truly value – look back at how quickly people adopted the costly use of cell phones. But when someone pretends to offer us a valued service “free”, we endure a host of consequences as we eagerly participate in the con.
 

Photos at top: Sergey Brin, co-founder of Google (left) and Mark Zuckerberg, Facebook CEO. Left photo, “A surprise guest at TED 2010, Sergey spoke openly about Google’s new posture with China,” by Steve Jurvetson, via Wikimedia Commons. Right photo, “Mark Zuckerberg, Founder and Chief Executive Officer, Facebook, USA, captured during the session ‘The Next Digital Experience’ at the Annual Meeting 2009 of the World Economic Forum in Davos, Switzerland, January 30, 2009”, by World Economic Forum, via Wikimedia Commons.

 


NOTES

1 The term “surveillance capitalism” was introduced by John Bellamy Foster and Robert W. McChesney in a perceptive article in Monthly Review, July 2014.

2 Thanks to Toronto photographer and writer Diane Boyer for this insight.

3 There would be a downside to stipulating that social networks or search engines do not provide their services to users free of charge, in that it would be difficult for a new service to break into the market. One option might be a size-based exemption, allowing, for example, a company to offer such services free until it reaches 10 million users.

Speeding down a dead end road

Also published at Resilience.org.

Since the birth of car culture more than a century ago, lavish consumption of energy has not been a bug but a feature. That’s now a feature we can ill afford, as we attempt the difficult and urgent task of transition to renewable energies.

Notwithstanding all the superlatives lavished on Elon Musk by mass media, one of his great achievements has gone unsung: his ingeniously simple contribution to the Search for ExtraTerrestrial Intelligence (SETI).

I refer, of course, to his donation of a used automobile to the possible inhabitants of outer space. If there is intelligent life out there, they will recognize Musk’s Tesla Roadster as a typically energy-guzzling death trap of the genus known as “car”, and they’ll promptly return it to sender, COD.

Wait a minute, Musk’s Roadster is not a typical car, some might protest – it’s electric! True enough, but the Roadster, like its newer sibling the Model 3, was designed to seamlessly fit into and extend our current car culture. And one of the key features of car culture is that it was structured, from the beginning, to consume energy with careless abandon.

That giddy attitude to energy was understandable in the early days of the age of oil, but it will make our current transition to a clean-energy economy far more difficult if not impossible.

The invention of car culture

Americans did not invent the car, but they quickly came to dominate both car production and car consumption – and more than any other country, they put car culture at the centre of a way of life.

In his excellent book Consuming Power, David E. Nye notes that

“[By 1929] there was roughly one car for every five Americans, and an astonishing 78 percent of the cars in the world were in the United States. In France or Great Britain there was only one car for every 30 people, and in Germany only one for every 102. The automobile had become the central American consumer good and the engine of the American economy, stimulating a wide range of subsidiary industries and suppliers.”[1]

The pattern continued after World War II. “Americans drove 75 percent of the world’s automobiles in 1950,” Nye says. “Moreover, they wanted big automobiles.”[2]

The taste for big, fast cars was cultivated long before most Americans could hope to buy a car. Tom McCarthy’s Auto Mania shows how a small coterie of wealthy young men, hyped by the new mass media, captured public imagination with their expensive quest for speed – starting in 1900. That was the year when an heir to the Vanderbilt shipping fortune set tongues wagging with his powerful new toy.

“In June 1900, Vanderbilt bought a Daimler Phoenix, his first Daimler and his first racing car for which he had to pay the impressive price of 10,000 dollars. This car – nicknamed “White Ghost” and powered by a 23 hp engine which accelerated the car to a top speed of just under 100 km/h – was at last completely to Vanderbilt’s liking.”[3]

At least, the Daimler car was completely to Vanderbilt’s liking for two years. By 1902, he needed a more powerful car – a 60 hp Mors Z – to set a new speed record of 122 km.[4]

Other wealthy Americans got into the racing game too, and it was essential not just to go fast, but to go fast uphill. In each city with an expensive auto dealership, McCarthy notes, the steepest hill was the standard place for a test drive. “By 1904, when vehicles such as Vanderbilt’s 90-hp Mercedes proved too powerful for the annual hill climb at Eagle Rock, New Jersey, the hill climbs had made their point.”[5]

There was no practical use for this speed at the time – there were very few stretches of road smooth enough or straight enough to be driven at 50 km/hr, let alone 120 km/hr. But in America, unlike in Western Europe, the love of overpowered cars quickly became not just an elite hobby but a mass movement – with effects that remain strong today.

To suburbia and beyond

As one component of car culture, Americans developed a new way of living that was simultaneously industrialized and decentralized – with residences, office complexes and factories all moving out of central cities to the edges of urban areas.

As Nye explains, “This post-urban society was based on a historically anomalous situation: multiple sources of energy were all in oversupply.”[6]

Timothy Mitchell also takes up this theme. In the US in the first half of the twentieth century, he writes, oil gushed out of the ground so readily that it was hard for major oil companies to keep control of the market, and over-supply often threatened their profits. Regulation of domestic competitors was one prong in their strategy, while purposeful restrictions on the flow of abundant Middle East oil, prior to the 1950s, was another prong.

Another “method of preventing energy abundance,” Mitchell writes “involved the rapid construction of lifestyles in the United States organised around the consumption of extraordinary quantities of energy.”[7]

This American project began in the early 1900s and eventually became self-driving.

Overcoming performance anxiety

At the beginning of the 20th century, “The speeding millionaire sportsmen so effectively demonstrated and publicized the speed and power of the automobile that its introduction had an ‘in-your-face’ quality,” McCarthy writes. “Their behavior aroused strong emotions in other Americans, provoking a bitter reaction while also stoking the desire of millions to own an automobile, too.”[8]

Thus was set in motion a habit exhibited by Americans ever since: buying cars that can reach top speeds well in excess of the limitations of most driving conditions and most laws.

That would have been of little consequence, unless someone started building cars that could be sold to working-class Americans, and paying workers enough that they could afford cars. That was the role of Henry Ford. His Model T hit a sweet spot of size, speed, and affordability:

“Ford made the Model T inexpensive enough, well-made enough, and, most important, just large, powerful and fast enough that buyers could close most of the status gap between themselves and the wealthy without hypocritically aping them or leaving themselves open to ridicule for choosing a cheap, slow, poorly made car.”[9]

With its 26 horsepower engine and a top speed of 55–65 kilometers/hour, the Model T was more  than fast enough for the typically rough, rutted roads of rural America in 1910 (and 64% of the first million Model Ts went to farm and small town markets).[10]

The market for cars, of course, would have been very limited without the right legal and physical infrastructure, and government readily offered an essential helping hand. As Nye notes,

“Automobiles are not isolated objects; they are only the most salient parts of a complex energy-consuming system that includes production lines, roads, parking lots, oil wells, pipelines, service stations, and the redesign of urban spaces to accommodate drivers.”[11]

He further explains,

“As much as half of a city’s land area was dedicated to roads, driveways, parking lots, service stations, and so on. … This reshaping of the environment was not caused by the automobile itself. Americans were extremely active in defining their landscapes by means of zoning boards, park commissions, and city councils.”[12]

By mid-century, the US was systematically decommissioning public transit infrastructure – intra- and inter-city trains, streetcars and buses – in favor of the private car. This change happens to have been in the financial interests of both the car companies and the oil companies, the most powerful corporate interests in the country.

In energy consumption terms, the consequence was simple: “The largest growth in energy use began in the late 1930s and lasted until the early 1970s. In these 35 years energy consumption grew by 350 percent.”[13]

The comparison to comparably-industrialized western Europe is illuminating. By the early 1970s, “Compared with equally affluent Europeans, Americans used roughly twice as much energy per capita. Half of the difference was directly attributable to their transportation system ….”[14] In the first 70 years of the 20th century, western Europe had no significant domestic sources of oil, and thus no powerful corporate interests to make a case that it was in the “national interest” to consume as much energy as possible.

Car culture in the US, however, had acquired seemingly unstoppable momentum. In the early 1970s the US reached its peak of conventional oil production, and the country had already become dependent on steady supplies of imported oil. Yet the blip of the 1970s “energy crisis” made little difference to a high-energy way of life.

“Between 1969 (just before the crisis) and 1983 (just after), the number of miles driven by the average American household rose 29 percent. There were 39 percent more shopping trips, and the distances traveled on these trips increased by 20 percent.”[15]

Fighting for space

At the heart of car culture is a contradiction. The essential allure of speed can be reliably achieved only on sparsely travelled roads. But the increasing profits of oil companies and auto manufacturers alike depend on selling more cars to more people – and most people live and/or work in densely populated areas.

As noted by Nye, when half of a city’s land area was devoted to roads and parking lots, that pushed residents further apart and further from urban centres. By design, the new suburbs had insufficient density to support good public transit – which further locked suburbanites into car dependency. Traffic congestion, once a phenomenon of urban centres, became a regular rush-hour phenomenon on essential arteries 30, then 40, then 50 km or more from urban cores.

The stressed-out commuters on these routes might indeed be able to drive part way to work at high speed. But in spite of (because of?) the fact that they drive increasingly powerful vehicles, they also, on average, spend more and more time commuting.[16] So what good is that speed and power?

The promise of cars was that speed would conquer space. But the reality of car culture is that space triumphs over speed.

A specific example illustrates how this dynamic has played out across North America. Consider the collection of bridges and ramps now under construction at this site:

(Photos taken Friday March 16, 2018)

What vast complex of engineering wizardry is this? Actually, it’s an intersection. An  intersection of two rural highways, about 70 km from downtown Toronto, Ontario, Canada.[17] And nothing so complex as a four-way intersection, just a three-way T-junction.

Why is it deemed necessary to invest so much in one T-junction out here? Well, as North America’s busiest road,[18] Highway 401 regularly stalls to stop-and-go traffic anywhere along a 100-km stretch. And as the ripples of auto-dependent sprawl spread ever wider, there is a perceived need to build even more traffic-facilitating infrastructure. (Meanwhile, as in jurisdictions across North America, it’s almost impossible to find money to fix the crumbling auto infrastructure built decades or generations ago.)

In Ontario, the quest for congestion relief has taken the form of a new privately-operated toll road, taking a wide swing around the northern edges of the Toronto megalopolis. On Highway 401 a single careless driver can at any time cause a traffic-snarling accident that delays thousands of other drivers, often for hours. But on the new toll expressway, tolls are set so high that traffic nearly always moves at standard “highway speeds”.

And that’s a good thing, since at these far edges of exurbia, there are a high proportion of “extreme commuters”.[19] A lot of drivers at the new Highway 401/418 t-junction will be commuting a long distance, so it’s very important to them that they can drive these entry and exit ramps at full highway speed. (Too bad for those who can’t afford the tolls – they’ll have to stay on the low-class public highway. And even the toll-payers will at some point have to exit onto slow-moving, congested arterials.)

