Welcome to the age of diminishing returns

Sunday, July 21, 2013

The decline of an empire




Guest post by Alexander Ac



Given that City of Detroit has now officially filed for bankruptcy, it is worth to look at the bigger picture. Is the fate of once mighty city just a short pause on the way to further prosperity? Or is it rather a symptom of something bigger and more widespread regarding the future of a post-industrial society?

Without exaggeration, Detroit was once a symbol of “American Dream”, characterized by the highest per capita income in the entire country, growing population, industrialization, mass production, growing wealth, etc. The population reached almost 2 million people.

Now, Detroit is more the symbol of “American Nightmare”, with a declining population* increasing poverty and criminality, declining property value, declining public services, etc. Now the population is bellow 700 thousands people.

The period after the WW2 was characterized by an explosive growth of population and energy consumption, tremendous increases in productivity brought by cheap energy, globalization of trade, technological innovation, especially in fields of computers and communication, increasing quality of healthcare, and hopefully collective growth of population happiness.

The same period can by also characterized by several fundamental trends, which probably explain a lot. Let’s look at the following graph:



Fig. 1: Graph shows evolution of primary energy consumption per capita in Btu (blue line) and the ratio of total debt to nominal GDP (red line in %) from 1950 to 2011. Vertical dashed lines show approximate thresholds of different growth/decline phases of USA. (Source: EIA, St. Louis Fed).


Expansion phase (1950-1979)

This period can be broadly characterized by a rapid population growth, rapid total energy consumption per capita growth (2% p.a.), infrastructure construction, and relatively stable debt/GDP ratio (0.3% p.a.). We could talk about the “expansion phase”, from which most of the population benefited in terms of increasing quality of life. Increasing safety, better access to health care, better education and freedom of almost everything were a given facts of life. Even the environmental conditions might have improved in some or even most locations. And global warming was not of a serious concern at that time.

Slow decline phase (1979-2009)

This characterization of 30 years following the peak in per capita energy consumption might be surprising to many, but should not be really. Many of the great achievements of science and technology started to be slowly overrun by resource depletion. This trend was largely undetected, since increased level of debt masked the real price of the energy. We decided to pay less for prosperity (better call it consumption) today, in exchange for more tomorrow, assuming that happy days of cheap energy would return at some moment in the future. Human naivety is endless, as we can easily observe. But during the phase of exponential growth in the debt to GDP (almost 5% p.a.) and slowly declining per capita energy consumption (0.5% p.a.), many of the previously positive trends turned negative. Here is a list of just some of them:

  • Growth in the income inequality between rich and poor
  • Declining fertility growth rates
  • Growth of the financial sector as the share of GDP
  • Outsourcing of the energy intensive industrial jobs to foreign countries
  • Increasingly negative trade balance
  • Declining quality of education
  • Increasing healthcare costs
  • Declining added value of further debt
  • Increasing oil dependency upon Middle East countries
  • Ageing infrastructure (what you build during 10 dollars/barrel era is difficult to maintain or even expand with 100 dollars/barrel era)

Fast decline phase (2009-???)

These and others long-term negative trends ended up with a financial crisis in 2008-9, which turned out to be global. Debt to GDP ratio peaked in the US, and its decline started off what we might call “fast decline” phase. Close to zero Fed Funds Rate or “quantitative easing” policies are not going to change fundamental evolution of the US economy. There is no new “industrial revolution” behind the corner, no matter what “shale oil” or “shale gas” money loosing/climate catastrophe ignoring propaganda wants you to convince.  We have plundered the cheap resources and now we have to face the consequences. If we are collectively wise enough, which is not happening yet, we might have a small change of avoiding WW3 in coming years and decades. Unfortunately, history seems to predict a different outcome.

* Keep in mind that under a global decline scenario people have nowhere to migrate, unlike in the case of local decline, such as for Detroit.

24 comments:

  1. It was factual up until "There is no new 'industrial revolution' behind the corner, no matter what “shale oil” or “shale gas” money loosing/climate catastrophe ignoring propaganda wants you to convince." That is just opinion. I don't say I disagree but you need to back this up. Otherwise, it's just alarming opinion mongering.

