Usually, we don’t stop to think about how the whole economy works together. A major reason is that we have been lacking data to see long-term relationships. In this post, I show some longer-term time series relating to energy growth, GDP growth, and debt growth–going back to 1820 in some cases–that help us understand our situation better.
When I look at these long-term time series, I come to the conclusion that what we are doing now is building debt to unsustainably high levels, thanks to today’s high cost of producing energy products. I doubt that this can be turned around. To do so would require immediate production of huge quantities of incredibly cheap energy products–that is oil at less than $20 per barrel in 2014$, and other energy products with comparably cheap cost structures.
Our goal would need to be to get back to the energy cost levels that we had, prior to the run-up in costs in the 1970s. Growth in energy use would probably need to rise back to pre-1975 levels as well. Of course, such a low-price, high-growth scenario isn’t really sustainable in a finite world either. It would have adverse follow-on effects, too, including climate change.
In this post, I explain my thinking that leads to this conclusion. Some back-up information is provided in the Appendix as well.
Insight 1. Economic growth tends to take place when a civilization can make goods and services more cheaply–that is, with less human labor, and often with less resources of other kinds as well.
When an economy learns how to make goods more cheaply, the group of people in that economy can make more goods and services in total because, on average, each worker can make more goods and services in his available work-time. We might say that members of that economy are becoming more productive. This additional productivity can be distributed among workers, supervisors, governments, and businesses, allowing what we think of as economic growth.
After a two-century-long burning bender, the globe is in for a heck of a hangover. Our guest this week on Sea Change Radio is Richard Heinberg, Senior Fellow at the Post-Carbon Institute, and author of a dozen books about growth, peak oil, and energy issues. His latest book is called Afterburn, a collection of essays that center on the impending consequences of what he terms “The Great Burning” – our chronic habit of fossil-fuel binging. Heinberg and host Alex Wise talk about what it will take to truly transition off of fossil fuels, including the need for bold leadership and radically different policies. He explains why the GDP is a flawed metric for success, and talks about why we should move away from the outdated Gross Domestic Product, and toward the Global Happiness Index as a better metric of national well-being.
