There is No Steady State Economy (except at a very basic level)

We keep seeing statements from the Center for the Advancement of a Steady State Economy suggesting that a steady state economy is desirable. I would agree that growth in a finite world is not sustainable, but even continuation of our current level economic level, or a drop to an economic level two or three levels below that where we are today, is not sustainable.

We are consuming a huge amount of fossil fuels, and to maintain anything close to our current economic state, we would need to continue to consume a very large amount of fossil fuels. If a person stops and thinks about it, no level of fossil fuel extraction is sustainable, because we only have a finite amount of fossil fuels. At best, we would be talking about stair-stepping extraction–reducing it to a lower level than today, and holding it there for a while.

One big issue with even trying to stair-step fossil fuel use is the fact that our financial system needs growth to keep from collapsing. In order to pay back debt with interest, it is necessary to have economic growth, and financial growth and growth in fossil fuel use are very closely tied. Economic growth can be 2% or 3% above fossil fuel use growth because of efficiency gains, and economic growth in a particular country can be higher than that of world economic growth because of greater outsourcing of manufacturing to other countries. There was even a gain in the late 70s and early 80s, as we picked the low-hanging efficiency fruit and switched to using nuclear. But overall, there is no evidence that fossil fuel use, or even oil use, can be divorced from economic growth. If there is a big decline in fossil fuel use, it will translate to a decline in economic growth.

The need for economic growth in order to pay back debt even applies to our money supply itself. Money is loaned into existence. This happens when a commercial bank makes a loan and deposit at the same time. The problem is that when the money is created, not enough money is loaned into existence to pay back the interest as well.  So economic growth is needed to create the additional money so that the debt can be paid back with interest.

Because of this issue, a Steady State Economy (economy without growth) requires a financial system with virtually no debt. It might be possible to have a little debt, but its use would be primarily to facilitate short-term transactions. Debt jubilees at regular intervals might be needed, to keep people from building up much debt.

It is theoretically possible to create a Steady State Economy that doesn’t use fossil fuels, and a new financial system that doesn’t use debt. As far as I can see, though, this would put us in a situation similar to where we were in 1750, because none of our so-called newer “renewables” (like solar PV and wind turbines and algae-based biodiesel) are really possible without fossil fuels. We need fossil fuels to extract metals and to make the solar PV and wind turbines and to transport them to their new locations. There is not even a plan in place that would get us to a situation such that the various renewables would replace themselves and provide enough energy for the world to live on.

The problem with going to a system without fossil fuels and with much less debt than we have today is the fact that the world supported fewer than one billion people in 1750. There are now nearly 7 billion people in the world. Furthermore, most people living today don’t have the skills required to live without fossil fuels. We also don’t have all of the infrastructure in place that we would need to live as people did then (draft animals, horse drawn carriages, wells that could be repaired with local materials, schools close to where people live, homes mostly in rural areas or villages, etc.). So it is not clear that we could even successfully make this type of transition.

When I read articles that talk longingly about going to a “Steady State Economy,” I am perplexed. If governments were to take away fossil fuels, or even reduce their use significantly, it would likely cause a crash of the financial system, and this would likely lead to a crash of other systems, particularly international trade. It would seem to be virtually impossible to keep this crash from affecting food production systems, international food export systems, and even such basic systems as electricity (because workers need to be paid, and fuel needs to be purchased). It seems to me that without a lot of intervention and planning, we would soon fall back to a very low level, very quickly, perhaps much lower than the 1750 level.

It seems to me that what we really ought to be doing is looking at the situation that is ahead, and figuring out what we can do to make the best of a pretty awful situation. Those wanting a steady state are dreaming for something that can never happen. Decline is pretty much inevitable. We need to be working to understand what is really ahead and figuring out how to make the best of a bad situation. Perhaps by planning, we can make things a little better.

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
This entry was posted in Financial Implications, Planning for the Future and tagged . Bookmark the permalink.

