Wednesday, October 26, 2011

Occupy to Self Manage

Occupy to Self Manage

I have yet to see my nearest large occupation, Boston, or the precursor of all U.S. occupations, Wall Street. Instead, I have been on the road for the past six weeks in Thesselonika and Athens Greece; Istanbul and Diyarbikar Turkey; Lexington, Kentucky; London, England; Dublin, Ireland; and in Barcelona, Madrid, and Valencia Spain. 
In all these places, I talked with diverse individuals at many meetings and popular assemblies. I met people involved in occupations, as well as audiences assembled by my hosts to hear about participatory economics. Beyond addressing assigned topics, my own priority was to learn about local movements. I repeatedly asked what folks struggling for many months wished to say to other folks first embarking on similar paths. 
Boredom, Disempowerment, and Consensus Obstruct Growth
In Greece and Spain, a single message predominated. It had nothing to do with analyses of capitalism or other analytic focuses. Instead, Greek and Spanish activists reported that they had massive assemblies in widespread cities and their occupations grew, grew, grew, so that assemblies were up to 12,000, 15,000 - and then they shrunk, shrunk, shrunk, so that assemblies are now not meeting, or are meeting in the hundreds, or less. 
Yet I heard, time after time, that nothing had diminished regarding the population’s rejection of unfolding injustices. The people remain fed up in huge numbers and still turn out massively for demonstrations, marches, and strikes. So why were most people who were rallying and marching no longer assembling? The reply I heard at every stop was that the decline of the assemblies wasn’t due to repression, or to people being co-opted, or to people being tricked or saddened by media distortion or dismissal. In fact, the assemblies shrinking wasn’t due to anything anyone else did to the assemblies, or said about them, or didn’t do to them, or didn’t say about them, activists repeatedly reported. Instead, they told me, the problem emanated from within.
For example, Greek and Spanish activists said that at assemblies initially people spoke with incredible passion of their plights and desires. Their voices often broke. Their hands shook. Each time someone rose to speak, something real, passionate, and persistent happened. It was enchanting and exciting. People were learning not only new facts and interpretations - and, indeed, that kind of learning was relatively modest - they were also learning new confidence and new modes of engaging with others. But after days and then weeks, the flavor of the talks shifted. From being new folks speaking passionately and recounting their reasons for being present and their hopes for their future by delivering deeply felt and quite unique stories, the speakers shifted toward being more seasoned or habituated folks, who lectured attendees with prepackaged views. The lines of speakers became overwhelmingly male. Their deliveries became overwhelmingly rehearsed. Listening to robotic repetition and frequent predictable and almost text-like ranting got boring and alienating. Sometimes it was even demeaning. 
At the same time, new people, who were still far more prevalent, didn’t know what to do while they were occupying. We could assemble, they reported. We could talk and engage with each other. We could listen to others and sometimes debate a bit - the Greek and Spanish Assemblers reported - but, how long could we do that and feel it was worth the time we had to spend away from our families, friends, and jobs, not to mention from rooms with a roof?
As they first formed, the assemblies were invigorating and uplifting. We were creating a new community, I was told. We were making new friends. We were hearing from new people. We were enjoying an environment where dissent was the norm. But as days passed, and then weeks, it got too familiar. And it wasn’t obvious to folks what more they could do. There weren’t tasks to undertake. We weren’t being born anymore, we were dying. It was hard. For many it was impossible to keep learning and keep contributing. There was a will, but there was not a way. Folks didn’t have meaningful things to do that made them feel part of a worthy project. We felt, in time, only part of a mass of people. 
After a time, many asked, why should I stay and listen to boring talks? Why should I be hugely uncomfortable and cut off from family and work, if I have nothing to do that is constructive, nothing that is empowering, nothing that furthers worthy aims? And so people started to attend less, and then to leave.
Another factor that was initially exciting but later became tedious, was seeking consensus. At first it was novel. It implied trust, which felt good. It implied shared intentions, which felt inspiring. But after awhile, seeking consensus became tortured, a time waster, and its reason for being the only decision making approach became steadily less compelling. 
Why can’t we arrive at decisions which some people do not like and don’t even want to participate in? Why can’t we arrive at decisions, and have a strong minority that dissents, and then respect that minority, and even have it pursue other possibilities to see their worth? Why do we allow some small group to cause discussions to continue without end, turning off many from relating when the small group has no legitimate claim to greater influence than anyone else - save that our mode of decision making gives them a veto? 
Folks recounted all these dynamics very graphically and movingly. No one said that people stopped participating in assemblies because of fear or the cops or depression over the newspapers. No one said people left because they had developed doubts about protest or resistance, much less about the condition of society. Instead, everyone I spoke with, and it was a lot of very committed people, told me participants left due to lacking good reasons to stay. The bottom line was that the assemblies got tedious and, ironically, even disempowering. Folks wondered, why must I be here every day and every night? The thought nagged. It led to legions moving on.
Making the Very Good Even Better
What is the solution, I asked, in each new city, and we discussed possible answers. 
Occupy but better yet, self manage, I was told. The former option is basically passive - the latter is active and yields tasks and opportunities to contribute. 
Grow in numbers and awareness, but those who become well learned must stay in touch with new people, and always remember that new people’s involvement matters most. Otherwise old timers are getting more knowledgeable but also more aloof, and new people will not stay.
Why not have classes for learning? Why not have activities for creating? Why not have actions for winning changes? Always speak to the new people. Always speak from experience, from events, not from preconceived lines. Always involve yourself and new people in tangible and worthy activity. Make the options evident and easy to become involved with.
Of course some things can’t be solved at occupations themselves. Sleeping out is a young person’s passion - but not an option for everyone. In Dublin, this was particularly evident. So, while sleeping in an occupied space makes sense for some young or homeless folks, why not proactively take for granted that many other folks, particularly with families, will not and cannot sleep under the stars? Why not have a program of activities that returns people to their home locales for organizing purposes each night, or even for all but the explicit time of assembly meetings, perhaps?
Ideas that resonated in the many discussions, and that activists involved felt needed preponderant support, included: once an occupation has a lot of people, have subgroups initiate other occupations in more places, all federated together and providing one another mutual aid. In the most local, neighborhood occupations, visit every home. Talk with every resident. Involve as many neighbors as possible. Determine real felt needs. If what is most upsetting neighbors is housing concerns, daycare issues, traffic patterns, mutual aid, loneliness, whatever, try to act to address the problems. 
Have occupations self manage and create innovations artistically, socially, and politically. Have occupations occupy indoors, not just outside. It is a leap, perhaps, but not much of one. In Barcelona and Madrid - some have tentatively begun occupying abandoned apartments and other buildings, preparatory, I believe, to inviting the homeless to dwell in them, as well as to using them for meetings and the like. In Valencia I was at a very fledgling university occupation, begun, indeed, after a talk. But to occupy buildings, especially institutions like universities or media, isn’t just a matter of call it, or tweet it, and they will come. It is a matter of go get them, inform them, inspire them, enlist them, empower them, and they will come.
In Greece and Spain, and to an extent the other venues I visited too, violence was another focus. All who I talked with agreed it was a suicidal approach on two counts. First, violence is the state’s main strength. Shifting the terms of conflict toward violence shifts it precisely where the state and elites want it - toward their strength. Second, violence distorts the project. It makes it inaccessible for many. It makes bystanders critical. It diminishes outreach, and outreach is the basis of all gains. 
I have been to Greece a number of times, and in earlier trips this view was quite weak among young Greeks, who were more typically ready and eager to rumble. But now the non violence stance has growing traction in Greece. In Spain, from the start, it was predominant and Spanish activists have successfully avoided giving the state an excuse for violence, thus causing every act of violence by the state to reverberate to its disadvantage.
Forget about violence and rioting, develop campaigns emanating from occupations, which means, said activists in Spain, developing demands to fight for. Indeed, over and over activists involved asked about demands that could unite constituencies and which could be fought for in creative and participatory ways so that victories were possible which would really matter to people’s lives and enthusiasm and spur further struggle. They felt that while the open ended character of dissent worked fantastically initially, and was warranted while waiting for enough outreach so demands would represent a real constituency’s views, not just those of a few leaders, over time, one needs focus. 
Some suggestions for demands that arose were welcome. Others less so. For example, everyone liked demanding big cuts in military spending and reinstatement and enlargement of funds for social programs. But what folks really liked was when that demand was explored and enlarged to include transforming the purposes of military bases that would otherwise be shrunk or closed due to budget cutting to instead stay open and do worthy public works such as building low income housing, first for base residents who would need and appreciate it, and then for the homeless.
And regarding the homeless, a demand that hit home was freezing foreclosures, returning homes, distributing vacant homes, housing the homeless - including the idea of enacting occupations to undertake these results directly, a process that has begun in Barcelona and Madrid which also have robust movements to block foreclosures.
Another approach that seemed to gather considerable support was to demand full employment. But that wasn’t all. Recognizing the lack of current demand for produced goods people realized a sensible full employment demand would require also reducing the work week by 10 - 25 percent, depending on the country's unemployment rate. Of course if most people saw their incomes decline by a corresponding amount, they would face catastrophe, and thus the reduced hours demand has to be combined with a demand that most people would incur no loss of income. (Living wage policies and redistributionist progressive taxation would also be part of the mix.) Full employment additionally strengthens working people because when they all have jobs, the threat of being fired declines to near irrelevance. Winning this demand also means workers enjoy more leisure and higher hourly wages for those in need. Additional costs would have to be born by owners, and if they don’t agree, that’s fine - workers might want to occupy those factories, and then move to self manage them.
Another popular notion was going after media. One option that resonated as a possible campaign goal, even while obviously falling short of total transformation, (though certainly on the way toward it), was demanding one or more new sections of mainstream newspapers, or shows, or whatever which would be devoted to, for example, labor dissent, or feminism, or peace, or ecology, and so on. Crucially, these would not be managed in the usual corporate fashion, but, instead, via self management of their participants under the umbrella of major labor, women’s, peace, or ecology organizations, for example.  
In these exchanges, activists were imagining a worldwide campaign against mainstream media, against military spending, for low income quality housing, and for full employment including accompanying income redistribution and increased leisure. They envisioned these campaigns unifying protest into resistance and then unifying resistance into creative self management, even as each occupation also related to its own local concerns. 
Self Managements!
Occupations - or what might come to be known, in time, as self managements - would occur in local neighborhoods and federate up to cities and beyond, but also at the entrances to, and perhaps even inside, mainstream media, and at military recruiting stations and bases, at government ministries and branches, and finally, one can envision, even at factories and other workplaces. And in such endeavors not everyone would have to sleep outdoors but everyone would have to give some of their time, resources, insight, and energy to aid one or another campaign of the overall project. 
The revolution, so to speak, is not immediately at hand. In my youth we bellowed - “We want the world and we want it now!” It was fine as a rousing chant. But we need to also understand that it takes time, it takes sustained effort, traversing not weeks or months, but years. 
Indeed, even with the incredible speed and ingenuity of current outbreaks of activism, there are undeniably pessimistic scenarios in which occupations wind down and then demos happen for a time but manage to win only minor if any gains until movement morbidity sets in. This is what the Greeks and Spaniards are trying to avoid. It is why they are beginning new kinds of occupations aimed at media, housing, universities, and at the transformation of budgets, and soon, perhaps at hiring and firing. Projects that are designed to enhance and widen participation in ways leading to massive involvement of masses of people - all knowing what they want and how they can contribute to attaining it.
There are, however, also optimistic scenarios in which occupations diversify and morph into self managing projects radiating out campaigns for change while also welcoming into sustained participation countless actors of all ages and orientations. In this picture, daily marches to support other campaigns in a city - like in New York currently - with growth in numbers and confidence, leads to empty buildings becoming residences and meeting places, to mainstream media businesses becoming targets for occupation, and likewise for universities, and other workplaces of all kinds. Simultaneously, local neighborhoods generate their own assemblies, again, like in New York, initiated by the residents who had been schooled in the earlier, larger, city-wide endeavors, and then local participants patiently and empathetically enter every house, every kitchen and living room, and elicit desires, and, in time, participation. 
Paths Forward
Envisioning all this and much more, once people’s ambition is unleashed from the shackles of daily pessimism, was not hard for folks I talked with. The optimistic path is a scenario involving planting the seeds of the future in the present. It is a scenario that marshals energy and insights to building alternatives, but also winning gains now all fought for and implemented in ways that build desires and organization aimed at winning still more gains in the future. 
We need a sense of proportion and pacing. The occupations now underway still involve only a small fraction, indeed a tiny fraction, of the people in pain and angry about it. To grow, the occupations need to very explicitly conceive themselves in ways that address immediate needs, are aimed at viable and worthy long term goals, and develop modes of participation that cause normal folks, enduring normal harsh conditions, to feel that giving their time makes good sense because it can eventually lead to a new social system with vastly better outcomes than those presently endured. Occupations that began in response to economic insanity need, as well, to broaden and adopt a more encompassing focus taking into account not only the economy, but also, and equally, matters of race, gender, age, ability, ecology, and war and peace. This is what makes a movement a threatening project able to induce capitulation from authorities afraid to make it grow even larger. It is what makes a movement worthy of winning, as well.
We need not only patience in the face of a long struggle, but also a sense of optimism and desire. The occupations are a start, a veritable firestorm of initiation, and they already have vastly wider support than their direct participation evidences. There is a possibility lurking in these events that is awesome in its potential implications. We should all be patient and keep our heads, yet we should all also realize that this may be a very special time, especially for young people, during which it is possible to make an indelible, enduring, and incredibly desirable mark on history. 

