Economics has failed us...but there is life after growth!
Meet Richard Heinberg, the most mild mannered thrasher you'll ever encounter.
Heinberg, the geeky brains behind the energy and culture think tank Post Carbon Institute, has toiled away over the past few decades crunching the numbers on energy depletion. In the process, he has come to some some pretty grim conclusions.
It's a wonder, then, that the guy seems so peppy. Perhaps it's a survival mechanism to keep us from shooting the messenger. Because the truth is Heinberg seldom has good news on the reality of our energy situation. And he knows that situation back and forth, having penned such blunt tomes as Powerdown: Options and Actions for a Post Carbon World; Peak Everything: Waking Up to the Century of Declines; and Blackout; Coal, Climate and the Last Energy Crisis.
He's kind of the contemporary wonky father of the peak oil movement here in the States, inheriting the legacy from its first spokesperson, M. King Hubbert, from whose foundation he received the namesake's award for excellence in energy eduction.
Now Heinberg's got as much downer news to share on the economy. A regular trove of the stuff is revealed in his latest book, The End of Growth: Adapting to Our New Economic Reality. (Also on Kindle.)
It's the economy, stupid
For a while, popular peak oil observers such as Nicole Foss, Michael Ruppert, James Howard Kunstler and Dmitry Orlov have linked energy to the economy, citing peak oil as the precursor to a major economic crisis.
Each has also opined on the simultaneous debt crisis as an equal problem, one likely to come before energy depletion really hits. They expect an unforgiving financial crash that would make the 2008 downturn look like chicken feed. Foss's lecture "A Century of Challenges: Peak Oil And Economic Crisis" and Ruppert's book Confronting Collapse: The Crisis of Energy and Money in a Post Peak Oil World, particularly hammer home this point.
Now, Heinberg joins their ranks with a full-length book specifically predicting the end of economic growth as a result of the convergence of peak energy, unsustainable debt and climate chaos. But it mostly centers its case around economic factors, fingering fractional reserve banking, escalating sovereign and consumer debt, currency jiu jitsu, Wall Street shenanigans and government fecklessness as complicit contributors to a runaway crisis about to implode.
Indeed the first few chapters go into extreme detail on just how convoluted, incestuous and wily the various pieces of the debt and banking crisis are, whether as a result of bad-faith players, the Fed's hand, cultural presumptions about the need for endless growth and its role in corporate culture, or the weak stance of federal regulators and absentee enforcers of law.
In all honesty, all this back story was, for me, TMI, laden as it was in technical minutia. My brain glazed over after all the deficits, foreclosures, bailouts, financial instruments, credit default swaps, mortgage-backed securities, quantitative easings, deflation and inflation and whatnot. I just understand enough of it to know that I want to hogtie the bastards behind it all.
Heinberg, however, is much more evenhanded than me, explaining in patient detail how all these factors combine into one helluva recipe for disaster. And that's before considering the impact of volatile oil prices, which did precede the 2008 near-death economic crisis. In the meantime, he says we're hanging on, but only tenuously, and not without a lot of contortions:
In general, what we are actually seeing so far is neither dramatic deflation nor hyperinflation. Despite the evaporation of trillions of dollars of wealth during the past four years, and despite government and central bank interventions with a potential nameplate value also running in the trillions of dollars, prices (which most economists regard as the signal of inflation or deflation) have remained fairly stable. (While at the time of this writing food and oil prices are soaring, this is due not to monetary policy but to weather events on one hand, and political turmoil in petroleum exporting nations on the other.) That is not to say that the economy is doing well: the ongoing problems of unemployment, declining tax revenues, and business and bank failures are obvious to everyone....Rather, what seems to be happening is that the efforts of the US federal government and the Federal Reserve have temporarily more or less succeeded in balancing out the otherwise massively deflationary impacts of defaults, bankruptcies, and falling property values.
And all of this in the name of so-called growth, that increasingly elusive chimera.
Who should care?
When I interviewed Heinberg earlier this month (stay tuned later this week for that piece, and read my interview with him from earlier this year in the meantime), he said he hoped the book would influence thought leaders and policymakers, and make the jump to the general reader. On the first two scores, there's no doubt this is the must-read of 2011. Heinberg's got the bona fides to back up every case he makes — from Wall Street's role to Washington's — in a logical, clear, and non-partisan manner.
General readers will enjoy the book too, immensely, if they already have a penchant for teasing out economic and banking intricacies. But some may find this part a bit tedious, as did I. You'll be rewarded, however, once you're past all the quadrillion in credit default swapping talk and the Fed's song and dance and move on to what it means in the larger context of the expectation by America's elites that such a major financial debacle was just a bump in the road on the way to getting back to growth as usual.