The method to Musk’s madness

When Elon Musk decided to sell electric cars to Americans, he followed a century-old playbook. First, put out an exclusive product endowed with marvelous powers of acceleration and speed. (Never mind that the buyers will be subject to the same speed limits and traffic congestion as everyone else – you can accelerate from 0 – 97 km in less than 4 seconds!) Then, having cleansed his electric-car brand of any taint of performance anxiety, he began marketing the later Model 3 at a price point that average American motorists could afford.

But an individual car is of no value. It only functions as part of an elaborate system of laws, roads, parking lots, and energy production and distribution – car culture, in other words. And car culture has proven to be a colossal waste of space, time and energy.

So if there are indeed intelligent aliens, they won’t be taken in by Musk’s unsolicited offer of a used car.

If there is extraterrestrial intelligence, that stray Roadster will be marked “Return to Sender.”

 

Top photo: composite by An Outside Chance from StarMan in Space video.


References

[1] David E. Nye, Consuming Power, MIT Press, 1997, page 178

[2] Nye, Consuming Power, page 205

[3] quoted from “Willie K.’s Cars #1: The 1900 23-HP Daimler “White Ghost

[4] Greg Wapling, “Land Speed Racing History

[5] Tom McCarthy, Auto Mania, Yale University Press, 2007, page 2

[6] Nye, Consuming Power, page 196

[7] Timothy Mitchell, Carbon Democracy, Verso, 2013, page 41

[8] McCarthy, Auto Mania, page 7

[9] McCarthy, Auto Mania, page 39

[10] McCarthy, Auto Mania, page 37

[11] Nye, Consuming Power, page 177

[12] Nye, Consuming Power, page 180

[13] Nye, Consuming Power, page 187

[14] Nye, Consuming Power, page 223

[15] Nye, Consuming Power, page 221

[16] Washington Post, February 22, 2017, “The American commute is worse today than it’s ever been

[17] While both Consuming Power and Auto Mania restrict their focuses to the United States, car culture in Canada closely mirrors that in the US. Not only does the manufacturing chain function as if there is no border, but the pattern of car-dependent suburban development is pretty much the same in Canada as in the US as well.

[18] From many sources, including Business Insider, Aug 29, 2012

[19] See chart “Extreme commutes are the fastest growing” in Washington Post, Feb 22, 2017

 

The climate revolution: a manual for head, hands and heart

Also published at Resilience.org.

How many people in North America and Europe have known for at least 15 years that climate change is dangerous, that it is caused mostly by our burning of fossil fuels, and that we must drastically reduce our fossil fuel consumption?

That would be most of us.

And how many of us have drastically reduced our fossil fuel consumption?

Not so many of us.

Mostly, our actions proclaim “We’ll cut back our fossil fuel use when everybody else does … or when the government forces us … or when hell freezes over – whichever comes last!”

Physicist and climatologist Peter Kalmus found the gulf between his beliefs and his lifestyle to be deeply unsatisfying, and he set out to heal that rift.

The result, he says, has been a dramatically richer life for him and his family.

His book Being The Change (New Society Publishers, 2017) outlines the ‘why’ and ‘how’ of his family’s reduction of their fossil fuel consumption by 90% in just a few years. His discussion ranges from climate science to economics, from bicycling to beekeeping, from community networks to meditation, in a deeply inspiring narrative.

Waves of gravity

Kalmus didn’t begin his scientific career in climatology. With a PhD in astrophysics, his speciality was gravitational waves and his day job was working through the data that would, in 2016, confirm Einstein’s prediction of gravitational waves.

But he was also learning about the onrushing catastrophe of climate change, and as a young parent he was deeply worried for the world his children would inherit. Motivated by a desire to work on problems closer to home, he switched his professional focus, taking a new job at NASA studying the role of clouds in global warming.

Kalmus describes Being the Change as a book for the head, the hands and the heart. Wearing his scientist hat, he lucidly lays out the science of climate change. These chapters don’t require more than a high-school science background to understand, but even those who have read many books and articles on the subject are likely to learn something. For those who have read little or nothing on this subject, a good beginning would be to read Kalmus’ chapters on climate science three or four times over – he packs a lot of information into 50 pages.

His sobering conclusion is that we have already stalled too long to have any reasonable chance of keeping global warming below 2°C. Within two or three decades, the mean global temperature will be higher than in any record-warmth year in human experience so far. That new climate era will last centuries, challenging the resiliency of not only human civilization but global biodiversity.

The key uncertainty, he says, is the temperature at which global warming will peak. None of us alive today will be here to experience that peak, but our actions this generation will have a major influence on that peak. A higher peak will cause a spike in the rate of species extinctions, and if and when global warming slows or stops, it will take far longer for biodiversity to recover.

“A good overarching goal for today’s civilization would be to minimize global warming and its concomitant biodiversity loss for the sake of the next few hundred thousand human generations.” (Being the Change, page 69)

Fear of not flying

Climate science gives us clear warning of the disaster we are bequeathing our descendants if we don’t change our way of life, fast. Kalmus concludes, “it’s critical we begin saying that burning fossil fuels is causing real harm and needs to stop. It’s even more important to begin living this message.” (Being the Change, page 120 – italics mine)

A second major focus of the book is “hands-on” – the many ways people can change their own lives to join the movement away from fossil fuels. Kalmus relates his personal experiences here, but he also provides valuable suggestions to help others estimate their consumption of fossil fuels and reduce that consumption in meaningful ways.

Kalmus found that one category of fossil fuel consumption outweighed all others in his life: long-distance travel by air. Much of this consumption happened in traveling to distant conferences where delegates would warn of the dangers of climate change. Kalmus’ decision to stop taking these flights led to a more satisfying life, he says – though this was a rejection of one of the signature privileges of a global elite.

“The act of flying is an exercise of privilege. Globally, only about 5% of humans have ever flown.” (Being the Change, page 151)

Even the average American spends relatively little time in the air. Kalmus writes that “The average American emits about 1,000 kg CO2 per year from flying, which is roughly equivalent to one 4,000-mile round-trip between Los Angeles and Chicago.” But in 2010, Kalmus’ carbon emissions due to flying were 16 times that average – and so it was obvious where he had to make the first change to align his lifestyle with his knowledge.

Kalmus’ graph of his greenhouse gas emissions for 2010 – 2014. Source: Being the Change, page 144. (click graph for larger view)

For the average American, Kalmus says, the “largest climate impact is from driving.” He largely eliminated those CO2 emissions from his life too, through routine bicycling, driving a car that he converted to run on used vegetable oil, and taking a bus or trains for occasional long-distance trips.

Each person’s CO2 emission profile, and therefore their opportunities for emission reductions, will be different.

But Kalmus hopes others will share his experience in one key respect – a greater peace with their own lives and their own surroundings.

“I think most people are afraid of a low-energy lifestyle because we equate quality of life with quantity of energy use,” he says. “My experience has been the opposite: low-energy living is more fun and satisfying.”

Reading about his new-found love of gardening and beekeeping, and the strength of the local community bonds he and his family have developed, it’s easy to understand the richness of this low-energy lifestyle.

He also makes clear that he doesn’t believe that purely individual actions are sufficient to halt the fossil-fuel juggernaut. In the realm of public policy, he pens an excellent advocacy for his preferred fiscal approach to reducing national and international CO2 emissions – Carbon Fee And Dividend (CFAD). He also discusses his work with one group working on the CFAD option, the Citizens’ Climate Lobby.

Finding a lifestyle that matches his principles brings joy and a significant measure of peace of mind. At the same time, finding peace of mind is key in giving him the energy to embark on all those personal changes. That brings us to a third major focus of Being the Change: meditation.

“As part of my daily work, I look directly at the truth of global warming, and what it’s doing to the inhabitants of the Earth. Meditation gives me the strength and the courage to keep interacting with this truth, as it is – not only to cope, but to be happy and as effective as possible in enacting positive change.” (Being the Change, page 203)

As one who has never been attracted to the practice of meditation, Kalmus’ story here left me with mixed feelings. On the one hand, his discussions of dissolving the ego and escaping all wants were, for this reader, just about the only parts of the book that weren’t wholly convincing. On the other hand his life story so far is truly moving, and if he says meditation has been central to that journey then I can only celebrate the strength and peace that meditation gives him. More than that, his book has made me ask whether I want to introduce meditation into my own life in a concerted way; better late, perhaps, than never.

Science and love

Peter Kalmus has written a profound book about the science of global warming, and a profound book about love:

“These two seemingly disparate things – reducing my own fossil fuel use and increasing my ability to love – are actually intimately interconnected.”

In the process he grapples with three of the most troublesome questions facing the environmental movement. Can we convince people it’s essential to eliminate fossil fuel use, when our own lifestyles say that fossil fuel use is no problem? Can we convince people that a high-energy lifestyle is unnecessary and destructive, when we act as if our lives depend on that lifestyle? Can we be happily productive agents of change, while we are caught up in the high-energy whirl of consumptive capitalism? It’s hard to answer those questions except with “No, no and no.” And yet Kalmus’ personal message is deeply positive and deeply hopeful:

“On my own path, as I continue to reduce, I’m actually experiencing increasing abundance. It’s a good path.”

 

Photo at top: Peter Kalmus, photo by Alice Goldsmith, courtesy of New Society Publishers

The unbearable cheapness of capitalism

Also published at Resilience.org.

René Descartes, Christopher Columbus and Jeff Bezos walk into a bar and the bartender asks, “What can I get for you thirsty gentlemen?”

“We’ll take everything you’ve got,” they answer, “just make it cheap!”

That’s a somewhat shorter version of the story served up by Raj Patel and Jason W. Moore. Their new book, A History of the World in Seven Cheap Things, illuminates many aspects of our present moment. While Jeff Bezos doesn’t make it into the index, René Descartes and Christopher Columbus both play prominent roles.

In just over 200 pages plus notes, the book promises “A Guide to Capitalism, Nature and the Future of the Planet.”

Patel and Moore present a provocative and highly readable guide to the early centuries of capitalism, showing how its then radically new way of relating to Nature remains at the root of world political economy today. As for a guide to the future, however, the authors do little beyond posing a few big questions.

The long shadow of the Enlightenment

Philosopher René Descartes, known in Western intellectual history as one of the fathers of the Enlightenment, helped codify a key idea for capitalism: separation between Society and Nature. In 1641,

“Descartes distinguished between mind and body, using the Latin res cogitans and res extensa to refer to them. Reality, in this view, is composed of discrete “thinking things” and “extended things.” Humans (but not all humans) were thinking things, Nature was full of extended things. The era’s ruling classes saw most human beings – women, peoples of color, Indigenous Peoples – as extended, not thinking, beings. This means that Descartes’s philosophical abstractions were practical instruments of domination ….”

