How can anything grow (or at least sustain growth rates) if the best energy available (oil) is declining and, at the same time, debt is spiraling out of control?I've addressed the first issue (growth after peak oil) many times, starting back in 2005 and that piece still looks pretty good to me as a decent rough approximation of the situation. I won't rehearse those arguments again here. But for the second issue - the overhang of excessive debt - which seems the more immediate problem of the day, a worst case analogy is the Great Depression. So I dragged out a couple of figures of technology adoption curves.
Here's one I found at Adverlab from a few years back, for percentage of US households with various technologies (click for big version in separate window).
I have added the purple rectangle for the great depression, and red rectangle for WWII. As you can see, whether the technology adoption was slowed or partially reversed very much depends on the individual technology. Automobiles and telephones took a big hit - actually going backward for a number of years. However, the progress of electricity is only moderately affected, and the progress of radio barely deviates at all from its rapid increase. Refrigerators started only in the late 1920s and spread very rapidly all through the depression.
I think the point is that for industrial societies, even when under a great deal of stress, they have some resources and some choices. Thus, those things that they see as the highest priorities may continue to move forward.
Amusingly, the chart above was originally titled "Consumption Spreads Faster Today", but they left off the original adoption of TV, one of the most influential 20th century technologies. This chart from here shows why: TV had one of the fastest adoption curves ever, spreading like wildfire during the fifties, and that didn't fit the "Consumption Spreads Faster Today" theory, so they left it off.
This chart is really worth clicking on for the big version and studying closely. The blue bands seem to be the recessions, and there's a lot of historical notes in the labels. In particular, it can be seen that the 1970s oil shocks had very modest effects on technology adoption.
13 comments:
Thanks for this.
I actually just had a meeting at my place of employment today about 401k investment, with the bank/fund manager guys on hand.
They stuck around for lunch and I was able to ask a question of them, as a young person, looking at Peak Oil and reading things online about The Limits to Growth. They had a similar answer to what you're saying here. Basically, innovation will continue (barring catastrophic events) even in a period of less energy availability and that as long as expectations are suitable, investment is still a sound option. Suitable expectations he clarified as investment growth of 4-8% instead of the 8-12% seen during the peak of things.
It remains to be seen whether I'll invest for my retirement funds, but I'm starting to think it might be an ok bet.
Hi Stuart, many thanks!
If I understand correctly, there is quite a bit of technological advancement even during recessions (and depressions!) and possibly even some growth. No argument about that, obviously.
Now, my counterpoint would be that most of created technologies were energy *consumers* and not energy *sources*. In fact, the last (concenatrated) energy source discovered is nuclear energy, now more than 60 years old and still securing as as little as 6 % of primary energy consumption (globally).
The problem is that nuclear reactors (or DESERTEC, take your pick...) are realy *complex* structures and need stable, peaceful and prosperous country to operate safely (otherwise expect Chernobyl). So can we (or indeed should we?) indeed further *increase complexity* of our energy infrastructure? If yes, where is the limit?
Climatologist prof. Barry Brook is a big proponent on nuclear technology, since this should be better scalable than wind or solar but I fear the complexity factor here is a bit neglected. Just look wat happened to Deepwater drilling technology.
I know you are well aware of Joseph Tainter work and his main argument for collapse of past societies - diminishing return.
I think unless we really find some high quality energy *source* (with no CO2 emissions) and with extremely high EROEI, we may find ourselves in quite harsh energy decline path - with some (millitary?) technologies growing for a while, indeed.
Is there a way for DE-complexifying of our society in a peacefull and creative way, or is it just wishfull thinking?
And I definitely do NOT agree with Paul Krugman argument that "we should spend out our way out of recession", when the point is that we spend *in* our way into the recession.
Looking forward for further discussion,
kind regards,
Alexander
Those are gadgets, not tech essential to moving society along. Refrigerators would allow women to spend time on activities other than canning/smoking etc, yes, and others certainly opened up economic avenues in various ways; but all except the auto were predicated on installation of electricity, which had already made vast inroads - those sales of radios and "stoves" (electric, presumably) were just taking advantage of the new found customer base.
Where would that obtain in a peak oil environment? This would be more akin to a fatal virus striking down horses 150 years ago then a garden variety recession. These gadgets in the graphs were cheap, too, your average car buyer isn't going to be able to obtain a LEAF sans a payment plan. The Prius has maintained sales sans subsidies so that apparently isn't critical after a certain point. Note that car sales only really rebounded after WWII, and the US was still a net exporter all that time.