But returning to past levels of growth will never happen, argues Heinberg, qualifying that statement always with the realistic acknowledgement that, yeah, we may see one quarter's GDP or earnings higher than a previous one. But don't think you have a trend there, friend, warns Heinberg. No way. And that's because of peak oil, he says, which the International Energy Agency said hit in 2006, though with a few mitigating statements that Heinberg doesn't really buy.
Quibbling over the exact meaning of the word "peak," or the exact timing of the event, or what constitutes "oil" is fairly pointless. The oil world has changed. And this powerful shock to the global energy system has just happened to coincide with a seismic shift in the world's economic and financial systems.
Debt is all about future promises to pay.
Knitting together the factors that moved the industrial world into a credit-based economy run on fractional-reserve banking, Heinberg ties economic growth to that thing so almost totally forgotten that it seems quaint to bring it up: Nature. Natural resources that is. Or what the ecological economist geeks like to call "the primary economy."
Though the financial sector has dragged the rest of us along into their delusional stupor over the possibilities of ghost wealth, paper assets and huge accumulations of enormous earnings tied to...well, to nothing...Heinberg reminds us once again that, uh, yeah, in the end it's our natural resources, the work done by God, or Time, or chemistry and geology that yields to our inheritance the vast stores that allow us to build, do, make, become. Debts are all promises of future payment, and unless you're content with getting paid in notional money mined from thin air, you're likely to expect your payout in reliable stock, backed by a real ability to pay—to make good on what's owed.
And there's the gum in the works, when almost every key resource today is stretched to the breaking point due to overuse, overpopulation, declining resource quality and the law of diminishing returns. This is a problem not just for now, but into the future as our kids inherit this compound, dysfunctional mess.
Given that cheap, abundant fossil fuels have been the real-world key driver of economy during the industrial age, its peak, and the ensuing precipitous decline, means the inability to pay back debts, which is crisis enough. But it also puts the kabosh on the entire paradigm of endless growth. That's a good thing for the commons and climate change and our grandkids. But try telling that to Eric Cantor or Lloyd Blankfein, who are emblematic of those who remain focused on the paradigm of growth that Heinberg says is dying before our eyes.
Perhaps the meteoric rise of the finance economy in the past couple of decades resulted from a semi-conscious strategy on the part of society's managerial elite to leverage the last possible increments of growth from a physical, resource-based economy that was nearing its capacity. In any case, the implications of the current economic crisis cannot be captured by unemployment statistics and real estate prices. Attempts to restart growth will inevitably collide with natural limits that don't respond to stimulus packages or bailouts.
Or the end of taxes.
His white hat
Heinberg's not the kind of guy to just give you one-two sucker punches of depressing news without offering clear examples of how communities, NGOs, think tanks and even governments are looking at ways to avert the worst outcomes from the inevitable decline in credit and resources. The close of his book gives insight into where relocalization meets profit and prosperity through resilient, human-scale endeavors as well as through redefining socio-economic success with metrics other than GDP, suggesting Gross National Happiness as a better overall barometer.
He gives plenty of resources to plumb, singling out the Transition Movement, Common Security Clubs and Community Economic Laboratories as proven, successful ways to meet decline with workable plans at the individual, family, community and municipal levels.
But will it work for everyone? Not easily.
There's no guarantee that the participants in this evolutionary and revolutionary transformation will view it as an extension of human progress, rather than the ending of civilization as we have known it. Unless we completely fail to rise to the occasion, in which case the human project will simply cease, there will probably be both elements of collapse and renewal.
One final note speaks to Heinberg's place as a researcher, a role which his book amply reflects with its copious grids, box explanations and citations. But in this, the book loses some accessibility from time to time, at least in reference to his stated hope for it to filter out to the general reader.
Stark, bright white paper, and a bevy of tables at first flip might turn off some readers before they dig deeper.
The book almost cries out for a companion piece, The End of Growth for Everyman or Dummies or something. In this it would be preferable for Heinberg to operate from the presumption that the end of growth is a done deal, offering only a cursory glance, and instead tipping toward more heart and soul in teasing out the alternatives. His ranging intellect, balanced perspective, ability to contextualize and toolbox of do-able options for the future would benefit from his unleashing some inspiration so that one need not be a closet wonk to get the benefit of his unparalleled insight into the critical challenges of our times.
Oh, and wonk though he is, Heinberg is actually quite engaging. He should totally be on Jon Stewart telling this story. Jon would so dig this book. It's right up his alley.
--Lindsay Curren, Transition Voice
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