From the time that Portuguese proto-capitalists were converting the inhabitants of Madeira into slaves on sugar plantations, and Spanish colonialists first turned New World natives into cogs in their brutal silver mines, there had been pushback against the idea of some humans owning and using others. But one current in Western thought was particularly attractive to the profit-takers.

In this view, Nature was there for the use and profit of thinking beings, which meant white male property owners. Patel and Moore quote English philosopher and statesman Francis Bacon, who expressed the new ethos with ugly simplicity: “science should as it were torture nature’s secrets out of her,” and the “empire of man” should penetrate and dominate the “womb of nature.”

The patriarchal character of capitalism, then, is centuries old:

“The invention of Nature and Society was gendered at every turn. The binaries of Man and Woman, Nature and Society, drank from the same cup. … Through this radically new mode of organizing life and thought, Nature became not a thing but a strategy that allowed for the ethical and economic cheapening of life.”

Armored with this convenient set of blinders, a colonialist could gaze at a new (to him) landscape filled with wondrous plants, animals, and complex societies, and without being hindered by awe, respect or humility he could see mere Resources. Commodities. Labour Power. A Work Force. In short, he could see Cheap Things which could be taken, used, and sold for a profit.

Patel and Moore’s framework is most convincing in their chapters on Cheap Nature, Cheap Work, and Cheap Care. Their narrative begins with the enclosure movement, in which land previously respected as Commons for the use of – and care by – all, was turned into private property which could be exploited for short-term gain.

Enclosure in turn led to proletarianization, resulting in landless populations whose only method of fending off starvation was to sell their labour for a pittance. The gendered nature of capitalism, meanwhile, meant that the essential role of bringing new generations of workers into life, and caring for them until they could be marched into the fields or factories, was typically not entered into the economic ledger at all. The worldwide legacy remains to this day, with care work most often done by women either egregiously under-paid or not paid at all.

Yet as the book goes on, the notion of “cheap” grows ever fuzzier. First of all, what’s cheap to one party in a transaction might be very dear to the other. While a capitalist gains cheap labour, others lose their cultures, their dignity, often their very lives.

Other essential components in the system often don’t come cheap even for capitalists. In their chapter on Cheap Money, Patel and Moore note that the European powers sunk tremendous resources into the military budgets needed to extend colonial domination around the world. The chapter “Cheap Lives” notes that “Keeping things cheap is expensive. The forces of law and order, domestic and international, are a costly part of the management of capitalism’s ecology.” The vaunted Free Market, in other words, has never come free.

A strategic definition

How can the single word “cheap” be made a meaningful characterization of Nature, Money, Work, Care, Food, Energy and Lives? The authors promise at the outset to tell us “precisely” what they mean by “cheap.” When the definition arrives, it is this:

“We come, then, to what we mean by cheapness: it’s a set of strategies to manage relations between capitalism and the web of life by  temporarily fixing capitalism’s crises. Cheap is not the same as low cost – though that’s part of it. Cheap is a strategy, a practice, a violence that mobilizes all kinds of work – human and animal, botanical and geological – with as little compensation as possible. … Cheapening marks the transition from uncounted relations of life making to the lowest possible dollar value. It’s always a short-term strategy.”

Circular reasoning, perhaps. Capitalism means the Strategies of getting things Cheap. And Cheap means those Strategies used by Capitalism. Yet Moore and Patel use this rhetorical flexibility, for the most part, to great effect.

Their historical narrative sticks mostly to the early centuries of capitalism, but their portrayals of sugar plantations, peasant evictions and the pre-petroleum frenzies of charcoal-making in England and peat extraction in the Netherlands are vivid and closely linked.

Particularly helpful is their concept of frontiers, which extends beyond the merely geographic to include any new sphere of exploitation – and capitalism is an incessant search for such new frontiers. As a result, it’s easy to see the strategies of “cheapening” in the latest business stories.

Jeff Bezos, for example, has become the world’s richest man through a new model of industrial organization – thousands of minimum-wage workers frantically running through massive windowless warehouses to package orders, with the latest electronic monitoring equipment used to speed up the treadmill at regular intervals. Life-destroying stress for employees, but Cheap Work for Bezos. Or take the frontier of the “sharing economy”, in which clever capitalists find a way to profit from legions of drivers and hotel-keepers, without the expense of investment in taxis or real estate.

Patel and Moore note that periods of financialization have occurred before, when there was a temporary surplus of capital looking for returns and a temporary shortage of frontiers. But

“there’s something very different about the era of financialization that began in the 1980s. Previous financial expansions could all count on imperialism to extend profit-making opportunities into significant new frontiers of cheap nature. … Today, those frontiers are smaller than ever before, and the volume of capital looking for new investment is greater than ever before.”

Thus the latest episode of financialization is just one of many indicators of a turbulent future. And that leads us to perhaps the most glaring weakness of Seven Cheap Things.

The subtitle makes a promise of a guide to “the future of the planet”. (In fairness, it’s possible that the subtitle was chosen not by the authors but the publishers.) The Conclusion offers suggestions of “a way to think beyond a world of cheap things ….” But in spite of the potentially intriguing headings Recognition, Reparation, Redistribution, Reimagination, and Recreation, their suggestions are so sketchy that they end a solid story on a very thin note.


Top photo: “The boiling house”, from Ten Views in the Island of Antigua, 1823, by William Clark, illustrates a step in the production of sugar. Image from the British Library via Wikimedia Commons.

Super-size that commodity

Also published at Resilience.org.

A review of ‘A Foodie’s Guide to Capitalism’

Don’t expect a whole lot of taste when you sit down to a plateful of commodities.

That might be a fitting but unintended lesson for foodies who work through the new book by Eric Holt-Giménez. A Foodie’s Guide to Capitalism will reward a careful reader with lots of insights – but it won’t do much for the taste buds.

While A Foodie’s Guide is lacking in recipes or menu ideas, it shines in helping us to understand the struggles of the men and women who work in the farms and packing plants. Likewise, it explains why major capitalists have typically shown little interest in direct involvement in agriculture – preferring to make their money selling farm inputs, trading farm commodities, or turning farm products into the thousands of refined products that fill supermarket shelves.

Fictitious commodities

Karl Polanyi famously described land, labour and money as “fictitious commodities”. Land and labour in particular come in for lengthy discussion in A Foodie’s Guide to Capitalism. In the process, Holt-Giménez also effectively unmasks the myth of the free market.

“Markets have been around a long time,” he writes, “but before the nineteenth century did not organize society as they do today.” He shows how capitalism in England arose concurrently with vigorous state intervention which drove people off their small farms and into the industrial labour pool. Meanwhile overseas both the slave trade and settler colonialism were opening critical parts of global markets, which were anything but “free”.

Nevertheless the takeover of food production by capitalism has been far from complete.

“Today, despite centuries of capitalism, large-scale capitalist agriculture produces less than a third of the world’s food supply, made possible in large part by multibillion-dollar subsidies and insurance programs. Peasants and smallholders still feed most people in the world, though they cultivate less than a quarter of the arable land.” (Holt-Giménez, A Foodie’s Guide To Capitalism, Monthly Review Press and FoodFirst Books, citing a report in GRAIN, May 2014)

There are a lot of reasons for this incomplete transition, but many are related to two of the “fictitious commodities”. Let’s start with land.

While land is the most important “means of production” in agriculture, land is of course much more than that. For people throughout history, land has been home, land has been the base of culture, land has been sacred. Even today, people go to great lengths to avoid having their lands swallowed up by capitalist agriculture – especially since this transition typically results in widespread consolidation of farms, leaving most former farmers to try to earn a living as landless labourers.

Autumn colours in the Northumberland Hills north of Lake Ontario, Canada

Likewise labour is much more than a commodity. An hour of labour is a handy abstraction that can be fed into an economist’s formula, but the labourer is a flesh-and-blood human being with complex motivations and aspirations. Holt-Giménez offers a good primer in Marxist theory here, showing why it has always been difficult for capitalists to extract surplus value directly from the labour of farmers. He also builds on the concept of the “cost of reproduction” in explaining why, in those sectors of farming that do depend on wage labour, most of the wage labourers are immigrants.

Before people can be hired at wages, they need to be born, cared for as infants, fed through childhood, provided with some level of education. These “costs of reproduction” are substantial and unavoidable. A capitalist cannot draw surplus value from labour unless some segment of society pays those “costs of reproduction”, but it is in the narrow economic self-interest of capitalists to ensure that someone else pays. Consider, for example, the many Walmart employees who rely on food stamps to feed their families. Since Walmart doesn’t want to pay a high enough wage to cover the “cost of reproduction” for the next generation of workers, a big chunk of that bill goes to taxpayers.

In industrialized countries, the farm workers who pick fruit and vegetables or work in packing plants tend to be immigrants on temporary work permits. This allows the capitalist food system to pass off the costs of reproduction, not to domestic taxpayers, but to the immigrants’ countries of origin:

“the cost of what it takes to feed, raise, care for and educate a worker from birth to working age (the costs of reproduction) are assumed by the immigrants’ countries of origin and is free to their employers in the rich nations, such as the United States and the nations of Western Europe. The low cost of immigrant labor works like a tremendous subsidy, imparting value to crops and agricultural land. This value is captured by capitalists across the food chain, but not by the worker.” (Holt-Giménez, A Foodie’s Guide to Capitalism)

Farmstead in the Black Hills, South Dakota, USA

The persistence of the family farm

In the US a large majority of farms, including massive farms which raise monoculture crops using huge machinery, are run by individual families rather than corporations. Although they own much of their land, these farmers typically work long hours at what amounts to less than minimum wage, and many depend on at least some non-farm salary or wage income to pay the bills. Again, there are clear limitations in a capitalist food system’s ability to extract surplus value directly from these hours of labour.

But in addition to selling “upstream” inputs like hybrid and GMO seeds, fertilizers, pesticides and machinery, the capitalist food system dominates the “downstream” process of trading commodities, processing foods, and distributing them via supermarket shelves. An important recent development in this regard is contract farming, which Holt-Giménez refers to as “a modern version of sharecropping and tenant farming”.

A large corporation contracts to buy, for example, a chicken farmer’s entire output of chickens, at a fixed price:

“Through a market-specification contract, the firm guarantees the producer a buyer, based on agreements regarding price and quality, and with a resource-providing contract the firm also provides production inputs (like fertilizer, hatchlings, or technical assistance). If the firm provides all the inputs and buys all of the product, it essentially controls the production process while the farmer basically provides land and labor ….”

