The simple future beyond oil: The convergence of our economic and ecological futures and the importance of change
by Paul Mobbs
A presentation for the Adderbury Gathering, Sunday 13th June 2010 We are living through “interesting times”; credit crises, recession and rising debt threaten to destabilise nation states. Whilst reckless bankers and traders might have a certain amount of responsibility, if we are to understand the larger processes that are driving these trends we need to stand back and look at the human system as a whole. Change is inevitable – it's one of the implications of the Laws of Thermodynamics. What we need to understand is the way human ecology works within these natural physical processes, how the contradictions between human systems and these natural processes define what is “unsustainable”, and what this means for our future as we adjust to the natural limitations of our environment. Perspectives More relevantly, this building is a tangible link to a time before the development of the things we take for granted as being “modern” – science, industrialisation, and the technical or economic theory that dominates our modern lives. Adderbury Meeting House was built in 1675, on land given by the landlord of West Adderbury, and Quaker, Bray Doyley1,. He and other local Quakers were imprisoned not only for building the Meeting House, but also for the non-payment of tithes to the Adderbury parish on a number of occasions. Whilst it has had a few improvements since, this building was erected at a time before the term “science”2 had been given its modern definition; it was then known as “natural philosophy”3. In fact many of the disciplines we take for granted in modern life had yet to be codified. The Royal Society had only been founded fifteen years before. Isaac Newton had only just formulated his methods for differential calculus and would not publish his work great work on physical forces, the “Principia”, for another twelve years4. In terms that we would recognise today, the specialised and technical body of knowledge we call civil engineering or architecture did not exist; and yet, three hundred and thirty-five years later, this building still stands. It's a stark contrast to the fate of many more recent structures that have failed to meet their design expectations – for example the concrete structures of the 1960s or the more recent system-built glass and metal structures of the 1980s and 1990s5. At the time this structure was erected, instead of knowledge being handed down from “experts above”, knowledge was something that was embedded in culture – a collection of experience distilled at the grass roots by trial and error over many generations and handed down as “rules of thumb”6 (quite literally, the human thumb is about 1 inch long and so can be used as a measuring device in accordance with traditional techniques of design or construction). As well as science, the theories of politics and economics – interchangeably related within the term “political economy”7, commonly used until only half a century ago – were not defined either. Britain had recently been through Civil War, and the subsequent restoration of a constitutional monarchy in 1660. However the modern pattern of British politics would not be established until 1688, with the “Glorious Revolution”8, and the establishment of Parliament as the prime legislative body in Britain with the passing of the Bill of Rights in 1689. Even so, less than 10% of the population had the right to vote for Members of Parliament at this time – not a very large number of people give that the British population was less then ten million around this time9. The first Parliamentary election where all men and women had the right to vote was in 1928. So, although in many ways British society today would be unrecognisable to the people who built this Meeting House, the Meeting House itself continues; it represents both physical continuity and social change. We may think that we live a long time, but in fact many of the great changes within human society take place progressively over many generations. The fact that the world changes so slowly can not only hide this processes of evolution and change from our short experience of them, it can also deceive us into believing that our present experience of society exhibits an overriding permanence – which, on closer examination it does not. This illustrates a very important point: people change, the natural environment need not. Society grows and develops, but in the background the natural world exists as a constant. Growth and development The earliest concept of growth was biological, organic, and essentially related to human experience. In the Renaissance, as mathematicians modelled the natural world, growth took on various numeric forms, but they still had a reliance upon nature because the analyses were based upon observation. In the modern world, whilst retaining its earlier meanings, growth has taken-on a new conceptual meaning, wholly separate from the natural world; today it represents abstract financial values attached to the modern, globalised economic system. It is arguable that this separation of growth from a concept based in the natural world to a concept based in an abstract human system is at the root of many of the ecological problems we are faced with today10. Just as Britain was instrumental in many of the breakthroughs in scientific discovery during the Seventeenth Century, so in the Eighteenth Century this new understanding gave rise to the Industrial Revolution. In parallel with the development of trade and commerce Britain also gave rise to the study of this process – economics. As noted above, the emphasis within all economic theory today is the