The Connection of Depressed Wages to High Oil Prices and Limits to Growth

In my view, wages are the backbone an economy. If workers have difficulty finding a job, or have difficulty earning sufficient wages, the lack of wages will be a problem, not just for the workers, but for governments and businesses. Governments will have a hard time collecting enough taxes, and businesses will have a hard time finding enough customers. There can be business-to-business transactions, but ultimately somewhere “downstream,” businesses need wage-earning customers who can afford to pay for goods and services. Even if a business produces a resource that is in very high demand, such as oil, it still needs wage-earning customers either to buy the resource directly (for example, as gasoline), or to buy the resource indirectly (for example, as food which uses oil in production and transport).

It is not just any wages that are important. It is the wages paid by private companies (rather than governments) that are important, as the backbone to the economy. Governments tend to get their revenues from private citizens and from businesses, both of which are dependent on wages of private citizens. There are a few pieces outside of this loop, such as taxes on imports from foreign countries. With the advent of free international trade, this source is disappearing. Another piece outside the US wage-loop is taxes on resource extraction, if these resources are exported.

Instead of using the analogy of a backbone, perhaps I should say that wages are the base that ultimately determines the quantity of goods and services an economy can afford.

Figure 1. Author's view of structure of the economy. Non-governmental wages form the base of the entire economy.

Figure 1. Author’s view of structure of the economy. Non-governmental wages form the base of the entire economy.

Obviously there are other kinds of income, such as “rents,” but these, too, ultimately come from wage earners. Furthermore, businesses cannot earn money to pay dividends unless some consumer, somewhere, can afford to buy the goods and services their business is selling.

I have written recently about how the proportion of Americans with jobs rose to a peak, and since has been declining.

Figure 2. US Number Employed / Population, where US Number Employed is Total Non_Farm Workers from Current Employment Statistics of the Bureau of Labor Statistics and Population is US Resident Population from the US Census.  2012 is partial year estimate.

Figure 2. US Number Employed / Population, where US Number Employed is Total Non_Farm Workers from Current Employment Statistics of the Bureau of Labor Statistics and Population is US Resident Population from the US Census. 2012 is partial year estimate.

I decided in this post to look at the dollars these workers are earning. In particular, I decided to look at wages, other than government wages, adjusted to today’s cost level using the “CPI- Urban,” cost index of the Bureau of Labor Statistics.  I discovered that these wages are doing very poorly. I also discovered a disturbing connection between high oil prices and flattening or declining wages. Putting all of these pieces together suggests a connection to “Limits to Growth.”

Per Capita Non-Government Wages

If we take inflation-adjusted non-government wages, and divide by the total US population (not just employed workers), we get a measure of the extent to which wages have been growing or shrinking. Some of this growth will be from a second wage-earner in a family joining the workforce. Some of this growth will be from families in recent years having fewer children, so that adults make up a larger portion of the population. If some jobs move overseas and are not replaced, this will act to reduce wages.

 Figure 3. US per capita non-governmental wages, in 2012 dollars. Non-governmental wages and population from Bureau of Economic Analysis; Adjusted to 2012 cost level using CPI-Urban from Bureau of Labor Statistics.

Figure 3. US per capita non-governmental wages, in 2012 dollars. Non-governmental wages and population from Bureau of Economic Analysis; Adjusted to 2012 cost level using CPI-Urban from Bureau of Labor Statistics.

Comparing Figure 2 and Figure 3, we can see that they follow generally the same shape. A major portion of the increase in wages in Figure 3 is thus driven by a higher proportion of the population having jobs, at least up until the year 2000.

Figure 3 emphasizes how poorly wages have performed since the year 2000. Average wages on a Figure 3 basis hit a high point of $$19,112 in 2000. They then dropped back to $18,145 in 2003. In 2007, they briefly surpassed the year 2000 high point, hitting $19,573. More recently they dipped again and (with government deficit spending) have recovered a bit, rising to $18,053 in 2012. This is very low by historical standards; it is between the level they were in 1998 and 1999.

Looking at Figure 3, the other time when wages were flat was the period between 1973 and 1983. The thing that is striking is that both the current period and the previous “flat” period took place during periods of high oil prices (Figure 4, below). The vast majority of the rise in non-government per capita wages that has taken place has happened when the inflation-adjusted price of oil was less than $30 barrel.

