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#323: They first make mad
Posted on May 5, 2026
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Foreword

Economic growth is generally understood as a process that delivers a material betterment of living standards over time.

But growth has two other virtues, neither of which has hitherto attracted as much attention as they deserve. Both will be a sore loss now that meaningful growth has ended (and even its faked simulacrum can’t be maintained for much longer),

First, economic growth can rescue us from the consequences of our own mistakes or misfortunes.

The obvious examples are the strong recoveries staged by Germany and Japan from the ruins of 1945. The quarter-century after the Second World War was a period of global economic expansion eclipsing anything ever experienced before or since, and it’s clear that the remarkable German and Japanese reconstructions could not have happened without these favourable worldwide conditions.

These curative properties of growth also apply, though, to businesses and individuals. Governments, too, can grow their economies out of fiscal failures.

Growth, that’s to say, gives us hope. It’s associated with economic regeneration – we might even say ‘redemption’ – as well as with betterment, making it very important indeed from the point of view of collective psychology and expectation.

It was possible, over a very long period, to believe that each generation would enjoy a material improvement in living standards and opportunities in comparison with its predecessor – a belief that has only quite recently ceased to be true.

The second great virtue of growth is that it can allow some to prosper without inflicting worsening hardship on others.

In essence, ‘A can get richer without impoverishing B’ under conditions of growth. During the high-growth years between 1945 and 1970, fortunes were made by many, but the living standards of the generality continued to improve, certainly in the West, and inequalities of wealth and income actually decreased during this period.

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Now that growth has ended, then, we face two fundamental shocks. The first is that we will have to own the consequences of our mistakes, and can no longer rely on economic expansion curing our ills.

Second, minorities will only be able to maintain or expand their wealth at the expense of majorities. This in itself is a massive political shift.

As well as confronting formidable social and political challenges, we will undoubtedly grieve the loss of the curative and reconciling properties of growth.

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Colloquially, we employ the word “shock” to describe any unexpected event, a term whose use extends across the gamut from a severe loss of oil supply to a dramatic overturning of the form books in a sporting contest.

But medical professionals use the term more specifically, referencing “shock” as a condition of acute stress reaction. This is described as “a psychological response to a terrifying, traumatic, or surprising experience”. Unless treated effectively, this can develop into post-traumatic stress disorder.

In layman’s terms, shocks that change our assumptions and expectations can have very real physical and psychological consequences.

Further insights into human reactions to bad news are provided by the five stages of grief set out by Elisabeth Kübler-Ross. We handle serious setbacks by moving, via denial and anger, into bargaining and depression before we finally reach acceptance.

Those of us who aren’t medical or psychological specialists might be well advised to confine ourselves to Cyril Benstead’s observation that “[t]he weaknesses of mankind are generally accentuated under strange and unaccustomed conditions”. There’s no doubt that the ending and reversal of economic growth counts as “strange and unaccustomed conditions”.

The broad point is that an unexpected event, especially an adverse one, can shock people out of rationality.

The term “unexpected” needn’t necessarily refer to something that couldn’t have been predicted.

It might instead reference a bad outcome whose very possibility we have chosen to disregard.

Should we, then, be starting to think in terms of a post-growth derangement syndrome combining the destabilizing characteristics of grief and shock?

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If we look at the world from a perspective of determined objectivity, it’s hard to avoid the impression that collective rationality has been breaking down.

There is, for a start, abundant evidence that, at the very least, the capability for economic growth is drastically lower now than it was in not-too-distant times. Some of us have been prepared to go further, noting that economic expansion has been in the process of reversing into contraction.

Yet society seems to be in the early – the denial and anger – stages of grieving over the loss of economic growth. Perhaps, more specifically, denial has become deeply entrenched, and anger is now starting to make its presence felt.

The aim of the Surplus Energy Economics project has, from the outset, been to interpret and quantify the observation that more than two centuries of meaningful economic growth have been drawing to close.

You don’t, though, actually need C-GDP, ECoE, resource conversion ratios or RRCI disequilibrium inflation to recognise what is really going on.