maintenance of growth; this is a policy that was given any such prominence by those who developed economic theory in the Eighteenth and Nineteenth Century. Even the Government's definition of what constitutes 'sustainable development' includes the phrase, “(the) maintenance of high and stable levels of economic growth and employment”11. Just over a century after this Meeting House was erected Adam Smith published, An Inquiry into the Nature and Causes of the Wealth of Nations12. Around the same period David Ricardo, Jeremy Bentham, and shortly after John Stuart Mill, all presented studies of economic theory that developed Adam Smith's ideas further, and in turn this influenced the development of new ideas of industrial and political organisation. However, all of them assumed that the better organisation of production and trade could maximise production until everyone had sufficient resources to live their lives enjoyably. At this point growth would cease because everyone had achieved “maximum utility”13 – they had an adequate supply of the goods required for a comfortable life. Amongst the early economic theorists the dissenter from this point of view was, infamously, Thomas Malthus. In his Essay on the Principle of Population14 (first published in 1798) he stated that, “This natural inequality of the two powers, of population, and of production of the earth, and that great law of our nature which must constantly keep their effects equal, form the great difficulty that appears to me insurmountable in the way to the perfectibility of society.” At the time his dour prediction was ridiculed by the more optimistic economists – but it is worth nothing that Malthus' theory of population growth was instrumental in Charles Darwin's development of the theory of Natural Selection. Not until the late Twentieth Century would Malthus' ideas once again be debated when, as a result of population growth, the world did face a food crisis in the 1960s15. The idea that growth could be a never-ending process did not arise until the 1930s and the 1940s. In an effort to understand the failure of economic theory during the Great Depression16, economists promoted the view that by consistently growing the economy everyone could have more, and thus we would be able to solve the traditional social conflicts over wealth and resources that had plagued society over preceding centuries. Economists boldly argued that focussing on growth would create a new and better society – for example John Maynard Keynes, who stated that, “...assuming no important wars and no important increase in population, the economic problem may be solved, or at least within sight of solution, within a hundred years. This means that the economic problem is not – if we look into the future – the permanent problem of the human race.”17 More sceptical economists, such as J.K Galbraith, commented that growth was not an issue of providing everyone with more, but providing the poor with a sufficiently increasing level of wealth that to deflect any criticism of the disparity between rich and poor. Growth and energy Then, in the 1950s, the US economist Robert Solow found that this view could only explain about a third of the observed growth in the economy. Something else, later called the Solow residual19, was driving the value of economic growth. More recent research has demonstrated that the majority of the value of growth is due to the actual increase in energy consumption in the economy, where each 1% of energy growth produces around 0.5% of economic growth; another significant contribution is made by the improving levels of energy efficiency, because improving the utilisation of energy in the economy overall allows more work to be done with the same amount of energy, and this adds around another 0.2% to average economic growth; and, capital and labour together, as observed by Solow, then make up the other 0.3%. These observations confirm the trend that has existed since the the beginning of historical records – there is an absolute correlation between human population, economic activity and resource consumption. For example, one of the most important trends within the Industrial Revolution has been the replacement of human labour with machines, and so we should expect that energy utilisation would have an impact upon growth in lieu of human labour. For example, the energy contained in one barrel of oil represents the equivalent of 25,000 hours of human labour – that's equivalent to 12 people working 40 hours a week for an entire year. A barrel of oil costs roughly $74 – which at an exchange rate of £1:$1.45 is about £51. The human labour equivalent to the energy in that barrel of oil, even assuming a low rate of pay such as £5.80/hour (minimum wage), would cost £145,000 – or about $210,250/barrel! In other words, 99.97% of the equivalent labour value of oil is “free”, and so our use of energy can be seen as constituting the labour of many energy slaves20 who serve our needs. This seemingly magical role of energy in the economy makes sense because, in terms of the thermodynamic principles, increasing the level of energy in the economy represents the equivalent of adding more labour to the economy at a vastly cheaper rate, and hence more efficient value than real human labour, and so the economy becomes more productive as a result; put simply, burning more energy allows you to do/make more “stuff”. Over the Twentieth Century economists have sought to improve the economic efficiency of society in order to increase growth, but within this process the role of energy was ignored because it was generally cheap. This deficiency first became apparent during the 1970s. As the cost of energy rose following the 1973 oil crisis21 the