Figure 4. Per capita non-government wages, as in Figure3, together with historical oil prices in 2012$, based on BP 2012 Statistical Review of World Energy data, updated with 2012 IEA Brent oil price data.

Figure 4. Per capita non-government wages, as in Figure 3, together with historical oil prices in 2012$, based on BP 2012 Statistical Review of World Energy data, updated with 2012 IEA Brent oil price data.

We have discussed previously why high oil prices can be expected to have an adverse impact on wages. There are multiple ways this can happen. For example, oil plays a very direct role in growing and transporting food and in making gasoline. Thus, the cost of food and of commuting increases. This causes people to cut back on discretionary expenditures, leading to layoffs in discretionary sectors. Lay-offs in discretionary sectors means fewer jobs.

Another thing that happens is a change in the competitive situation that indirectly leads to layoffs. Oil is used in transporting many types of goods, and is used in producing a wide variety of products, such as asphalt shingles and synthetic cloth. Wages don’t rise at the same time as oil prices rise. The result is a mismatch between what citizens can afford, and the cost to manufacture and transport products. Some customers are “priced out” of the market. Businesses find that they must scale back the size of their operations to produce only the amount customers can afford. For example, a delivery service will operate fewer vehicles, if demand is lower, laying off workers.

Also playing a role in reduced employment is increased competition from China, India, and other low wage countries. These countries typically use a lot of coal in their energy mix, so are less affected by high oil prices. As a result, their prices become more competitive as oil prices rise.

Changes in trade agreements can also be expected to play a role in the competitive situation. China started growing rapidly immediately after it joined the World Trade Organization in December, 2001. The big drop-off in US employment coincides very closely in time to the time China started growing quickly.

Figure 5. China's energy consumption by source, based on BP's Statistical Review of World Energy data.

Figure 5. China’s energy consumption by source, based on BP’s Statistical Review of World Energy data.

Another factor in reduced wages is increased automation, in an attempt to compete with low-wage countries. An employer may replace several workers with a single worker, using a new high-tech machine. The worker with the new machine may earn more, but the others are left to find jobs elsewhere.

Going forward, increased retirement of “baby boomers” is likely to add further challenges. Retirees will need to be fed and cared for, mostly from taxes on current workers. In theory, the retirement of baby boomers should leave more jobs for unemployed young people, but this will depend on whether such jobs are really available.

One important point is that the impact of high oil prices on wages doesn’t “go away” to any significant extent over time. This is clear from Figure 4, and is a point I have made previously. Increased fuel efficiency helps a bit, as do adaptations like finding a job closer to where a person lives. But high oil prices continue to make goods that are made using oil less competitive on a world market. High oil prices also continue to make increased automation attractive, and continue to keep the cost of transport of high. Individuals find they need to permanently cut back on discretionary spending to balance their budgets.

Oil prices are likely to remain high, and in fact, rise in the future. When we started extracting oil, we began with the easy (and cheap) to extract oil first. Now, the inexpensive to extract oil is mostly gone; what is left is high-priced oil.  Over time, the price becomes even higher, as diminishing returns set in. The recent publicity about the possibility of more tight oil in the United States doesn’t change this dynamic. What the press releases don’t say is that this oil will only be available if it is sufficiently high-priced. A recent survey by Barclays indicates that North American oil and gas companies are anticipating less than a one per cent increase in “exploration and production” expenses in 2013; current North American oil and gas prices are not high enough to justify much increase in investment.

Per Capita Real GDP

In recent years, the economy as a whole has tended to fare better than wage earners. This happens partly because deficit spending is being used to provide income to the many unemployed people, and partly because businesses are able to “bounce back” from an earnings point of view better than wage-earners, because they can cut back the size of their operations to keep profits high. Sometimes they can even substitute low overseas labor costs, or automation.

If we compare per capita real (that is, inflation-adjusted) GDP with oil prices (both in 2012$), this is what we see:

Figure 6. Per capita real GDP (based on US Bureau of Economic Analysis data) compared to oil prices in 2012$, based on BP's 2012 Statistical Review of World Energy data.

Figure 6. Per capita real GDP (based on US Bureau of Economic Analysis data) compared to oil prices in 2012$, based on BP’s 2012 Statistical Review of World Energy data.

