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Resilience and Collective Psychology – fast collapse or slow disintegration

Resilience and Collective Psychology – fast collapse or slow disintegration

Will a failure in hub interdependencies lead to economic and social disintegration? The connection between the energy and finance institutions, as well as the state of public health are explored to examine whether there might be a “cross contagion” of cascading collapse between some combination of a public health crisis, difficulties in the financial economy, the energy sector and supply networks which run into and reinforce each other.

A repeated theme of this book has been that, in concentrating on the improvement of production (i.e. the increase of production), economics has systematically neglected issues of safety, vulnerability and resilience. We saw in an earlier chapter that the research of Kahneman and Tversky suggests that people are risk averse. However, economic decision-making is driven by powerful companies and governments who are frequently able to impose risks and costs on others while taking gains for themselves. There are however other risks which occur, not at local or company level, but in the system as a whole. There is a need to explore what might happen after the limits to economic growth are reached, and whether humanity will face a manageable contraction or a variety of catastrophic collapses. In this chapter, I want to look at some of the conceptual thinking about these issues as they relate to the beginning of the 21st century.

The decline in resilience

As explained by the late David Fleming:

The resilience of a system is its ability to survive without loss of diversity and complexity despite shocks. The diversity and complexity are essential: resilience is an empty concept except when they are implicit in it. The surface of Mars, or a dead coral reef, are resilient in a trivial sense – resilient, since they do not change under assault.

…click on the above link to read the rest of the article…

The Climate Crisis as seen by the economics mainstream

The Climate Crisis as seen by the economics mainstream

Mainstream economics frames the climate crisis in a particular way but this approach is not at all helpful. There have been a variety of controversies which show clearly how economists think – like the “price of a life” controversy. The findings of the Stern Review were widely quoted but how were they calculated? Much of the controversy about the Stern Review among economists was about the discount rate to be applied to future projections. These issues are explained.

Although the effects of climate change seem to be near to apocalyptic over the long term, over the
short term taking signficant action to cut emissions also appears to be a tremendous challenge. The magnitude of this challenge is indicated by a statement in the Stern Review of the Economics of Climate Change: “Experience suggests that it is difficult to secure emission cuts faster than 1% per year except in instances of recession…” (Stern, 2006, p. 231)

When the Soviet Union was wound up the Russian economy collapsed. Between 1989 and 1998, fuel related emissions fell in that country by 5.2% per annum because economic activity halved. However, this was no model to copy. It was a period of deep crisis. The death rate, particularly among young Russian men, soared. (Stern, 2006, p. 232)

This brings us to the climate policy response so far, or the lack of it, and how mainstream economists frame the climate debate.

• Any policies have to be consistent with growth
• Optimal policies are supposed to be based on cost benefit calculations in which gains and losses
for different people through time are held to be commensurable in money terms
• An appropriate discount rate must be charged when making policy calculations
…click on the above link to read the rest of the article…

The Dynamics of Depletion

Paul Klee Ghost of a Genius 1922
The Automatic Earth has written many articles on the topic of EROEI (Energy Return on Energy Invested) through the years, there’s a whole chapter on it in the Automatic Earth Primer Guide 2017 that Nicole assembled recently, which contains 17 different articles.

Still, since EROEI is the most important energy issue there is at present, and not the price of oil or some new gas find or a set of windmills or solar panels or thorium, it can’t hurt to repeat it once again, in someone else’s words and from someone else’s angle. This one comes from Brian Davey on his site CredoEconomics, part of his book “Credo”.

It can’t hurt to repeat it because not nearly enough people understand that in the end everything, the survival of our world, our way of life, is all about the ‘quality’ of energy, about what we get in return when we drill and pump and build infrastructure, what remains when we subtract all the energy used to ‘generate’ energy, from (or at) the bottom line.

Anno 2017, our overall ‘net energy’ is nowhere near where it was for the first 100 years or so after we started using oil. And there’s no energy source that comes close to -conventional- oil (and gas) when it comes to what we are left with once our efforts are discounted, in calories or Joules.

The upshot of this is that even if we can ‘gain’ 10 times more than we put in, in energy terms, that won’t save our complex societies. To achieve that, we would need at least a 15:1 ratio, a number straight from our friend Charlie Hall, which is probably still quite optimistic. And we simply don’t have it. Not anymore.