effect was to make the economy less productive; prices rose, then inflation rose, profits fell, and in turn this reduced the real value of economic growth. At 2008 inflation adjusted prices, over the fifty years from 1924 to 1973 the price of oil averaged $14.78/barrel, and $13.64/barrel in the boom period between 1949 and 1973. Over the twenty-five years from 1974 to 1998 (before the current upswing in prices) oil prices averaged $45.48/barrel – over three times higher; and the average over the ten years from 1999 to 2008 was $49.96/barrel, with the average in 2008 rising to $97.26. Contrary to previous recessions the oil price has not fallen significantly since this peak, and remains at historically high levels even though there has been a major world recession. Recent research on the value of energy to the economy suggests that the present-day economic crisis was not ultimately due to “sub-prime mortgages”, but rather the rise in oil prices22 and other resource costs. As in the early 1970s, the high energy prices of the last five years have once again generated an economic recession. Although it might be blamed upon the “sub-prime crisis”23, and the role of banking liabilities in the severity of the resultant crash, it was initiated by the effects of high energy prices on the economy as a whole; not least the high fuel and food prices hitting the domestic budget of those who held sub-prime mortgages, which caused them to default. Obviously if at least half of economic growth is energy-related then such a relationship price and economic productivity/efficiency is not surprising. Other research suggests that, once the world begins to grow again at the end of the present recession, oil prices could rise once more24 and repeat the recessionary cycle far more quickly than governments might anticipate. Not only has spending on new resources been cut, but many of the large oil fields have continued to decline in the mean time, meaning that oil production globally is stagnating. Britain as a working model of “limits” Malthus was not the only economist to comment of the ecological limits to growth. In 1865 William Stanley Jevons published The Coal Question27. He observed that as steam engines became more efficient the amount of coal they consumed increased rather than decreased – a trend now known as the rebound or backfire effect28. He postulated that if consumption kept growing we would eventually run out of coal, and so he posed the question, “Are we wise in allowing the commerce of this country to rise beyond the point at which we can long maintain it?”. It may have taken longer than Jevons anticipated, but in 1999 we may have reached this critical point. During the early 19th Century we were the “Saudi Arabia of coal”, exporting British coal around the world; more recently Britain has exploited the oil and gas reserves of the North Sea, and this has inarguably contributed the the well-being of our economy for the past three decades. Today, this 250 year arc of economic and technical development has reached its zenith; the accelerating depletion of North Sea oil and gas production marks the point at which we must plan for the “downside” – the inevitable decline in the easy availability of wealth that is the inevitable result of this transition. The graph at the top of the next page29 shows that “peak energy” is not a theory in Britain – it is a hard, quantifiable fact. The graph shows how our energy use has changed over the last 80 years, and gives projections until 2020 – all this data is sourced from “official” statistics produced by the Department for Business, Enterprise and Regulatory Reform. British coal production reached a peak in the 1920s and then began a slow decline – this had little effect within Britain as we exported less coal as a result. We also began to import ever larger amounts of oil from the 1920s. This can be seen on the graph as a slow fall of the bars below the '0' line. This decline in indigenous energy production also mirrors a more general decline in the UK economy as the economic imbalance of importing more energy began to exert itself on the economy as a whole. The oil crisis, and higher energy prices of the 1970s, exacerbated this process and produced the economic problems Britain experienced in the latter half of the 1970s. At the very end of the 1970s and during the 1980s we can see the effect of the oil and gas produced from the North Sea. Britain ceased to import large quantities of energy. During the 1990s we became an energy exporter, and as a consequence the economic well-being of the nation improved. Then, in 1999, North Sea oil production reached a peak; in 2003 gas production peaked too. We are now on an inevitable long decline of indigenous energy production; there are no other “dense” energy sources left. We do have, by comparison to fossil fuels, a large potential for renewable energy; at best renewable energy could replace around 30% to 40% of our present demand for energy. Consequently the challenge we face is to balance our demand for energy with the inevitable decline of our own indigenous production. We already have an illustration of the potential economic effects from the last time this happened, during the late 1960s and 1970s. At that time we were approaching the 50% level of importation, driven by the growing demand for oil in the economy as a result of the “consumer boom”. This progressively took capital out of the economy, and economic activity slowly declined as a result. Whilst we were an energy exporter the sale of oil and gas contributed between £4 billion and £7 billion to the value of the trade balance each year. Now that we have become an energy importer our energy use is instead driving the trade deficit.
