Author: Norman Pagett (The End of More)
While we might think of money as supporting our economy, only energy can support the solvency of a nation, and only surplus energy can fulfill the aspirations of its rulers and the desires of its citizens. Until the advent of the industrial revolution, and in particular the universal availability of cheap oil, that energy could only come from territory that could produce sufficient food and other essentials for any level of civilized living. We might ‘demand’ that our leaders provide new hospitals, schools, roads and all the other things that make life comfortable, but without the necessary surplus energy to do it, it is impossible. No political posturing or promises or taxation can change that.
Most deny it, but we live in an energy economy, not a money economy. Without the continually increasing forward thrust of energy input, no economy can exist in the context that we have become used to.
Not just the Greeks, but those charged with governing every nation on Earth, have lost sight of the fundamental law of collective survival: if a nation doesn’t produce enough indigenous surplus energy to support the demands of its people, they must beg, buy, borrow or steal it from somewhere else, or face eventual collapse and starvation until their numbers reach a sustainable level.
Our lifestyle support system has been based on that premise since prehistory. Nomadic tribesmen, probably in the region of present day Iraq, had the bright idea of fixing borders around land, then growing their food supply instead of chasing after it. Fences and borders meant land could be owned and given value that could be measured in energy terms.
What we know as civilization is based on that simple concept. Land and its potential energy became capital, and our genetic forces ensured it was exploited to the full. Primitive farmers knew nothing of calorific values, or capitalism; only that too little food meant starvation, sufficient food averted famines, and surplus food offered prosperity. No one wanted to starve, few were content with sufficient, so the drive for surplus became relentless. It still is; only the scale has changed, it has become the profit motive in everything we do. Everybody wants a payrise, few refuse one. We are all capitalists, we differ only by a matter of scale.
Enclosed land needed strong control and the will to fight for it. Strength prevailed while weakness went under as resource competition ebbed and flowed across tribal territories. If land produced enough spare food and other necessary commodities, it was possible to equip and feed an army, and use it to occupy more territory. In that way collective energy could rapidly roll up small territories into a nation or an empire, create warlords and kings, and give credence to gods who were invariably on the winning side.
Possession of land and what it produces is the hidden support of what we now understand as our economy and the viability of our infrastructure. Conflict makes that economy even more profitable and one that is built on power and aggression provides the potential for endless resource warfare, whether bloody or political. In 1941 Germany invaded Greece using the bloody version. In 2015 Greece is experiencing the political version. As a small weak country Greece lacks the resource strength to resist.
The more land that could be held and ruled, the more food-energy could be produced. Surplus energy that came in the form of meat and grain and timber was too big to carry around, so tokens of gold and silver became an accepted measure of energy value.
Different civilisations arose and used different monetary systems, but all broadly followed the pattern we are locked into now: those who controlled the land controlled the energy that supported the prevalent economy, whether primitive or sophisticated, warlike or peaceful. With sufficient surplus and a big enough labour force held in some kind of serfdom or dependency, tokenized energy could be diverted to pay for the construction of cities, castles and cathedrals. While the labour of men to build them, the allegiance of soldiers to guard them, and the faith of priests to pray over them might be bought with gold and silver, the system depended on a supply of food and basic commodities well above subsistence level, ultimately provided by the heat of the sun. That’s why the great early civilisations and empires began in the warm tropical and sub tropical regions of the world. And why Eskimos did not field armies, build cities, or inflict the hysteria of mass religion on themselves; they didn’t get enough sunshine to provide the energy resources.
That gave rise to the factors we still live with today: warm productive stable land sustains a bigger healthier population. People eat and procreate, need more sustenance, and demand that their leaders provide it, so the thrust of constant expansion is inevitable in order to feed them. This was as true for small farming settlements between the Tigris and the Euphrates, as it was for the Roman Empire. It was the force that drove the European industrial powers outwards to carve up Africa, the Americas and the Far East to give a privileged section of humanity a prosperity that has been unique in our history. Those of us who enjoy those privileges have lost sight of where they came from, and how fragile they are.