77 Responses to There is No Steady State Economy (except at a very basic level)

  1. Arthur Robey says:

    “Pointed threats they bluff with scorn,
    Suicide remarks are torn,
    From the Fools gold mouthpiece.
    The hollow horn plays wasted words,
    Proves to warn
    That he not being born,
    Is busy dying.”

    A process such as a body or a fountain of water or a civilization is never in a condition of stasis. They are in disequilibrium. Our bodies survive as long as they do because of apoptosis. Voluntary cell death.

    If the promise of the recent demonstration by Rossi have substance, then we will be growing again and it will be our manifest destiny to leave OurFiniteWorld.

    (Rumour has it that his 1MW Cold Fusion unit is awaiting a decision by bureaucrats. And that the Italian Navy has woken with a start to the implications).

    • brian says:

      Actually, we mostly stay alive due to senescence. Apoptosis is mostly about building and maintaining developmental structures, such as fingers, skin, gut, etc. In senescence, a cell gets programmed to no longer divide. There is a fine balance for senescence, too little and you get cancer or too much and you get Progeria. Just right you get to die at the ripe old age of 100 or so.

      BTW, limitless energy doesn’t help anything. Go back to Limits to Growth and you will see that limitless energy just makes us feel better for a while, but we still choke on our waste.

      • Jan Steinman says:

        Brian wrote: “limitless energy doesn’t help anything.”

        Stephen Hawking wrote: “Given infinite energy, by the year 2,500, humans will occupy, shoulder-to-shoulder, every square inch of the Earth’s surface, which will glow a dull red from the dissipation of their heat.”

        Doesn’t sound like a place I’d want to live in.

  2. Arthur Robey says:

    Oops. Lyrics by Bob Dylan

  3. Ikonoclast says:

    “Cold fusion is always 20 years away.” – A sarcastic scientist.

    In fact cold fusion is about as possible as the perpetual motion machine. At least my idee fixe, the solar convection tower, uses known technology and would actually produce power. Whether it produces net power after all inputs (probably it will) and whether it can be ramped up on a massive scale to replace fossil fuels (this is dubious) are the key questions.

  4. Shunyata says:

    Lifestyle, whether spontaneously organized or deliberately organized, requires energy consumption. Any lifestyle that consumes energy faster than that energy is replaced is doomed in the long-run. (Of course the short-run may be thousands of years, which changes the nature of the discussion immensely.)

    Human society has increasingly relied upon consumption of pre-existing energy stores – whether clearing forests for charcoal, mining coal, or extracting oil. A “steady-state” society takes us back about 5,000 years.

  5. Philip C Stone says:

    Ikonoclast
    You write: “I think Gail is aware of the issues you raise.” Here I would counter and say that silent awareness is not enough. Climate change, both short and long term, is the biggest and most threatening issue of all. If we fail to address this problem, all of our other efforts will have been in vain.
    The solution, in all its banal simplicity, is increased efficiency, reduced fossil fuel consumption, and the deployment and continuing development of clean energy sources. The solution also involves examining our priorities and distinguishing between the essential and the non-essential.
    To illustrate what I mean: Approximately 70% of America’s oil consumption goes to transportation, and I believe that most other automobile based societies would show a similar pattern. If we had mixed-development, walkable communities with good bike infrastructure and good mass transit, we could reduce our oil consumption by a considerable amount. If we limited the use of cars by introducing congestion fees, removing parking spaces and increasing parking fees, the reduction would be greater. And if we could replace our current internal combustion vehicles with more efficient technologies, even more would be gained. All of this is doable, and steps of this sort could have the added benefit of discouraging developing countries from developing the disastrous kind of transportation infrastructure that we have. Another necessary step would be to correct the widespread misconception that mass transit is subsidized but driving isn’t. In fact, in today’s USA, 80% of all transportation dollars
    goes to roads and only 20% to mass transit.
    This is just one of the two birds with one stone solutions. It would reduce fossil fuel consumption and decrease the CO2 emissions that contribute to global warming. It would also remove some of the pressure from our food and water problems. And insofar as we can reduce the number of cars, we can free additional resources that can be used to build clean sources of energy. We are facing enormous challenges, but they are not insurmountable.