There is some stalling in the rise of real GDP per capita, with high oil prices, but it is not nearly as pronounced as the stalling of wage growth. Nevertheless, Economist James Hamilton found that 10 out of the last 11 US recessions were associated with oil price spikes.

On a per capita basis, real GDP per capita in 2012 is between the 2005 and the 2006 level. This is far better than the situation with non-government wages. In Figure 4, we saw that in 2012, non-government wages were only between the 1998 to 1999 level. Ouch!

Hitting “Limits to Growth?” 

I wonder if the situation we are reaching now isn’t “Limits to Growth,” as described by the book by that name by Meadows et al. written in 1972.  The way we seem to be reaching Limits to Growth is through high oil prices, and the impacts these high oil prices have both on wages and on competitiveness with other countries. I explained some of these issues earlier in this post. There are also impacts on governments:

  • Low wages in total mean less tax revenue for governments;
  • Fewer employed means more government outlays for unemployment benefits;
  • Low wages lead to more problems with debt defaults, and more need for bank bailouts;
  • Governments can’t raise taxes fast enough or reduce benefits quickly enough, so they find themselves with rapidly rising deficits. If governments do raise taxes, workers are even worse off. If they reduce expenditures (less unemployment payments or allowing banks to fail), citizens are also unhappy.

Over the last several thousand years, many civilizations have grown up, reached limits of one sort or another, and eventually collapsed. Based on the work of  Peter Turchin and Sergey Nefedov in the book  Secular Cycles, there were financial issues not too different from the ones we are seeing now involved in these collapses. I showed in my post 2013: Beginning of Long-Term Recession? that there seem to be significant parallels to our current situation. These collapses often took 20 years or more, but the situation is still concerning.

While the situation we are looking at is unpleasant, if we understand the source of our problems, we can at least look at our situation a bit more rationally. We may not be able to find solutions, but we can at least eliminate some approaches as being unrealistic. We may be able to find partial solutions, such as making survival possible for a subset of humanity, if not everyone. If we don’t understand our predicament, there is no way we can rationally address it.

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.
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138 Responses to The Connection of Depressed Wages to High Oil Prices and Limits to Growth

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  6. Bicycle Dave says:

    Hi Gail,

    If we don’t understand our predicament, there is no way we can rationally address it.

    Your point supports my belief that all the solutions to our predicament suggested by your followers (well-intentioned as they may be) are pretty much just academic exercises that have little current value – although they might prove useful at some far point in the future.

    I’ve found this problem solving model to be very useful:

    1. Define the problem in terms of symptoms and root causes. Symptom identification should be relatively non-controversial. In times of medieval plagues most people would agree that the volume and nature of the death rate was an undesirable symptom. Root causes are always much more difficult to understand. But, again in those plague times, eventually most people came to accept the sanitation issues as being a root cause.

    2. Set goals and objectives that are consistent with problem. The people in those medieval plague times could easily agree to cutting the death rate by something like 80% in a few years. Not many folks would disagree even if this was not explicitly published in the town square.

    3. Brainstorm solutions that are designed to meet the goals; experiment with the most likely solutions; fully implement the most successful ones. Killing rats and getting sewage out of the village worked well for the medieval folks – offering sacrifices was not very effective.

    4. Monitor the success of the solutions as measured against the goals; re-evaluate progress and iterate back through any previous steps as more information is discovered; rinse and repeat.

    You and I agree that the rate of natural resource consumption is a demonstrable symptom of our predicament – your excellent analysis is basically a documentation of this. We also agree that a fundamental driver of resource consumption is the current and projected number of humans on the planet and most other factors pale in comparison. And, it seems we agree that most people don’t understand these simple facts and therefore ” there is no way we can rationally address” our predicament. According to my model, we therefore can’t agree on the goals needed to address our predicament and all the proposed solutions lack real purpose.

    We disagree on what I consider to be a fundamental root cause: the cultural memes related to religion, politics, and economics. I think Richard Dawkins is completely correct that these cultural influences blind us to certain otherwise obvious realities of our existence. Clearly we have the brainpower and technology to deal with the population problem. If we can put a robot on Mars we can understand the Limits to Growth idea. Birth control technology is now pretty well established. The idea that a village can only have one child per hundred adults only sounds ridiculous if one doesn’t understand the problem or one simply does not care about future generations – and most people would “care” if they believed what we think is in store for today’s infants.

