The economy isn’t coming back

Presently Americans wait with bated breath, watching sales numbers and unemployment statistics, grasping for signs that an economic recovery is underway. We search for signals that indicate we’re growing, that there will be a job for everyone who wants one, and that the United States will resume the prosperity and standing in the world it once had.

We wait in vain.

Sometimes it takes a cartoon character to show the absurdity of our global economic system
(click to play video)

The economy isn’t coming back. On the contrary, it’s a patched-together mess on its way to the crapper. Though the Obama administration might crow about a tepid recovery, even today’s insufficient economy is itself a lie, propped up by governments printing money to buy their own bonds and simulate growth. The Dow ascends to ever more lofty heights, and yet few believe it’s tied to improving conditions for regular people. China, the economic engine of the world, is now slowing precipitously, and experiencing serious market declines and confidence problems. Europe is an economic mess, and when the EU eventually implodes (it really is a when and not an if), it will send shocks through the rest of our globalized world.

To try and remedy our situation, every government is of course promoting growth. We continue to push the lie that we’ve all internalized but have never spoken: that we could have infinite growth on a finite planet. Expecting infinite from the finite is an absurdist proposition, one that falls apart for the same reason the world economy has stalled: resource constraints. It might seem preposterous to talk about resource constraints, when we in the Western world are surrounded by endless abundance. After all, don’t we have the choice of ten different kinds of kitchen sponges, and 20 types of diet soda?

Yet if you can look past the bounty of the supermarket shelf, there are really dire resource shortages advancing from all sides. For example:

oilOIL

Oil is the lifeblood of modern civilization…and it’s running out. The world’s biggest fields are running dry, leaving humanity to scrape the bottom of the barrel with high effort-low reward energy options like Tar Sands and fracking. Peak Oil is and always has been a real thing, so if you’re unfamiliar with the concept I’d recommend a quick introduction.

waterWATER

Oil may be civilization’s lifeblood, but water is life itself — and it too is becoming scarce as sources are ravaged by climate change and rampant overuse. Water will be more valuable than oil in the future, and already conflicts over water rights are common. You might shrug and assume I’m talking only of sources in arid regions like the Middle East and North Africa, but even within the United States the water wars have begun.

09farmlandLAND

Right now rich countries are buying up huge tracts of land in poorer countries, primarily to grow food and ship it back home. These countries, of which China is the most prolific, need this extra production because as their population and consumption levels skyrocket, they are increasingly unable to feed their people. Exacerbating the problem is the fact that  humanity is pissing away its topsoil, making much of Earth’s arable land worthless.

Oil, water, land…these are the basic building blocks of modern civilization, and all three are in serious jeopardy. Everyone knows the economy is terrible right now, yet for each person you’d no doubt get a different opinion about the cause — lazy people, corporate abuses, excess regulation, automation, corruption, partisanship in Washington, the list goes on and on. But step back for a moment and consider the fact that what’s unfolding is much more fundamental: our output is so low because our inputs are dwindling. Beyond even the fundamental inputs outlined above, there are dozens of other key shortages contributing to our economic woes like phosphorus (fertilizer), rare earth metals (electronics), fish, and copper. All of those are legitimate crises in their own right; taken together, it’s the death knell for a growth-based economy.

A brief interview with author Richard Heinberg, who explains this stuff much better than I do
click to play video (7:20)

So I put to you again: the economy we knew isn’t coming back. As our resources run out, prices will skyrocket and we will no longer be able to afford those that come from far-flung places after winding their way through an energy-intensive distribution system. In a world where every calorie of food you consume requires 10 calories of energy to produce, package, and transport, your Chilean Sea Bass and your Saudi Arabian oil will share the same fate.