The corporation buying the chickens gets the chance to dominate the chicken market, without the heavy investment of buying land and buildings and hiring the workforce. Meanwhile farmers with purchase contracts in hand can go to the bank for operating loans, but they lose control over most decisions about production on their own land. And they bear the risk of losing their entire investment – which often means losing their home as well – if the corporation decides the next year to cancel the contract, drop the price paid for chicken, or raise the price of chicken feed.

Contract farming dominates the poultry industry in the US and the pork market is now rapidly undergoing “chickenization”. Holt–Giménez adds that “The World Bank considers contract farming to be the primary means for linking peasant farmers to the global market and promotes it widely in Asia, Latin America, and Africa.”

Farm field in springtime, western North Dakota, USA

Feeding a hungry world

In North America the conventional wisdom holds that only industrial capitalist agriculture has the ability to provide food for the billions of people in today’s world. Yet on a per hectare basis, monoculture agribusiness has been far less productive than many traditional intensive agricultures.

“Because peasant-style farming usually takes place on smaller farms, the total output is less than capitalist or entrepreneurial farms. However, their total output per unit of land (tons/hectare; bushels/acre) tends to be higher. This is why, as capitalist agriculture converts peasant-style farms to entrepreneurial and capitalist farms, there is often a drop in productivity ….”

Marxist political-economic theory provides a useful basis for Holt-Giménez’ explorations of many aspects of global food systems. Among the topics he covers are the great benefits of the Green Revolution to companies marketing seeds and fertilizers, along with the great costs to peasants who were driven off their lands, and potentially catastrophic damages to the ecological web.

But an over-reliance on this theory, in my opinion, leads to an oversimplification of some of our current challenges. This is most significant in Holt-Giménez’s discussions of the overlapping issues of food waste and the failure to distribute farm outputs fairly.

In recent decades there has been a constant surplus of food available on world markets, while hundreds of millions of people have suffered serious malnutrition. At the same time we are often told that approximately 40% of the world’s food goes to waste. Surely there should be an easy way to distribute food more justly, avoid waste, and solve chronic hunger, no?

Yet it is not clear what proportion of food waste is unavoidable, given the vagaries of weather that may cause a bumper crop one year in one area, or rapid increases in harvest-destroying pests in response to ecological changes. It is easy to think that 40% waste is far too high – but could we reasonably expect to cut food waste to 5%, 10% or 20%? That’s a question that Holt-Giménez doesn’t delve into.

On the other hand he does pin food waste very directly on capitalist modes of production. “The defining characteristic of capitalism is its tendency to overproduce. The food system is no exception.” He adds, “The key to ending food waste is to end overproduction.”

Yet if food waste is cut back through a lowering of production, that in itself is of no help to those who are going hungry.

Holt-Giménez writes “Farmers are nutrient-deficient because they don’t have enough land to grow a balanced diet. These are political, not technical problems.” Yes, access to land is a critical political issue – but can we be sure that the answers are only political, and not in part technical as well? After all, famines predated capitalism, and have occurred in widely varying economic contexts even in the past century.

Particularly for the coming generations, climatic shifts may create enormous food insecurities even for those with access to (formerly sufficient) land. As George Monbiot notes in The Guardian this week, rapid loss of topsoil on a world scale, combined with water scarcity and rising temperatures, is likely to have serious impacts on agricultural production. Facing these challenges, farming knowledge and techniques that used to work very well may require serious adaptation. So the answers are not likely to be political or technical, but political and technical.

These critiques aside, Holt-Giménez has produced an excellent guidebook for the loose collection of interests often called “the food movement”. With a good grasp of the way capitalism distorts food production, plus an understanding of the class struggles that permeate the global food business, foodies stand a chance of turning the food movement into an effective force for change.

When boom is bust: the shale oil bonanza as a symptom of economic crisis

Also published at Resilience.org.

The gradual climb in oil prices in recent weeks has revived hopes that US shale oil producers will return to profitability, while also renewing fevered dreams of the US becoming a fossil fuel superpower once again.

Thus a few days ago my daily newspaper ran a Bloomberg article by Grant Smith which lead with this sweeping claim:

“The U.S. shale revolution is on course to be the greatest oil and gas boom in history, turning a nation once at the mercy of foreign imports into a global player. That seismic shift shattered the dominance of Saudi Arabia and the OPEC cartel, forcing them into an alliance with long-time rival Russia to keep a grip on world markets.”

I might have simply chuckled and turned the page, had I not just finished reading Oil and the Western Economic Crisis, by Cambridge University economist Helen Thompson. (Palgrave Macmillan, 2017)

Thompson looks at the same  shale oil revolution and draws strikingly different conclusions, both about the future of the oil economy and about the effects on US relations with OPEC, Saudi Arabia, and Russia.

Before diving into Thompson’s analysis, let’s first look at the idea that the shale revolution may be “the greatest oil and gas boom in history”. As backing for this claim, Grant Smith cites a report earlier in November by the International Energy Agency, predicting that US shale oil output will soar to about 8 million barrels/day by 2025.

Accordingly, “ ‘The United States will be the undisputed leader of global oil and gas markets for decades to come,’ IEA Executive Director Fatih Birol said … in an interview with Bloomberg television.”

Let’s leave this prediction unchallenged for the moment. (Though skeptics could start with David Hughes detailed look at the IEA’s 2016 forecasts here, or with a recent MIT report that confirms a key aspect of Hughes’ analysis.) Suppose the IEA turns out to be right. How will the shale bonanza rank among the great oil booms in history?

Grant Smith uses the following chart to bolster his claim that the fracking boom will equal Saudi Arabia’s expansion in the 1960s and 1970s.

 

Chart by Bloomberg

 

OK, so if US shale oil rises to 8 million barrels by 2025, that production will be about the same as Saudi oil production in 1981. Would that make these two booms roughly equivalent?

First, world oil consumption in the early 1980s was only about two-thirds what it is now. So 8 billion barrels/day represented a bigger proportion of the world’s oil needs in 1980 that it does today.

Second, Saudi Arabia used very little of its oil domestically in 1980, leaving most of it for sale abroad, and that gave it a huge impact on the world market. The US, by contrast, still burns more oil domestically than it produces – and in the best case scenario, its potential oil exports in 2025 would be a small percentage of global supply.

Third, Saudi Arabia has been able to keep roughly 8 million barrels/day flowing for the past 40 years, while even the IEA’s optimistic forecast shows US shale oil output starting to drop within ten years of a 2025 peak.

And last but not least, Saudi Arabia’s 8 million barrels/day have come with some of the world’s lowest production costs, while US shale oil comes from some of the world’s costliest wells.

All these factors come into play in Helen Thompson’s thorough analysis.

No more Mr. NICE Guy

In an October 2005 speech, Bank of England governor Mervyn King “argued that the rising price of oil was ending what he termed ‘NICE’ – a period of ‘non-inflationary consistently expansionary economic growth’ that began in 1992.” (Thompson, Oil and the Western Economic Crisis, page 28-29)

In spite of their best efforts in the first decade of this millennium, Western governments were not able to maintain steady economic growth, nor keep the price of oil in check, nor significantly increase the supply of oil, nor prevent the onslaught of a serious recession. Thompson traces the interplay of several major economic factors, both before and after this recession.

By the beginning of the George W. Bush administration, there was widespread concern that world oil production would not keep up with growing demand. The booming economies of China and India added to this fear.

“Of the increase of 17.9 million bpd in oil consumption that materialised between 1994 and 2008,” Thompson writes, “only 960,000 of the total came from the G7 economies.” Nearly all of the growth in demand came from China and India – and that growth in demand was forecast to continue.

The GW Bush administration appointed oilman and defense hawk Dick Cheney to lead a task force on the impending supply crunch. But “ultimately, for all the aspiration of the Cheney report, the Bush Jr administration’s energy strategy did little to increase the supply of oil over the first eight years of the twenty-first century.” (Thompson, page 20)

In fact, the only significant supply growth in the decade up to 2008 came from Russia. This boosted Putin’s power while fracturing Western economic interests, as “the western states divided between those who were significant importers of Russian oil and gas and those that were not.” (Thompson, page 23)

Meanwhile oil prices shot up dramatically until Western economies dropped into recession in 2007 as a precursor to the 2008 financial crash. Shouldn’t those high oil prices have spurred high investment in new wells, with consequent rises in production? It didn’t work out that way.

Between 2003 and the first half of 2008 the costs of the construction of production facilities, oil equipment and services, and energy soared in good part in response to the overall commodity boom produced by China’s economic rise. Consequently, whilst future oil supply was becoming ever more dependent on large-scale capital investment both to extract more from declining fields and to open up high-cost non-conventional production, the capital available was also required by 2008 simply to cover rising existing costs.” (Thompson, page 23)

Thus oil prices rose to the point where western economies could no longer maintain consumption levels, but these high prices still couldn’t finance the kind of new drilling needed to boost production.

Oddly enough, the right conditions for a boom in US oil production wouldn’t occur until well after the crash of 2008, when monetary policy-makers were struggling with little success to revive economic growth.

Zero Interest Rate Policy

In western Europe and the US, recovery from the financial crisis of 2008 has been sluggish and incomplete. But the growth in demand for oil by India and China continued, with the result that after a brief price drop in 2009 oil quickly rebounded to $100/barrel and stayed there for the next few years.

As in the years leading up to the crash, $100 oil proved too expensive for western economies, accustomed as they had been to running on cheap energy for decades. Consumer confidence, and consumer spending, remained low.

Simply pumping the markets with cash – Quantitative Easing – had little effect on the real economy (though it afforded bank execs huge bonuses and boosted the prices of stocks and other financial assets). But as interest rates dropped to historic lows, the flood of nearly-free money finally revived the US energy-production sector.

QE and ZIRP hugely increased the availability of credit to the energy sector. ZIRP allowed oil companies to borrow from banks at extremely low interest rates, with the worth of syndicated loans to the oil and gas sectors rising from $600 billion in 2006 to $1.6 trillion in 2014. Meanwhile, in raising the price and depressing the yield of the relatively safe assets central banks purchased, QE created incentives for investors to buy assets with a higher yield, including significantly riskier corporate bonds and equities. …” (Thompson, page 50)

Without this extraordinary monetary expansion “the rise of non-conventional oil production would not have been possible”, Thompson concludes.

And while a huge boost in shale oil production might be counted as a “win” for the economic growth team, the downsides have been equally serious. The Zero Interest Rate Policy has almost eliminated interest earnings for cautious middle-income savers, which depresses consumer spending in the short term and threatens the security of millions in the long term. The inflation in asset prices has boosted the profits of large corporations, while weak consumer confidence has removed corporate incentive to invest in greater production of most consumer goods.