From: Z Net - The Spirit Of Resistance Lives

Wednesday, October 19, 2011

Occupy Wall Street, the Trade Union Movement and the Fight to Stop the Cuts and Concessions ((((( The B u l l e t )))))

Occupy Wall Street, the Trade Union Movement and
the Fight to Stop the Cuts and Concessions

The Organizer

Tens of thousands – if not hundreds of thousands – of people have taken to the streets over the past four weeks across the United States as part of an Occupy Wall Street movement to protest the intolerable conditions of massive unemployment, growing inequality, rampant home foreclosures, and stepped-up cuts in the social safety net. Their outrage has been especially focused against the bailout of Wall Street, while Main Street has been left to languish, and the takeover of the political system by big-money interests.

A growing number of trade unionists have joined this movement, first as individual workers, then as part of an increasing number of union contingents that have joined the OWS activists to build large protest actions, often with more focused political demands.
One of the largest actions in the San Francisco Bay Area, for example, witnessed thousands of union and community activists – mostly Black and Latino – marching to Wells Fargo Bank on October 12 in response to a call by the union-based Jobs with Justice, Causa Justa and other organizations to demand an immediate halt to home evictions and a moratorium on foreclosures. Their leaflet included the following wording:

“We are the 99%. From Wall Street to Market St., we demand an end to racist profiteering off of foreclosure and immigrant detention! We demand full employment, social services and civil liberty for all. From San Francisco to Kabul, we demand an end to corporate war and militarism that target communities of color, tearing our families and planet apart.”

This explosion of anger against the unbridled greed of the capitalists – particularly the banksters and speculators – is legitimate. The protesters speak for millions of people in this country. They speak for the working-class majority. They speak for the 99 per cent – all of whom have said in one form or another, “Enough is Enough!”

Obama and Democrats Seek to Co-Opt the Movement

President Barack Obama says he shares the values of the Occupy movement. “I think people are frustrated, and the protesters are giving voice to a more broad-based frustration about how our financial system works,” Obama declared., Progressive Democrats of America and many other liberal groups have explicitly urged their supporters to join OWS to help steer this movement toward their overall goals, including their goal of “stopping the right wing in November 2012” – by which they mean vote for Obama. Some prominent figures are calling for the OWS to play the same role in relation to the Democratic Party that the Tea Party has played in relation to the Republican Party.

But what is the Obama administration doing? What is the record of his administration? The Obama administration had a majority in the Congress. It could have challenged Wall Street and begun to implement the change that the millions of people across the nation had demanded when they voted for Obama in 2008. But it did just the opposite. It bailed out the banksters and speculators to the tune of more than $4-trillion – more than half of which is still sitting in the Wall Street coffers collecting interest while more than 27 million people are unemployed and more than 50 million people face foreclosures.

And today, Obama and the bipartisan congressional “Super Committee of 12” are pushing forward with even more devastating plans. Obama, in keeping with the “Grand Bargain” deal he had struck with House Majority Leader John Boehner last spring regarding the budget deficit, is urging the “Super Committee” to enact cuts of up to $3.5-million in the social safety net – particularly in Social Security, Medicare and Medicaid – over the next 10 years.
The program most immediately targeted by the politicians in the pay of the Wall Street operatives is Medicaid, which affects the lives of 58 million recipients and their family members. Forty-nine per cent of Medicaid recipients are children, 25 per cent are adults, 10 per cent are older Americans, 15 per cent are disabled, and all are low-income.

Cuts to Medicaid are especially dangerous for Blacks and Latinos, who are more likely to rely on this vital program. If people on Medicaid lose their benefits, the results will be greater illness and disability, increased poverty, and even death.

This is why the central question facing the OWS movement – and the working class majority as a whole – is putting an end to the murderous cuts against working people, beginning with an end to the cuts in Social Security, Medicare and Medicaid – all of which are imposed by the Wall Street/credit agencies' dictates, in the name of balancing the budget deficits.

The demand that needs to be raised louder and louder to ensure the independence and fighting unity of this movement is: "Make Wall Street Pay For the Crisis, NOT Working People! STOP THE CUTS AND CONCESSIONS, NOW!"

And this demand – coupled with specific demands to address the crisis such as "Nationalize the Banks!" or "Repossess the $2.2 Trillion in the Wall Street Coffers to Fund a Public Works Program to Put 27 Million People Back to Work!" – must be addressed to the politicians in Washington. They are the ones who make the decisions. They are the ones who can make Wall Street pay.

Responsibility of the Trade Union Officials

Toward this end, the entire working class, beginning with the trade unions and their community partners, needs to be mobilized. It is the responsibility of the trade union officials to organize everywhere this mass mobilization, independently of the Democratic and Republican parties, which have been bailing out the banksters and pushing the bosses' austerity measures. And this all-out mobilization of the working class has to take place at the federal, state and local levels.

The trade unions have the means to organize these mass mobilizations and strike actions to demand: "No more concessions! Make Wall Street Pay for the Crisis!" With the growing momentum created by the OWS movement, the time is now for labour and its community allies to pull out all the stops and organize the kind of fightback that can put a stop to the ruling-class assault and turn things around in the interests of the working-class majority.

But, clearly, the trade union officials are not doing this. AFL-CIO President Richard Trumka has given lip service in support to the OWS movement, but he has not called out all the troops to take to the streets to demand "Stop the Cuts!" or "Jobs For All!" Instead, he is urging union members and their supporters to support Obama's new Jobs Act, which at best would create jobs for 1 to 2 million people, while furthering depleting the Social Security fund to pay for his jobs program – which is unacceptable.

Likewise, Leo Gerard, president of the United Steelworkers of America (USWA), has lavished great praise upon the OWS, but only to urge the movement to help labour fight the Republicans in 2012.

This "support" by the labour officialdom for the OWS is a convenient way for them to get off the hook. It is easy for the labour officials and their Democratic Party allies to point their fingers at Wall Street. Even the Tea Party people have targeted Wall Street and the Federal Reserve Bank. But the union tops are not putting any resources into mobilizing their members, and – more important – they are not confronting the politicians that have enabled the Wall Street fat cats to get even fatter on the backs of working people.

The labour officialdom's silence in relation to the impending assault on Social Security, Medicare and Medicaid is deafening. Without a doubt, a deal has been struck between Obama and Trumka to get labour to go along with these cuts in exchange for a pledge by Obama to seek some meager sources of tax revenue from Wall Street and the rich.

What Way Forward?

In the San Francisco Bay Area, a large number of local trade unions have come together with a wide array of community organizations in a Re-Fund California coalition. They are calling for major protests in San Francisco and Long Beach, California, on November 9-17, when the regents of the University of California and the California State University systems gather to discuss implementing major tuition increases and program cuts (including cuts to ethnic studies departments statewide) that would further devastate these once proud public university systems.
The Re-Fund California call states, in part:

“Our growing movement is not a moment too soon. This week, state budget analysts are expected to propose about $2.5-billion in new cuts to education. ...

“Our November Week of Actions will come on the heels of thousands taking to the streets this month. Our Week of Actions are about making Wall Street and the rich pay.”

The California Faculty Association has called for strikes at two CSU campuses (East Bay Hayward and Dominguez Hills) during this period to demand NO CUTS!

Student and union activists – including general assemblies of the Occupy Wall Street movement at campuses such as San Francisco State University – are coming together across California to support this November Week of Actions. Demanding "No Cuts, No Concessions!" and building mass mobilizations, organizing walkouts and sit-ins, and promoting strike actions on other CSU campuses are the order of the day.

“No Cuts to the Social Safety Net!”

Building on the momentum of the OWS movement and forging united-front coalitions such as those taking shape in California to stop the cuts in public education can and must take place across the country around this or other crucial demands of concern to working people.

Most important, these actions can become stepping stones in the fight to stop the massive cuts in the social safety net – perhaps the biggest attacks ever on the working class and all the oppressed in the history of this country.

In the San Francisco Bay Area, trade unions and their community allies are beginning to organize for a mass action the first week of December to demand "No Cuts to Social Security, Medicare and Medicaid. The "Super Committee of 12" is expected to release its recommendations to the Congress at the end of November, and the Congress is expected to vote on these recommendations before the end of the year.

The San Francisco Labor Council is organizing a teach-in on October 24 to educate about the impending attacks on the social safety net and to build a coalition – together with other Bay Area labour councils, CARA, Jobs with Justice, and other community organizations – with the aim of organizing a mass action in the streets that can send a powerful signal that working people will not accept the cuts. Similar teach-ins and coalitions can and must be organized all across the country.

Most important, if working people are to succeed in forcing the Congress to say "No" to the Cuts in the social safety net, it will be necessary for the AFL-CIO, Change to Win, the NAACP, the main retiree organizations – and all the organizations that over the past four weeks have supported the Occupy Wall Street movement – to draw a line in the sand and fight the cuts by any means necessary, including organizing a one-day walk-out/sick-out/strike/day of action, together with the OWS movement, around the specific demand of "No Cuts, No Concessions!"