During the first decade of my life I visited my grandfathers 160 acre depression era Missouri farm every summer. He was a hard working farmer but obsessed with checkers, croquet and technology - especially radio. At lunch time he would come home from the field to listen to the radio. In addition to entertainment there was a business aspect since he might get weather and other agriculture information. --One of my earliest childhood memories is an evening listening to the second Louis/Schmeling fight.
Robert:
I just wanted to say how much I appreciate your occasional reminisces here. When we're talking about some period of history, it's nice to have a perspective from an elder who lived through it.
KLR:
Electricity certainly wasn't a gadget, but a major new energy infrastructure, and that curve drops briefly for a couple of years, and then resumes growing.
Alexander:
I'm not a big nuclear fan, though it's probably a necessary evil in the short to medium term.
Modern solar and wind both have respectable EROEI's, in the same ballpark as the current US oil EROEI, if installed in reasonably good locations.
The world's net debt is exactly zero. So if we're talking about particular parts of the world where it is positive then maybe we should be specific. And how do places with negative net debt get on (e.g. China, Germany). Also it hardly seems that some parts of the world will struggle endlessly with net debt: eventually they'll default or inflate the debt away. So how relevant is debt?
The lesson I draw from the chart is that the roll-out of new general-purpose technologies that require major investment--electricity, cars, and telephones--is severely affected by lack of investment finance. (No surprise!)
Yes, electricity did resume growing during the Depression, but only because there was a huge government program to roll it out (Hoover Dam, TVA, etc). The government was not resource-constrained or finance-constrained. More importantly, its benefits were great and obvious to all--opposition from the powerful was muted at first.
In a re-run of the Depression, a government that is merely attempting to preserve the status quo in an age that is cynical about progress and science would have a more difficult job. Firstly it would have to understand the situation. A government that understood what was happening might be able to mobilise new investment to "get back on track," but if social cohesion was poor, it might not. The latter seems to be what's happening today.
rks- Debt is how capitalism tries to direct investment into things that produce a return (so the debt can be repaid). When lenders stop asking how their money will be paid back, loans are spent on unproductive things. When that causes defaults, lenders get scared and won't lend anyone money for anything, useful or not. Production slows down for lots of silly reasons, such as a manufacturer not being able to afford the cost of shipping her products to her customer--a cost normally covered with a short-term loan.
Debt itself is just a technology--an extremely useful one when handled well. People's beliefs about debt are very relevant.
What Greg said. Some have speculated on some kind of peak oil WPA equivalent crash program to put a PHEV in every pot, which could well do the job of filling the gap, but I think we still have more than enough reason to warn people in advance with these discussions. Cuba could've had their whole populace tooling around on golf carts decades ago, too.
I still maintain that these techs are by and large wholly optional for one's well-being; they are very useful conveniences, is all. And notice that the one requiring the most upfront investment, the auto, didn't regain pre-GD market penetration until the 1950s. That should tell you something right there. We are at about 2.6% of US sales being hybrids; if they descend to 2% for another 20 years with 6-10 years median age for the fleet and overall sales stuck at <10 million/year that's pretty paltry gains to overall fuel economy, given the size of the US fleet. Other techs with lower sticker prices like diesels and green vehicles would be more likely to gain acceptance, I'd think.
Off-topic,
DD has a nice graph of the increasing ocean heat content, taken from the new report - Climate change indicators in the United States (pdf free):
http://www.desdemonadespair.net/2010/06/graph-of-day-ocean-heat-content.html
Globe and mail has an article about Vaclav Smil:
"Prof. Smil methodically sets out to show that the facts do not support either the romantics, who think we’ll be saved by wind turbines, or the techno-optimists, who think that electric cars are right around the corner. Along the way he demolishes peak oil theory, biomass for fuel, carbon sequestration, and various other energy myths. He believes that weaning ourselves away from fossil fuels would be a good thing. But we need to understand that the transition from fossil fuels will be complex, protracted and nonlinear, and will require enormous investments. “Wishful thinking,” he writes, “is no substitute for recognizing the extraordinary difficulty of the task.”"
so "peak oil" is a myth? :-) I think Vaclav Smil is not disputing peak oil as such, but the consequences of peak oil... he probably thinks that increased oil price, increased energy efficiency and unconventionals will do the job...
he is not a fan o fast energy transitions:
"“We are structurally cooked,” he recently explained. “Every new technology takes 40 to 50 years before it captures the bulk of the market. As of today, there are no clean-energy technologies that can replace fossil fuels on a large scale.”"
Finally, climate change is not an immediate problem, rather than flu pandemic, which he thinks is 100 % sure in the near future...
...and the link:
http://www.theglobeandmail.com/news/opinions/the-man-whos-tutoring-bill-gates/article1609926/
Post a Comment