Problems with “the cost of living”, for example, are visible wherever we look, yet this is still described as a “crisis”, implying some purely temporary phenomenon that wisdom or simply the passage of time will resolve.

This delusion is reinforced by an episodic narrative which blames worsening hardship and insecurity on the ‘bad luck’ of experiencing, in quick succession, a pandemic, a war in Eastern Europe and, now, a conflict in the Persian Gulf.

SEEDS analysis indicates that, far from being temporary, pressure on the costs of essentials has become a relentless and firmly-established trend.

These calculations are carried out by adding government expenditures on public services to the estimated cost of household necessities.

To be clear, any such analysis can only ever be based on estimates, not least because the definition of “essential” varies both geographically and over time. Some products and services now regarded as necessities were viewed as “luxuries” in the not-too-distant past, examples of which include colour televisions and mobile phones.

But the broad conclusion, which seems underscored by observation, appears to be valid. It is that the real costs of essentials are rising rapidly, and are out-growing any continuing expansion in economic means.

Meanwhile, the basis of economic value has been shifting, away from all forms of income and towards capital gains. The latter are, by definition, incapable of monetisation at the aggregate level. Obviously enough, the only people to whom the entirety of real estate, stocks and any other financial asset class could ever be sold are the same people to whom they already belong.

We have, then, been substituting paper gains for material-equivalent incomes.

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The denial characteristics of collective economic self-delusion are particularly visible in the increasing veneration of the two false deities of economic salvation.

One of these is the notion that a deteriorating material economy can be reinvigorated using monetary tools. The other is that we can overcome material finality using the “limitless” capability of human innovation, enacted as technology.

As you may know, both of these assertions are false.

Money, having no intrinsic worth, commands value only as an exercisable “claim” on those material products and services for which it can be exchanged. This, in Surplus Energy Economics, is known as the principle of money as claim, and its validity is surely self-evident.

No amount of money has the slightest value to anyone isolated from exchange, which is the predicament of a person stranded on a desert island, or cast adrift in a lifeboat. Air-dropping banknotes to people suffering from energy and food deprivation cannot help these people unless these commodities are available for purchase.

Meanwhile, the very idea that technology has “limitless” potential is illogical, since all technological possibility is bounded by the characteristics of materials and the laws of physics.

What’s interesting, from the perspective of a post-growth derangement syndrome, is the extent to which irrationality has been extending into the twin fields of technology and finance.

Huge hope and vast amounts of capital have been invested in artificial intelligence, which has been called “the money-losingest project the human race has ever attempted”, has no demonstrable route to profitability, and requires energy and other raw materials at scales which do not even exist.

Meanwhile, American stock markets have reached new highs, despite the fact that closure of the Straits of Hormuz has already inflicted enough material damage to ensure, at the very least, a pronounced economic hit.

Neither does anyone even seem to know what monetary responses are to be expected as this crisis unfolds – will decision-makers tighten policy, in an effort to tame inflation, or will they loosen it, to try to stimulate a sagging economy?

Nobody really knows – but equities are continuing to climb the slope towards the cliff-edge.

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Only in the oil markets has some kind of realistic thinking seemed to prevail.

The closure of the Straits is by far the worst shock ever experienced by the petroleum industry. Not only is it equivalent to the 1973-74 and the 1978-79 crises added together, but it has been greatly exacerbated by severe interruption to shipments of LNG, refined products, petrochemicals and other critical inputs such as sulphur and fertilizers.

Under these extraordinary conditions it was wholly to be expected that oil prices would spike but, thus far at least, these responses have been strikingly muted. Brent crude has occasionally tested US$120/bbl before retreating back towards US$100.

This is a far cry from mid-2008, when Brent reached US$147/bbl, equivalent to almost US$190/bbl at 2026 values. That spike was driven, not by supply shortages, but simply by robust demand.

In essence, the markets seem to have recognised that demand destruction now occurs at markedly lower price-points than in the comparatively recent past.

This doesn’t mean that consumers can shift wholesale to alternatives to oil, since no such scalable alternatives actually exist in most of the applications in which oil in general – and diesel in particular – are critically important.