To get there, it will be necessary to organize "No Cuts/No Concessions Committees" in unions and community organizations to (1) build local actions against the cuts in the social safety net and (2) press the national leadership of the trade union movement to issue a national call to action against these cuts, preferably during the first week of December.

The tide of resistance is rising. The time for action is now! •

Written by the Editorial Board of The Organizer newspaper, where this article was first published.

Thursday, October 13, 2011

Occupy Wall Street: Beyond the Rhetoric

Occupy Wall Street: Beyond the Rhetoric

Matthew Flisfeder

One of the distinguishing features of the Occupy Wall Street (OWS) movement is its apparent lack of central leadership. Not only does the movement seem leaderless; it does not appear to be organized around any clearly defined ‘demands.’ This has been perceived as something quite positive for participants and supporters of the movement, while being the primary point of criticism from opponents, particularly the mainstream media. Clearly, OWS stands against the unfair balance of wealth distribution in the United States (and around the world, for that matter), the unfair neoliberal politics that have swept the globe over the last four decades, corporate greed (especially in the financial sector), and various forms of systemic violence resulting from structural inequalities built into the capitalist system of exploitation. But what media pundits are looking for is something that they can represent: something, that is, with a timeline, that defines when the protestors will be ‘satisfied.’ This makes OWS qualitatively different from the Tunisian and Egyptian uprisings that took the world stage last winter, popularly touted as the ‘Arab Spring.’ These groups had clearly defined ‘demands’: first and foremost was the overthrow of their political leaders. OWS is distinguished from the Arab Spring to the extent that its definitive aims and goals have yet to be defined.

The movement has gone beyond the various ‘–isms,’ labels that media pundits and the corporate elite find easy to dismiss: ‘communism,’ ‘socialism,’ ‘anarchism,’ ‘Leftism,’ etc. Commentators outside the United States have started to take notice. CBC business personality, Kevin O’Leary made a mockery of himself last week during a live interview with the Pulitzer Prize winning journalist, Chris Hedges, by referring to him as a “Left-wing nut-bar.” The more intelligent and articulate Hedges responded by suggesting that most of the protesters are more ‘conservative’ in the sense that they desire a return to the rule of law in opposition to the radicalism and neo-feudalism of the financial class. O'Leary's frustration in the matter shows that perhaps part of the success of OWS so far can be attributed to the fact that, as the discourse theorist, Ernesto Laclau, pointed out over a decade ago, “empty signifiers” matter to politics.

Why Do “Empty Signifiers” Matter to Politics?

For those unfamiliar with the language of semiotics – the ‘science of signs’: every word in a language (a sign) can be divided into two elements: a signifier – the word itself – and a signified – the concept pronounced and articulated by the signifier. Ferdinand de Saussure, the Swiss linguist who first developed semiotics, argued that the meaning of any term in language is derived, not from its direct relation to reality, but through its difference from all of the other words in the same language. ‘Tree’ means ‘tree’ because it does not mean ‘bush’ or ‘flower.’ One need only look through a dictionary to grasp this concept, where all words are defined with reference to other words.

The French post-structuralist philosopher, Jacques Derrida, referred to the system of differences in language as a process of différance, by which he meant that language consists of a constant deferment of meaning. In contrast, his contemporary, the psychoanalyst, Jacques Lacan, claimed that, in order for anything to mean anything at all, every language is fixed at some point through the operation of an empty ‘Master-Signifier’ that arrests the meaning of all of the other ‘floating signifiers.’ Every other word in a language gathers its meaning by distinguishing itself from some primary, empty ‘Master-Signifier,’ or a signifier without a signified.

Laclau argues, then, that empty signifiers are important for political hegemony. The theory of hegemony that he identified, together with Chantal Mouffe in their seminal text, Hegemony and Socialist Strategy: Towards a Radical Democratic Politics (1985), relies upon the Lacanian concept of the signifier without a signified. Every political movement – both at the level of the reigning ideology and that of opposition – must be coloured and tied together (‘sutured’) by some particular content that is supposed to stand in to represent the universal constitution of the political and social order. The empty signifier ties people together into a single political movement or group. A prime example is the way in which the category of the ‘middle-class’ has recently been deployed by politicians in both the United States and Canada, across the political spectrum. The ‘middle-class’ is such an ambiguous term that it would seem to refer to almost everyone.

Political discourse is often flooded with other rhetorical empty signifiers such as ‘freedom,’ ‘rights,’ ‘justice’ and, significantly, ‘democracy.’ The last half-century has even seen the Rightist appropriation of Left signifiers, such as ‘communism’ and ‘socialism’ to signal something negative in relation to the authoritarianism of the Soviet Union. These are now terms that are used to dissuade people from choosing alternative approaches to politics.

Populism or Class Struggle?

Laclau, though, has recently moved away from his notion of hegemony and toward a new conception of populism for the Left. In his book, On Populist Reason (2005), he argues in favour of the creation of a populist political force on the Left, which he refers to as ‘the people.’ Laclau's ‘people’ emerge as a force that transcends particular political agencies: the ‘proletariat,’ or the ‘working-class,’ in Marxian terms. Laclau's ‘post-Marxism’ draws strength from the postmodern turn in cultural politics, with the rise of New Social Movements (NSMs) in the 1960s and 1970s, such as the Civil Rights Movement, Post-Colonialism and Anti-Racism, the Feminist Movement, and the Gay Rights Movement. These movements all emerged as non-classed based approaches to politics. Significantly, the NSMs emerged at a time when it began to appear as though class-based politics did not pose enough of a threat to existing forms of power; nor did class-based politics seem to address wider political concerns. Moving into the 1980s, the conservative ‘working class’ also appeared to side with the conservative populism of the ruling elite, particularly in the case of Thatcherism and Reaganism. The unity between the various identity groups, according to Laclau, must come by way of their organization around an antagonism with some ‘nemesis’ or enemy. It is by way of their unified opposition to this subjective enemy that political alliances are formed between the various political-cultural groups. Certainly this nemesis can be something like global capital or the financial class. However, Slavoj Žižek warns that this kind of populism has the potential to degenerate into some form of neo-Fascism.

Populism, according to Žižek, obfuscates the objective violence of the system of capitalist exploitation by displacing it onto some external, subjective, enemy/intruder who disrupted the stability of the system. A populist perspective, in other words, sees nothing wrong with the system itself, internally, but instead perceives the intrusion of some external factor as that which caused the disruption. Nazi anti-Semitism is the clearest example of Fascist populism, which, rather than locating the cause of the crisis of the 1930s in something internal to capitalism, displaced the class struggle onto the anti-Semitic figure of the Jew. Unlike the Rightist Tea Party movement, which lays blame for the current crisis using racist, sexist, and homophobic rhetoric, OWS does not appear to be organized around some kind of populist politics, at least not in the sense used by Laclau or Žižek. The movement, though, is popular in the Gramscian sense, as evinced by the language of the ‘99%,’ which seems to be articulating popular frustration precisely in terms of ‘class warfare.’

Despite the bickering and moaning of the Republican Party and the ruling elite in the United States, one should not shy away from using ‘class warfare’ as a phrase to identify the current political confrontation – but it is necessary to point out that warfare was first declared upon the ‘99%’ who have finally decided to fight back in such a non-violent way that it may begin to be felt by the ruling ‘1%’ as something tremendously violent since, at the present moment, the movement exists in a form that makes it very difficult to assimilate into dominant discourse. There is something ‘real’ (for social theorists, in the Lacanian sense), about the current movement in its ability to resist symbolization by the mainstream media on their terms (on the side of reigning ideology).

It is perhaps possible to claim that OWS has taken on the form of the ‘multitude’ defined by Michael Hardt and Antonio Negri – in fact, there has already been talk of the role played by their book, Empire (2000), in theorizing OWS avant la lettre. But it may be important to take note, again, of the way that term ‘middle-class’ has been used in recent political discourse, both in reference to OWS and in reference to the wider group of ‘hard working Americans’ often invoked by politicians. In the context of the United States, the ‘middle-class’ is ultimately tied to the ideology of the American Dream. Yet, something sinister remains in the use of this term.

Contradictions Within the System

Over 150 years ago, Marx and Engels argued in The Communist Manifesto that capitalism would eventually contribute to the force involved in its own destruction: the proletariat. The latter is more commonly known as the ‘working-class.’ But it is necessary to distinguish between the proletarian class position and that of the ‘working-class’: the former is an agency of social transformation, while the latter represents a position in the existing social order. I would risk the argument that, today, the term ‘working-class’ evokes an image of industrial/factory workers, or service and public sector workers, and the organization of labour through unionization. But I would argue as well that those referred to as ‘the middle-class’ by media personalities and politicians – the group of ‘hard working families’ – are much closer to what Marx and Engels had in mind when they spoke of the proletariat. The ‘99%’ are much closer to those forces that Marx and Engels predicted would bring the eventual destruction of the capitalist class, i.e., the ‘1%.’ They are those who continue to be exploited objectively by the capitalist mode of production, and are divided by the so-called ‘Culture Wars’ and ‘identity politics.’ Occupying an objective position (as opposed to divided subjective positions defined by Culture Wars and identity politics), within the system, is what has brought the ‘99%’ together. They have been brought together, not in reference to some external intruder who disrupted the system (as in Laclau's populism), but in reaction to those who first waged class warfare, politically and systemically, on the ‘99%’ themselves. The ‘1%,’ in whose interest the capitalist mode of production is organized, has been targeted, not as an enemy/intruder who disrupted the system from outside, but as the class responsible for the system itself.

