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THE ECONOMY & THE ENVIRONMENT, OBJECTIVELY CONSIDERED

Foreword

Meaningful growth has long been decelerating towards an impending moment at which the global economy inflects into contraction. This is going to have profound consequences, many of them extremely unpleasant.

But these problems pale when compared with the alternative. Long experience has shown a profound collective inability to back away from behaviours which confront humanity with existential environmental risk.

Involuntary economic de-growth should, or at least could, be manageable.

Mass extinction events are not.

Human behaviours, which we seem unable to change, have been driving the Holocene (“sixth”) mass extinction event, so the ending and reversal of economic growth – something that we are powerless to halt, let alone reverse – is, in all probability, the only process which can save us from ourselves.

Three different outcomes, then, are on the table. The grimmest is that nothing can now halt the “sixth extinction”. The second is that our collective behaviours change in time to avert this outcome, but this seems extraordinarily unlikely.

The third – perhaps optimistic, but very well supported by the evidence – is that a new factor intervenes to stave off the worst version of the extinction.

That “new factor” is the ending and reversal of economic growth.

The stand-off between growth and the environment must be the most profound issue with which we are confronted.

Let’s try to bring some objective assessment to bear.

1

The no-choice choice between a smaller economy and an environmental disaster has pushed us into extreme tantrums of denial. The rest of the Kübler-Ross sequence of grief – anger, bargaining, depression and acceptance – seems certain to follow, but denial is our immediate cognitive and practical challenge.

This denial takes two forms. The first is denial that there need ever be any obstacle to the attainment of ‘infinite, exponential economic growth on a finite planet’.

The second is the claim that accelerating environmental decay, traceable to human recklessness, is some kind of “hoax”.

Lying to ourselves never changes anything, of course, but it can inhibit rational analysis whilst paralyzing our ability to take constructive decisions.

Of the two, environmental denial is arguably more harmful than end-of-growth denial, and is certainly the more insidious.

“End-of-growth denial” is cloaked in a pre-industrial economics orthodoxy whose fallacies are comparatively easy to expose.

“Environmental denial”, on the other hand, works in ways whose false claims have a convincing, if essentially superficial, plausibility. Its core purpose is to persuade us that a course of action which benefits some in the present, to the detriment of all in the future, is both a desirable and a safe form of behaviour.

Environmental denial works in two main ways. It asserts that the term “climate change” (or “global warming”) encompasses the entirety of environmental risk, and then aims to portray disagreement amongst the experts about the reality of this mechanism. Environmental decline, narrowed down to “climate change”, is, we’re told, a contested hypothesis, not a factual reality.

We are, in fact, being sold a misleading environmental nostrum in much the same way that we are sold cartons of cornflakes or packages of political promises. The fault-lines in this nostrum are miles wide.

First of all, the claim that the entirety of environmental risk can be wrapped as “climate change” is untrue. Rising temperatures are just one of three core risks.

The others are pollution and the loss of biodiversity.

Both the worsening toxicity of the land, sea and atmosphere, and the far-above-trend rate of species extinction, are harmful, in some cases lethal, even if they do not contribute directly to increases in global temperatures. We could, as it were, experience an environmental disaster even if the thermometer were to stick right where it is.

Second, the claim that science is meaningfully “divided” about climate change seems false. To the admittedly non-specialist observer, a huge preponderance amongst climate scientists seems to accept the climate change thesis as real.

Neither, for that matter, are climate scientists or environmental activists unworldly idealists, self-charged with a starry-eyed mission of trying to “save the planet”. The planet can get along fine without us, just as it survived the extinction of the dinosaurs.

What’s really at stake is the viability of ‘the human project’, and, as in so many other issues, the trade-off is between immediate gratification and a longer-term balance of costs and benefits.

2

Somewhere in the realms of science fiction is a tale in which intergalactic travellers encounter a beautiful blue-green planet that they decide to investigate.

As their starship descends, they first have to weave their way through a carpet of seemingly meaningless metallic junk. Then they begin to hear a painful and irritating buzz of the kind they associate with insect infestation. Finally, their senses are assaulted by a sickly-sweet odour of decay.

Their sensors detect a superabundant life-form seemingly engaged in frenetic, destructive activity which has no discernibly rational purpose.

Their conclusion is that the planet has been infested by a dramatically expanded species with very little rationality and an absolute inability to curb destructive patterns of behaviour which must encompass its own downfall.

The final irony is their discovery that this low-rationality species styles itself Homo sapiens whilst exhibiting few, if any, signs of sapience.

3

Sixty-six million years ago, the fifth mass extinction event was triggered by a gigantic asteroid, between six and nine miles in diameter, which struck the Earth onshore and offshore the Yucatan peninsula.

The force of the impact was at least a billion times greater than the atomic bomb dropped on Hiroshima. The resulting Chicxulub crater is about 110 miles in breadth. Because the sea in the area was shallow, the ensuing tsunami was only about 330 ft in height, rather than the near three miles that it could have reached had the asteroid landed in deep water.