But though our growth economy cannot survive, if we are diligent and inventive a new economy may bloom in its stead. The future of the world is local: economic inputs like food and energy will be produced in your local community. Prosperity will be found within worker cooperatives, which often perform much better than traditional businesses in times of economic turmoil. Things will not be easy, and there are no silver bullets here. Saying goodbye to the growth paradigm will be scary and strange, because it’s really all we’ve ever known. But I feel confident that with grit, determination and a bit of luck we’ll find our way through to something better on the other side.

26 thoughts on “The economy isn’t coming back”

  1. [Most of] my food, grown on the premises from seed, has a much better ratio than 1 to 10, but even if everyone did as I do, we’d be facing the elephant. I dunno about that something better on the other side, but I guess it’s human nature (mine too), this whistling past the graveyard.

    1. I fear you may be right Risa, it’s just part of human nature to put of dealing with problems until we hit rock bottom. It think it’s great that you’re growing a good amount of your food though!

      1. Thanks Jake. Yeah, fractional reserve banking is amazing, mind-blowing stuff when you first learn about it. It amazes me that everyone has an idea of what money is…but no one knows where it comes from in the first place.

        1. That picture makes no sense.
          At the end of the first line there is $1000 dollars in the system and the bank has $100.

          At the end of the second line there is $1000 dollars in the system and the bank has $190.

          I think the assumption is that the both the person on the left of the picture and the person on the right of the picture have money. That’s not true because the person on the left lent their money to the bank. For that person to collect her money the bank would have to first collect from the people to the right.

          1. Gareth, the picture is correct, get ready to have your mind blown. To really understand the depths of our economic turmoil, you have to understand how fractional reserve banking works, and specifically how money is created through the process. I recommend this video:

            https://www.youtube.com/watch?v=W3hLKpKv3ME

          2. There is too much propaganda in that movie to believe what it says. Wikipedia on the other hand I generally trust. http://en.wikipedia.org/wiki/Fractional_reserve_banking It makes it seem like your graph and the film are generally correct on how additional money can be added to the system. It’s not technically money though it’s essentially an IOU from the bank.

            More factual info on fractional reserve banking.
            http://www.khanacademy.org/science/macroeconomics/monetary-system-topic/fractional-reserve-banking-tut/v/overview-of-fractional-reserve-banking

          3. I considered giving you that one too, but I liked the one with more dramatic flair. :) Well, what do you think? Did you know this was going on? Don’t you see how this could be problematic with the way things are currently set up?

          4. I knew banks did not keep the money that you deposited but I did not think about the cyclical nature of the situation. Which is sad because I know I’ve heard it discussed on econ-talk several times but it just never sank in before. I just watched this.

            http://www.khanacademy.org/science/macroeconomics/monetary-system-topic/fractional-reserve-banking-tut/v/full-reserve-banking

            It doesn’t really seem any better and it puts more onus on the central bank to figure out the exact right amount of money. I’m guessing there are other setups that could exists as well.

            I don’t buy the conspiratorial angle nor do I think that the problem with our current economy is the fractional reserve banking system per se. I continue to believe that most problems are not caused by nare do wells but by normal people who are given bad incentives. In the US I usually think these bad incentives are created by the government in the guise of consumer protection.
            On a side note I’ve been discussing economic collapse with people I know for similar reasons as mentioned in your movie. Basically the theory goes the fed is printing money and the us consumers use the money to buy foriegn goods. The money ends up in foriegn banks while we get foreign goods. We don’t see inflation here because the money supply in the us hasn’t changed. The theory is the collapse comes when the foreign money starts pooring back into the US causing hyper inflation.
            I find the story convincing but most mainstream economists don’t. Given our relative expertise I would put more money on the mainstream economists then on my own economic reasoning ability. You’ll notice I’m not buying bullets, gold, or timeshares in central america.

  2. Two things. One, time-scale. When you say the economy is not coming back, do you mean this year, this decade, this century or this millennium? It makes a difference. Consider the Roman empire, followed by the ‘Dark Ages’, followed by the Renaissance. Centuries to get over the problems, but they were certainly overcome. Two, locality. Resouces are not universally distributed. Could there be economic scarcity problems in some areas, and good times in others? Makes a difference in strategy – hunker down or migrate.

