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Converging global crises and why we deny them - Part 2

An unraveling earth. Graphic from Sound of Cannons.

"Anyone who believes that exponential growth can go on forever in a finite world is either a madman or an economist." -- Kenneth Boulding

[Second in a series.]

One revealing way to understand the total human impact on the natural world is by examining the implications of this formula: I = P x A x T. The formula tells us that the total human environmental impact is proportional to the total population, times its average affluence, times the impact on the natural world of the prevailing technology.

Meanwhile, the science is telling us with increasing urgency that we are headed into dangerous territory by ignoring the total global human impact of growth itself.

If the total human impact on nature is approaching a natural limit, we face difficult choices. Voluntarily reducing population is very unpopular, except through immigration control. So is voluntarily reducing affluence, since almost everyone seeks to "improve" their own personal circumstances.

Only a decrease in the impact of our technology has much popular support. It would call for a transition away from, and a reduction of the impact associated with, a prevailing technology highly dependent on cheap fossil fuels. The expectation is not very realistic, but it's way more than good enough when judged by our current standards of political spin.

The ideology supportive to growth will fight the growing pressure of evidence to the contrary; it will strain to convince us that the growth of our impact on nature will somehow lead to the best result. When the natural limits to growth themselves become a barrier to economic expansion, the science that warns of natural limits will itself meet with widespread opposition and denial.

Given the weight of the evidence, it is clear that capitalism and its integral expansionist philosophy represent the prevailing outlook of our time. The same outlook is shared by many liberals and socialists who likewise promise to get at least the domestic sector of a globally struggling economy back on the "right track."

An economic road map arguing for the best of a list of unhappy, but still achievable, choices might be a smarter goal. But bad news does not sell very well in competition with optimism, concerning the prospects for an eventual economic recovery. The best basis for hope is really quite achievable and is moving forward, it being the earliest possible cessation of our denial.

Now for a closer look at the details of five core crises we face and their interactions. They all have different time frames and dynamics so nobody can now see very well where they are leading us. Hopefully this will help serve as an introduction and inspire further study. Despite denial, there is a growing awareness that converging crises might well lead to rapid change and the need for advance preparation. This is helping to stimulate a rapidly growing transitional community movement in the USA.

1. The Political Denial Syndrome; buying public opinion

The last century of economic expansion, based on cheap fossil fuels, has been highly profitable to a small politically powerful elite, who have in recent decades become active in preserving a profitable status quo. Since the dawn of the industrial era, the accumulation of capital has been constant, based on advances in science and technology. An increasingly for-sale political system has helped to encourage the beneficiaries of this long expansion to mobilize political opposition to reform, using private media funds for persuasion.

The climate change denial lobby has become so politically influential that President Obama has been avoiding the topic. Obama had anticipated last spring that he would soon be obliged by political pressure to talk about global warming. That hasn't happened. In an April 2012 Rolling Stone interview he had said, "I suspect that over the next six months, this is going to be a debate that will become part of the campaign, and I will be very clear in voicing my belief that we’re going to have to take further steps to deal with climate change in a serious way."

The deniers seek to delay a united government policy response, which would mean abandoning trillions of dollars worth of investments tied to a world built with cheap energy. Here Naomi Wolf discusses the past focus on global warming denial:

As the U.S. faces record drought and an Old Testament-level pestilential heatwave in the midwest, American environmental denialism may be starting to change. The question is: is it too late?

America has led the world in climate change denial, a phenomenon noted with amazement by Europeans, not to mention thinking people around the world. Year after year, the U.S. has failed to sign global treaties or curb emissions, even as our status as a source of a third of the world's carbon emissions goes unchanged.

It is fairly well-known what has been behind that climate change denial in America: vast sums pumped into an ignorance industry by the oil and gas lobbies. Entire think-tanks to obfuscate man-made climate change have been funded by these interests, as have individual congressmen and women.

A recent book documents the reach of the science denial lobby, showing how it extends well beyond climate change:

In their new book, Merchants of Doubt, historians Naomi Oreskes and Erik Conway explain how a loose-knit group of high-level scientists, with extensive political connections, ran effective campaigns to mislead the public and deny well-established scientific knowledge over four decades.

In seven compelling chapters addressing tobacco, acid rain, the ozone hole, global warming, and DDT, Oreskes and Conway roll back the rug on this dark corner of the American scientific community, showing how the ideology of free market fundamentalism, aided by a too-compliant media, has skewed public understanding of some of the most pressing issues of our era.