    • Unfortunately, we don’t have the time to do all of the things you are talking about. Things are happening much more quickly, as far as I can see. Fossil fuel use will decline far too quickly for the things you are hoping for to happen. Extraction of fossil fuels now requires huge machinery, and replacement parts for the machinery in turn requires global trade and a working financial system. All of these things will last for at most a few more years (20 years max). Once we lose them, we lose fossil fuels, and it won’t matter whether we have walkable communities at all–it is likely that the developers will have just wasted resources, because they won’t have thought about what the world would be like without an operating water and sewer system, and without adequate transportation of food to town. The problem with these plans is that they assume we really have far more time and resources than we have (which is why climate change folks are so worried in the first place).

      If the climate change plans were focused on raising draft animals and on developing crops that could be raised with simple tools and crop rotation, and building simple cisterns for water catchment, then they might be worthwhile. The problem is that they are starting from vastly too favorable a view of future fossil fuel availability.

      • Ikonoclast says:

        I find myself in the position of agreeing with both Philip and Gail and I don’t think there is any real contradiction in doing so.

        It is true that some percentage (perhaps as high as 50%) of the western world’s fuel consumption is wasteful and unecessary. When we combine consumption for recreational driving, extravagent tourism travel and inefficient automobile commuting (often with only the driver in the auto) then we could assume that this accounts for 50% of all fuel use. We could even add in excess transport for items which should be produced locally in a more “energy rational” world. But in any case, let us assume we could, right now, with the proper will, reduce fuel consumption in the west by 50%.

        The above reduction or savings would probably not apply in the developing world. However, 50% reduction in western world use would provide some climate change amelioration or delay and would provide a better buffer and window for a transition to renewables. This assumes something not proven yet, namely that renewables could eventually power us say at 50% of our current energy use. It is not unreasonable to assume currently that 50% of our energy use is wasteful. So far I have been agreeing with Philip.

        Gail’s points explicit and implied (and I hope my summary is right) are that;

        1. We are not seeing enough progress in the right direction.
        2. Obstacles to this progress are inbuilt into our entire political economy. On the socio-political side there are ideologies, vested interests, complacency, inertia and even perverse propaganda and disinformation campaigns against the necessary changes. On the economic side there are financial system obstacles and another form of inertia, the inertia of a large system in motion and committed to a certain path with massive investments in fossil fuels infrastructure.
        3. Even with the best will and technology it may be too late save our current civilization because of overshoot. There may not be enough fossil fuels left to transition, the climate may be irreparably damaged in any case before the transition is complete, the energy flow from renewables may be too little and the infrastructure required for renwables may be too extensive and thus not feasible.
        4. Financial, material-economic and social-civilizational breakdown from all the strains of transition may occur before transition is complete and sabotage all hope even if transition were theoretically feasible.

        I think though that we cannot afford to totally give in to despair. If I may be forgiven a penchant for a little Tolkein inspired philosopy that is not pure fantasy I will say this. Yes, as a species we are fighting the “long defeat”. The species will go extinct sooner are later even as each of us individually is fighting to survive for a while until die in the end.

        Total despair is just as unreasonable a philosphical position as is total optimism. We cannot entirely know the future so we cannot know that it is either hopeful or despair-laden. Every person alive on this world must die sometime anyway. Is a mass die-off ultimately worse than all the enventual deaths which must happen in any case? Given that capitalism is the exploitative system that has destroyed so much of nature and the earth’s carrying capacity, it will be good that natural forces will destroy capitalism. I still hope that some smaller remnant and wiser civilization might arise after. Perhaps the chances are small but then so be it. What will be will be. Compared to the csomos humans are puny and unimportant except to themselves in their own existential view.