    1. Hi Stanley, thanks for commenting. I agree the timing totally makes a difference. The truth is I don’t know when this is going down, no one can say for sure. And certainly any kind of breakdown is going to be chaotic, uneven. The world economy is a complex system, and complex systems inherently defy prediction.

      That said, I think you’d have a hard time finding someone to tell you that the world economy isn’t extremely fragile and unbalanced right now. I wrote an article back in March (really a compilation of other people’s articles/interviews) that predicted a major downturn this summer in the May-September timeline, and I’m still operating on that assumption.

    2. When the world reaches peak fossil fuel production, which some people predict will occur in 2025 (give or take 5 years) , it will be all down hill. On average, world economy cannot grow without growth in fossil fuel production. In 2100 the carrying capacity of the Earth will be a small fraction of what it is today. This will be permanent.

    1. As man considers himself separate from his environment, as he regards the Earth as a source of resources only to promote the wealth of individuals, as he sees himself as wholly above and in command of the laws of nature, these kinds of abuses make perfect sense and will continue at pace.

  3. A fundamental redefinition of wealth by economists is what must be done. Measurements of wealth baed on consumption must be mothballed. Consumption is wealth dissipation pure and simple. Measurements such as increases in new clean energy, reforestation increases and recycling increases need to be adopted along with infrastructure investment, educational investment and quality of life/health measurements.

    1. That’s a good start, and a good systemic approach to the problem. The idea of Gross National Happiness is starting to take root a little bit…

  4. The things you are talking about are the iceberg which is only 20 feet away from hitting the Titanic, yet people still can’t see them. The issues you list aren’t a “threat” so much as a reality; so the only variable is in how we as a species respond to them. Consequently, our normalcy bias and our refusal to prepare are the real “threat”. Avertable, but not likely. It doesn’t help that stake holders who are vested in the status quo are busy denying these dangers so that their short term profits can continue for at least a little while longer (i.e., oil companies denying peak oil, etc.).
    Steven in Dallas

  5. Eric, thanks for spelling it out so clearly – in fact I thought it was so clear that I re-blogged it here: http://lockyervalley.org/2013/08/02/why-permaculture/ – with appropriate source credits – I hope you don’t mind. I also subscribed to your newsletter.

    I think a lot of what you describe applies across the board, not just to the US. And when you say that vast tracts of land are being bought up in poorer countries, count Australia in with that group. China and Middle Eastern countries (and others) are buying up our agricultural land big time, and we aren’t among the poorer countries – though I would class us as an un-developing nation; we are seriously going backward on a range of metrics, including levels of poverty, educational standards, and quality of governance.

    1. Hi Gordon, thanks for the reblog! I think I heard about Australia being bought up too, and yeah, you guys have plenty of social and political drama down that way I know. You just got a new leader, someone who professes serious commitment to climate issues, isn’t that right?

      1. That’s what he (Kevin Rudd, recycled Prime Minister, brought back to counter Labor Party’s abysmal poll ratings) said when he was first elected PM, but he seriously dropped the ball on it when push came to shove (with the labor unions and the industrialists doing the shoving, having shoved cash into the Party coffers during the election). Not much chance he will be different this time around, he’s a political opportunist who would sell his mother for a good poll.

        1. Hah, we Americans DREAM of the scandal being our politicians just breaking their word. Instead we’re subjected to cell phone pictures of their penises. Heh

  6. The localization solution is more of the atomization/reductionism that got us into the pickle in the first place. The solution has to be holistic, integral, combining both local and global in a planetary holarchy. The first step is to replace the monetary system which allows profit-making and exploitation of people and resources. A non-fungible value index will allow us to manage the global economy within the earth’s carrying-capacity and with equity for all systems: bioregions, species, populations. http://netplanetaryvalue.wordpress.com

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