Following a brief but intense pulse of infrared radiation, the Earth was subjected, by dense atmospheric dust, to a year-long impact winter which blocked most sunlight from reaching the planet’s surface, whilst huge clouds of ash were generated by the associated firestorm. Sulphur aerosols ejected into the atmosphere descended as acid rain, which acidified the oceans.

It’s reckoned that this Cretaceous-Paleogene (K-Pg) mass extinction event destroyed about 75% of all species then extant. Amongst them were all non-avian dinosaurs, animals which had strolled around the World for about 135 million years.

It isn’t true, by the way, that some dinosaurs had two brains, the second serving to animate their tails. But their brains were very small, ranging in size from a walnut to a tennis ball.

Perhaps a species requires a much larger brain to accomplish its own mass extinction.

The likelihood of another asteroid strike on the same scale is said to be infinitesimally small. More to the point, there would be absolutely nothing that we could do about it if it happened. This being so, we need only concern ourselves with it if we’re tasked with writing futuristic scripts for what now remains of Hollywood.

Two practical matters are at issue with the “sixth extinction”. The first is our collective propensity to self-destruction, and the second is the question of what – if anything – could stall this extinction process before its worst potential is realised.

4

The principle of surplus energy is pretty close to a law of life. “An animal or a bird survives if, and only if, the energy it obtains from its nutrition exceeds the energy expended in sourcing its food”.

No creature can survive if its energy surplus turns negative.

It’s truly remarkable – and in its way rather frightening – that we should think ourselves uniquely free from this principle, and proceed to interpret our economy on the basis of this hubristic and wholly unfounded assumption of immunity.

If so minded, we can narrate human history on the template of surplus energy.

For hunter-gatherers, the surplus energy equation was rather hit-and-miss. In good times, surplus energy was positive, and they survived. In adverse conditions – poor weather, ill health, a dearth of food sources – they perished.

The development of agriculture created an increase in collective surplus energy, though, by more recent standards, this surplus remained very small indeed. By way of analogy, twenty people or households could now subsist on the labour of nineteen.

The twentieth person, freed from subsistence tasks, was available to work on other things, which included trade, government, law and the making of tools and infrastructures. That these systems remained comparatively rudimentary was a direct consequence of the narrowness of the surplus energy margin.

The big change occurred, of course, from the symbolic date of 1776, in which year James Watt completed the first truly efficient machine for the conversion of heat into work. Coal, previously used for cooking and warmth, could now drive machinery.

At the infancy of the Industrial Revolution, the aggregate of surplus energy remained very small. This was why subsequent progress was pedestrian. More than half a century would elapse between Watt’s achievement and the arrival of the truly transformatory technology of the age, which was the railway.

Over time, the growth of aggregate surplus energy was compound in character, with each increase in the energy surplus freeing more people and more resources for the development of new capabilities.

This progression embraced energy supply itself, notably with the harnessing of oil and natural gas, whose energy characteristics were superior to those of coal.

Over time, we extended the geographical reach of the energy industries, scouring the World for larger and low-cost sources of carbon energy. Likewise, economies of scale worked in our favour – we could double the size of, say, a refinery, a pipeline or a tanker, without doubling its cost.

5

Given our seemingly limitless inherent hubris, we have prided ourselves on the role that human ingenuity, enacted as technology, has played in this advance.

In fact, modern methods of extracting, processing and transporting energy are little different, in principle, from those of a much earlier era. Our mines and wells may be more efficient, our refineries more complex and our pipelines and tankers larger than their predecessors, but the basic physical processes remain essentially the same.

This leads us to what we might call the two laws of technology.

The first is that the rate at which a technology advances is inverse to the material importance of the technology in question.

A time-traveller from a century ago would be dazzled, perhaps impressed, by many modern-day technological achievements. But he or she would find all of the processes that carry out the really important heavy lifting in the economy – pumping water, growing food, supplying and processing energy – immediately recognizable.

The “second law of technology” is that the potential scope of technology is bounded by an envelope of possibilities whose parameters are set by the characteristics of materials and the laws of physics.

To claim otherwise – to suppose that human ingenuity can circumvent material characteristics, or abolish the laws of physics – is to carry hubris to the nth degree of irrationality.

This might be why we have so steadfastly refused to acknowledge material constraints on the potential of energy supply.

A point was reached, almost certainly in the years immediately after the Second World War, when the potential benefits of scale and reach had been maximised.

Thereafter, a new driver of energy supply capability took over. This is depletion, a term which describes our natural propensity to use lowest-cost resources first, and leave costlier alternatives for later.

All natural resources are subject to depletion – minerals, soil and so on – but energy, as the master factor in the material, is more significantly exposed to it than others.

6

The surplus energy equation has just two components, though the interconnections between them are more complex than they might at first sight appear.

In brief, one of these components is the supply of energy itself, and the other is the proportionate cost of supply. Energy is never “free”, because it cannot be put to use without a delivery infrastructure. This infrastructure, being material, cannot be created, operated, maintained or replaced without the use of energy. We “have to use energy”, then, “to get energy”.

In Surplus Energy Economics, the energy that we must “use” in order to “get” energy is known as the proportionate Energy Cost of Energy.