The situation would be more stable if non-conventional oil producers had the ability to weather prolonged periods of low oil prices. But as the price drop of 2015 showed, that would be wishful thinking. “By the second quarter of 2015 more than half of all distressed bonds across investment and high-yield bond markets were issued by energy companies. Under these financial strains a wave of shale bankruptcies began in the first quarter of 2015” – a bankruptcy wave that grew three times as high in 2016.

Finally, financial markets with their high exposure to risky non-conventional oil production have been easily spooked by mere rumours of the end of quantitative easing or any significant rise in interest rates. So central bankers have good reason to fear they may go into the next recession with no tools left in their monetary policy toolbox.

Far from representing a way out of economic crisis, then, the shale oil and related tar sands booms are a symptom of an ongoing economic crisis, the end of which is nowhere in sight.

Energy and power

Thompson also discusses the geo-political effects of the changing global oil market. She notes that the shale oil boom created serious tensions in the US-Saudi relationship. The Saudis wanted oil prices to be moderately high, perhaps in the $50-60/barrel range, because that would afford the Saudis substantial profits without driving down demand for oil. The Americans, with their billions sunk into high-cost shale oil wells, now had a need for oil prices in the $70/barrel and up range, simply to make the fracked oil minimally profitable.

There was no way for both the Saudis and the Americans to win in this struggle, though they could both lose.

At the peak (to date) of the shale oil boom, there was only one significant geo-political development in which the Americans were able to flex some muscle specifically because of the big increase in US oil production, Thompson says. She attributes the nuclear treaty with Iran in part to the surge of new oil production in Texas and North Dakota. In her reading, world oil markets at the time needn’t fear the sudden loss of Iran’s oil output, and that gave European governments a comfort level in agreeing to impose sanctions on Iran. These sanctions, in turn, helped convince Iran to make a deal (a diplomatic success which the Trump administration is determined to undo).

But in 2014 OPEC still produced about three times as much oil as the US produced – with important implications:

“even at the height of the shale boom the obvious limits to any claim of geo-political transformation were also evident. The US remained a significant net importer of oil and, consequently, lacked the capacity to act as a swing producer capable of immediately and directly influencing the price.” (Thompson, page 56)

“Most consequentially, when the Obama administration turned towards sanctions against Russia after the onset of the Ukrainian crisis in the spring of 2014, it was not willing to contemplate significant action against Russian oil production.” (Thompson, page 57)

Thompson wraps up with a look at the oil shock of the 1970s, concluding that “There are striking similarities between aspects of the West’s current predicaments around oil and the problems western governments faced in the 1970s. … However, in a number of ways the present version of these problems is worse than those that were manifest in the 1970s.” (Thompson, page 57)

A much higher world oil demand today, the fact that new oil reserves in western countries are very high-cost, plus the explosion of oil-related financial derivatives, make the international monetary order highly unstable.

Has the US returned to the ranks of “fossil fuel superpowers”? Not as Thompson sees it:

Now the US has nothing like the power it had in the post-war period in providing other states access to oil. Shale oil … cannot change the fact that the largest reserves of cheaply accessible oil lie in the Middle East and Russia, or that China and others’ rise has fundamentally changed the volume of demand for oil in the world.” (Thompson, page 111)

S-curves and other paths

Also published at Resilience.org.

Oxford University economist Kate Raworth is getting a lot of good press for her recently released book Doughnut Economics: 7 Ways to Think Like a 21st Century Economist.

The book’s strengths are many, starting with the accessibility of Raworth’s prose. Whether she is discussing the changing faces of economic orthodoxy, the caricature that is homo economicus, or the importance of according non-monetized activities their proper recognition, Raworth keeps things admirably clear.

Doughnut Economics makes a great crash course in promising new approaches to economics. In Raworth’s own words, her work “draws on diverse schools of thought, such as complexity, ecological, feminist, institutional and behavioural economics.” Yet the integration of ecological economics into her framework is incomplete, leading to a frustratingly unimaginative concluding chapter on economic growth.

Laying the groundwork for that discussion of economic growth has resulted in an article about three times as long as most of my posts, so here is the ‘tl;dr’ version:

Continued exponential economic growth is impossible, but the S-curve of slowing growth followed by a steady state is not the only other alternative. If the goal is maintaining GDP at the highest possible level, then the S-curve is the best case scenario, but in today’s world that isn’t necessarily desirable or even possible.

The central metaphor

Full disclosure: for as long as I can remember, the doughnut has been my least favourite among refined-sugar-white-flour-and-grease confections. So try as I might to be unbiased, I was no doubt predisposed to react critically to Raworth’s title metaphor.

What is the Doughnut? As Raworth explains, the Doughnut is the picture that emerged when she sketched a “safe space” between the Social Foundation necessary for prosperity, and the Ecological Ceiling beyond which we should not go.

Source: Doughnut Economics, page 38

There are many good things to be said about this picture. It affords a prominent place to both the social factors and the ecological factors which are essential to prosperity, but which are omitted from many orthodox economic models. The picture also restores ethics, and the choosing of goals, to central roles in economics.

Particularly given Raworth’s extensive background in development economics, it is easy to understand the appeal of this diagram.

But I agree with Ugo Bardi (here and here) that there is no particular reason the diagram should be circular – Shortfall, Social Foundation, Safe and Just Space, Ecological Ceiling and Overshoot would have the same meaning if arranged in horizontal layers rather than in concentric circles.

From the standpoint of economic analysis, I find it unhelpful to include a range of quite dissimilar factors all at the same level in the centre of the diagram. A society could have adequate energy, water and food without having good housing and health care – but you couldn’t have good housing and health care without energy, water and food. So some of these factors are clearly preconditions for others.

Likewise, some of the factors in the centre of the diagram are clearly and directly related to “overshoot” in the outer ring, while others are not. Excessive consumption of energy, water, or food often leads to ecological overshoot, but you can’t say the same about “excessive” gender equality, political voice, or peace and justice.

Beyond these quibbles with the Doughnut diagram, I further agree with Bardi that a failure to incorporate biophysical economics is the major weakness of Doughnut Economics. In spite of her acknowledgment of the pioneering work of Herman Daly, and a brief but lucid discussion of the work of Robert Ayres and Benjamin Warr showing that fossil fuels have been critical for the past century’s GDP growth, Raworth does not include energy supply as a basic determining factor in economic development.

Economists as spin doctors

Raworth makes clear that key doctrines of economic orthodoxy often obscure rather than illuminate economic reality. Thus economists in rich countries extoll the virtues of free trade, though their own countries relied on protectionism to nurture their industrial base.

Likewise standard economic modeling starts with a reductionist “homo economicus” whose decisions are always based on rational pursuit of self-interest – even though behavioral science shows that real people are not consistently rational, and are motivated by co-operation as much as by self-interest. Various studies indicate, however, that economics students and professors show a greater-than-average degree of self-interest. And for those who are already wealthy but striving to become wealthier still, it is comforting to believe that everyone is similarly self-interested, and that their self-interest works to the good of all.

When considering a principle of mainstream economics, then, it makes sense to ask: what truths does this principle hide, and for whose benefit?

Unfortunately, when it comes to GDP growth as the accepted measure of a healthy economy, Raworth leaves out an important part of the story.

The concept of Gross Domestic Product has its roots in the 1930s, when statisticians were looking for ways to quantify economic activity, making temporal trends easier to discern. Simon Kuznets developed a way to calculate Gross National Product – the total of all income generated worldwide by US residents.

As Raworth stresses, Kuznets himself was clear that his national income tally was a very limited way of measuring an economy.

Emphasising that national income captured only the market value of goods and services produced in an economy, he pointed out that it therefore excluded the enormous value of goods and services produced by and for households, and by society in the course of daily life. … And since national income is a flow measure (recording only the amount of income generated each year), Kuznets saw that it needed to be complemented by a stock measure, accounting for the wealth from which it was generated ….” (Doughnut Economics, page 34; emphasis mine)

The distinction between flows and stocks is crucial. Imagine a simple agrarian nation which uses destructive farming methods to work its rich land. For a number of years it may earn increasingly high income – the flow – though its wealth-giving topsoil – the stock – is rapidly eroding. Is this country getting richer or poorer? Measured by GDP alone, this economy is healthy as long as current income grows; no matter that the topsoil, and future prospects, are blowing away in the wind.

In the years immediately preceding and following World War II, GDP became the primary measure of economic health, and it became political and economic orthodoxy that GDP should grow every year. (To date no western leader has ever campaigned by promising “In my first year I will increase GDP by 3%, in my second year by 2%, in my third year it will grow by 1%, and by my fourth year I will have tamed GDP growth to 0!”)

What truth does this reliance on GDP hide, and for whose benefit? The answers are fairly obvious, in my humble opinion: a myopic focus on GDP obscured the inevitability of resource depletion, for the benefit of the fossil fuel and automative interests who dominated the US economy in the mid-twentieth century.

For context, in 1955 the top ten US corporations by number of employees included: General Motors, Chrysler, Standard Oil of New Jersey, Amoco, Goodyear and Firestone. (Source: 24/7 Wall St)

In 1960, the top ten largest US companies by revenue included General Motors, Exxon, Ford, Mobil, Gulf Oil, Texaco, and Chrysler. (Fortune 500)

These companies, plus the steel companies that made sheet metal for cars and the construction interests building the rapidly-growing network of roads, were clear beneficiaries of a new way of life that consumed ever-greater quantities of fossil fuels.

In the decades after World War II, the US industrial complex threw its efforts into rapid exploitation of energy reserves, along with mass production of machines that would burn that energy as fast as it could be pulled out of the ground. This transformation was not a simple result of “the invisible hand of the free market”; it relied on the enthusiastic collaboration of every level of government, from local zoning boards, to metropolitan transit authorities, to state and federal transportation planners.

But way back then, was it politically necessary to distract people from the inevitability of resource depletion?

The Peak Oil movement in the 1930s

From the very beginnings of the petroleum age, there were prominent voices who saw clearly that exponential growth in use of a finite commodity could not go on indefinitely.

One such voice was William Jevons, now known particularly for the “Jevons Paradox”. In 1865 he argued that since coal provided vastly more usable energy than industry had previously been able to harness, and since this new-found power was the very foundation of modern industrial civilization, it was particularly important to a nation to prudently manage supplies:

Describing the novel social experience that coal and steam power had created, the experience that today we would call ‘exponential growth’, in which practically infinite values are reached in finite time, Jevons showed how quickly even very large stores of coal might be depleted.” (Timothy Mitchell, Carbon Democracy, pg 129)

In the 1920s petroleum was the new miracle energy source, but thoughtful geologists and economists alike realized that as a finite commodity, petroleum could not fuel infinite growth.