      • Gary Peters says:

        Gail,

        Climate change is already “baked into the cake” and will worsen as we continue to burn fossil fuels as fast and furiously as possible until they either become too expensive or completely unavailable. Though James Howard Kunstler and others keep talking about the end of “happy motoring” in America, I don’t see that happening any time soon. Gasoline remains a dollar or so below its peak a couple or three years ago, and even that peak, at above $4/gallon, hardly made a dent in our use of private autos to scoot us around. There are perhaps 250 million passenger autos in the U.S. and I don’t see them all parked any time soon.

        I can see why you might like climatologists (most of whom are remaining far to silent) and others to promote the use of draft animals and simpler farming methods, but that seems like a lost cause. We’re not going to feed 310 million people with a simplified agricultural system like that, though personally I think it would be very good for the environment. As for its effects on global warming, it would be more than countered by China’s incessant addition of coal-fired power plants.

        Though I don’t disagree with you and others in the peak oil community about what appears to be happening to world oil production, I don’t agree that oil and other fossil fuels will fall into disuse in time to prevent considerably more climate change.

        With the world’s population approaching 7 billion, much pressure will be on providing food and other necessities for that population, even though it is probably well beyond numbers that we can support over the long run, which may be closer to one billion or less, numbers that would fit with your date of 1750.

        • The way I see it, all of the fossil fuels are very closely linked through the financial system. Once oil fails, it is likely to take out the financial system, and with that, the majority of international trade. Once those things are gone, coal and natural gas will decline, almost at the same time as oil.

          If I thought there was a chance that all fossil fuels could continue in great abundance for a long time, I would be worried about the climate change effects. Since I don’t see this happening, it makes one fewer thing to worry about.

      • Philip says:

        I’m glad you wrote “unfortunately”, because here that’s a constructive starting point. We may not be able to do everything I’m suggesting, but we should do as much as we can as quickly as we can.

        At present we are not just using fossil fuels, we are squandering them. We need to learn to use less, and we need to use wisely.

  6. Dave Gardner says:

    Great post and impressive, if not depressing, conversation. I would just add this suggestion, notwithstanding the few technological optimists who still have high hopes: We’re going to end up living like 1750 one way or the other. It might be prettier, though certainly not easier (and maybe even impossible), if we make the choice to coast to that level rather than wait for nature to quickly and cruelly do the job.

    I expect there are steadystaters who recognize this but are trying to take it one step at a time, and steadystaters who have faith that some combination of stabilization of population and economy along with a few technological miracles and the adjustment won’t be so bad. I choose not to sweat the difference, as even advocating steadystate is a radical move in the right direction. I’d like to see us get the ship turned, then we can quibble about the speed, the exact compass heading, and what’s for dinner.

    Dave Gardner
    Producing the documentary
    GrowthBusters: Hooked on Growth

    • Bicycle Dave says:

      Hi Dave,

      Good website.

      I’d like to see us get the ship turned, then we can quibble about the speed, the exact compass heading, and what’s for dinner.

      A suggestion for your next documentary: Why most people are unable to recognize the real problems facing humanity and the planet in general? The symptoms of the problem are obvious and abundant: climate change related events, the rate of species extinction, increasing forest destruction, ocean’s losing fish and corral reefs, soil erosion/desertification, aquifer depletion, food scarcity, etc. Or even limits to livable space (the mouse universe experiment).

      Symptoms of a problem are often obvious – causes are much more difficult: fossil fuel depletion rates, increasing rate of GHG, human population growth rate, growing consumption rates, conversion of forest to cropland, paving over aquifer recharge areas, monoculture/industrial farming practices, etc.

      From those few who do see the symptoms and understand the causes, a multitude of “solutions” are proffered – basically to no avail because this tiny minority has little ability to change the course of events.

      So, why do so few people understand? Why are so many oblivious? I think Richard Dawkins knows the answer. Is he right?

      What (besides catastrophe) might start turning the ship in any meaningful way?

      • Dave Gardner says:

        Bicycle Dave, that is EXACTLY what my first film is about! Great suggestion, clearly. And the exciting news is you won’t have to wait for a sequel.