    So, until most people on the planet deeply believe in the concept of Limits To Growth, we aren’t going to set some goal like: 4B humans on the planet by 2100 (via humane means). Without such a goal there’s a very slim chance of any agreement on potentially effective solutions. And, I contend that understanding the mentally crippling effect of our cultural memes is a necessary part of understanding the root cause of our predicament. This understanding would lead to much different solutions than we normally talk about. I also admit that my musings are also just an academic exercise as there is almost no chance of humanity coming to grips with the adverse effects of our religious, economic and political belief systems.

    • Mel Tisdale says:

      Now who’s being academic, and with pretty basic academics at that? No mention of how we move from the current system of combative governance with limp oversight by the U.N. to one of mutual support, especially at a time when resource wars are highly likely. No realisation that our systems of selecting our leaders are clearly not putting people of sufficient calibre into office. No mention of the degree that developing nations will feel aggrieved by any attempt to deny them the standards to which developed nations have become accustomed and how we address that conumdrum. Take the U.K. All we get from our ‘leaders’ is “We are all in this together.” When it is obvious that whatever it is that the privileged leaders are in, it is not the same thing that the rest of the population is in and ‘togetherness’ is far from reality, or even possible, yet.

      If anything is going to work, I suspect that we need to put the planet on a collective war footing with poor Old Mother Nature, who is totally innocent. She is only doing what she has been telling us she would do if we didn’t listen. If we let that stance imbue the notion of ‘needs must when the devil drives’ it might circumvent the hindrance the current systems are bound to produce. Perhaps when the world stops listening to the nonsense put about by the denialati and realises that its children and grandchildren are likely to die a slow death from malnutrition, we might get some action. We will never defeat Old Mother Nature, but we might achieve a meaningful truce. Until that happens, the status quo is going to result in the rich getting richer with the poor getting poorer, and when one considers just how much money talks (or ‘swears’ as Bob Dylan has it), the less likely we are to get the change we need.

      But first of all we need proper governance by people capable of managing the change so obviously needed. Then will be the time for academic analysis of the options open to us, options which are becoming fewer and fewer as time passes.

    • I think instincts play a big role. Humans have instincts, just as animals. I expect you would have a very hard time telling cats or dogs or chickens to limit their population. The instinct of all animals is to make use of whatever energy sources are available, and expand their population. Humans have the same instinct; it expresses itself in different forms. Some of it is in religions of various types. Even if a small share of the world population understands the problem and rationally agrees that a solution is needed, it is hard to get the whole world to agree. This is why population limitation doesn’t work.

      • Bicycle Dave says:

        Hi Gail,

        This is why population limitation doesn’t work.

        If we agree that human population levels prevent an actual “solution” to our predicament, and that there is no humane/deliberate way to limit the growth, then the conclusion is pretty obvious. At least in our way of thinking, then it’s just a matter of when and how a collapse will occur – but not “if”. Some of us might engineer some coping/mitigating strategies but these will not avoid some very nasty consequences for future generations, the young people today, or even us old folks if the timeline is short enough.

        My main point is that suggesting possible “solutions” is ineffective if most people on the planet don’t understand the problem. I give you great credit (even if I like to argue with you) because the main thing you do is explain why we have a problem. I wish there were some great world leaders who could take your message forward – but, this is not likely to happen.

  7. david john says:

    Thanks to Gail and all the commenters. It is apparent to me that we are edging closer to collapse. I think climate change is underestimated – all it takes to jeopardize our survival is for the grass not to grow for a year. Which is what happens during a drought.

    Peak oil is linked to wages and the economy, as you observed. What I don’t hear is any discussion about saving some oil for higher purposes, such as producing pharmaceuticals, eyeglasses, fertilizer, tires, etc. instead of simply burning it for the energy content. Very shortsighted, IMO.