…click on the above link to read the rest of the article…

 

Shale Euphoria: The Boom and Bust of Sub Prime Oil and Natural Gas

Shale Euphoria: The Boom and Bust of Sub Prime Oil and Natural Gas

Those whom the gods wish to destroy they first send mad

Introduction

The aim of this article is to show that the shale industry, whether extracting oil or gas, has never been financially sustainable. All around the world it has consistently disappointed profit expectations. Even though it has produced considerable quantities of oil and gas, and enough to influence oil and gas prices, the industry has mostly been unprofitable and has only been able to continue by running up more and more debt. How could this be? It seems paradoxical and defies ordinary economic logic. The answer is to be found in the way that the shale gas sector has been funded. It is part of a bubble economy inflated by monetary policy that has kept down interest rates. This has made investors “hunt for yield”. These investors believed that they had found a paying investment in shale companies – but they were really proving that they were susceptible to wishful thinking, vulnerable to hype and highly unethical practices that enabled Wall Street and other bankers to do very nicely. Those who invested in fracking are going to lose a lot of money.

A Global Picture of disappointed expectations

Around the world big expectations for fracking have not been realised. One example is Argentina where shale oil reserves were thought to rival those in the USA. It is a country where there has been local opposition while central government pushed the industry in alliance with multinational companies and its own company YPC. However profitability has been elusive. To have any hope of profitability shale development has to be done at scale to rapidly bring down costs enough to make a profit.

 

…click on the above link to read the rest of the article…

Austerity and degrowth – dealing with the economic crisis and the ecological crisis together

Austerity and degrowth – dealing with the economic crisis and the ecological crisis together

This article arises from increasing frustration and irritation about the way that the debate about Greece, and in general about austerity, is framed. My frustration is not only with the policy thugs who are implementing austerity, but also, to a degree, with their critics – which includes the failure of most of the critics of growth to actually get involved in this controversy and argue their own point of view. There have been attempts, for example by Nicola Hinton of the Post Growth Institute. It seems like a tough one to argue for degrowth in the context of the Greek crisis and as an alternative to austerity – but then all the more reason to try. Otherwise a movement for degrowth will never get out of the university lecture rooms into the real world. It will never become a guide or a narrative for the future of society to be realised in practical and popular politics.

Austerity – elite terrorism against ordinary people

So let’s start by reframing the debate about austerity. When Yanis Varoufakis describes what has happened to Greece as “Fiscal Waterboarding” he is part way in the direction that I mean. His description of austerity as a form of terrorism is also right.

The purpose of austerity is to create insecurity and instill fear in the general population in order to protect the finance and banking sector from popular rage against the crimes the participants of this sector have committed against ordinary people. This rage ought to have given rise a long time ago to legal actions and desperately needed fundamental reforms to take away from bankers the right to create money, a right which they have abused at tremendous cost to ordinary people.

…click on the above link to read the rest of the article…

 

 

Approaching a Global Deflationary Crisis?

Approaching a Global Deflationary Crisis?

Anyone with any sense for global economic trends ought to be worried. The signs are everywhere of a serious deflationary crisis. It is obvious that Chinese growth is falling. The prices for energy and the raw materials that feed the growth economy keep falling. The demand for Chinese exports is down too. Stock Markets in Asia are falling, despite attempts to prop them up. Countries are being tempted to export their problems abroad – for example by competitive devaluation. In Europe its obvious that a “solution” is being cobbled together for the Euro and Greek crisis even though no one at all believes that it will work. At the same time the policy response of “quantitative easing” which has kept interest rates down very low has reached the end of the road. With interest rates at or near to zero the scope for addressing the crisis through monetary policy (low interest rates) is exhausted. Many pundits believe that low interest rates have not encouraged productive investment but speculative bubbles – the creation of capacity in fields that in the long run will not pay, or fuelled a casino style speculation, a giant bubble of bets that could soon collapse, bringing the global economy down with it.

So what is going on? How do we explain the situation? In this paper I am going to argue that there are a number of ways of understanding and addressing what is developing into a global crisis. The desire to make the crisis understandable can convert into a temptation to make it seem simpler than it is. At its most banal we have the explanations that neo liberal German politicians are prone to – like the idea that the crisis is because of a lack of confidence and trust and that this can be resolved (in Europe) purely and simply by countries following the Eurozone rules. If the confidence and trust are restored then all will be well and the market will restore prosperity.

…click on the above link to read the rest of the article…

 

Olduvai IV: Courage
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Olduvai II: Exodus
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