In the battle to defeat propaganda from the corporate media and criticism from those who side with the system – a system that benefits none but the top ‘1%,’ it may be necessary to resist the temptation to articulate definitive demands and signifiers of oppositional rhetoric according to a pace established by them. It may also be necessary to appropriate those political terms (signifiers) often used by those in positions of power, i.e. ‘family,’ ‘freedom,’ ‘justice’ and ‘democracy.’ Doing so can bring solidarity between the various different identity groups who all feel the weight of exploitation under capitalism. But at some point soon – and this point may rapidly approach – ‘new signifiers’ may need to be adopted internally in order to lead the movement forward. Just as the OWS movement is showing innovation in organizing popular anti-capitalist sentiments, there is still a need for organizational experimentation in political forms, capable of effectively breaking us out of the limits of liberal democracy. •

Matthew Flisfeder is a media and cultural theorist. He teaches at OCAD University, Wilfrid Laurier University, and Ryerson University, and is the author of The Symbolic, The Sublime, and Slavoj Žižek's Theory of Film (Palgrave Macmillan, forthcoming).

~~~~~~~~~~~~~~~(((( The   B u l l e t ))))~~~~~~~~~~~~~~~

Wednesday, October 12, 2011

On the cusp of collapse: complexity, energy, and the globalised economy

On the cusp of collapse: complexity, energy, and the globalised economy

David Korowicz

The systems on which we rely for our financial transactions, food, fuel and livelihoods are so inter-dependent that they are better regarded as facets of a single global system. Maintaining and operating this global system requires a lot of energy and, because the fixed costs of operating it are high, it is only cost-effective if it is run at near full capacity. As a result, if its throughput falls because less energy is available, it does not contract in a gentle, controllable manner. Instead it is subject to catastrophic collapse.
Fragments from a globalised economy
  • The eruption of the EyjafjallajÖkull volcano in Iceland led to the shut-down of three BMW production lines in Germany, the cancellation of surgery in Dublin, job losses in Kenya, air passengers stranded worldwide and dire warnings about the effects the dislocations would have on some already strained economies.
  • During the fuel depot blockades in the UK in 2000, the supermarkets’ just-in-time supply-chains broke down as shelves emptied and inventories vanished. Anxiety about the consequences rose to such an extent that the Home Secretary, Jack Straw, accused the blockading truckers of “threatening the lives of others and trying to put the whole of our economy and society at risk”.
  • The collapse of Lehman Brothers helped precipitate a brief freeze in the financing of world trade as banks became afraid to accept other banks’ letters of credit. [1]
Just as we never consider the ground beneath our feet until we trip, these glimpses into the complex webs of inter-dependencies upon which modern life relies only come when part of that web fails. When the failure is corrected, the drama fades and all returns to normal. However, it is that normal which is most extraordinary of all.
Our daily lives are dependent upon the coherence of thousands of direct interactions, which are themselves dependent upon trillions more interactions between things, businesses, institutions and individuals across the world. Following just one track; each morning I have coffee near where I work. The woman who serves me need not know who picked the berries, who moulded the polymer for the coffee maker, how the municipal system delivered the water to the café, how the beans made their journey or who designed the mug. The captain of the ship that transported the beans would have had no knowledge of who provided the export credit insurance for the shipment, who made the steel for the hull, or the steps in the complex processes that allow him the use of satellite navigation. And the steel-maker need not have known who built the pumps for the iron-ore mine, or how the oxygen for the furnace was refined.
Every café has customers like me who can only buy coffee because we are exchanging our labours across the world in ways that are dependent upon the globalised infrastructure of IT systems, transport and banking. The systems and the myriad businesses upon which they depend are only viable because there are economies of scale. Our global infrastructure requires millions of users across the world, the ship needs to carry more than coffee beans, and my café needs more than a single customer. The viability of my morning coffee requires the interactive economic and productive efforts of the globalised economy.
Thinking this way enables us to see that the global economy, and thus our civilisation, is a single system. This system’s structure and dynamics are therefore central to understanding the implications of ecological constraints and, in particular for this analysis, peak oil.[2] Here are some of its principal features.
The global economy is self-organising
The usually seamless choreography of the global economy is self-organising. The complexity of understanding, designing and managing such a system is far beyond our abilities. Self-organisation can be a feature of all complex adaptive systems, as opposed to ‘just’ complex systems such as a watch. Birds do not ‘agree’ together that arrow shapes make good sense aerodynamically, and then work out who flies where. Each bird simply adapts to its local environment and path of least effort, with some innate sense of desire and hierarchy, and what emerges is a macro-structure without intentional design. Similarly, our global system emerges as a result of each person, company and institution, with their common and distinctive histories, playing their own part in their own niche, and interacting together through biological, cultural and structural channels.
The self-organisation reminds us that governments do not control their own economies. Nor does civil society. The corporate or financial sectors do not control the economies within which they operate. That they can destroy the economy should not be taken as evidence that they can control it.
The global economy has growth-dependent dynamics
We have come to regard continued economic growth as normal, part of the natural order of things. Recessions are viewed as an aberration caused by human and institutional weakness, the resumption of economic growth being only a matter of time. However, in historical terms, economic growth is a recent phenomenon. Angus Maddison has estimated that Gross World Product (GWP) grew 0.32% per annum between 1500 and 1820; 0.94% (1820-1870); 2.12% (1870-1913); 1.82% (1913-1950); 4.9% (1950-1973); 3.17% (1973-2003), and 2.25% (1820-2003). [3]
We tend to see global economic growth in terms of change. We can observe it through increasing energy and resource flows, population, material wealth, complexity and, as a general proxy, GWP. This can be viewed from another angle. We could say that the globalising growth economy has experienced a remarkably stable phase for the last 150 years. For example, it did not grow linearly by any percentage rate for any time, decline exponentially, oscillate periodically, or swing chaotically. What we see is a tendency to compound growth of a few percent per annum, with fluctuations around a very narrow band. At this growth rate, the system could evolve, unsurprisingly, at a rate to which we could adapt.
The sensitivity felt by governments and society in general to very small changes in GDP growth shows that our systems have adapted to a narrow range of variation. Moving outside that range can provoke major stresses. Of course small differences in aggregate exponential growth have major effects over time, but here we are concentrating upon the stability issue only.
The growth process itself has many push-pull drivers: in human behaviour; in population growth; in the need to maintain existing infrastructure and wealth against entropic decay; in the need to employ those displaced by technology; in the response to new problems; and in the need to service debt that forms the basis of our economic system.
The global economy grows in complexity
Complexity can be measured in several ways — as the number of connections between people and institutions, the intensity of hierarchical networks, the number of distinct products produced and the extent of the supply-chain networks required to produce them, the number of specialised occupations, the amount of effort required to manage systems, the amount of information available and the energy flows required to maintain them. By all these measures, economic growth has been associated with increasing complexity. [4]
As a species, we had to become problem solvers to meet our basic needs, deal with status anxiety and respond to the new challenges presented by a dynamic environment. The problem to be solved could be simple such as getting a bus or buying bread; or it could be complex, such as developing an economy’s energy infrastructure. We tend to exploit the easiest and least costly solutions first. We pick the lowest hanging fruit or the easiest extractable oil first. As problems are solved new ones tend to require more effort and complex solutions.
A solution is framed within a network of constraints. One of the system constraints is set by the operational fabric, comprising the given conditions at any time and place which support system wide functionality. For modern developed economies this includes functioning markets, financing, monetary stability, operational supply-chains, transport, digital infrastructure, command and control, health services, research and development infrastructure, institutions of trust and socio-political stability. It is what we casually assume does and will exist, and which provides the structural foundation for any project we wish to develop. Our solutions are also limited by knowledge and culture, and by the available energetic, material, and economic resources available to us. The formation of solutions is also shaped by the interactions with the myriad other interacting agents such as people, businesses and institutions. These add to the dynamic complexity of the environment in which the solution is formed, and thus the growing complexity is likely to be reinforced as elements co-evolve together.
As a result, the process of economic growth and complexity has been self-reinforcing. The growth in the size of the networks of exchange, the operational fabric and economic efficiencies all provided a basis for further growth. Growing complexity provided the foundation for developing even more complex integration. In aggregate, as the operational fabric evolves in complexity it provides the basis to build more complex solutions.
The net benefits of increasing complexity are subject to declining marginal returns — in other words, the benefit of rising complexity is eventually outweighed by its cost. A major cost is environmental destruction and resource depletion. There is also the cost of complexity itself. We can see this in the costs of managing more complex systems, and the increasing cost of the research and development process. [5] When increased complexity begins to have a net cost, then responding to new problems arising by further increasing complexity may be no longer viable. An economy becomes locked into established processes and infrastructures, but can no longer respond to shocks or adapt to change. For the historian Joseph Tainter, this is the context in which earlier civilisations have collapsed. [6]
The global economy is increasing co-dependence and integration
As the globalising economy grows, increased population, wealth and integration opens up the possibility of greater economies of scale and more diverse productive niches. When new technologies and business models (solutions or sets of solutions) emerge, they co-adapt and co-evolve with what is already present. Their adoption and spread through wider networks depends on the efficiencies they provide in terms of lower costs and new market opportunities. One of the principal ways of gaining overall efficiency is by letting individual parts of the system share the costs of transactions by sharing common infrastructure platforms (information and transport networks, electric grid, water/sewage systems, financial systems), and integrating more. Thus there is a reinforcing trend of benefits for those who build the platform and the users of the platform, which grows as the number of users grows. In time, the scale of the system becomes a barrier to a diversity of alternative systems as the upfront cost and the embedded economies of scale become a greater barrier to new entrants, especially where there is a complex hub infrastructure. The lack of system diversity is not necessarily due to corporate monopolies. There is vigorous competition between mobile phone service providers but they share common information platforms and depend on electricity networks and the monetary system, both of which have little or no system diversity.
Our operational systems are integrated into the wider economy. Expensive infrastructure and continual need for replacement components mean that economies of scale and a large number of economically connected people are necessary to make them viable. For example, the resources required to maintain the IT infrastructure on which we rely for critical services demand that we also buy games consoles, send superfluous text messages and watch YouTube. In other words, our non-discretionary needs and the critical systems that support them are affordable because they are being cross-subsidised by discretionary spending, which itself depends on further economies of scale being generated by the globalised economy that provides us with our discretionary income in the first place.
From this perspective, asking about the resource requirements for individual products of the economy (a computer or my morning coffee, say) is akin to asking about the resource requirements for your finger; it only makes sense if the rest of the body is properly resourced.
Each new level of infrastructural complexity implies a new fixed cost in terms of energy flows and resources required for maintenance and operation, and an economy of scale that can support such flows. It also locks into place co-dependence amongst components of our critical infrastructure that integrate the operational fabric. For example, if our IT platform failed, so too would our financial, knowledge and energy systems. Similarly, if our financial system collapsed, it would not take long for our IT and supply-chains to collapse too. The UK-based Institute of Civil Engineers acknowledges that the complex relationships between co-dependent critical infrastructures are not understood. [7]
Finally, as new infrastructural platforms become established, legacy systems are left to shrink or decay. Thus, if suddenly we all were to lose the communications infrastructure introduced over the past ten years, we would not return to the system we had before that infrastructure was introduced. Instead, most of us would be left without any fall-back communication system at all.
The global economy has bounded resilience