Consequently we are still locked into the same energy-hungry capitalist dynamic, only now we believe that money has not only been substituted for the energy that created it, it has replaced it. In most people’s minds, the illusion of money has supplanted tangible, hard resources. Energy is no longer regarded as necessary to sustain prosperity; we can print it, or better still, make it appear electronically.
Who needs oil? Keynesian economics says that perpetual growth will come through passing bits of coloured paper or plastic from hand to hand at an ever-faster rate.
The leaders of every advanced industrial nation are driven to promise this kind of ‘growth’ to their people, for no better reason than because there has always been growth, so our future will be growth driven too; they and we know no other way. We believe the lie that money itself has taken on an intrinsic worth of its own.
The Greeks fiddled their accounts, joined the EU and accepted the common currency of the Euro and the collective certainty of the money-driven nature of growth, at a time when oil was $25 a barrel. With oil so cheap, any concern about indigenous energy sources was irrelevant. They had a world class (oil dependent) shipbuilding and sea transport industry, and (oil dependent) tourism was booming. In the late 90s, when oil had fallen to $18 a barrel, they borrowed $11 billion to buy still more energy to burn in order to stage the 2004 Olympic games. Greek prosperity depended on infinite supplies of hydrocarbon fuel, but they followed the common belief in infinite money.
When the price of oil peaked in 2008, the crash was inevitable. The certainty that money represented wealth was destroyed by the price of oil, but they borrowed billions more to try to prove it hadn’t. Any reason was better than reality: that you can’t run a cheap energy economy on expensive energy.
The latest clutch of Greek politicos got themselves voted into office because they told the Greek people what they wanted to hear: that prosperity could be voted into office, as if the availability of indigenous energy within their borders was a matter of political choice. Alexis Tsipras believed the Keynesian fantasy and convinced himself that borrowed money put into endless circulation will generate wealth and ‘growth’. $11 billion spent on the now derelict Olympic stadium should have served as a warning, but it didn’t.
More ‘bailouts’ have been agreed; the Greeks will now settle back into their soporific lifestyle and the headline writers will find something more newsworthy. But the hammer of reality has only been lifted temporarily from the anvil of their economy. In a year or so, when the Greeks have spent their latest loan, it will crash down again, harder.
The Greeks are not money-bankrupt, they are energy-bankrupt.
But so is every other nation, to a greater or lesser degree. Saudi Arabia is in a worse state of energy bankruptcy than the poverty stricken Greeks, they just don’t know it yet.
A century ago, Greece had a population of around 5 million, and had only partially freed itself from control by the Ottoman Empire. Despite wars, revolution, hyperinflation and foreign occupation during the 20th century, it remained poor but largely self sufficient as a pastoral country. During that period, the population doubled, due in a large extent to reclaiming Turkish held territories in the early 20th century. In a worst-case scenario, if Greece defaults on its debts, and drops out of the EU and the European currency, 11 million Greeks will be left to feed themselves at a very basic level. They will have no choice but to fall back on a more primitive lifestyle, forgo the luxuries bought by oil consumption and live on the energy sources within their own borders. When they do that, their energy bankruptcy will disappear.
100 years ago, Arabia had a population of 1.5 million, and was also a region of the Ottoman Empire. The term Saudi had not been prefixed to it and the Gulf States did not exist. Their people were basically nomadic, with no concept of national identity, or civilization approaching the Greek level. Though under nominal control of the Turks, they were effectively protected by their hostile desert. Living was primitive, but like the Greeks, self sufficient on their terms.
Then in 1938 oil was found in Arabia, now the population is over 30 million. The current excesses of Saudi Arabia are too familiar to need recounting here. We’ve all watched the Saudis use their oil to build unsustainable cities in deserts, where previously there had been none. They have used their oil to suck finite water out of aquifers and desalinate seawater to maintain the fantasy of endless prosperity. They buy in every conceivable luxury and try to outdo each other with meaningless towers of vanity that they see as expressions of wealth and status. They build because they can, believing the economic nonsense that spending energy-based tokens, i.e. money, creates profit and wealth. Just like the vanity of the Greek Olympic venues, the glittering towers of Riyadh and Mecca and Jeddah are seen as a source of commercial prosperity that will deliver and provide cashflow long after the oilflow has dried up.