    • Mel Tisdale says:

      David, you are absolutely right in identifying the need to protect the production of important, let alone vital, goods. Such protection is not going to come from self-serving politicians who have only got the next election in sight. “Climate change? To hell with that, let’s win the next election first.” (And then the next, and the next, and so on, seemingly ad infinitum. That has to be their attitude when one considers just how urgent the need for action is on that topic and is one of the many reasons why I have been trying to initiate a call for better governance. Watch the video of Prime Minister’s Questions in the U.K. House of Commons and the need for change becomes blindingly obvious. I think Stephen Sondheim must have got the idea for ‘Send in the Clowns’ from watching their vauderville act. The situation in America is nothing like as amusing, but much more serious, considering how much more important it is on the world stage.

    • I don’t see that there is any way of “saving oil for higher purposes”. Oil extraction is part of a huge system that includes pipelines, refineries, and education of engineers. I don’t see any way that the system can operate below a certain production level. In a world market, reducing our consumption doesn’t really reduce total consumption–it just reduces price a bit, and lets developing nations have more of the total oil that is produced.

      I think if we were going to save oil for certain purposes, we would have to refine it and store it in tanks, earmarked for that purpose. This procedure would limit severely how much we could do. There is also an issue of refined products not “keeping”. Hopefully that would not be a problem in this case.

      • I agree. I don’t see any way that we can operate below a certain production level of oil. Our cumulative, aggregate purchases is what makes oil so cheap for all of us. One person trying to get a barrel of oil would face an impossible situation. Even now the oil companies and nations are spending the equivalent of lunar explorations just to bring us our “run to the store and get milk” fuel.

        Essentially when the bubble bursts even Bill Gates will have to spend millions and millions of dollars to get fuel. The reason why is because the rest of us will be unable to buy or pay for any fuel. The rest of us will not be able to share the cost.

        The costs will become exponential.

  8. Don Stewart says:

    Here are some interesting results from a farming trial. 3 different systems were compared: a purely human powered system with modern hand tools; a walk-behind mini-tractor; and oxen. The productivity rates were as follows:

    Labor $ per hour: 22.94 30.79 25.38
    Land $ per hectare 56,497 53,503 28,445
    Energy EROEI 5.1 2.3 6.5

    As you can see, if energy is really cheap the mini-tractor may be the best choice, but it has a low EROEI and if energy costs go up it will become increasingly less acceptable. The oxen actually generate the highest labor productivity and the highest EROEI, but they do not generate as much productivity per hectare because the oxen require grazing land. (If the grazing land were unsuitable for crops, that could make a difference. In China early in the 20th century, F.H. King found that the Chinese grazed their water buffalo in graveyards.)

    We currently use about 10 calories of fossil fuel energy to produce 1 calorie of consumed food. If our goal is to use less than a calorie of fossil fuel energy to produce 1 calorie of food, then it seems unlikely that mini-tractors will be part of the equation. Instead, we will either do everything by hand or else we will use draft animals. Draft animals have the capability of slightly increasing human incomes. Draft animals will only make sense if the Fed stops printing money and lets the value of farmland fall.

    These numbers are from Rebuilding The Foodshed, page 34.

    Don Stewart

    • Thanks! Part of the issue, too, is how much food can be produced in total. The current system likely wins in that regard. As you know, farming prevailed over hunter-gathering, because it could produce more food relative to a given acreage, not that it was particularly good in any other regard. The level of effort for humans was much higher and the quality of nutrition much worse.

      In the time since mankind discovered fire over 1 million years ago, humans have used more than one calorie of energy to produce their food and get it to the table in prepared form. It seems like it is possible that we may be setting too high a standard if we expect to spend less than one calorie of energy in growing one calorie of food. Draft animals are a way of increasing energy available to humans, and at least in some instances, increasing total food production.

      • Don Stewart says:

        There simply isn’t much evidence that fossil fuels increase production in the field. We have recently discussed the Iowa State trials, and today on Resilience.Org is a story from Australia about a system of combining perennials and annuals and never plowing. The total yields are the same in both the Iowa State trials and in Australia. But the reliance on fossil fuels is very much lower. I will note that the Iowa State trials were over a 10 year period and the Australian system has been in operation for 20 years. So these are not flash-in-the pans. If you look at the Australian results, also note the carbon sequestration results. If we ever get desperate enough to pay farmers to sequester carbon, farming might actually become profitable.

        The use of fossil fuels in the food business is actually mostly not on the farm. The biggest single factor in energy use is food preparation–at home and in fast food restaurants. Refrigeration is one of the huge energy hogs.