An isolated, poor and self-sufficient community is vulnerable to severe risk of a general failure of food production due to flooding or pestilence, say. Even comparatively rich France had 18 general famines in the eighteenth century and hundreds of local ones [8]. Without access to money, weak transport links, markets and communications, surplus production from elsewhere could not relieve local starvation. The growth in the interconnectedness, infrastructure and institutions of the globalising economy meant local risks could be shared over wide networks, and this enhanced local resilience.
One of the great virtues of the global economy is that while factories may fail and links in a supply-chain break, the economy can quickly adapt by fulfilling its needs elsewhere or finding substitutes. This is a measure of the resilience within the globalised economy and is a natural feature of a de-localised and networked complex adaptive system. But it is true only within a certain context. There are common platforms or ‘hub infrastructure’ that maintain the operation of the global economy and the operational fabric as a whole, and the collapse of such hubs is likely to induce systemic failure. Principal among these are the monetary and financial system, accessible energy flows, transport infrastructure, economies of scale and the integrated infrastructures of information technology and electricity.
Our freedom to change can be limited by lock-in
Lock-in can be defined broadly as an inability to deal with one problem by changing a sub-system in the economy without negatively modifying others upon which we depend. For example, our current just-in-time food system and agricultural practices are hugely risky. As the current economic crisis tightens, those involved in food production and distribution strive for further efficiencies and economies of scale as deflation drives their prices down. The lower prices help maintain welfare and social peace, and make it easier for consumers to service their debts, which in turn supports our battered banks, whose health must be preserved or the bond market might not show up at a government auction. As a result, it is very hard to do major surgery on our food systems if doing so required higher food prices, decreased productivity and gave a poor investment return.
However, the primary lock-in process is the growth economy itself. We are attempting to solve systemic ecological problems within systems that are themselves dependent upon increasing resource depletion and waste. We are embedded within economic and social systems whose operation we require for our immediate welfare. But those systems are too optimized, interconnected and complex to comprehend, control and manage in any systemic way that would allow a controlled contraction while still maintaining our welfare.
The problem of lock-in is part of the reason why there is no possibility of a managed degrowth.
The global economy’s adaption to ecological constraints displaces and magnifies stresses
Peak oil is expected to be the first ecological constraint to impact significantly on the advanced infrastructure of the globalised economy. However, it is only one part of an increasingly integrated web of constraints including fresh-water shortages, bio-diversity loss, soil erosion and reduced soil fertility, shortages of key minerals and climate change. As a result, it makes little sense to compartmentalise our focus as we do through the UN Framework Convention on Climate Change, for example. The interwoven nature of our predicament is clearly shown by the Green Revolution of the 1960s that supposedly ‘solved’ the increasing pressure on food production from a growing population. Technology was marshalled to put food production onto a fossil-fuel platform, which allowed further population overshoot and thus a more general growth in resource and sink demands. The result is that even more people are more vulnerable as their increased welfare demands are dependent upon a less diverse and more fragile resource base. As limits tighten, we are responding to stress on one key resource (by, say, reducing greenhouse gas emissions or getting around fuel constraints by using biofuels) by placing stresses on other key resources that are themselves already under strain (food, water). That we have to do so demonstrates how little adaptive capacity we have left.
Our local needs depend on the global economy
Our basic and discretionary needs are dependent on a globalised fabric of exchange. So too is our ability to exchange our labour for the means to pay those needs. The conditions that maintain our welfare are smeared over the globe.
We have adapted to the stability of globalising growth over the decades. Our skills and knowledge have become ever more refined so as to contribute to the diverse niches within the global economy. The tools we interact with — computers and software, mobile phones, machines and payment systems — maintain our productivity. So too do the supply-chains that feed us, provide inputs to our production process and maintain the operation of the systems we depend upon. Our productivity also depends upon the global economy of scale, not just those reaped by our direct customers, but also the conditions that support their economic activity in the wider economy. We are all of us intertwined. For this reason we can say that there is no longer any wholly indigenous production.
Money and credit integrate the global economy
If one side of the global economy is goods and services, the other side is money and credit. Money has no intrinsic value; it is a piece of paper or charged capacitors in an integrated circuit. It represents not wealth, but a claim on wealth (money is not the house or food we can buy with it). Across the globe we exchange something intrinsically valuable for something intrinsically useless. This only works if we all play the game, governments mandate legal tender and monetary stability and trust are maintained. The hyper-inflation in Weimar Germany and in Zimbabwe until it adopted the US dollar shows what happens when trust is lost.
The thermodynamics of the global economy
Like human beings and life on earth, economies require flows of energy through them to function and maintain their structure. If we do not maintain flows of energy (directly, or by maintenance and replacement) through systems we depend upon, they decay. Humans get their energy when they transform the concentrated energy stores in food into metabolising, thinking and physical labour, and into the dispersed energy of heat and excreta. Our globalising economy is no less energy constrained, but with one crucial difference.
When humans reach maturity they stop growing and their energy intake stabilises. Our economy has adapted to continual growth, and that means rising energy flows.
The self-organisation and biodiversity of life on earth is maintained by the flows of low-entropy solar energy that irradiate our planet as it is transformed into high-entropy heat radiating into space. Our complex civilisation was formed by the transformation of the living bio-sphere and the fossil reserves of ancient solar energy into useful work, and the entropy of waste heat energy, greenhouse gases and pollution that are the necessary consequences of the fact that no process is perfectly efficient.
The first law of thermodynamics tells us that energy cannot be created or destroyed. But energy can be transformed. The second law of thermodynamics tells us how it is transformed. All processes are winding down from a more concentrated and organised state to a more disorganised one, or from low to higher entropy. We see this when our cup of hot coffee cools to the room’s ambient temperature, and when humans and their artefacts decay to dust. The second law defines the direction in which processes happen. In transforming energy from a low-entropy to a higher-entropy state, work can be done, but this process is never 100% efficient. Some heat will always be wasted and be unavailable for work. This work is what has built and maintains life on earth and our civilisation.
So how is it that an island of locally concentrated and complex low-entropy civilisation can form out of the universal tendency to disorder? The answer is that more and more concentrated energy has to flow through it so as to keep the local system further and further away from the disorder to which it tends. The evolution and emergence of complex structures maximises the production of entropy in the universe (local system plus everywhere else) as a whole. Clearly, if growing and maintaining complexity costs energy, then energy supply is the master platform upon which all forms of complexity depends. [9]
The operational fabric evolves with new levels of complexity. As integration and co-dependency rise, and economies of scale become established, higher and higher fixed costs are required to maintain the operational fabric. That cost is in energy and resource flows. Furthermore, as the infrastructure, plant and machinery that are required to maintain economic production at each level expand, they are open to greater depreciation costs or, in thermodynamic terms, entropic decay.
The correlation between energy use and economic and social change should therefore come as no surprise. The major transitions in the evolution of human civilisation, from hunter-gatherers through the agricultural and industrial revolutions, have been predicated on revolutions in the quality and quantity of energy sources used.
We can see this through an example. According to the 1911 Census of England and Wales, the three largest occupational groups were domestic service, agriculture and coal mining. By 2008, the three largest groups were sales personnel, middle managers and teachers. [10] What we can first notice is 100 years ago much of the work done in the economy was direct human labour. And much of that labour was associated directly with harnessing energy in the form of food or fossil fuels. Today, the largest groups have little to do with production, but are more focused upon the management of complexity directly, or indirectly through providing the knowledge base required by people living in a world of more specialised and diverse occupational roles.
What evolved in the intervening century was that human effort in direct energy production was replaced by fossil fuels. The energy content of a barrel of oil is equivalent to 12 years of adult labour at 40 hours a week. Even at $100 a barrel, oil is remarkably cheap compared with human labour! As fossil-fuel use increased, human effort in agriculture and energy extraction fell, as did the real price of food and fuel. These price falls freed up discretionary income, making people richer. And the freed-up workers could provide the more sophisticated skills required to build the complex modern economy which itself rested upon fossil-fuel inputs, other resources and innovation.
In energy terms a number of things happened. Firstly, we were accessing large, highly concentrated energy stores in growing quantities. Secondly, fossil fuels required little energy to extract and process; that is, the net energy remaining after the energy cost of obtaining the energy was very high. Thirdly, the fuels used were high quality, especially oil, which was concentrated and easy to transport at room temperature; or the fuels could be converted to provide very versatile electricity. Finally, our dependencies co-evolved with fossil-fuel growth, so our road networks, supply-chains, settlement patterns and consumer behaviour, for example, became adaptive to particular energy vectors and the assumption of their future availability.
The growth and complexity of our civilisation, of which the growing GWP is a primary economic indicator, is by necessity a thermodynamic system and thus subject to fundamental laws.
In neo-classical models of economic growth, energy is not considered a factor of production. It is assumed that energy is non-essential and will always substitute with capital. This assumption has been challenged by researchers who recognise that the laws of physics must apply to the economy and that substitution cannot continue indefinitely in a finite world. Such studies support a very close energy-growth relationship. They see rising energy flows as a necessary condition for economic growth, which they have demonstrated historically and in theory. [11] [12] [13] It has been noted that there has been some decoupling of GWP from total primary energy supply since 1979 but much of this perceived decoupling is removed when higher energy quality is allowed for. [14]
It is sometimes suggested that energy intensity (energy/unit GDP) is stabilising, or declining a little in advanced economies, a sign to some that local decoupling can occur. This confuses what are local effects with the functioning of an increasingly integrated global economy. Advanced knowledge and service economies do not do as much of the energy-intensive raw materials production and manufacturing as before, but their economies are dependent upon the use of energy-intensive products manufactured elsewhere, and the prosperity of the manufacturers to whom they sell their services.
Peak oil
The phenomenon of peaking — be it in oil, natural gas, minerals or even fishing — is an expression of the following dynamics. With a finite resource such as oil, we find in general that which is easiest to exploit is used first. As demand for oil increases, and knowledge and technology associated with exploration and exploitation progress, production can be ramped up. New and cheap oil encourages new oil-based products, markets and revenues, which in turn provide revenue for investments in production. For a while this is a self-reinforcing process but eventually the reinforcement is weakened because the energy, material and financial costs of finding and exploiting new production start to rise. These costs rise because, as time goes on, new fields become more costly to discover and exploit as they are found in smaller deposits, in deeper water and in more technically demanding geological conditions. In some cases, such as tar sands, the oil requires very advanced processing and high energy and water expenditures to be rendered useful. This process is another example of declining marginal returns.
The production from an individual well will peak and decline. Production from an entire oilfield, a country and the whole world will rise and fall. Two-thirds of oil-producing countries have already passed their individual peaks. For example, the United States peaked in 1970 and the United Kingdom in 1999. The decline has continued in both cases. It should be noted that both countries are home to the worlds’ best universities, most dynamic financial markets, most technologically able exploration and production companies, and stable, pro-business political environments. Nevertheless, in neither case has decline been halted.
As large old fields producing cheap oil decline, more and more effort must be made to maintain production with the discovery and production from smaller and more expensive fields. In financial terms, adding each new barrel of production (the marginal barrel) becomes more expensive. Sadad al-Huseini said in 2007 that the technical floor (the basic cost of producing oil) was about $70 per barrel on the margin, and that this would rise by $12 per annum (assuming demand was maintained by economic growth). [15] This rapid escalation in the marginal cost of producing oil is recent. In early 2002, the marginal cost of a barrel was $20.