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    1. Hi Rob, thanks for response. To your comment, there are 2 main points made in that sentence. 1st it that shale oil and/or gas are "money loosing", try for example this: Industry Insiders Call Shale Gas a Ponzi Scheme, Invoke Enron -- NYT Report

      b) climate catastrophe is already occuring, if you look at scientific papers and data, I don't think it is 'opinion mongering', how would you call this?

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    2. Yes, various types of what Robert Banks (and, likely, others) refer to as "self-poisoning" are occurring rapidly. Among these are CO2 emissions and consequent climate disruption, topsoil erosion, chemical pollution, industrial, urban, and agricultural waste streams, and others.

      And tight oil, shale gas, tar sands, kerogen ("oil shale"), or methane hydrates are extremely unlikely to provide a new era of abundance with respect to energy. But many imagine other "new industrial revolutions" involving information technology, genetics, artificial intelligence, various types of renewable power, etc. I don't have high confidence that these will result in a new industrial revolution or contented well-being for most of us, but neither can I dismiss it with a wave of the hand (or the turn of a phrase).

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    3. Agreed. Just to close it up, I think the last think we should do is to blindly rely on antything close to "industrial revolution", be it based on any technology - since most of the problems are directly connected to our misuse of technologies...

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    4. so what rob. people also believe in aliens, the rapture, homeopathy and ghosts. so people, can believe anything.

      none of the things you mention will result in a new industrial revolution. firstly, most of them are not energy sources, so we can immediately rule them out for causing an industrial revolution - because energy is what the old industrial revolution was all about. a massive bubble of free energy. all you had to do was dig a hole and burn it. secondly, the world has just had an industrial revolution and is full up with humans and human stuff. there is no more room for growth, even if we managed to come up with a massive new bubble of free energy. we would require a new planet.

      note, i havn't just dismissed it with a wave of the hand. there are concrete reasons why it is impossible.

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  2. there won't be another phase of economic growth. far from it. all the signs are that a collapse of some kind will happen in the next decade or two and it will probably be karma considering how laymen (economists, politicians and ordinary people) have rejected scientific advice on how the human world should have been run (while selectively exploiting to the full without a hint of complaint the scientific nice bits). the EROI of unconventional fossil fuels and other energy types like solar and wind are pathetic compared to conventional oil and coal, gas. they are so poor, both in scale and relative EROI, they can be considered merely fossil fuel derivative playthings that were built at the high point of ind civilization when we could see the end of ff, but still had enough energy to play at them with. but it is all far too little too late. if all the energy we squandered for 30 years on cars, suburban expansion, the global economy and employing billions in ridiculous working niches payed for by cheap energy, were spent instead on building an appropriately scaled alt energy infrastructure, then maybe we could coast along for a few centuries using a no growth policy and long term population reduction, with more than enough 'stuff' for everyone, but it isn't going to happen now. too late in the day. alternatives may replace a certain proportion of ff for a time, but its just delaying the inevitable. when ff diminish to a certain level we wont be able to build more alt energy, and run ind civilization at the same time. everything we have built (cities, population, agriculture, roads, a billion cars) has grown far too big to be maintained. we are now not far from the tipping point EROI where ind civ becomes untenable

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  3. Soon more and more people will leave the state and will find new ways of living. Maybe on the sea? I have a business case for a mediterranean kind of life style supporting community... I am ready to leave the Empire with my family. Only have to sell my Passiv-House in austria, what is a challenge in a world full of denial. http://peakaustria.blogspot.co.at/2013/07/the-sea-bugs-niche-for-sea-steady.html

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    1. I'm building a Passivehouse in Austria. One would think it'd be easier to sell.

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    2. That was my suggestion as well! But, I have to admit, I don't have enough money to purchase a passive house...

      Alex

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    3. Me neither, that's why I'm building one myself. I can't wait to see where I screwed up. ;-)

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  4. Nice piece by the way, Alex. It has been coming for quite a whole, but to see Motor City come apart like this...

    Plenty of foreboding irony there.