As the Greeks discovered when the energy flow stopped going into their arenas, they began to disintegrate. Without constant energy input, money embedded in concrete, glass and steel can only show a return if more money (energy) is constantly added to resist the ultimate certainty of entropy. No one has pointed out that while Saudi towers may be designed to last 100 years, the oil-energy that supports them will run out in less than 30, maybe as few as 20 years. (It has been suggested that Saudi might become an oil importer by 2030, though exactly where the imported oil will come from, or how it might be paid for, is not clear). Then the towers will start to fall apart just as the Saudi economy will fall apart because the oil-energy they use to fuel such vanities is borrowed from their own future. And they will have no means of repaying it; their creditors are not foreign bankers, but their own young and dispossessed. They will violently reject the certainty of a life as goat herders and camel traders if only for the reason that they wouldn’t know how.
Just like the Greeks they will demand that the lifestyle they know carries on unimpeded by the reality of energy shortage. They will try to borrow money to maintain it, with the same result. Bankruptcy on the Saudi scale will make the Greek version look like a small bank overdraft. Unlike Greece, the desert is hostile to human life at the current Saudi density, and needs constant input of food, water and air conditioning to survive 50o C summer heat.
11 million Greeks can feed themselves from their own land. 30 or 40 million Saudis are going to have to face the brutal truth that they can’t. The Saudis currently produce about 10 million barrels of oil a day, and they have to use one third of that to keep themselves alive and in the luxury they think they need. They have created an artificial existence entirely dependent on trading oil for food, and face a future of actual starvation, because there will not be sufficient surplus food energy available anywhere in the world to prevent it once the oil has gone. At current rates of growth their population is projected to reach 60 million by 2050 so between now and then a sudden and catastrophic end to the oil-excess is certain. That life-subsidy of one barrel of oil in three will rapidly disappear, with Saudi using constantly depleting oil to buy food at constantly increasing prices in a race to stay alive. Unemployable young men face a non-future where their luxurious privileges are stripped away by forces beyond their control and understanding. With the oilwells sucked dry, the US fleet will sail away from Bahrain, and discontent will manifest itself into riot. In perhaps only 10 or 15 years, Saudi Arabia as a viable nation will not have sufficient indigenous energy to prevent collapse. There will be nowhere to buy, beg, borrow or steal it from, and no oil for export. Which is where Greece is right now.
Since the oilwealth kicked in and the population exploded, Saudi now has a youth bulge in their population. 37% are under 14, 51% are under 25. Already the unemployment rate in the 16 to 29 age range is reported as 29%, possibly much higher. Of those with graduate level jobs, most have been absorbed by the public sector, with Shias being actively discriminated against by the dominant Sunnis. Jobs requiring technical skills are filled by foreign workers. Effectively this means that virtually all wages and unemployment benefits are paid out of oil revenues. This is where violent unrest will come from when the oil flow begins to dry up. Already Saudi has paid out $billions in freebies to pacify their unemployable young men, while maintaining the unreality of gasoline at 16c a liter, effectively using oil to subsidise itself.
With its oil wealth diminishing, Saudi is a ticking time bomb, split by religious factions and sectarianism, confined by repression at a medieval level and surrounded by religious zealots who see infidel industry being supported by the holy oil that rightfully belongs in the land of the prophet. Compared to that, Greece is an oasis of tranquility.
For a different energy/economy collapse scenario, move on to China.
There, energy is being locked into unusable real estate on a truly colossal scale, concentrated on building cities in places where there are no people to live in them. City after city is being constructed right across the country, creating an illusion of ‘Gross Domestic Product’, where officials can only achieve recognition by the rate at which infrastructure is built. A building without people in it is disregarded as irrelevant. 6 million people enter the Chinese job market every year. Construction creates employment, GDP means everything and urbanization targets must be reached.
Employment is the biggest thing for well-being. The government must not slacken on this for one moment … For us, stable growth is mainly for the sake of maintaining employment. Prime Minister Li Keqiang, November 2013
If an apartment block or shopping mall costs $10 million to build, then that is the ‘value’ of the building on the ledger of national prosperity. If it stands empty for years, the ‘value’ is somehow retained. In China, the motivation is different to that in Saudi Arabia or Greece, but there is the same determination to spend money on projects that are intended to deliver infinite commercial prosperity based on the imagined value of the building itself.