It is sometimes argued that there is a huge amount of oil in deposits such as the Canadian tar sands. The questions this claim raises are “When will it be on-stream?”, “At what rate can oil be made available?”, “What is the net energy return?” and “Can society afford the cost of extraction?” If less available net energy from oil were to make us very much poorer, we could afford to pay even less. Eventually, production would no longer be viable as economies could no longer afford the marginal cost of a barrel. In a similar vein, our seas contain huge reserves of gold but it is so dispersed that the energetic and financial cost of refining it would far outweigh any benefits (Irish territorial waters contain about 30 tons).
Some misconceptions regarding peak oil
The decline curve assumption
The now familiar image of a modelled global oil production curve showing a decline in production of 2-3% per annum (EGross), has led commentators to assume that this is what will be available in future to the global economy. Intuitively this might seem an almost manageable constraint. The assumption on which this curve is based, the decline curve assumption, is incorrect for three reasons. Firstly, it does not account for the increasing energy cost of extracting oil; the net energy (ENet) available to society will decline at a faster rate than the modelled decline.
Secondly, oil exporters, for the moment at least, are growing consumers of oil, and will favour domestic consumption over exports. This will reduce the volume of internationally traded oil.
Energy supply too small to permit economic growth
Figure 1: In this projection of a possible future, the steadily-increasing amount of energy required for economic growth to continue is shown by the line EGrowth. While the gross amount of energy that might be available is indicated by the line EGross and the net amount of energy after the energy required to deliver that energy has been deducted is marked ENet. In theory, the gap between the energy available and the energy required for growth (EGap) grows smoothly and steadily as the graph shows but this ignores powerful feedbacks caused by the gap itself. As a result, the gap is likely to grow far more rapidly and erratically.
The third reason lies at the heart of why we must take a whole-systems approach to peak oil. The decline curve assumption assumes there is no strong feedback between declining production, the economy, and oil production. The modelled assumptions for the declining production, even accounting for declining net energy and producer consumption, assume a stable economy and infrastructure. In most of the modelling, the production curve (EGross) is derived from “proven reserves” or “proven plus probable” ones. “Proven” reserves imply we can afford to pay current real prices and deploy existing technology, while “proven plus probable” reserves are estimated on the basis of assumptions about the growth in technology and the idea that increasing wealth might allow us to pay higher prices more comfortably. In other words, at a minimum, the future production curve assumes that current technology and real prices would allow new oil to be brought on-stream to counter some of the effects of declining established production, without which the so-called natural decline rate could be greater than 7% per annum. [16]
A decline in oil production undermines economic production, thus reducing society’s ability to pay for oil. A decline also, as we shall see, undermines the operational fabric, which in turn constrains the ability of society to produce, trade, and use oil (and other energy carriers) in a reinforcing feedback loop. Energy flows through the economy are likely to be unpredictable, erratic and prone to sudden and severe collapse. The implication is that much of the oil (and other energy carriers) that are assumed to be available to the global economy will remain in the ground as the real purchasing power, productive demand, energy infrastructure and economic and financial systems will not be available to extract and use it.
Energy independence
Another misconception is that the output from other energy sources — natural gas, coal, nuclear, and renewable energy — are largely independent of oil even though oil is part of the systemic fabric of the global economy. At the most direct level, oil is used to transport coal and re-supply the infrastructure of natural gas and coal. More broadly, while oil is predominantly a transport fuel, the demand for it is tied to production in the wider economy, which is dependent upon natural gas and coal. A forced reduction in oil use would reduce economic production, which would induce a system-wide reduction in electricity and heating demand. At a wider level, all energy sources interact to maintain the global economy. If there was a major failure in that economy, the continued production, processing, trade and distribution of all energy sources may be imperiled. There would only be energy source independence if there was perfect real-time substitutability and a real-time net energy surplus in one or more of the alternative sources.
We can fill the gap
If the peak in global oil production is imminent, or occurs within the next decade, we have neither the time nor the resources to substitute for oil, or to invest in conservation and efficiency. This point has been made recently by the UK Energy Research Council [17] and many others [18], [19].
We can outline the general reasons as follows. It is not merely that we are replacing high-quality energy sources with lower-quality ones, such as tar sands and renewables. It is not that the costs of such alternatives are generally greater than established historical sources. Nor is it that the productive base for deploying alternative energy infrastructure is small, with limited ramp-up rates, or that it competes with food. Nor even that as the global credit crisis continues with further risks ahead, ramping-up financing will remain difficult while many countries struggle with ballooning deficits and pressing immediate concerns. The main point is that once the effects of peak oil become apparent, we will lose much of what we have called the operational fabric of our civilisation. For example, any degradation and collapse of the operational fabric in the near future may mean that we already have in place a significant fraction of the renewable energy infrastructure that will ever be in place globally.
The economics of peak oil
The thermodynamic foundations of the global economy are expressed through energy prices. Although the price of oil depends upon many things, supply and demand are the most basic. Speculation can be a major factor in setting prices too, but it may only have short-term effects and, if the world was awash with oil, there would be little incentive to speculate. On the supply side, the price paid for oil must be greater than the marginal cost of a barrel of oil, otherwise it’s not worth producing. On the demand side, the price that users can afford to pay depends on the health of their economy, which can be undermined by high oil prices.
The oscillating decline model is an attempt to describe the effect of peak oil on an economy. In this model, constrained or declining oil production leads to an escalation in oil and food prices relative to available income, which feeds through to the whole economy. But economies cannot pay this price for a number of reasons. Firstly the price rises leave people with less money to spend on discretionary items, causing job losses and business closures amongst suppliers. Secondly, for a country that is a net importer of energy, the money sent abroad to pay for energy is lost to the economy unless it stimulates the export of goods of equivalent value (highly unlikely in this analysis).
The constricted growth leads to rising defaults on loans and to less international trade that would support the servicing of external debt. It would raise interest rates as the future economic outlook became more precarious. There would be a tendency to save against the increased risks of unemployment. The general effect would be deflationary as money supply dropped in relation to available goods and services. This would add to what are already huge deflationary pressures arising from the deleveraging of the hyper-credit expansion of the last two decades. The rising cost of debt servicing, on top of food and energy price rises, would further squeeze consumption. The oscillating decline model assumes such stresses are not great enough to cause a terminal systemic global banking failure or a major monetary collapse.
The decline in economic activity leads to a fall in purchasing power and a decline in all forms of energy demand and a fall in its price. Falling or volatile energy prices mean new production is less likely to be brought on stream. New energy investments in oil, renewable energy, natural gas or nuclear power, for example, become less competitive not just because energy prices are lower but also because existing energy infrastructure and supply has an overhang of spare capacity. Energy companies’ reduced revenue and the bad credit conditions further constrain their ability to invest in new production. [20] The reduced revenue also means that the fixed costs of maintaining existing energy infrastructure (gas pipelines, the electric grid, refineries etc.) is a greater burden as a percentage of declining revenue.
If production falls significantly, companies lose the economies of scale they have been getting from their infrastructure. For example, once the revenue from natural gas sales becomes less than the fixed operating costs of production platforms and pipelines, then continuing to deliver gas becomes no longer viable. That means that loss of economies of scale can lead to an abrupt supply collapse and the withdrawal of supply, leading to a further reduction in production capability, and thus in economic production. This is yet another positive feedback loop.
These same conditions also constrain energy adaptation. For example, customers would find it more difficult to buy electric cars or invest in insulation, and governments to subsidise them. It would also be more difficult for the car manufacturers to ramp-up production and gain economies of scale (in addition to dealing with tight lithium supplies). In general, the tighter the economic and social constraints on an economy, the more likely it is that resources will be deployed to deal with current concerns rather than being invested in something that brings a future benefit. This expresses the generally observed increase in the social discount rate in times of growing stress.
In such an energy-constrained environment, one would also expect a rise in geo-political risks. Bilateral arrangements between countries to secure oil and food would reduce the amount on the open market. It would also increase the inherent vulnerability to highly asymmetric price/supply shocks from state/non-state military action, extreme weather, or other “black swan” events.
When oil prices rise above the marginal cost of production and delivery, but can still be afforded despite the economy’s decreased purchasing power, the energy for growth becomes available again. Of course local and national differences (in, for example, the degree of dependence on energy imports or the export of key production such as food) affect how regions fared in the recession and their general ability to pick up again. Even so, growth begins again, focusing maybe on more ‘sustainable’ production and consumption.
However, the return of growth will not raise the purchasing power of the economy to its previous level because oil production will be limited by resource depletion; the lack of investment in production; the entropic decay of infrastructure and productive capacity; and the lower purchasing power which will reduce the price that the economy can afford to pay for its oil. The recovery will be cut short as rising oil, food and energy prices produce another recession.
The sequence of events in the oscillating decline model is therefore as follows: economic activity increases — energy prices rise — a recession occurs — energy prices fall — economic activity picks up again but to a lower bound set by declining oil production. As a result, the economy oscillates to a lower and lower level of activity.
There are good grounds for believing that this process has already begun. At least one authority links the record oil prices in 2007 to the pricking of the credit bubble. [21]
Collapse dynamics
The oscillating decline model does not account properly for some of the embedded structures of the global economy which, while relatively obvious, have been obscured by the fact that they were adaptive in a growing economy. If oil production declines, and we cannot fill the gap between the energy required for growth and what can be produced, as we saw in the oscillating decline model, this limits the availability of other types of energy, then the global economy must continue to contract. In short, humanity is at, or has exceeded, the limits to growth.
Embedded structures that fail to contract in an orderly manner will break down. The structures that will break down include monetary and financial system, critical infrastructure, global economies of scale, and food production. As argued earlier, these structures are deeply inter-dependent. As a result, they will reinforce each other’s collapse. Their collapse undermines the whole operational fabric and the functioning of the global economy and all it supports.
It has been argued so far that our civilisation is a single, complex adaptive system. Complex adaptive systems, and the sub-systems of which they are comprised, are a feature of open thermodynamic systems. And while they show great diversity, from markets to ecosystems to crowd behaviour, their dynamic properties have common features. For most of the time complex adaptive systems are stable, but many of them have critical thresholds called tipping points, when the system shifts abruptly from one state to another. Tipping points have been studied in many systems including market crashes, abrupt climate change, fisheries collapse and asthma attacks. Despite the complexity and number of parameters within such systems, the meta-state of the system may often be dependent on just one or two key state variables. [22]
Recent research has indicated that as systems approach a tipping point they begin to share common behavioural features, irrespective of the particular type of system. [23] This unity between the dynamics of disparate systems gives us a formalism through which to describe the dynamic state of globalised civilisation, via its proxy measure of Gross World Product (GWP) and its major state variable, energy flow.
Catastrophic bifurcation is the name given to a type of transition where once the tipping point has been passed, a series of positive feedbacks drives the system to a contrasting state. For example, as the climate warms, it increases methane emissions from the Arctic tundra, which drives further climate change, which leads to a further growth in emissions. This could trigger other tipping points such as a forest die-off in the Amazon Basin, itself driving further emissions. These positive feedbacks could mean that whatever humanity does would no longer matter as its impact would be swamped by the acceleration of much larger-scale processes.
Small changes can produce a big response