Recently the science deniers have gone on the offensive. ClimateDepot has it all: peak oil denial, climate change denial, and denial of any limits to growth. Climate Depot is sponsored by CFACT, Committee for a Constructive Tomorrow, which has teams of paid organizers, starting chapters at college campuses across the USA.

2. Population growth in the face of peak food per capita

The gradual increase in global population to a current global level of about seven billion has been, by its nature, exponential, with a big acceleration during the last several hundred years, based on cheap fossil fuel energy. Even a slow but exponential growth in population must reach a limit at some point, historically a limit marked by periodic famine.

High agricultural output is in various ways tied to the the cheap energy which is now running short. In the absence of other limits, and especially in the context of global warming, food production tends to be erratic and has now nearly reached the limits of arable land globally available. Since food, and grain in particular, is now widely traded as an international commodity, global shortages tend to be more manageable by means of the richer countries which are able to outbid the poorer countries.

We saw a 2008 global food price spike related to the oil price spike, which led to a global outbreak of food riots. Current food price indexes are again approaching the levels that caused earlier unrest. The result is that a combination of worse global warming and a high price for oil tends to be reflected in rising food cost, which expresses itself through food riots and political unrest which Michael Klare terms "hunger wars".

The Great Drought of 2012 has yet to come to an end, but we already know that its consequences will be severe. With more than one-half of America's counties designated as drought disaster areas, the 2012 harvest of corn, soybeans, and other food staples is guaranteed to fall far short of predictions.

This, in turn, will boost food prices domestically and abroad, causing increased misery for farmers and low-income Americans and far greater hardship for poor people in countries that rely on imported U.S. grains. This, however, is just the beginning of the likely consequences: if history is any guide, rising food prices of this sort will also lead to widespread social unrest and violent conflict.

Currently, about 60% of the total corn crop in the USA is not consumed by humans at all, but is being used for legally-mandated but energy-inefficient ethanol production, and for animal feed. This diversion creates some slack in the system, since the corn could be used to feed humans.

Global warming tends to reduce food production, but in such an unpredictable way that it is still possible to deny climate change and to blame the worsening heat waves, droughts, and floods on bad luck. Notwithstanding, an increasing incidence of crop failures is leading to food shortages and higher food prices.

Meanwhile, the groundwater used for irrigation is running short globally.

3. Global warming and climate change

Climate change is seen as a gradually emerging crisis by its nature, but it has become more noticeable over the last several decades. Scientists have been warning us that the current global temperature increase of about .8 degrees centigrade is only about half of what we can expect once the delayed effects kick in, as Elizabeth Kolbert tells us in her New Yorker story.

Before many effects of today’s emissions are felt, it will be time for the Summer Olympics of 2048. (Scientists refer to this as the “commitment to warming.”) What is at stake is where things go from there. It is quite possible that by the end of the century we could, without even really trying, engineer the return of the sort of climate that hasn’t been seen on earth since the Eocene, some 50 million years ago.

Along with the heat and the drought and the super derecho, the country this summer is also enduring a Presidential campaign. So far, the words “climate change” have barely been uttered... There’s no discussion of what could be done to avert the worst effects of climate change, even as the insanity of doing nothing becomes increasingly obvious.

The political impact of global warming is being driven by an increasing pattern of weather extremes that everyone can see for themselves as droughts and wildfires. There are power grid failures even in the rich countries like the USA. Climate change is experienced through political unrest in poorer areas due to higher food prices as Michael Klare has explained.

Already the effects of global warming have been enough to convince about 70% of the general public that climate change is real. However climate awareness has not yet become a strong political motivation issue compared to chronic unemployment.

Affluent supporters of a free market and the status quo can still manage to ignore climate change, aside from having to turn up their air conditioners and pay a bit more for food and fuel. After running short of the cheap oil that used to run our world, we have been turning to unconventional oil in an attempt to maintain a constant level of liquid fuel output to power the economy.

Producing unconventional oil and fracking to produce gas and the like really means using a lot more fossil fuel as the input required to produce the same barrel of liquid fuel. This is like running harder and harder to keep up, and ultimately makes global warming that much worse. In the USA, we have been straining to burn enough coal electricity to run air conditioners, whereas India has been straining to use its coal to pump enough irrigation water to maintain food production.

4. Peak oil and peaking power generation per capita

When inflexible global oil production meets an inflexible global market demand the economic result can be dramatic. An oil price spike has the capacity to cause a serious economic shock that can, in combination with weak credit regulation, cause the global economy to stall without a lot of advance warning.