        To my simple minded way of thinking, we should at least be able to get a calorie out the farm gate by expending only one calorie of energy. That leaves many calories consumed by transportation, packaging, processing, storing, and preparation to be dealt with.

        The low EROEI of the small tractor solution leads me to think about what is really driving the decision making. Are we trying to maximize income to pay the note to the bank (the historical situation of small farmers)? Are we trying to maximize labor productivity (the historical way capitalism has looked at it)? Are we driven to use energy with the greatest efficiency (the way ecologists usually look at it)? I won’t even discuss such a ridiculous concept as ‘maximizing profit’ in terms of small farms–anybody who thought that way would be in some other business–such as robbing banks or running banks.

        Don Stewart

        • I agree that transporting, storing, and processing grains and other foods are huge energy users. Someone (maybe you) said that part of the need for slaves in ancient times was to grind grain, IIRC. These are huge issues–one of the reasons why hunting and gathering looked like a good choice for so long.

          I expect that there is a big difference between “little fossil fuels” and “no fossil fuels” in growing food. We really need fossil fuels in order to have enough metals for transport and for such basic items as fences. I know I was surprised to discover that the big drop in the need for farm workers came with the availability of coal, and the changes it made possible. It was possible to make better plows for horses to pull, for example.

          • Don Stewart says:

            Dear Gail
            The question of how much, if any, fossil fuels we might have in 25 or 50 years, what our society will look like at that point, what will be the population, etc. is way to complicated for me to forecast with any credibility.

            If we are real optimists, I suppose we come out with one of Herman Daly’s Steady State Economies. If we are doomers, we come out with something like the implosion of a dynamited building–nothing but rubble left. If we have faith in rationalism, I suppose we visualize a military medical unit performing triage and saving the most essential functions.

            I tend toward the triage scenario myself. Not because I am confident that we will behave so rationally, but because it is one that I can do something about today–I can begin the triage process in my own life and in my social relationships.

            To get a picture of what triage might look like in food, I suggest you take a look at this chapter in David Kennedy’s book 21st Century Greens:

            Just read the first 4 or 5 pages and then scan down his list of cover crops. I think he will pretty quickly convince you that cover crops can do anything industrial agriculture can do–just better and more cheaply. Cover crops can also provide a significant portion of the dietary vegetables that our human health depends upon.

            Let’s suppose you have a backyard garden and you decide to begin the cover crop scenario David outlines on page 138 under Home Vegetable Garden. So you buy some seeds and get started. Now buying the seeds assumes that either you have bought seeds once and subsequently saved them or else someone is in the business of saving seeds and you buy some from them. It also assumes that seeds can be transported from the seller to you in the society which exists in the coming decades. Is it reasonable to assume that seeds will be available?

            The lecture this spring at the local Botanical Garden features the man who restored the Monticello garden to a very near replica of what was there when Thomas Jefferson lived in Monticello. Jefferson avidly collected seeds from all over the world. There were no fossil fuels. So if our wise ‘arbitrage councils’ have any sense at all, they will insure that we are able to trade seeds with each other. Perhaps the Post Office will be useful after all.

            Thomas Jefferson and the other Founding Fathers plowed with those iron plows you mention. Their reward was eroded soil and the depletion of fertility. There are surviving letters between guys like Washington and Hamilton bemoaning the loss of soils and fertility on the Eastern Seaboard. The only answer they really had was ‘going West’. Some Europeans tried to explain better practices, but Americans were a stubborn lot because we were blessed with ‘infinite space as a gift from God’.

            The knowledge encapsulated in 21st Century Greens would be high on my list of important things for the ‘Triage Council’ to consider worth saving.

            We also need a way to knock back (or kill) the cover crops to deposit organic matter and nutrients deep into the soil without tilling. Crimping is the current best solution. The Rodale Institute developed a roller which is pulled behind a tractor which is filled with water to make it heavy. The roller has crimping blades which knock back the cover crop and leave mulch on the soil. At the more humble garden level, one can buy metal crimpers that you just work with your foot and the weight of your body. Put together a well made boadfork, a crimper, several hoes designed by Eliot Coleman in Maine, perhaps an Austrian sickle, and a scythe and you have pretty much what you need in the way of equipment to garden successfully.