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  5. Spain is an even better example of falling down the Seneca Cliff.
    2007 was the best year ever in our history.
    In 2008 the world's economy crashed, and Spain lost its wheels.

    Since 2008 and accelerating, Spain has seen unemployment grow to 26% -7 Million working age people.
    The traffic is stopping, travel on the Underground and on Trains and on the road has diminished, at least by a third.
    The consumption of Oil drops at 17% a year, also the demand for electricity.

    It is easy to understand why. Spain doesn't have Oil, Gas and Coal and it is sorely lacking in the kind of businesses that could compensate with exports -we don't have anything like Casio, Samsung, Mitsubushi, Sony. In fact the car companies are all foreign owned: Ford, GM, Peugeot, Renault, VW (owns SEAT).

    Millions of people are destitute. Spain doesn't have a benefits based Welfare State and when Unemployment payments stop they do not receive any aid.
    There are no Food Stamps or the equivalent in Spain.
    And people are losing their homes, and thrown out on the streets by the banks.
    No, they are not given shelters like could happen in the UK or Germany, where they are sent to a B&B or some other solution, like Social Housing -there's no social housing in Spain worth mentioning

    In fact the situation is now very similar to that during the Second World War in Europe !
    Millions of people are being helped by the Red Cross.
    The other day there was an article in the German magazine Der Spiegel denouncing the situation -it happens also in Romania, but they were already very poor before 2008.

    * Made Poor by the Crisis: Millions of Europeans Require Red Cross Food Aid *
    SPIEGEL Online International - 11.03.2013
    http://www.spiegel.de/international/europe/food-distribution-at-european-red-cross-at-greatest-level-since-war-a-888182.html

    2008, 2009, 2010, 2011, 2012, 2013 dropping down, real fast.
    And it is not stopping, we have not reached bottom, not by a long shot.

    I sincerely believe we'll fall to something akin to the situation in 1959.
    When workers bought cigarettes one by one, or a single glass of red wine and everybody was very, very poor.

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    1. Armando,

      thanks for informing on the situation in Spain. Actually, I think the fall of Spain has accelerated in the recent months, check this graph

      Alex

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  6. Hugo - as you know I'm all for looking the predicament squarely in the face. Until we do so as a society we cannot recognize the measures needed for mitigation, so the decay of our prospects continues.

    Yet focussing on the predicament without a balancing focus on the requisite mitigation measures is bouncing people from mild concern into defeatism. In the last 18 months this awful indulgent corrosive state of mind has grown massively across the web while denialism has only marginally declined. This is a major net negative outcome, as it robs the effort for change both of informed activists and new recruits.

    With respect, I wonder if on reflection you may agree that discourse that nurtures defeatism is actually more damaging than that which nurtures denial ? This is no kind of dig, but a serious question as to effective communications.

    It is extremely rare to find articles that measure what are called solutions against the scope of 'the problematique', let alone that go looking for the solutions that are commensurate and the steps that must be achieved for their fulfillment. I really wish you'd have a go at such, not least because you have about a hundred times the facility with language that I shall ever have.

    All the best,

    Lewis

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    1. Yes, Lewis, I was thinking about that, too. We keep oscillating between defeatism and false optimism and neither seems to be effective against denial. We haven't found a good recipe for communicating the problems and, likely, we'll never find it. Sometimes I wonder if denialists haven't understand what the problem is way better than those people who think it can be solved by high efficiency lightbulbs and selling your SUV for a compact.

      So, we need to break the defeatism barrier and, as we are there, crash through the wall of false optimism. And then we emerge with our tank into the plains of effective action......

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    2. "The chief cause of problems is solutions" Eric Sevareid

      Perhaps what is required is transformation to a homeostatic state that includes the human race, otherwise there will be a homeostatic state and humans will be extinct.

      We would appear to be in overshoot now and our response is to tread on the accelerator. Somehow we have to change the narrative and I can only suggest that each of us looks in the mirror as taking the first step.

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  7. As you are well aware, our work on a sustainable, carbon-neutral US economy, emphasized efficiency. Specifically, we modeled conversion of all residences to PassivHaus Standard, and emplacement of 6kwe of PV on the roofs of each dwelling.