We saw this in 2008. The resource reality behind peaking oil and its economic consequences were described in detail in a Jan. 26, 2012 article in Nature (Vol 481, p 433): "'Oil’s tipping point has passed; The economic pain of a flattening supply will trump the environment as a reason to curb the use of fossil fuels,' say James Murray and David King."

The scientists are being joined by economists saying much the same thing. Due to the pervasive role of fossil fuel energy in powering the global economy, there is a growing awareness that high oil prices can initiate recessions. The following from McClatchy offers one example:

For President Barack Obama and Republican rival Mitt Romney, the race for the White House seems indisputably centered around one issue: Who can do more to bolster the sputtering U.S. economy. But to some experts, spikes in oil prices over the last several years have signaled an ominous turn that could make it nigh on impossible for any president to expand the economy as it has in the past.

Unlike previous oil price jumps stemming from turmoil affecting Middle East oil producers, prices surged over the last eight years because tightening supplies couldn’t keep pace with Third World demand, researchers have concluded. “The question is how much can we keep growing without a growing supply of energy?” said James Hamilton, a University of California-San Diego economics professor who has been on the leading edge of research into the impact of high energy costs.

The context of this crisis is that the cheap conventional oil production has already peaked in 2005. Since then, the broader category of global liquid fuel production in all forms has risen to a plateau hovering near a probable peak of about 90 million barrels per day. Whenever the economy recovers enough to demand more liquid fuel than this, the price spikes.

This rationing by price tends to send the economy back into recession. The fossil fuel peak thus tends to conceal itself by generating an economic recession that temporarily reduces demand. This tends to lead to bust and boom cycles that decrease in amplitude over time, finally tending toward stagflation and permanent recession.

This boom and bust interaction confuses the cause and effect relationship between oil and the economy in the eyes of the public. We have recently seen a spate of denial stories proclaiming that peak oil is a myth, and that higher prices can provide all the oil we need from alternative sources like tar sands, but this myth has been skillfully debunked.

We cannot; make a smooth transition from the past world built with cheap conventional oil to a new world trying to keep on growing as usual by using $100 a barrel non-conventional oil, such as the oil that the Canadian tar sands produce. This core economic problem was described in a recent James Howard Kunstler interview in Rolling Stone.

The bottom line is, once you are trying to replace a shortage of easy-to-get conventional oil with unconventional, expensive oil, you’re stuck in a trap. There is a paradox there: you really need a cheap oil economy to support an expensive oil economy.

Some are now claiming that our electric power production problems can be managed by "fracking" to provide natural gas that is cheaper to burn than coal. While there has recently been a glut of cheap natural gas, what is probably going on is that a fracking binge has led to gas supply overshooting demand within the areas served by the pipelines. Cheap fracking gas is a Ponzi scheme, according to industry experts.

If we look at the recent oil market, we see that global oil prices, after a dip in benchmark Brent prices in recent months, have been recovering fast to over $110 a barrel. That is probably about all that a very weak global economy can pay, without falling back into contraction.

Consider the following: If the U.S. economy is increasing its dependence on Saudi oil, as stated in a New York Times article by Clifford Krauss, but the Saudis are now pumping flat out, where does that leave the U.S. economy in its attempt to buy the additional oil that the economy would need to recover or to restructure? The same article has charts useful in understanding the basic trends.

The United States is increasing its dependence on oil from Saudi Arabia, raising its imports from the kingdom by more than 20 percent this year, even as fears of military conflict in the tinderbox Persian Gulf region grow... “This is strictly, totally business,” said Sadad Al Husseini, a former executive at Saudi Aramco, the state oil company. “Saudi production is flat out. Where you send it is a matter of where you make the best profit.”

5. An unpayable debt burden in the wake of unregulated credit extension

The natural world is finite, whereas the world of unregulated expansion of credit and debt is not. The dollar, as a fiat currency, is not backed up by anything other than public faith in its presumed future exchange value; the worth of our dollar is now based on little more than psychology and tradition. This fact alone offers a considerable potential for abuse.

Experience has demonstrated that -- given the absence of laws to prevent such activity -- loan sharks are inclined, by the nature of their business, to try to extend credit in such a way as to lead borrowers to assume perpetual debt. According to a similar principle there has been little oversight to prevent an unregulated system of finance capital from doing much the same thing, but on a much larger global scale.