            But will you have any land on which to garden? That depends on how our society turns out. The new book Rebuilding The Foodshed spends several pages describing how local officials are frequently the biggest obstacle to making a garden and perhaps putting up some of that produce and selling it to raise the cash to buy more seeds. Let’s hope that, somehow, our Triage Council figures out a way to utterly destroy governments so that we can start over and design something sensible–while avoiding lawlessness and unrestrained violence. Then people can do what they need to do to survive in relative safety. Making sure that golf courses are destroyed and turned into gardens would be high on my list, as well as growing food in every yard.

            This has gone on for too long already. Getting into things like food preparation would take me a lot longer. I will only mention that Paradise Lot: Two Plant Geeks, One-Tenth of an Acre, and the Making of an Edible Garden Oasis in the City lays out the decade long results of an effort to mostly eat fresh food in Massachusetts. By cleverly selecting their mostly perennial plants, they have fresh fruit almost all year–with a 2 week gap in August that they have plans to fill. So they are approaching the hunter-gatherer ideal rather than the ‘huge pantry full of canned goods’ ideal.

            In short, if we can achieve a Triage scenario, and if some people begin to prepare themselves today, I think that those who do prepare may well have a life worth living.

            Don Stewart

  9. dashui says:

    My friend is an investigator for DHS. And I’m turning all your names in!
    Actually I asked him about ammo. He said that they only buy 1 type of ammo so they don’t get confused and have the wrong one in their gun.

    • Mel Tisdale says:

      I am not an expert in the matter, but all the comments that I have seen on the procurement of the ammunition for the DHS commented on the amount being procured. If the majority were used for training, then we can expect the DHS to send a pistol shooting team to the next Olympics.

  10. SlowRider says:

    I can only say I’m glad not to live in the US. You have some scary things happening over there since the “war on terror” started. Europe has it’s own problems and it’s own arrogance, but one thing I love here is that things have remained small-scale, in the end more human I think. Life may be difficult, but in the end most everybody finds some shelter, and that is a very important thing in life. Of course you also have rural areas and certainly some good communities over there, but they seem kind of lost in this “highway-life” as I called it on my visits.

  11. Mel Tisdale says:

    There has been much talk about the possibility of collapse, though what its exact nature will be is as yet ill-defined. The financial columns seem to have an oversupply of pundits who believe that the chickens that flew the coop when America left the gold standard and with it the Breton Woods rules, are now coming home to roost.

    So it seems that at the very least we are going to have a financial collapse. Whether that will be the first of many dominoes to fall, or simply be a standalone event remains to be seen. We do know that waiting in the wings are water supply problems and limits to the supply of finite resources of oil, copper and other minerals essential to our current way of life, with oil the most serious, as evidenced by this latest posting by Gail. In the background is climate change, which is likely to have a dramatic effect on food production just when the population is set to climb above nine billion and possibly reach ten billion or even higher. It is perhaps an understatement to say that society as it is currently structured across the globe is in a precarious state.

    As I have mentioned in another comment, we know that the authorities have purchased large amounts of ammunition and have also set up what are called FEMA camps, which apparently are now staffed. If I had only got this from Alex Jones, I would ignore it, simply because he sees anything that does not quite fit his view of the world as a conspiracy by something called the new world order, which I find tiresome. However, I have seen other, less extreme, people refer to this information and have seen supporting documentation, so it is perhaps credible. It would fit into a scenario where the attacks of 9/11 were an essential justifying pre-cursor to the creation of the Patriot Act and the Department of Homeland Security. Is it just coincidence that these give the powers that be the necessary tools to control the civil unrest that is highly likely in a financial collapse where the paper money in our pockets becomes worthless? A collapse that anyone with a two digit IQ could forecast simply by looking at the data; data which has been around for some time. For instance, Chris Martenson has been doing an excellent job of warning us via his Crash Course for some time now. On this side of the pond the U.K. has also lost some freedom, though nothing like as much as that lost by the citizens of the U.S.A.