At present the Government wants to save at least six billion pounds of expenditure over the course of this year; what was the amount of revenue that was lost during 2009 compared to 1999 as a result of the downturn in North Sea production?.... six billion pounds! In fact, the growing level of the government's current account deficit pretty much mirrors the decline in North Sea revenues; and of course this process will continue for the foreseeable future. We must reduce spending because it is beyond the scope of “efficiency measures” to achieve this level of cuts. However, this only solves the present problem; it doesn't address the continued loss of energy production and the need to import progressively more. The only way to address this is for the UK economy to consume less overall – unfortunately such measures are not on the political agenda! Simplicity by necessity In any case, we should be asking the question, “what has growth done for us?” Recent studies of the way the British economy has developed since the 1950s30 – when economic growth became the core policy of governments and political parties – show no relationship between people's life satisfaction and the change in national wealth. It concludes that greater prosperity has led us to exchange one set of concerns for another as the pressures on daily life have changed to reflect our higher consumption/more affluent lifestyles; and thus our satisfaction with everyday life has not improved markedly as a result of greater wealth31. “More” does not mean “better”!
Britain is moving “beyond oil” because we've already peaked our production and the economy must adjust to take account of this. Globally the peak in oil production may be happening right now, but we won't have the evidence to demonstrate this for at least another three or four years. Global oil production, irrespective of price changes, has been on a plateau since around 2006, and some forecasts32 predict that it will begin to fall sometime between 2011 to 2015 – well-ahead of the date of 2030 that most Western governments quote. When production begins to fall consistently this will not be conducive to operating a global, free trade, market-led economic system (see reference 24 earlier). The solution may appear simple – use less energy; the reality of this statement is far more problematic. Energy does not just allow us to have/use more; there is an intrinsic relationship between greater energy use and the complexity of society. The greater use of energy entails greater complexity in order to direct the use of the additional energy and materials. The difficulty is that sudden changes in conditions can lead this organisational complexity to unravel quickly, and thus, as shown from research into resource crises in other human civilisations over history33, small changes can result in serious crises. For this reason society must, as part of the process of reducing energy, become more simply organised, and our own expectation must be for a simpler, but not necessarily less rewarding, pattern of activity. The graph above shows that greater growth has not delivered any significant change in personal well-being; consequently its equally possible, if people understand why these changes are taking place, that reductions in material affluence need not create a significant drop in well-being. For example, modern holidays often involve air travel, theme parks and hotels; fifty years ago they may have involved train travel, camping and cooking over a Primus stove. There is a great difference in energy and complexity between these two ways of taking a holiday – but the simpler one does not preclude taking great enjoyment from the experience. Tradition and change Therefore we must shift our thinking from merely looking at direct consumption to the footprint of the human system, and its impact over time. We need to change the intensity of consumption, not just the amount, and this requires that we understand the 'utility' of things not just their function. This is the difference between a truly “sustainable” human system and the ideas of “sustainable consumption” that dominate the ecological agenda in the media. In this respect, Quakers represent an interesting example in terms of British social history because, as part of the Testament of Simplicity36, such considerations have led their thinking for many years:
This clearly represents quite a challenge for most people (perhaps even some Quakers), but it highlights the difference between the purely material pursuit of development and the human spiritual potential for progress. Whilst the physical world has limits37, this does not entail that human culture is constrained indefinitely. People might argue that consumption and resources are key to our development, but consider this; over the 300 year period of the Renaissance38 in Europe, the rebirth of modern culture and learning took place using less energy and resources than the world now consumes in a single year. Consumption does not imply progress. Our minds have limitless creativity; whilst resource restrictions limit the extent to which we can develop “physical goods”, in terms of our cultural development there is no limit to the creativity of humans to create “social goods”. We have been on a three hundred year quest, called “industrialisation” to see what our species is capable of doing. Now – as a result of peaking resource production (gold, silver and probably copper, not just oil) and our impact on the planet (e.g. climate change or soil loss) – we reached a point where this quest must take a new direction: We can either try to continue the fallacy that continual growth within a finite system is possible; or find a new value with which to measure the worth of our existence. Change is essential, but also inevitable because we can no longer maintain our global levels of consumption and pollution. Whilst once rigidly separate, the economic and ecological world are now converging to recognise the impending restrictions on “business as usual”39. How we deal with consumption is a physical issue, but it's also a spiritual one. We can change brands, or the way we buy things, but the most important thing to change is our view of ourselves – the reason we consume in the first place. That involves an understanding of why we exist and for what purposes that existence is for; perhaps a question for us all to consider in reflective silence. 1 A History of the County of Oxford – Volume 9: Bloxham Hundred, Mary D. Lobel and Alan Crossley, 1969 – http://www.british-history.ac.uk/report.aspx?compid=101912 Editorial NotesThe Free Range Activism Website (FRAW) – http://www.fraw.org.uk/ Paul Mobbs is the author of Energy Beyond Oil. Original article available here |
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