They are building dozens of fully functioning cities on the assumption that workers will show up to fill them. But of course those workers will need food as well as ongoing and permanent employment, which isn’t going to be there, so the ghost cities will not have the means to exist. The cities are where people are supposed to live, the countryside is where food is supposed to be produced.
But both need vast quantities of oil to function. At the current rate of growth of around 8% a year, by 2035 China will (in theory) be using the same volume of oil currently consumed in the world now. That won’t happen of course, because the world oil supply is the same for China as it is for Saudi Arabia, twenty years, maybe much less, no matter how much they buy in and hoard. The Chinese desperation for oil will become critical, just as Saudi exports begin to become unavailable. As supply tightens, so conflict over it will increase, thus restricting supply still further until conflict brings oil production to a virtual standstill. But the Chinese ‘ghost cities’, just like Saudi towers, are intended to last a hundred years.
The figures don’t add up; it’s arithmetic too frightening for most to contemplate. China is dependent on its ever increasing production system to generate new jobs. That drives suicidal pollution and insatiable resource consumption because like capitalist governments everywhere, growth must be prioritized over the environment. Growth without oil is impossible so while the ghost cities of China have a value according to government statistics, they produce nothing; and until they do, will have no value at all. Even if some workers do manage to occupy parts of the ghost cities, without oil there won’t be sufficient power to keep them functioning. Under the inflexible second law of thermodynamics, without constant energy input, entropy takes over and buildings begin to deteriorate from the moment they are completed.
Detroit has followed a different path to bankruptcy.
Ruins at the abandoned Packard Automotive Plant (September 4, 2013 in Detroit, Michigan) serve as canvas for graffiti artists. 78,000 abandoned buildings are strewn across Detroit’s 142 square miles.
Whatever the causes of Detroit’s demise, and there can be said to be many, the overall picture is one of declining energy input. People moved out and no longer spent money on making the city a viable entity. The car plants closed, removing the need for people to be there, the loss of inhabitants removed their collective energy, and the city began to fall apart. The result is unequivocal: remove energy input, and any artifice declines, decays and collapses at an accelerating rate.
Detroit is a bankrupt microcosm of the USA: a nation of 330 million people built entirely on the capitalist system needing infinite expansion, drawing on finite energy borrowed from a future that is unsustainable.
America differs little from the disaster scenarios of Saudi Arabia and China. Finite water is being relentlessly pumped out of depleting aquifers, and finite hydrocarbon is being turned into fertilizer to produce food while cities are forced to grow in hostile deserts. The products of Detroit and cheap fuel allowed suburban sprawl to spread 50 miles out from city hubs across the nation because food and water could be delivered, sewage disposed of and climate altered to personal taste. Declining oil supply will render suburbia hostile to modern living as we know it; the local environment may look different, but the effect on human existence will be the same as the excesses of Saudi or China.
Saudi Arabia, China and America are examples of what our future is going to be. But every nation is promising itself a prosperous future while borrowing from it at an ever-increasing rate, making certain that it cannot exist.
The input of oil into national economics has not exempted humanity from the laws of physics. The trappings of civilization have not altered our fundamental rule of existence: whether your station in life is humble or exalted, if you don’t produce food from the earth on a personal basis, your life depends on someone, no matter how many stages removed, converting sunlight into food on your behalf. Not only that, it must be sold at a price you can afford within a stable environment. Essentially, civilization is just that. Remove it and most will starve while those with enough personal resilience will have no option but to revert to hunter gathering or even scavenging, because what we call civilization is as fragile as the oil it sits on. For the millions of homeless people living on the streets in our ‘civilised’ cities, civilization is over. For them there is little hope of a return to prosperity, with a good job, a warm home and security.
History shows that a radically destabilized environment results in war, famine, disease and death. Any one of those four can and will exacerbate the other three.
Our civilization is becoming increasingly unstable, and right now the four horsemen are getting restless.
In one hundred years time, would you prefer to be living in the United States, China, Saudi Arabia…..or Greece?