        “Why most people are unable to recognize the real problems facing humanity and the planet in general? “

  7. Alan McDonald says:

    Many small groups all over the place are making plans. Here in the UK the Transition movement, local food campaigns and other sustainability initiatives are working out how, locally, to make the transition. I am very distrustful of big figures and global solutions. Let’s begin with local specifics: how can we around here have more local food, use local water wind and sun to get energy, what do we really need beyond that to have a good life?

    To me the point of debating the steady state economy is to begin to imagine how things will be different. To predict that certain things will be impossible when we can’t know this: I can’t see how that’s useful or intellectually sound. So many of the initial blog’s predictions seem to be doubtful that I hardly know where to start: with inflation, for instance, we can easily imagine living through periods of negative real rates of interest, for instance – we are in one – and I feel there is an underlying despondency to the thesis which is not evidence-based.

    But maybe I’m just an optimistic fool 🙂

  8. Stephen says:

    Maybe we need to rethink the motion that every bit of matter has a dollar value associated with it, and work to provide basic needs locally again. Then we need to invest in the alternative fuels with the highest EROEI available and rethink the motion that every person needs a car and must work an 8-5 job. Some of these alternatives may not keep happy motoring alive but may allow us to power some things like farm tractors, railroads, a few vehicles, and maybe an occasional airplane flight every now and then (I envision possibly running a few flights around holidays as opposed to all year so people can still see distant family occasionally).

    From then, we need to focus on quality of life at home as a priority over GDP. We need to get schools to drop No Child Left Behind and high stakes testing and instead teach a generation of kids the skills they need to survive peak oil. We also probably need to relax debt collection laws and abandon the motion of losing everything you own when a job loss or economic decline hits, especially in the personal possessions, housing, and quality social life realms. I also think each town is going to adapt differently, for example the northeast will have a cold problem in the winters. For a climate like the desert southwest (e.g. Phoenix AZ, Las Vegas NV), perhaps this will lead to a seasonal migration into the mountain regions via Railroad to places like Flagstaff, Lake Tahoe, Gallup NM, Southern California, etc during the hot summers and return from the mountain regions in the winter.

  9. Rebecca says:

    One question about debt: I get the point about growth making it so a dollar today is $1.02 tomorrow so you can pay it back with interest. But what about borrowing against future productivity, as in student loans? Or purchasing a productive item like a sewing machine, and then using part of the future flow of value to pay back the current investment. I tend to discourage people from borrowing these days because their future cash flow is becoming very uncertain, but I would think there would always be a place for investment / debt.

    • Jan Steinman says:

      Rebecca, it’s precisely the assumption of “future flow of value” that makes interest-bearing debt dependent on growth.

      Prior to the widespread use of fossil sunlight, debt was “at par” — you were expected to return the principle amount only. And there were periodic “debt jubilees” every fifty years or so when all debt was forgiven. And all three of the great middle-eastern religions forbade interest — although they conveniently overlook that prohibition today. That should tell you something, no?

    • This is one of the reasons I leave the door open to a little debt.

      The problem that happens in real life is that debt for what we think is an investment often doesn’t work out very well in a declining economy. For example, a person gets an expensive degree, then finds he/she is “overqualified” for every job he/she applies for. Or a person gets laid off from jobs repeatedly, or there are few people who want the goods the new sewing machine will produce. As replacement parts become more scarce, and electricity more intermittent, what look like good investments now are likely not to turn out very well.

  10. Tiago says:

    I’ve been in a big steady state conference, in Leeds, UK (last year(. Other than a woman from the Transition Town movement, the thing was sufferable. Most people laughed at peak oil. The standard reaction was black-or-white: either it does not exist (majority) or if it does then a Malthusian outcome is guaranteed. It was mostly a gathering of useless academics that lost the battle against Thatcher (and were clearly resented).

    Don’t get me wrong: I would have loved to liked it. In concept it is a great idea. This made the disappointment even bigger.

Comments are closed.