Our prevailing global system of unregulated finance capital has thus offered a powerful motivation to expand the debt on the books of its component institutions like investment banks to the maximum, just so long as someone, somewhere, can be held legally responsible for paying it back. The global expansion of private debt, secured by credit default swaps and similar paper promises, has been encouraged by central banks like the U.S. Fed, which sets the interest rates.

Meanwhile, the public sector of the U.S. economy, the U.S. Treasury, must always print or tax enough money to balance its books, including paying back a huge overhang of accumulated federal debt. And, as we have seen, the world we have inherited was built with cheap oil. Both borrowers and lenders are trapped in a transition to a much less profitable world, which is becoming constantly more costly to maintain in good condition.

A cascading financial crisis, a sort of domino effect of called-in loans, is unpredictable by its nature, but in our time of instant global transactions, such a crisis can be very fast moving. The scale and speed of federal action to prop up the credit markets after Lehman Brothers collapsed in 2008, associated with an oil price spike, was an indication of what can happen, and how quickly, in response to loss of trust in the various securities and agreements which are basic to the world of global finance.

The scale of global finance capital debt on the books of the global lenders is impossible to repay in terms of its anticipated buying power, as Europe is beginning to realize. U.S. federal debt now appears to be growing at about $5 trillion a year.

It has long been accepted that any attempt to call in a substantial part of bank loans would reveal that the money isn't really there, especially on short notice. This has led to fractional reserve banking to prevent bank runs, and to maintain lender confidence.

To actually earn all the money loaned out would demand the extraction of profit by such extreme and counterproductive exploitation of the natural world that the emphasis has shifted toward concealing and postponing an ultimate global debt crisis. Domestically and globally the debt on the books of the central banks cannot be repaid, in current terms of its promised purchasing power.

The same banks that are too big to fail are too smart to try to call in their loans, or to make their true condition too obvious. The economic warnings are now becoming more common. Jim Rogers is one recent example of those spreading the alarm.

Richard Duncan is another. This is from Terry Weiss at Money Morning:

Richard Duncan, formerly of the World Bank and chief economist at Blackhorse Asset Mgmt., says America's $16 trillion federal debt has escalated into a "death spiral," as he told CNBC. And it could result in a depression so severe that he doesn't "think our civilization could survive it." And Duncan is not alone in warning that the U.S. economy may go into a "death spiral." Since the recession, noted economists including Laurence Kotlikoff, a former member of President Reagan's Council of Economic Advisers, have come to similar conclusions...

One member of this team, Chris Martenson, a pathologist and former VP of a Fortune 300 company, explains their findings: "We found an identical pattern in our debt, total credit market, and money supply that guarantees they're going to fail. This pattern is nearly the same as in any pyramid scheme, one that escalates exponentially fast before it collapses. Governments around the globe are chiefly responsible.And what's really disturbing about these findings is that the pattern isn't limited to our economy. We found the same catastrophic pattern in our energy, food, and water systems as well."

According to Martenson: "These systems could all implode at the same time. Food, water, energy, money. Everything." Another member of this team, Keith Fitz-Gerald, the president of The Fitz-Gerald Group, went on to explain their discoveries. "What this pattern represents is a dangerous countdown clock that's quickly approaching zero. And when it does, the resulting chaos is going to crush Americans," Fitz-Gerald says.

Here Chris Martenson, in part of his celebrated "Crash Course," explains how the three big E's; the economy, energy and the environment, are linked by an ultimately futile effort to maintain exponential growth in a finite world.

Things are not just unsustainable on the federal level. One recent pattern of federal policy has been to try to expand the defense industry budget at the federal level, while pushing the social welfare obligations down to the state level. The state budgets are now often in precarious shape, such that their condition has the potential to lead to a crisis starting at the state level.

Ravitch and Volcker also recommended that federal and state officials work together on Medicaid and health care costs. States, the report said, should carefully monitor the financial health of local governments and address infrastructure maintenance. Ravitch said state and federal leaders need to address the issues immediately. "It is getting worse every day," Ravitch said. "We have to stop bullsh---ing."

[Roger Baker is a long time transportation-oriented environmental activist, an amateur energy-oriented economist, an amateur scientist and science writer, and a founding member of and an advisor to the Association for the Study of Peak Oil-USA. He is active in the Green Party and the ACLU, and is a director of the Save Our Springs Association and the Save Barton Creek Association in Austin. Mostly he enjoys being an irreverent policy wonk and writing irreverent wonkish articles for The Rag Blog. Read more articles by Roger Baker on The Rag Blog.]

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