Figure 2: The state of a system responds to a change in conditions. The continuous line represents a stable equilibrium. In A a change in conditions drives an approximately linear response in the systems state, unlike B where a threshold is crossed and the relationship becomes very sensitive. The fold bifurcation (C, D) has three equilibria for the same condition, but the one represented by the dotted line is unstable. That means that there is a range of system states that are dynamically unstable to any condition. Source [24].
Figure 2 shows how the system state responds to a change in conditions. The state of a system could represent the size of a fish population, or the level of biodiversity in a forest, while the conditions could represent nutrient loading or temperature (both effectively energy vectors). The continuous line represents a stable equilibrium; the dotted line an unstable one. In a stable equilibrium, the state of the system can be maintained once the condition is maintained. In figure a) and b) we see two different responses of a stable system under changing conditions. In the first, a given change in conditions has a proportional effect on the system state; in the latter, the state is highly sensitive to a change in conditions. In c) and d) the system is said to be close to a catastrophic bifurcation. In both of these cases there is an unstable region, where there is a range of system states that cannot be maintained. If a system state is in an unstable regime, it is dynamically driven to another available stable state. If one is close to a tipping point at a catastrophic bifurcation the slightest change in the condition can cause a collapse to a new state as in c), or a small perturbation can drive the system over the boundary as in d).
The state of our civilisation necessarily depends on the state of the global economy. I mentioned earlier that the global economy has been in a dynamic but stable state for 150 years or so, because it has had compound economic growth of about 3% per annum within a narrow band of fluctuation during that time. The state of the global economy is indicated by annual GWP growth of approximately 3%, and GWP is absolutely dependent upon rising energy flows.
To argue that civilisation is on the cusp of a collapse, it is necessary to show that positive feedbacks exist which, once a tipping point has been passed, will drive the system rapidly towards another contrasting state. It is also necessary to demonstrate that the state of the global economy is driven through an unstable regime, where the strength of the feedback processes is greater than any stabilizing process. It acknowledges that there may be an early period of oscillating decline, but that once major structural components (international finance, techno-sphere) drop or ‘freeze’ out, irreversible collapse must occur.
In the new post-collapse equilibrium state we would expect a collapse in material wealth and productivity, enforced localisation/de-globalisation, and collapse in the complexity as compared with before — an expression of the reduced energy flows.
Collapse mechanisms
The monetary and financial system
As I write, fears are being expressed that a Greek sovereign default may be inevitable and that, as a result, the markets might refuse to lend to Ireland, Portugal and Spain, causing them to default as well. In Ireland, as in other countries, deflation is continuing as the money supply contracts, and people retrench their spending because of fears of future unemployment. As our debt burden becomes greater in relation to our national income, it adds to the instability in the eurozone. A contagious default would be a major blow to German and French banks, which have lent to all four countries. The economic historian Niall Ferguson argued that US fiscal deficits could lead at some point in time to a rapid collapse in the United States economy, noting “most imperial falls are associated with fiscal crisis”. [25] Such a crisis would drag down every other economy, including those of China and Saudi Arabia.
These examples point to three things. One is that while money may not have any intrinsic value, it can nevertheless decide the fate of nations and empires. The second is that in an integrated globalised economy, a crisis in one region can become everybody’s crisis. Finally, it emphasises that the risks arising from huge indebtedness (and implied trade imbalances) are still with us, irrespective of resource constraints. The latter signifies the necessary irony that never before have we been so indebted, which is essentially an expression of our faith in future economic growth, just as that growth becomes impossible due to resource constraints.
Earlier I explained that the monetary and financial system was a hub infrastructure of the global economy, with no operational alternative. It is based upon credit, interest and fiat currencies. Credit underpins our monetary system, investment financing, government deficit financing, trade deficits, letters of credit, the bond market and corporate and personal debt. Credit, and the promise of future economic growth, supports our stock market, production, employment and much else besides. It is a primary institutional infrastructure of the global economy.
Over the whole of an economy, in order for debt to be repaid with interest, the money supply must increase year on year to replace the money lost to the economy when interest payments are made[1]. Money is injected into the economy when additional loans are taken out. Accordingly, the payment of interest requires an increasing level of debt, and eventually, the level of debt will become unsupportable unless incomes grow as well, either because the economy has grown or because there has been an inflation. If loan repayments including interest exceed the value of the new loans being taken out, the money supply contracts. If it does so, less business can be done, so firms fail and there is less purchasing power in the economy and increasing difficulties with servicing debts. This causes people to spend less, and investment borrowing to fall. In other words, a deflationary spiral develops. On the other hand, if debt, and thus the money supply, increases without a corresponding increase in GDP, money’s purchasing power is reduced by inflation.
Increasing GDP requires increasing energy and material flows. With an energy contraction, the economy must contract. In a growing economy, debts can be paid off as they fall due, because borrowers are prepared to take out enough additional loans to cover the payment of the principal plus interest on old loans as they mature. In a permanently contracting economy, the shrinking income makes the payment of even the interest increasingly difficult as, with inadequate borrowing, the money supply declines. Another way of putting this is that reducing energy flows cannot maintain the economic production required to service debt. The value of the debt needs to be written down to a level appropriate to the new level of production. This write-down can be achieved by either mass defaults or by inflation. Consequently, if the economy is expected to shrink year after year, the number of people prepared to borrow or lend money in the conventional way will dry up, as no-one will be confident that the borrowers will have enough income to make the interest payments.
A bank’s main assets are the loans on its books. If even a tenth of those loans cannot be repaid, that bank is wiped out because making good the losses would take more than its shareholders’ capital and retained profits. Its depositors could not be repaid in full and its government or central bank would have to step in to make good the loss and allow the bank to continue to trade. If the bank’s losses continued as incomes and asset values fell further, the government is likely to reach the end of its borrowing capacity. It would be open to the central bank to create money out of nothing to fill the hole in the bank’s books, but it is likely to be reluctant to do so for fear that the new money would cause inflation.
Unlike previous monetary crisis, one caused by declining incomes and asset values would be systemic and global. There would be no ‘outside’ lender to provide rescue, or external hard currency to provide reserves for important imports. Nor could the system be ‘re-set’ in the expectation of future growth, because those expectations would have little foundation.
As the deflationary pressures would continue as the crisis developed, the prices of oil, food, and debt servicing would rise in relation to people’s falling incomes. There would be an increasing frequency of sovereign defaults, banking collapses and runs, declining production, panic buying and shattered public finances. In such a context, printing money (not necessarily by conventional quantitative easing) and currency re-issues are likely to become necessary. Unless the money issue was tightly controlled, this could open the door to hyper-inflation. However, forecasting and control of money supply may be very difficult due to the intrinsic uncertainty of the monetary and economic environment. An additional inflation risk is that, if people began to have doubts over their bank deposits and future monetary stability, they may start spending on necessities and resilient assets, driving up the velocity of money and further increasing inflation.
Trust is the central principle underpinning the global monetary system and thus the trade networks upon which we rely. Governments can in theory print endless money, at almost no cost, to their hearts’ content. That we trade it for our limited assets, or our finite labours, is a measure of the remarkable trust bequeathed to us through our experience of globalising growth. The economist Paul Seabright argues that trust between unrelated humans outside our own tribal networks cannot be taken for granted. [26] Because trade is, in general, to all our benefit, we have developed institutions of trust and deterrence (‘good standing’, legal systems, the IMF, banking regulations, insurance against fraud, and the World Trade Organization, etc.) to reinforce co-operation and deter freeloaders. Trust builds compliance, which confers benefits, which in turn builds trust. But the reverse is also true. A breakdown in trust can cause defections from compliance, further reducing trust.
Because our governance and monetary policy is national (the Euro is likely to fail), but our basic needs are supplied globally, countries will be tempted to engage in predatory devaluations followed by inflations. This could occur even if governments were directly issuing debt-free money to citizens. Governments act firstly for their own citizens. In an evolving crisis, they are also likely to favour clear immediate benefits over uncertain future ones. Facing pressing immediate and projected national needs, the prospect of a continuing decline in the global productive base, and the risks of collapse in the operational fabric, governments are likely to face the following choice: maintain the value of your currency by limited issuance in the hope that it will in future be more acceptable to foreign traders, or ‘stealth’ print money to make a grab for international assets and inputs before there is a major system failure. Furthermore, if currency crises are seen as inevitable, and hard asset barter or currency backing are likely to supersede it, then the break-up of countries’ dedication to monetary stability becomes a matter of when, not if. In such a manner, the globalising trust dynamics that evolved in the confidence in future growth begin to break down.
Remember, we only exchange something of intrinsic value for currency if we can assume that the money we get can be exchanged later on for something else of intrinsic value. In other words, we need to be able to assume that exchange rates will be stable and that inflation will be low in the period before we spend the money again. The instability of debt money, fiat currencies and competitive devaluations all remove the basis for this assumption. Money becomes very difficult to value in space (for foreign exchange and trade) and in time (for savings and investment). We can say that it becomes opaque.
Bank intermediation, credit and confidence in money holding its value are the foundations of the complex trade networks upon which we rely. The mismatch between our dependencies upon integrated global supply-chains, local and regional monetary systems, and nationalised economic policy, which has not been a problem up to now, will become so as the monetary crisis develops. A complete collapse in world trade is an extreme but not unlikely consequence.
Even if debts are written off or inflated away, a much higher proportion of everyone’s reduced incomes will be absorbed by food and energy purchases. However, a country will only be able to import energy, food and inputs for its production processes by exporting something of equal value, because it will not be granted credit to run a trade deficit. The uncertainty about the value of money, and fears of future degradation of the operational fabric, is likely to mean that commodities such as gold, oil, grain and wood may be used as currency to settle accounts. However, this form of payment is ill suited to the complexity of global inputs.
Exports will collapse along with the level of production within a country, making it even more difficult to import energy or materials to increase production. As I explained earlier, modern economies produce almost nothing indigenously, as supply-chain breakdowns causing key production inputs to become unavailable become increasing likely. This will cause further production problems and make it likely that countries will remain trapped at a very low level of economic activity.
Moreover, because our supply-chains are so complex and globalised, local failures in monetary stability, lack of inputs, or a failing operational fabric would propagate through supply-chain links and other national operational fabrics. In this way, localised failures quickly become globalised.
Global food producers are already straining to meet rising demand against the stresses of soil degradation, water shortages, over-fishing and the burgeoning effects of climate change. [28] It is estimated that between seven and ten calories of fossil-fuel energy go into every one calorie of food energy we consume. It has been estimated that without nitrogen fertiliser, produced from natural gas, no more than 48% of today’s population could be fed at the inadequate 1900 level. [29] No country is self-sufficient in food production today.
The fragility of the global food production system will be exposed by a decline in oil and other energy production. It is not just the more direct energy inputs, such as diesel, that would be affected, but fertilisers, pesticides, seeds, and spares for machinery and transport. The failing operational fabric may mean there is no electricity for refrigeration, for example.
It should be clear even from the above overview that a major financial collapse would not just cut actual food production, but could result in food left rotting in the fields, an inability to link surplus production with those in need, a lack of purchasing power and an inability to enact monetised food transactions.
Our critical reliance upon complex just-in-time supply-chain networks means there is little buffering to protect us from supply shocks. In the event of a shock, unless precautions are taken, it is likely that hunger could spread rapidly. Even in a country that could be food independent or a net exporter, it may take years to put new systems in place. In the interim, the risks are severe.