Meanwhile, the crisis in the Persian Gulf has already lasted long enough to impair output from the summer planting season in the northern hemisphere, with yields set to fall by as much as 50% in some categories of food supply.

What “demand destruction” actually means is that a price is reached at which consumers opt to do without oil rather than chasing its price to ever-greater heights.

Given the profound material consequences of petroleum deprivation, a reduction in the demand-destruction price-point can only mean that consumers – and hence the economy – are poorer than was previously the case.

Fig. 1

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We are, in essence, trapped between two truisms.

One of these was stated by Kenneth Boulding, who famously explained that only “a madman or an economist” could believe in the promise of infinite, exponential economic growth on a finite planet.

But Upton Sinclair, equally famously, said that “t is difficult to get a man to understand something when his salary depends upon his not understanding it”.

We seem to have been prepared to go to almost any lengths rather than admit that economic growth has long been decelerating towards contraction.

Why, though, has growth come to an end?

At the very simplest level, the explanations are that, whilst the non-energy resource base has been subject to long term degradation, the economics of energy itself have been worsening as the impetus initially imparted to the economy by the harnessing of fossil fuels fades out, with nothing available to take its place.

These processes are calibrated here using two specialised metrics. One of these measures the rate at which non-energy resources – including minerals, non-metallic mining products, biomass and water – are converted, using energy, into the top-line flow of economic value.

This, as can be seen in Fig. 2A, has been on a gradual downwards trend. What this means is that these resources have been depleting rather more rapidly than the broad swathe of conversion technologies has been able to advance.

Greater prioritization of resource use could slow this deterioration. Equally, though, the effects of environmental degradation could make things worse, by impairing the qualities of land, water and other resource systems.

Meanwhile, the Energy Cost of Energy has been rising relentlessly. ECoE is defined as “that proportion of energy which, being consumed in the energy access process, is not available for any other economic purpose”.

Rather than showing recent trends – a rise from 2.0% in 1980 to almost 12% today – Fig. 2B illustrates this as an inferred parabola extending over a much longer period.

Given the lack of really long-term historical data, this parabola is necessarily illustrational, but the point to be noted here is that ECoEs fall over an initial phase in which costs are driven downwards by extending geographical reach and rising economies of scale, together with gradual improvements in the technologies of access and use.

Once the benefits of reach and scale have been exhausted, though, the new driver becomes depletion, which describes the natural preference for using lowest-cost resources first, and leaving costlier alternatives for later.

The combined effect, as illustrated in Fig. 2C, is that surplus (ex-ECoE) energy turns down before the adverse combination of rising producer costs and declining consumer prosperity starts to impair top-line supply.

The economic corollary, shown in Fig. 2D, is moderated from the energy curves through the application of resource conversion ratios.

This shows top-line economic output (annotated C-GDP) retaining a modest amount of residual growth capability, but ex-ECoE prosperity already heading into decline.

Fig. 2

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On the basis of SEEDS projections, aggregate material economic prosperity is likely to be about 16% lower by 2050 than it is now, but a continuing (though decelerating) expansion in population numbers could see the prosperity of the average person decline by around 30% over that period.

The real costs of this person’s energy-intensive essentials could rise by more than 70% over the coming quarter-century.

In effect, discretionary (non-essential) affordability gets crushed.

None of this is all that difficult to anticipate, but even its early stages are proving remarkably hard to process collectively.

Denial, thus far, has taken the forms of runaway monetary claim expansion, and a willingness to accept all technological change as “progress”, even where, as Charles Hugh Smith has explained, it often actually constitutes anti-progress.

It’s not as though it’s even hard to predict that the undue faith invested in the false deities of limitless monetary stimulus and infinite technological possibility are likely to fail together, in an event at which the credibility both of money and of technology form a combined crisis.

In other words, we should anticipate a conjunction of technological disillusionment and a collapse of trust in money.

Will that be the point at which Boulding’s truism is accepted, and Sinclair’s axiom is somehow overcome?