Because we know the sequential processes that shape its course – reach, scale, depletion and very gradual technological innovation – we can infer a parabolic course over time, and can further infer the general path of this parabola for a period extending further back in time than the data necessary for its calibration exists.

Fig. 1

7

Knowledge of these trajectories enables us to plot both a longer history of surplus energy and prosperity, and to establish a set of calculated projections for where things go from here.

Endeavours to extend SEEDS analysis long before the model’s start date of 1980 are necessarily hampered by a diminishing availability of data as we scroll back in time. No precision is claimed for these interpretations, but they nevertheless have an interpretive value which accords with our knowledge of the periods in question.

Aggregate material economic prosperity seems to have grown at a comparatively modest annual rate until the inter-war years, when a process of deceleration set in. This can be associated with the maturing of the coal-based economic system (see Fig. 2A).

Thereafter, the harnessing of oil and natural gas reinvigorated the economy, such that aggregate economic prosperity grew by an unprecedented 4.7% annually during the 1950s, and 5.1% in the 1960s, before slowing to 3.8% in the 1970s.

The latter may seem surprisingly robust given the traumas of those years, but those traumas were political and financial, not material – oil and gas remained abundant in potential availability, and low in material cost, during those years.

Annual rates of population increase naturally followed the trend in prosperity, and equally naturally at something of a remove in years.

The result was that the World’s “average” person became materially more prosperous at annual rates of about 2.7% in the 1950s, 3.0% in the 1960s, and 1.9% in the 1970s.

Latterly, these rates of per capita improvement have fallen dramatically, such that our average person started becoming poorer in the 1990s, and experienced an annual decrease in his or her prosperity of 0.4% between 2010 and 2020.

We’ve tried to reverse (or at least disguise) this trend, of course, using increasingly hazardous monetary expansion.

But, as we know, monetary expansionism cannot reinvigorate the material economy, because money is no more than an adjunct to, and a proxy for, the material. Having no intrinsic worth, money commands value only as an “exercisable claim” on those material things for which it can be exchanged.

The sequence described here explains why reported “growth” has been so dramatically exceeded by the reckless expansion of debts and quasi-debts in modern times, and why the so-called “cost of living crisis” has become an established trend, and is not some kind of temporary “crisis” phenomenon.

Fig. 2

8

This same knowledge enables us to project forward developments at high levels of confidence, and with strong correlations to experience.

In brief, energy supply in aggregate might carry on expanding gradually for some years yet, but this linear expansion cannot possibly keep up with the exponential rate at which ECoEs are rising.

Ex-ECoE surplus energy, which is the direct correlate of material economic prosperity, is thus trending downwards (Fig. 3B), a process which looks even worse when related to the continuing (though decelerating) rate of increase in population numbers.

A further (though lesser and more gradual) head-wind exists in the form of the depletion of non-energy raw materials. For this reason, the rate at which energy use converts into the supply of physical goods, artefacts and infrastructures is inclining downwards (Fig. 3C).

The result, which is energy trends transposed into material economic outcomes through the prism of conversion, is that, economic output might not yet have peaked, but the all-important metric of physical economic prosperity is already inflecting into contraction (Fig 4C).

We shall, of course, refuse to accept any of this, and try to reverse it. We’ll throw money at the problem, and vest almost supernatural faith in our technological genius, but neither will succeed.

The rest, as the saying goes, “will be history”.

Fig. 3

9

For now, at least, one critical question remains – why are we so ignorant about fundamentals, and so determined to deceive ourselves about the knowledge that’s potentially available to us?

The absolute centrality of surplus energy is surely self-evident, as is the reality of an environmental deterioration which extends beyond “global warming” into an undeniable worsening of pollution and loss of diversity.

The very idea that the laws of physics and the finite characteristics of materials can be over-ruled by money or technology strays beyond the infantile into the puerile.

A reasonably generous explanation might lie in the bifurcation of human study.

In the early days of what is now called biology, “natural philosophers” set out to study the “economies” of creatures, by which word they meant the material way of living of whatever species they were studying. These thinkers were either on the road to, or already comfortable with, the law of surplus energy.

Their “moral philosopher” counterparts, by contrast, were interested in immaterial concepts such as ethics, morality, law and government. It’s a great misfortune that the pseudo-science of economics developed out of the “moral” rather than the “natural” stream of human philosophical inquiry.

Adam Smith cannot be “blamed” for this, because his Wealth of Nations (1776) was written under pre-industrial conditions in which the economic meaning of the word “energy” could reasonably be confined to the supply of human and animal labour and the nutritional energy by which both were supported. These forms of energy, though variable in quantity, were invariable in their qualitative characteristics.

Thereafter, “economics” continued to be presented as a “science”, and proffered “laws” which are (and remain) in no way analogous to the laws of science.

We could, had we been so minded, have long ago have developed a genuine science of the economy.

We can only conclude that our collective refusal to do this is traceable to our instinctive dislike of the results that were certain to emerge from it.

We seem instead to have preferred the false expectations (and the distorted incentives) that ensue from favouring comfortable fantasy over unpalatable fact.