Marion King Hubbert was a student in 1926, but more than sixty years later he still recalled the eye-opening lesson he received when a professor asked pupils to consider the implications of ongoing rapid increases in the consumption of coal and oil resources.

As Mason Inman relates in his excellent biography of Hubbert,

When a quantity grows by a constant percentage each year, its history forms a straight line on a semilogarithmic graph. Hubbert plotted the points for coal, year after year, and found a fairly straight line that persisted for several decades: a continual growth rate of around 6 percent a year. At that rate, the production doubled about every dozen years. When he looked at this graph, it was obvious to him that such rapid growth could persist for decades – his graph showed that had already happened – but couldn’t continue forever.” (The Oracle of Oil, 2016, pg 19)

Hubbert soon learned that there were many others who shared his concerns. This thinking coalesced in the 1930s in a very popular movement known as Technocracy. They argued that wealth depended primarily not on the circulation of money, but on the flow of energy.

The leaders of Technocracy, including Hubbert, were soon speaking to packed houses and were featured in cover stories in leading magazines. Hubbert was also tasked with producing a study guide that interested people could work through at home.

In the years prior to the Great Depression, people had become accustomed to economic growth of about 5% per year. Hubbert wanted people to realize it made no sense to take that kind of growth for granted.

“It has come to be naively expected by our business men and their apologists, the economists, that such a rate of growth was somehow inherent in the industrial processes,” Hubbert wrote. But since Earth and its physical resources are finite, he said, infinite growth is an impossibility.

In short, Technocracy pointed out that the fossil fuel age was likely to be a flash in the pan, historically speaking – unless the nation’s fuel reserves were managed carefully by engineers who understood energy efficiency and depletion.

Without sensible accounting and allocation of the true sources of a nation’s wealth – its energy reserves – private corporations would rake in massive profits for a few decades and two or three generations of Americans might prosper, but in the longer term the nation would be “burning its capital”.

Full speed ahead

After the convulsions of the Depression and World War II, the US emerged with the same leading corporations in an even more dominant position. Now the US had control, or at least major influence, not only over rich domestic fossil fuel reserves, but also the much greater reserves in the Middle East. And as the world’s greatest military and financial power, they were in a position to set the terms of trade.

For fossil fuel corporations the major problem was that oil was temporarily too cheap. It came flowing out of wells so easily and in such quantity that it was often difficult to keep the price up. It was in their interests that economies consume oil at a faster rate than ever before, and that the rate of consumption would speed up each year.

Fortunately for these interests, a new theory of economics had emerged just in time.

In this new theory, economists should not worry about measuring the exhaustion of resources. In Timothy Mitchell’s words, “Economics became instead a science of money.”

The great thing about money supply was that, unlike water or land or oil, the quantity of money could grow exponentially forever. And as long as one didn’t look too far backwards or forwards, it was easy to imagine that energy resources would prove no barrier. After all, for several decades, the price of oil had been dropping.

So although increasing quantities of energy were consumed, the cost of energy did not appear to represent a limit to economic growth. … Oil could be treated as something inexhaustible. Its cost included no calculation for the exhaustion of reserves. The growth of the economy, measured in terms of GNP, had no need to account for the depletion of energy resources.” (Carbon Democracy, pg 140)

GDP was thus installed as the supreme measure of an economy, with continuous GDP growth the unquestionable political goal.

A few voices dissented, of course. Hubbert warned in the mid-1950s that the US would hit the peak of its conventional fossil fuel production by the early 1970s, a prediction that proved correct. But large quantities of cheap oil remained in the Middle East. Additional new finds in Alaska and the North Sea helped to buy another couple of decades for the oil economy (though these fields are also now in decline).

Thanks to the persistent work of a small number of researchers who called themselves “ecological economists”, a movement grew to account for stocks of resources, in addition to tallying income flows in the GDP. By the early 1990s, the US Bureau of Economic Analysis gave its blessing to this effort.

In April 1994 the Bureau published a first set of tables called Integrated Environmental-Economic System of Accounts (IEESA).

The official effort was short-lived indeed. As described in Beyond GDP,

progress toward integrated environmental-economic accounting in the US came to a screeching halt immediately after the first IEESA tables were published. The US Congress responded swiftly and negatively. The House report that accompanied the next appropriations bill explicitly forbade the BEA from spending any additional resources to develop or extend the integrated environmental and economic accounting methodology ….” (Beyond GDP, by Heun, Carbajales-Dale, Haney and Roselius, 2016)

All the way through Fiscal Year 2002, appropriations bills made sure this outbreak of ecological economics was nipped in the bud. The bills stated,

The Committee continues the prohibition on use of funds under this appropriation, or under the Census Bureau appropriation accounts, to carry out the Integrated Environmental-Economic Accounting or ‘Green GDP’ initiative.” (quoted in Beyond GDP)

One can only guess that, when it came to contributing to Congressional campaign funds, the struggling fossil fuel interests had somehow managed to outspend the deep-pocketed biophysical economists lobby.

S-curves and other paths

With that lengthy detour complete, we are ready to rejoin Raworth and Doughnut Economics.

The final chapter is entitled “Be Agnostic About Growth: from growth addicted to growth agnostic”.

This sounds like a significant improvement over current economic orthodoxy – but I found this section weak in several ways.

First, it is unclear just what it is that we are to be agnostic about. While Raworth has made clear earlier in the book why GDP is an incomplete and misleading measure of an economy, in the final chapter GDP growth is nevertheless used as the only significant measure of economic growth. Are we to be agnostic about “GDP growth”, which might well be meaningless anyway? Or should we be agnostic about “economic growth”, which might be something quite different and quite a bit more essential – especially to the hundreds of millions of people still living without basic necessities?

Second, Raworth may be agnostic about growth, but she is not agnostic about degrowth. (She has discussed elsewhere why she can’t bring herself to use the word “degrowth”.) True, she remarks at one point that “I mean agnostic in the sense of designing an economy that promotes human prosperity whether GDP is going up, down, or holding steady.” Yet in the pictures she draws and in the ensuing discussion, there is no clear recognition either that degrowth might be desirable, or that degrowth might be forced on us by biophysical realities.

She includes two graphs for possible paths of economic growth –  with growth measured here simply by GDP.

Source: Doughnut Economics, page 210 and page 214

As she notes, the first graph shows GDP increasing at steady annual percentage. While the politicians would like us to believe this is possible and desirable, the graph showing what quickly becomes a near-vertical climb is seldom presented in economics textbooks, as it is clearly unrealistic.

The second graph shows GDP growing slowly at first, then picking up speed, and then leveling off into a high but steady state with no further growth. This path for growth is commonly seen and recognized in ecology. The S-curve was also recognized by pre-20th-century economists, including Adam Smith and John Stuart Mill, as the ideal for a healthy economy.

I would concur that an S-curve which lands smoothly on a high plateau is an ideal outcome. But can we take for granted that this outcome is still possible? And do these two paths – continued exponential growth or an S-curve – really exhaust the conceptual possibilities that we should consider?

On the contrary, we can look back 80 years to the Technocracy Study Course for an illustration of varied and contrasting paths of economic growth and degrowth.

Source: The Oracle of Oil, page 58

M. King Hubbert produced this set of graphs to illustrate what can be expected with various key commodities on which a modern industrial economy depends – and by extension, what might happen with the economy as a whole.

While pure exponential growth is impossible, the S-curve may work for a dependably renewable resource, or a renewable-resource based economy. However, the next possibility – with a rise, peak, decline, and then a leveling off – is also a common scenario. For example, a society may harvest increasing amounts of wood until the regenerating power of the forests are exceeded; the harvest must then drop before any production plateau can be established.

The bell curve which starts at zero, climbs to a high peak, and drops back to zero, could characterize an economy which is purely based on a non-renewable resource such as fossils fuels. Hopefully this “decline to zero” will remain a theoretical conception, since no society to date has run 100% on a non-renewable resource. Nevertheless our fossil-fuel-based industrial society will face a severe decline unless we can build a new energy system on a global scale, in very short order.

This range of economic decline scenarios is not really represented in Doughnut Economics. That may have something to do with the design of the title metaphor.

While ecological overshoot, on the outside of the doughnut, represents things we should not do, the diagram doesn’t have a way of representing the things we can not do.

We should not continue to burn large quantities of fossil fuel because that will destabilize the climate that our children and grandchildren inherit. But once our cheaply accessible fossil fuels are used up, then we can not consume energy at the same frenetic pace that today’s wealthy populations take for granted.

The same principle applies to many essential economic resources. As long as there is significant fertility left in farmland, we can choose to farm the land with methods that produce a high annual return even though they gradually strip away the topsoil. But once the topsoil is badly depleted, then we no longer have a choice to continue production at the same level – we simply need to take the time to let the land recover.

In other words, these biophysical realities are more fundamental than any choices we can make – they set hard limits on which choices remain open to us.

The S-curve economy may be the best-case scenario, an outcome which could in principle provide global prosperity with a minimum of system disruption. But with each passing year during which our economy is based overwhelmingly on rapidly depleting non-renewable resources, the smooth S-curve becomes a less likely outcome.

If some degree of economic decline is unavoidable, then clear-sighted planning for that decline can help us make the transition a just and peaceful one.

If we really want to think like 21st century economists, don’t we need to openly face the possibility of economic decline?

 

Top photo: North Dakota State Highway 22, June 2014. (click here for larger view)

Guns, energy, and the coin of the realm

Also published at Resilience.org.

While US debt climbs to incomprehensible heights, US banking authorities continue to pump new money into the economy. How can they do it? David Graeber sees a  simple explanation:

There’s a reason why the wizard has such a strange capacity to create money out of nothing. Behind him, there’s a man with a gun.” (Debt: The First 5,000 Years, Melville House, 2013, pg 364)

In part one of this series, we looked at the extent of violence in the “American Century” – the period since World War II in which the US has been the number one superpower, and in which US garrisons have ringed the world. In part two we looked at the role of energy supplies in propelling the US to power, the rapid drawdown of energy supplies in the US post-WWII, and the more recent explosion of US debt.

In this concluding installment we’ll look at the links between military power and financial power.

A new set of financial institutions arose at the end of World War II, and for obvious reasons the US was ‘first among equals’ in setting the rules. Not only was the US in military occupation of Germany and Japan, but the US also had the financial capital to help shattered countries –whether on the war’s winning or losing sides – in reconstructing their infrastructures and restarting their economies.

The US was also able to offer military protection to many countries including previous mortal enemies. This meant that these countries could avoid large military outlays – but also that their elites were in no position to challenge US supremacy.