    In the commercial sector, we modeled conversion of all commercial buildings to using no more than twice the energy usage of the Bullit Building in Seattle, and emplacement of PV on all suitable roofs.

    We also found sufficient silicon to build the necessary PV from phosphate mining waste. We know there is sufficient sand to make the glass.

    We assume that storage will be provided via NaS batteries, which have recently been debugged by NGK, and use readily available materials.

    We assume that refrigeration/aircon are converted to holdover plate systems which run during the day, minimizing storage requirements.

    We assume mass conversion of all lighting to LEDs.

    Through conversion of agricultural machinery to Elsbett SVO engines, we know it is possible to fuel US agriculture with oilseed production from ~ 10 acres/farm. The oil can be extracted on each farm using conventional expeller presses, with the meal used as a protein supplement for livestock on the farm.

    We also modeled emplacement of 50kwe of PV on the roofs of each farm, and 100 kwe of wind on each farm (using direct drive Permanent Magnet Alternators).

    We also assumed conversion of all possible industrial processes to electricity vs hydro carbons.

    We also assumed that 95% of all ton-miles are on electrified double tracked rail, and the transport system is converted to something similar to that of France today.

    These modifications provided sufficient power to run the industrial sector, with a residual demand of 1 million barrels / day of hydrocarbons, primarily required by the petrochemicals industries, which we assumed would be provided by Doty's WindFuels process using atmospheric CO2.

    As we showed in our reports, these changes coupled with 200Gwe of Hydro, 100Gwe of GeoThermal, and 200Gwe of wind were sufficient to run a US economy consuming 10 Quads/yr of energy.

    This is 10% of current consumption.

    INDY

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    1. Dear George,
      I don't know the report you are discussing about and it will be my pleasure to have a look at that. However, I would like to ask you some key assumptions which I think are missing from the picture you presented.
      In particular, did you account for the indirect requirement of fossil fuel that your scenario implicilty implies? For instance, did you account for the imports (of food, Hi-tech, etc.)? Did you consider where the PV panels are going to be produced and by means of which source of energy?
      I guess that including such information is quite crucial to better understand the implications of your scenario. Is your scenario based on the assumption that PVs are produced in Cina and shipped to the US? As long as I know, PVs produced in China are a way cheaper than the ones produced in Western countries. It seems to me that Western societies have externalized the most of their production to the BRICS. To do so, Chinese(or others) must have access to high quality energy carriers (fossil fuels), with high EROI and relative low prices.
      Hence, somebodyelse has to extract the fossil fuels, somebody has to use them in their industrial system to fulfill the Western demand and Western societies buy the semi or finished products. If you assume the US importing PVs from elsewhere you can not really say that your system is run by using that small quantities of energy (renewables). On the contrary you would account that system is dependent on an industrial system running elsewhere, which, in turn, is guarranteed only by the fact that fossil fuels are the key carriers needed to run it.
      Moreover, do you think that bio-fuels are a real solution? similarly to the question above, did you account for the oil-based fertilizers and chemicals that you would need for getting the high yields we are used to get in Western agricultural systems?

      On the contrary, if you assume that the PVs are completely produced in the US, then you have to account that you need an equivalent amount of energy to produce them. Please apologize me for such rethorical question, but how many PVs are needed to sustain an economy entirely based on PVs? this sounds like a loop that has no solution to my opinion.. and the picture gets even more complicated if you account for the changes in the social structure that you would need for getting it running..how many hours of human labour would be needed to run such system?

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  8. Our analysis of the EROEI of PV, beginning with a thorough work by Siemens in 2000, updated for current production technology, and assuming emplacement at Purdue University is an EROEI = ~ 32. This is nearly 4 X the EROEI of Natural Gas at the well head.

    As mentioned in our report we consider that all renewables EROEIs should be FOB factory, to make them comparable to the EROEIs of fossil fuels which are at the well head or mine mouth.

    We did not assume the location of PV production. Our analysis was for a steady state economy that has an industrial sector matching current output, a commercial sector, matching the current situation, a residential sector containing existing dwellings, and an agricultural sector containing the same number of farms.