The primacy of the necessary and reverse economies of scale
We mentioned that more and more of people’s declining income will go on the most non-discretionary purchases, in particular food and energy. What does this mean for developed economies where most energy and a fair amount of food is imported, and which together employ only a few percent of a population? It means not only mass unemployment, but also a tiny amount of purchasing power chasing the declining availability of the necessities we depend upon. A similar position would exist in other countries. Imports and exports would drop rapidly. The unemployed, schooled and adapted to specialised and largely service roles in the globalised economy, would be quite at a loss for a considerable period.
In addition we would face reverse economies of scale. As the size, integration and complexity of the global economy has grown, our local well-being has become more and more dependent upon global economies of scale. Economies of scale work at every level-not just in the good you buy, but in all the components that went into making it, and so on. Similarly, all the hub infrastructures depend on globalised economies of scale. The lower unit prices have led to greater sales volumes and have also a freed up discretionary income to be spent on other goods and services. Thus our purchasing power too is dependent upon economies of scale. The evolution of our economies and economic infrastructure has been predicated upon increasing economies of scale.
If the scaling-up process goes into reverse, reduced purchasing power, and the constriction in non-discretionary consumption, causes purchases to fall and unemployment to rise. Fewer goods and services are sold, which reduces economies of scale, which causes prices to rise, causing further falls in sales. The problem is particularly acute for very complex products and services with limited substitutability, and ones that have high operational costs.
For example, as fewer users can afford to replace mobile phones or computers, or use them less, the cost of the personal hardware and maintaining the network rises per user. Rising costs mean less discretionary use and so on. This is a serious matter for the operators because common IT platforms require a large number of users to keep costs per user low. In effect, the most discretionary use (say, Facebook, texting and Playstation) keeps down the cost for more important uses such as business operations, banking, the electricity grid and the emergency services. Remove the discretionary uses and the cost for businesses and critical services begins to escalate. Furthermore, large hub infrastructure has a fixed cost of operation and maintenance. Once income falls below the operating cost, the system will be switched off unless supported from outside. As government income is likely to fall greatly, this may not be possible.
Critical infrastructure
We are deeply dependent on the grid, IT and communications, transport, water and sewage, and banking infrastructure. In general, these are amongst the most technologically complex and expensive products in our civilisation. Their scale and capacity is determined by current and the projected growth in economies, meaning they have high fixed costs. They are viable because there is purchasing power, economies of scale, open supply-chains and general monetary stability over the world. They both comprise and are dependent upon the operational fabric.
Because of their complexity and scale (implying high levels of entropic decay), this infrastructure requires continuous inputs for maintenance and repair. These inputs are often very complex, have limited lifetimes and require specialised components that depend upon very diverse and extensive supply-chains. For the various reasons discussed, substitutes and sub-components for missing inputs may not exist, causing critical infrastructure to break down. Or, the infrastructure provider or component suppliers may not be able to afford inputs due to loss of purchasing power in economies, loss of economies of scale or monetary collapse.
The tight coupling between different infrastructures magnifies the risk of a cascading failure in our critical infrastructure and thus a complete systemic failure in the operational fabric upon which our welfare depends. At the very least, a failing infrastructure feeds back into reduced economic activity and energy use, further undermining the ability to keep the infrastructure maintained.
Financial system dynamics
Our knowledge and response to expectations of the future shape that future. One area that is most sensitive to this is financial markets.
Money only has value because it can be exchanged for a real asset such as food, clothing or a train journey. As long as we share the confidence in monetary stability, we can save, trade and invest. It is a virtual asset, as it represents only a claim on something physically useful. [27] For most of us, bonds and equities are effectively virtual, as very few shareholders have any meaningful access to underlying physical assets; they are mediated by money. However, the current valuation of virtual assets towers over real productive assets on which their value is supposed to be based. A bond is valuable because we expect to be paid back with interest some years hence; paying 20 times earnings for shares in a company is a measure of confidence in the future growth of that company. Conversely, if a productive asset cannot be made to produce because of energy and resource constraints and the failing operational fabric, it loses its value. This implies that virtual wealth, including pension funds, insurance collateral and debt, will become worth much less than at present, or effectively evaporate[2].
The widespread acknowledgement by market participants (and governments) that peak oil is upon us, coupled with an understanding of its consequences, is likely to crash the global financial system. Initially, just a few market participants will begin to question their faith in the overall stability and continued growth of the system and thus the likely value of their virtual assets. However, the transition can be very rapid from a few market participants accepting the idea that the system could break down permanently, to large-scale acceptance. A fear-driven, positive feedback conversion of a mountain of paper virtual assets into a mole-hill of resilient real assets could develop. This would help precipitate an irretrievable collapse of the financial and economic system.
The re-booting problem
The opportunity to re-boot the globalised economy from a trough in the oscillating decline model, or from a collapsed state, so as to return it to the operation and functionality of its current state, is likely to be deeply problematic. We can consider this from four standpoints.
Entropic decay
As Germany was hit by the global economic crisis, there was a big drop in the need for commercial transport. As a result trains and locomotives were taken out of use. A year later as the economy picked up, the trains were again required. But in the interim, cylinders and engines had rusted. The trains were of no use until repairs could be carried out, which required finance, time and open supply-chains. There was a costly shortage for a while but a fully functioning operational fabric and wider economy ensured there was no disaster [30].
If we have a major economic collapse, the longer it continues the greater the entropic decay of our productive and critical infrastructure, and the more difficult it will be to re-boot.
Loss of co-ordination
The global economy we have now is the result of a self-organising process that emerged over generations. If it collapsed, we would lose the infrastructure that allowed that complex self-organisation to emerge. Post-collapse, we would have to begin with top-down conscious re-building; this would suffice for simple projects but not the hyper-complex products with globalised sourcing we rely upon today.
Loss of resilience & adaptive capacity
In this paper, I have focused on some well-defined collapse mechanisms that are to varying degrees necessary, though they are by no means exclusive. Social stresses, health crises, and the effects of climate change may all add to our difficulties.
By way of illustration we can consider climate change. We are likely to see a major (forced) drop in emissions of anthropogenic greenhouse gases. However, temperature may continue to rises for many decades. Furthermore, we are left with uncertainty as to whether we have crossed tipping points in the climate system that could accelerate terrestrial emissions.
Few studies of the economic impact assume we will be very much poorer in future. The physical effects of climate change, in the form of flooding or reduced food productivity, will amplify the effects of the collapse processes. Being much poorer, and without our current operational fabric, will mean that the relative cost of adaption and recovery from climate induced shocks will escalate beyond our ability to pay much sooner than if our economies continued on their present courses. Furthermore, we will lose the buttressing provided by insurance, and the open supply-chains and strong globalised economies that could re-distribute surplus food from elsewhere.
Focus of the moment
In the increasing stress of the moment, available resources are more likely to be invested in dealing with immediate needs over long-term investment. The stability of the globalising economy has provided the context in which planning and investment could occur. The inherent uncertainty in the collapse process will also tend to favour shorter-term actions. This will reduce the resources for re-booting the system to its former state.
An amalgam of the oscillating decline and the collapse model has been offered as a guide rather than a prediction. The irony is that people may rarely notice they are living under energy constraints. Energy retraction from the global economy can be achieved by production declines or collapses in demand, though as we have seen, they are deeply inter-related. We may experience energy use collapse not as an energy constraint, but as a systemic banking collapse and vanished purchasing power. While energy is generally regarded as non-discretionary, energy use can drop considerably and welfare can, to some degree, be maintained. Food will represent a far more persistent challenge with the strongest real price support. For collapses in food supply and/or demand may well be associated with famine.
Tainter, drawing on historical precedent, defined some of the features of the collapsed state:
  • a lower degree of stratification and social differentiation;
  • less economic and occupational specialisation;
  • less behavioural control;
  • less flow of information between individuals, between political and economic groups, between the centre and its periphery;
  • less sharing, trading, and redistribution of resources;
  • less overall co-ordination and organisation of individuals and groups;
  • smaller territories integrated within a single political unit.
The integration and speed of processes (financial information, capital movement, supply-chains, component lifetimes, etc.) within the globalised economy suggest that a collapse will be much faster than those that have gone before. Furthermore, the level of delocalisation and complexity upon which we depend, and our lack of localised fall-back systems and knowledge, suggests that the impacts may be very severe for the most advanced economies. No country or aspect of human welfare will escape significant impact.
Our understanding and expectations of the world have been shaped by our experience of economic growth. The dynamic stability of that growth has habituated us to what is ‘normal’. That normal must soon shatter. Our species’ belle époque is passing and its future seems more uncertain than ever before.

  1. Here we are referring to the 95% drop in the Baltic Dry Shipping Index. See
  2. Korowicz, D. (2010) Tipping Point: Near-term Systemic Implications of a Peak in Global Oil Production.
  3. Maddison, A. (2007) Contours of the World Economy 1-2030AD. Page 81 Oxford Univ. Press.
  4. See Beinhocker, E. (2005) The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics. Rh Business Books.
  5. Jones, B. (2009) The Burden of knowledge and the Death of the Renaissance Man: Is Innovation Getting Harder? Review of Economic Studies 76(1).
  6. Tainter, J. (1988) The Collapse of Complex Societies. Cambridge University Press.
  7. State of the Nation: Defending Critical Infrastructure. Institute of Civil Engineers (2009).
  8. Braudel, F. (1981). The Structure of Everyday Life (Vol. 1): The limits of the possible. Collins. Page 74.
  9. Chaisson, E. (2001) Cosmic Evolution: The Rise of Complexity in Nature. Harvard Univ. Press.
  10. Kinsella, T. Politics must liberate itself for revolution to succeed. The Irish Times. 16th March 2009.
  11. Cleveland, C. et al. Energy and the US Economy: A biophysical Perspective. Science 255 (1984).
  12. Ayres, R., Ayres, L., Warr, B. Energy, Power, and Work in the US Economy, 1990-1998. Energy 28 (2003).
  13. Ayres, R., Warr, B. (2009) The Economic Growth Engine: How Energy and Work Drive Material Prosperity. Cambridge, Edward Elgar Publishing.
  14. Cleveland, C., Kaufmann, R., Stern D., eds, Aggregation and the Role of Energy in the Economy. Ecological Economics 32. Elsevier (2000).
  15. Al-Huseini, S. In conversation at
  16. World Energy Outlook (2008). The International Energy Agency estimates a ‘natural’ decline rate of 6.7%, which would be expected to rise as production became more dependent upon smaller fields.
  17. Sorrell, S. and Speirs, J. (2009) Global Oil Depletion: An Assessment of the Evidence for the Near-Term Physical Constraints on Global Oil Supply. UKERC Report.
  18. Heinberg, R. (2009) Searching For a Miracle: Net Energy Limits and the Fate of Industrial Society. Forum on Globalisation and The Post Carbon Institute.
  19. Trainer, T. (2007) Renewable Energy Cannot Sustain a Consumer Society. Springer.
  20. The evolving credit crisis has led to a drop of 19% in energy investments in 2008 according to the International Energy Agency and the cancellation of many projects that depended upon high oil prices such as the tar sands.
  21. Hamilton, J. (2009) Causes and Consequences of the Oil Shock 2007-2008. Brookings Papers on Economic Activity. March.
  22. Scheffer, M. (2009) Critical Transitions in Nature and Society. Princeton Univ. Press.
  23. Scheffer, M et al. (2009) Early-warning signals for critical transitions. Nature Vol. 461 3 Sept.
  25. Ferguson, N. (2010) Complexity and Collapse: Empires on the Edge of Chaos. Foreign Affairs March/ April.
  26. Seabright, P. (2005) The Company of Strangers: A Natural History of Economic Life. Princeton Univ. Press.
  27. Soddy, F. (1926) Wealth, Virtual Wealth and Debt: the Solution of the Economic Paradox. George Allen and Unwin.
  28. Godfray, H et al. (2010) Food Security: The Challenge of Feeding 9 Billion People. Science Vol. 327.
  29. Smil, V. (1999) Long-Range Perspectives on Inorganic Fertilisers in Global Agriculture. International Fertiliser Development Centre.
  30. Germany Faces Freight Train Shortage as Growth Picks Up. Der Spiegel Online. 4th May 2010.,1518,687291,00.html

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