That being said, there were challenges both large and small in dozens of nations, particularly from the grass roots. The US exercised political power, both soft and hard, in attempts to influence the directions of scores of countries around the world. Planting of media reports, surreptitious aid to favoured electoral candidates, dirty tricks to discredit candidates seen as threatening, military aid and training to dictatorships and police forces who could put down movements for social justice, planning and helping to implement coups, and full-fledged military invasion – this range of intervention techniques resulted in hundreds of thousands, if not millions, of deaths. Cataloguing the bloody side of US “leadership of the free world” is the task taken on so ably by John Dower in The Violent American Century.

Dollars for oil

One of the rules of the game grew in importance with each passing decade. In Timothy Mitchell’s words,

Under the arrangements that governed the international oil trade, the commodity was sold in the currency not of the country where it was produced, nor of the place where it was consumed, but of the international companies that controlled production. ‘Sterling oil’, as it was known (principally oil from Iran), was traded in British pounds, but the bulk of global sales were in ‘dollar oil’.” (Carbon Democracy, Verso, 2013, pg 111)

As David Graeber’s Debt explains in detail, the ability to force people to acquire and use the ruler’s currency has, throughout history, been a key mechanism for extracting tribute from subject populations.

In today’s global economy, that is why the pricing of oil in dollars has been so important for the US. Again in Timothy Mitchell’s words:

Europe and other regions had to accumulate dollars, hold them and then return them to the United States in payment for oil. Inflation in the United States slowly eroded the value of the dollar, so that when these countries purchased oil, the dollars they used were worth less than their value when they acquired them. These seigniorage privileges, as they are called, enabled Washington to extract a tax from every other country in the world …. (Carbon Democracy, pg 120)

As Greg Grandin explains, the oil-US dollar relationship grew in importance even as OPEC countries were able to force big price increases:

With every rise in the price of oil, oil-importing countries had to borrow more to meet their energy needs. With every petrodollar placed in New York banks, the value of the US currency increased, and with it the value of the dollar-denominated debt that poor countries owed to those banks.” (“Down From The Mountain”, London Review of Books, June 19, 2017)

But the process did take on another important twist after US domestic oil production peaked and imports from Saudi Arabia soared in the 1970s. Although the oil trade continued to support the value of the US dollar, the US was now sending a lot more of those dollars to oil exporting countries. The Saudis, in particular, accumulated US dollars so fast there wasn’t a productive way for them to circulate these dollars back into the US by purchasing US-made goods. The burgeoning US exports of munitions provided a solution. Mitchell explains:

As the producer states gradually forced the major oil companies to share with them more of the profits from oil, increasing quantities of sterling and dollars flowed to the Middle East. To maintain the balance of payments and the viability of the international financial system, Britain and the United States needed a mechanism for these currency flows to be returned. … Arms were particularly suited to this task of financial recycling, for their acquisition was not limited by their usefulness. The dovetailing of the production of petroleum and the manufacture of arms made oil and militarism increasingly interdependent.” (Carbon Democracy, pg 155-156)

He adds, “The real value of US arms exports more than doubled between 1967 and 1975, with most of the new market in the Middle East.”

An F-15 Eagle aircraft of the Royal Saudi Air Force takes off during Operation Desert Shield, 1991. (Source: Wikimedia Commons)

Fast forward to today. Imported oil is a critical factor in the US economy, in spite of a supply blip from fracking. US industry leads the world in the export of weapons; the top three buyers, and five of the top ten buyers, are in the Middle East. (Source: CNN, May 25, 2016) Yet US arms sales are dwarfed by US military expenditures, which are roughly double in real terms what they were in the 1960s. (Source: Time, July 16, 2013)

Finally, US national debt, in 1983 dollars, is about 10 times as high as it was from 1950 to 1980. In other words the US government, along with its banking and military complexes, has been living far beyond its means (making bankruptcy king Donald Trump a fitting figurehead). (Source: Stephen Bloch, Adelphi University)

Yet the game goes on. As David Graeber sees it,

American imperial power is based on a debt that will never – can never – be repaid. Its national debt has become a promise, not just to its own people, but to the nations of the entire world, that everyone knows will not be kept.

At the same time, U.S. policy was to insist that those countries relying on U.S. treasury bonds as their reserve currency behaved in exactly the opposite way: observing tight money policies and scrupulously repaying their debts ….” (Debt, pg 367)

We’ll close with two speculations on how the “American century” may come to an end.

US supremacy rests on interrelated dominance in military power, financial power, and influence over fossil fuel energy markets. At present the US financial system can create ever larger sums of money, and the rest of the world may have no immediately preferable options than to continue buying US debt. But just as you can’t eat money, you can’t burn it in an electricity generator, a diesel truck, or a bomber flying sorties to a distant land. So no amount of financial wizardry will sustain the current outsized industrial economy or its military subsection, once prime fossil fuel sources have been tapped out.

On the other hand, suppose low-carbon renewable energy technologies improve so rapidly that they can replace fossil fuels within a few decades. This would be a momentous energy transition, and might also lead to a momentous transition in geopolitics.

In recent years, and especially under the Trump administration, the US is ceding renewable energy technology leadership to other countries, especially China. If many countries free themselves from fossil-fuel dependence, and they no longer need US dollars to purchase their energy needs, a pillar of US supremacy will fall.

Top photo: Commemorative silver dollar sold by the US Mint, 2012.

Energy And Civilization: a review

Also published at Resilience.org and BiophysEco.

If you were to find yourself huddled with a small group of people in a post-crash, post-internet world, hoping to recreate some of the comforts of civilization, you’d do well to have saved a printed copy of Vaclav Smil’s Energy and Civilization: A History.

Smil’s new 550-page magnum opus would help you understand why for most applications a draft horse is a more efficient engine than an ox – but only if you utilize an effective harness, which is well illustrated. He could help you decide whether building a canal or a hard-topped road would be a more productive use of your energies. When you were ready to build capstans or block-and-tackle mechanisms for accomplishing heavy tasks, his discussion and his illustrations would be invaluable.

But hold those thoughts of apocalypse for a moment. Smil’s book is not written as a doomer’s handbook, but as a thorough guide to the role of energy conversions in human history to date. Based on his 1994 book Energy in World History, the new book is about 60% longer and includes 40% more illustrations.

Though the initial chapters on prehistory are understandably brief, Smil lays the groundwork with his discussion of the dependency of all living organisms on their ability to acquire enough energy in usable forms.

The earliest humanoids had some distinct advantages and liabilities in this regard. Unlike other primates, humans evolved to walk on two feet all the time, not just occasionally. Ungainly though this “sequence of arrested falls” may be, “human walking costs about 75% less energy than both quadrupedal and bipedal walking in chimpanzees.” (Energy and Civilization, pg 22)

What to do with all that saved energy? Just think:

The human brain claims 20–25% of resting metabolic energy, compared to 8–10% in other primates and just 3–5% in other mammals.” (Energy and Civilization, pg 23)

In his discussion of the earliest agricultures, a recurring theme is brought forward: energy availability is always a limiting factor, but other social factors also come into play throughout history. In one sense, Smil explains, the move from foraging to farming was a step backwards:

Net energy returns of early farming were often inferior to those of earlier or concurrent foraging activities. Compared to foraging, early farming usually required higher human energy inputs – but it could support higher population densities and provide a more reliable food supply.” (Energy and Civilization, pg 42)

The higher population densities allowed a significant number of people to work at tasks not immediately connected to securing daily energy requirements. The result, over many millennia, was the development of new materials, tools and processes.

Smil gives succinct explanations of why the smelting of brass and bronze was less energy-intensive than production of pure copper. Likewise he illustrates why the iron age, with its much higher energy requirements, resulted in widespread deforestation, and iron production was necessarily very limited until humans learned to exploit coal deposits in the most recent centuries.

Cooking snails in a pot over an open fire. In Energy and Civilization, Smil covers topics as diverse as the importance of learning to use fire to supply the energy-rich foods humans need; the gradual deployment of better sails which allowed mariners to sail closer to the wind; and the huge boost in information consumption that occurred a century ago due to a sudden drop in the energy cost of printing. This file comes from Wellcome Images, a website operated by Wellcome Trust, a global charitable foundation based in the United Kingdom, via Wikimedia Commons.

Energy explosion

The past two hundred years of fossil-fuel-powered civilization takes up the biggest chunk of the book. But the effective use of fossil fuels had to be preceded by many centuries of development in metallurgy, chemistry, understanding of electromagnetism, and a wide array of associated technologies.

While making clear how drastically human civilizations have changed in the last several generations, Smil also takes care to point out that even the most recent energy transitions didn’t take place all at once.

While the railways were taking over long-distance shipments and travel, the horse-drawn transport of goods and people dominated in all rapidly growing cities of Europe and North America.” (Energy and Civilization, pg 185)

Likewise the switches from wood to coal or from coal to oil happened only with long overlaps:

The two common impressions – that the twentieth century was dominated by oil, much as the nineteenth century was dominated by coal – are both wrong: wood was the most important fuel before 1900 and, taken as a whole, the twentieth century was still dominated by coal. My best calculations show coal about 15% ahead of crude oil …” (Energy and Civilization, pg 275)

Smil draws an important lesson for the future from his careful examination of the past:

Every transition to a new form of energy supply has to be powered by the intensive deployment of existing energies and prime movers: the transition from wood to coal had to be energized by human muscles, coal combustion powered the development of oil, and … today’s solar photovoltaic cells and wind turbines are embodiments of fossil energies required to smelt the requisite metals, synthesize the needed plastics, and process other materials requiring high energy inputs.” (Energy and Civilization, pg 230)

A missing chapter

Energy and Civilization is a very ambitious book, covering a wide spread of history and science with clarity. But a significant omission is any discussion of the role of slavery or colonialism in the rise of western Europe.

Smil does note the extensive exploitation of slave energy in ancient construction works, and slave energy in rowing the war ships of the democratic cities in ancient Greece. He carefully calculates the power output needed for these projects, whether supplied by slaves, peasants, or animals.

In his look at recent European economies, Smil also notes the extensive use of physical and child labour that occurred simultaneously with the growth of fossil-fueled industry. For example, he describes the brutal work conditions endured by women and girls who carried coal up long ladders from Scottish coal mines, in the period before effective machinery was developed for this purpose.

But what of the 20 million or more slaves taken from Africa to work in the European colonies of the “New World”? Did the collected energies of all these unwilling participants play no notable role in the progress of European economies?

Likewise, vast quantities of resources in the Americas, including oil-rich marine mammals and old-growth forests, were exploited by the colonies for the benefit of European nations which had run short of these important energy commodities. Did this sudden influx of energy wealth play a role in European supremacy over the past few centuries? Attention to such questions would have made Energy and Civilization a more complete look at our history.

An uncertain future

Smil closes the book with a well-composed rumination on our current predicaments and the energy constraints on our future.