    The full list of assumptions was not mentioned above.

    My point in posting the summary of our work is to unequivocably state that continuing down the existing path toward oblivion is a choice. A choice remarkably similar to that made by the Polynesians on Easter Island, who chose destruction of their forests to construct monuments.

    My point in revisiting this page is to remind one and all of the lessons from the demise of the Greenland Norse, as documented in "Collapse". These are as follows:

    1. Maintenance of an iron culture will require reducing agents to react with iron ore, either charcoal or hard coal, or natural gas.
    2. Biomass production is not sufficient to provide the required energy
    3. Loss of iron making will cause reversion to stone tools, with concomitant loss of
    productivity.

    In our analysis, we assumed existing energy stocks are used to power the conversion, initially, and that power from renewables will snowball through the economy.

    Consider that elimination of central power station production of electricity, eliminates 90% of all coal mining, eliminates Uranium mining and concentration, both of which represent enormous amounts of energy consumption. Currently this totals 40 Quads/ yr.

    Consider that our analysis of Natural Gas Fired Electricity production gives an EROEI of 1.2 at the consumer's meter, and does not consider conversion losses within the dwelling.

    Consider that the most energy efficient mode of transport is electrified rail, which is only possible if a steel making industry can be maintained.

    Consider that it is possible to revert to glass containers and waxed paper containers from plastic.

    We considered each and all of these reversions when calculating the converted energy requirements.

    We also assumed that civil aviation is eliminated, and only military aviation remains.

    We also assumed a 50% efficiency improvement in water borne freight, mostly due to conversion of ocean freight to sail.

    These and other items were considered.

    To date, we have tried to interest others in auditing the work, and everyone is "too busy". However, we are of the opinion that one can not make a plan for a conversion, unless one knows the goal, and we currently believe that the only goal is to repress populations until collapse is brought on by energy production collapse, when what should be done, is to mobilize populations to convert dwellings, commercial buildings, and farms, to the highest standards of efficiency and to the lowest possible energy consumption, to convert land transport to electrified rail, to convert all lighting to LEDs, to mass convert water heating to solar, and other measures.

    Should you wish to participate in this work, we welcome your cover letter and CV.

    Please send them to goprisko@publicresearchinstitute.org

    Warmly,

    INDY

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  9. "My point in posting the summary of our work is to unequivocably state that continuing down the existing path toward oblivion is a choice. A choice remarkably similar to that made by the Polynesians on Easter Island, who chose destruction of their forests to construct monuments."

    Well said, George (or Indy). I completely agree with you. Why don't you write something along these lines for the blog?

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  10. I too agree with George (or Indy) as most here I'm sure do. It's really a no-brainer. People aware of a problem can solve it, but people who don't know one exists won't. People here are interested in solutions, they recognize the problem. The question becomes will we or the evil ones prevail on the deciders, some of the deciders whom sadly are known to be among the evil ones.

    I advocate peace, reason, democratic principles, all the good things. But I fear new ways must be found to fight the tools of ignorance which are becoming evermore refined.

    This is not a plug for my own website, but at the very end of a post I made there yesterday I ended it with a link to an article that's critical of the Oil Drum website which is shutting down. The article says peak oil is a failed theory. I would not dignify a comment with a link to the news article which is is why it looks like I'm pulling a shameless trick to get people to my site when I'm not.

    We simply need to know the enemy.

    The article depends on the false belief that technology can solve all our problems. This belief is a natural one and widely held in society. Humans use technology innately to survive. In a world without limits wired with such a survival strategy worked well but those times have now gone. Humans can be lead to falsely believe there is no end to technical innovation and that therefore there is no such thing as resource depletion for the god of technology solves all.

    I find a strong sensation of sanity here. I find leaving a comment here refreshing. - K-Dog

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  11. Are we not participants in and witnesses to a collective intellectual, moral and strategic failure of colossal proportions?

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Who

Ugo Bardi is a member of the Club of Rome and the author of "Extracted: how the quest for mineral resources is plundering the Planet" (Chelsea Green 2014)