While the timing of transition is uncertain, Smil leaves little doubt that a shift away from fossil fuels is necessary, inevitable, and very difficult. Necessary, because fossil fuel consumption is rapidly destabilizing our climate. Inevitable, because fossil fuel reserves are being depleted and will not regenerate in any relevant timeframe. Difficult, both because our industrial economies are based on a steady growth in consumption, and because much of the global population still doesn’t have access to a sufficient quantity of energy to provide even the basic necessities for a healthy life.

The change, then, should be led by those who are now consuming quantities of energy far beyond the level where this consumption furthers human development.

Average per capita energy consumption and the human development index in 2010. Smil, Energy and Civilization, pg 363

 

Smil notes that energy consumption rises in correlation with the Human Development Index up to a point. But increases in energy use beyond, roughly the level of present-day Turkey or Italy, provide no significant boost in Human Development. Some of the ways we consume a lot of energy, he argues, are pointless, wasteful and ineffective.

In affluent countries, he concludes,

Growing energy use cannot be equated with effective adaptations and we should be able to stop and even to reverse that trend …. Indeed, high energy use by itself does not guarantee anything except greater environmental burdens.

Opportunities for a grand transition to less energy-intensive society can be found primarily among the world’s preeminent abusers of energy and materials in Western Europe, North America, and Japan. Many of these savings could be surprisingly easy to realize.” (Energy and Civilization, pg 439)

Smil’s book would indeed be a helpful post-crash guide – but it would be much better if we heed the lessons, and save the valuable aspects of civilization, before apocalypse overtakes us.

 

Top photo: Common factory produced brass olive oil lamp from Italy, c. late 19th century, adapted from photo on Wikimedia Commons.

Alternative Geologies: Trump’s “America First Energy Plan”

Also published at Resilience.org.

Donald Trump’s official Energy Plan envisions cheap fossil fuel, profitable fossil fuel and abundant fossil fuel. The evidence shows that from now on, only two of those three goals can be met – briefly – at any one time.

While many of the Trump administration’s “alternative facts” have been roundly and rightly ridiculed, the myths in the America First Energy Plan are still widely accepted and promoted by mainstream media.

The dream of a great America which is energy independent, an America in which oil companies make money and pay taxes, and an America in which gas is still cheap, is fondly nurtured by the major business media and by many politicians of both parties.

The America First Energy Plan expresses this dream clearly:

The Trump Administration is committed to energy policies that lower costs for hardworking Americans and maximize the use of American resources, freeing us from dependence on foreign oil.

And further:

Sound energy policy begins with the recognition that we have vast untapped domestic energy reserves right here in America. The Trump Administration will embrace the shale oil and gas revolution to bring jobs and prosperity to millions of Americans. … We will use the revenues from energy production to rebuild our roads, schools, bridges and public infrastructure. Less expensive energy will be a big boost to American agriculture, as well.
– www.whitehouse.gov/america-first-energy

This dream harkens back to a time when fossil fuel energy was indeed plentiful and cheap, when profitable oil companies did pay taxes to fund public infrastructure, and the US was energy independent – that is, when Donald Trump was still a boy who had not yet managed a single company into bankruptcy.

To add to the “flashback to the ’50s” mood, Trump’s plan doesn’t mention renewable energy, solar power, and wind turbines – it’s all fossil fuel all the way.

Nostalgia for energy independence

Let’s look at the “energy independence” myth in context. It has been more than 50 years since the US produced as much oil as it consumed.

Here’s a graph of US oil consumption and production since 1966. (Figures are from the BP Statistical Review of World Energy, via ycharts.com.)

Gap between US oil consumption and production – from stats on ycharts.com (click here for larger version)

Even at the height of the fracking boom in 2014, according to BP’s figures Americans were burning 7  million barrels per day more oil than was being produced domestically. (Note: the US Energy Information Agency shows net oil imports at about 5 million barrels/day in 2014 – still a big chunk of consumption.)

OK, so the US hasn’t been “energy independent” in oil for generations, and is not close to that goal now.

But if Americans Drill, Baby, Drill, isn’t it possible that great new fields could be discovered?

Well … oil companies in the US and around the world ramped up their exploration programs dramatically during the past 40 years – and came up with very little new oil, and very expensive new oil.

It’s difficult to find estimates of actual new oil discoveries in the US – though it’s easy to find news of one imaginary discovery.

When I  google “new oil discoveries in US”, most of the top links go to articles with totally bogus headlines, in totally mainstream media, from November 2016.

For example:

CNN: “Mammoth Texas oil discovery biggest ever in USA”

USA Today: “Largest oil deposit ever found in U.S. discovered in Texas”

The Guardian: “Huge deposit of untapped oil could be largest ever discovered in US”

Business Insider: “The largest oil deposit ever found in America was just discovered in Texas”

All these stories are based on a November 15, 2016 announcement by the United States Geological Survey – but the USGS claim was a far cry from the oil gushers conjured up in mass-media headlines.

The USGS wasn’t talking about a new oil field, but about one that has been drilled and tapped for decades. It merely estimated that there might be 20 billion more barrels of tight oil (oil trapped in shale) remaining in the field. The USGS announcement further specified that this estimated oil “consists of undiscovered, technically recoverable resources”. (Emphasis in USGS statement). In other words, if and when it is discovered, it will likely be technically possible to extract it, if the cost of extraction is no object.

The dwindling pace of oil discovery

We’ll come back to the issues of “technically recoverable” and “cost of extraction” later. First let’s take a realistic look at the pace of new oil discoveries.

Bloomberg sums it up in an article and graph from August, 2016:

Graph from Bloomberg.com

This chart is restricted to “conventional oil” – that is, the oil that can be pumped straight out of the ground, or which comes streaming out under its own pressure once the well is drilled. That’s the kind of oil that fueled the 20th century – but the glory days of discovery ended by the early 1970s.

While it is difficult to find good estimates of ongoing oil exploration expenditures, we do have estimates of “upstream capital spending”. This larger category includes not only the cost of exploration, but the capital outlays needed in developing new discoveries through to production.

Exploration and development costs must be funded by oil companies or by lenders, and the more companies rely on expensive wells such as deep off-shore wells or fracked wells, the less money is available for new exploration.

Over the past 20 years companies have been increasingly reliant on a) fracked oil and gas wells which suck up huge amounts of capital, and 2) exploration in ever-more-difficult environments such as deep sea, the arctic, and countries with volatile social situations.

As Julie Wilson of Wood Mackenzie forecast in Sept 2016, “Over the next three years or more, exploration will be smaller, leaner, more efficient and generally lower-risk. The biggest issue exploration has faced recently is the difficulty in commercializing discoveries—turning resources into reserves.”

Do oil companies choose to explore in more difficult environments just because they love a costly challenge? Or is it because their highly skilled geologists believe most of the oil deposits in easier environments have already been tapped?

The following chart from Barclays Global Survey shows the steeply rising trend in upstream capital spending over the past 20 years.

Graph from Energy Fuse Chart of the Week, Sept 30, 2016

 

Between the two charts above – “Oil Discoveries Lowest Since 1947”, and “Global Upstream Capital Spending” – there is overlap for the years 1985 to 2014. I took the numbers from these charts, averaged them into five-year running averages to smooth out year-to-year volatility, and plotted them together along with global oil production for the same years.

Based on Mackenzie Wood figures for new oil discoveries, Barclays Global Survey figures for upstream capital expenditures, and world oil production figures from US Energy Information Administration (click here for larger version)

This chart highlights the predicament faced by societies reliant on petroleum. It has been decades since we found as much new conventional oil in a year as we burned – so the supplies of cheap oil are being rapidly depleted. The trend has not been changed by the fracking boom in the US – which has involved oil resources that had been known for decades, resources which are costly to extract, and which has only amounted to about 5% of world production at the high point of the boom.

Yet while our natural capital in the form of conventional oil reserves is dwindling, the financial capital at play has risen steeply. In the 10 year period from 2005, upstream capital spending nearly tripled from $200 billion to almost $600 billion, while oil production climbed only about 15% and new conventional oil discoveries averaged out to no significant growth at all.

Is doubling down on this bet a sound business plan for a country? Will prosperity be assured by investing exponentially greater financial capital into the reliance on ever more expensive oil reserves, because the industry simply can’t find significant quantities of cheaper reserves? That fool’s bargain is a good summary of Trump’s all-fossil-fuel “energy independence” plan.

(The Canadian government’s implicit national energy plan is not significantly different, as the Trudeau government continues the previous Harper government’s promotion of tar sands extraction as an essential engine of “growth” in the Canadian economy.)

To jump back from global trends to a specific example, we can consider the previously mentioned “discovery” of 20 billion barrels of unconventional oil in the Permian basin of west Texas. Mainstream media articles exclaimed that this oil was worth $900 billion. As geologist Art Berman points out, that valuation is simply 20 billion barrels times the market price last November of about $45/barrel. But he adds that based on today’s extraction costs for unconventional oil in that field, it would cost $1.4 trillion to get this oil out of the ground. At today’s prices, in other words, each barrel of that oil would represent a $20 loss by the time it got to the surface.

Two out of three

To close, let’s look again at the three goals of Trump’s America First Energy Plan:
• Abundant fossil fuel
• Profitable fossil fuel
• Cheap fossil fuel

With remaining resources increasingly represented by unconventional oil such as that in the Permian basin of Texas, there is indeed abundant fossil fuel – but it’s very expensive to get. Therefore if oil companies are to remain profitable, oil has to be more expensive – that is, there can be abundant fossil fuel and profitable fossil fuel, but then the fuel cannot be cheap (and the economy will hit the skids). Or there can be abundant fossil fuel at low prices, but oil companies will lose money hand-over-fist (a situation which cannot last long).

It’s a bit harder to imagine, but there can also be fossil fuel which is both profitable to extract and cheap enough for economies to afford – it just won’t be abundant. That would require scaling back production/consumption to the remaining easy-to-extract conventional fossil fuels, and a reduction in overall demand so that those limited supplies aren’t immediately bid out of a comfortable price range. For that reduction in demand to occur, there would have to be some combination of dramatic reduction in energy use per capita and a rapid increase in deployment of renewable energies.

A rapid decrease in demand for oil is anathema to Trumpian fossil-fuel cheerleaders, but it is far more realistic than their own dream of cheap, profitable, abundant fossil fuel forever.
Top photo: composite of Donald Trump in a lake of oil spilled by the Lakeview Gusher, California, 1910 (click here for larger version). The Lakeview Gusher was the largest on-land oil spill in the US. It occurred in the Midway-Sunset oil field, which was discovered in 1894. In 2006 this field remained California’s largest producing field, though more than 80% of the estimated recoverable reserves had been extracted. (Source: California Department of Conservation, 2009 Annual Report of the State Oil & Gas Supervisor)