    I will be the first to admit that the above might all be complete nonsense. In fact, I sincerely hope that it is. However, operating on the maxim ‘Plan for the worst and hope for the best’ would it not be a good idea to begin an open discussion on what is likely to happen regarding the various scenarios there are concerning financial collapse and other possible subsequent collapses? Perhaps if the public were aware of just how thin the ice is that they are walking on, they might join in a move to open up the discussion on where to go from here; only this time in a much more purposeful way than they did with the Occupy movement.

    If I am anywhere near correct in the above, then we stand at a cross-roads. We still have a choice in which road to take, though for how much longer that choice will remain open is anyone’s guess. Personally I want to see an improvement in the way we govern ourselves and any changes to that are going meet with strenuous efforts to close down our options. If 9/11 was an inside job, which the science strongly indicates that it was, then these people will stop at nothing and so they themselves must be stopped. I have put my head above the parapet. Is anyone else prepared to do likewise?

    • Unfortunately, we are dealing world which is reaching the situation of not enough resources to go around. Either the elite must reduce their consumption, or some of the lower level users must be eliminated from the equation. Economists seem to think that price is the way of doing this. This approach tends to keep the elite in their power, without forcing them to cut their consumption by much. It also has the effect of pricing poor people out of essential goods (water and food come to mind, at least in some parts of the world). Loss of jobs and loss of government programs to support the jobless can be expected to increase the number of people who are marginalized, and thus pushed to the bottom.

      I suppose FEMA camps are a way of dealing with all of the marginalized individuals, as a result of this approach to solving our problems.

      We should have thought about this issue long ago, and kept our population way down.

      • Mel Tisdale says:

        We should have thought about this issue long ago, and kept our population way down.

        Perhaps we should have seen where the Industrial Revolution and discovery of oil would lead. A better form of governance might, but I concede only might, have provided such vision.

  12. Lizzie says:

    Gail, I picked you up at The Oil Drum, where you are much respected by the Drumbeat crowd — I find that crowd to be instructive and helpful in many ways. Intellectually, it pays to be a skeptic — I just didn’t believe the MSM “reports” after the BP oil began flowing into the GOM, and through inquiry to some geology friends, I found Drumbeat. And now I have found you. Thank you ever-so much, for again I have found a source of information/education in a field where I was lacking such. Lizzie

    • You are welcome. It is hard to believe what a poor job the main street media is doing on the subject.

      You were something close to my 1,000,000th visitor on Our Finite World. I have been using Our Finite World primarily since Thanksgiving time, 2010. I used it a little early in 2007 as well before I wrote on The Oil Drum.

  13. Xabier says:

    I had an elite education (history faculty) of the kind which the British politicians, whom Mel finds so unimpressive, had. I should say that such an education does nothing at all to prepare one for the reality which we are facing. They functioned well enough in 1830, but are no good for 2030. And yes, they should be wearing clown costumes!

    Why discuss these questions if we can do nothing? The pleasure of rational discourse!

  14. Pingback: High Oil Prices Have A Brutal Effect On US Workers | Political Thrill

  15. sorry Mel. I misread the gist of your post, thinking you were following the line of mutual standoff or something.
    I’m with you on nuclear terrorism, a bomb on a boat up the Thames or the Hudson is all that’s needed, and I would say its a very near certainty, given the proliferation of expertise and hardware
    Once a nation (say Iran) is pushed so far into poverty and hardship, the reaction will be like any cornered animal, do anything in one last desperate show of strength. Another likely scenario could well be over water access, between India and Pakistan for instance, Or N Korea breaking down its neighbours fence just get food.

  16. Mel Tisdale says:

    The world is in a mess; that much is blindingly obvious. What is becoming even more apparent, to me at least, is that we just do not have the quality of governance necessary to steer the individual ships of nation state through the troubled waters we now find ourselves in. One has only to look at the Youtube video of Prime Minister’s Questions from the British House of Commons (the lower, some would say much lower, house of the nation’s Parliament) to see that. There is not one member of that house that is properly dressed. There is neither a big red nose nor a revolving bow-tie in sight. Though one member, a Sir somebody or other, does at least try. His suit jacket reaches down to his knees, but even he does not go all the way, which would be marked by having it made from yellow material with baggy red sleeves. Nor does he wear the obligatory size 20 shoes worn by all clowns.

    In the U.K., and almost everywhere else it seems, the current democratic system simply fails to elect the right people into office. Seeing as we live in an age dominated by science and technology, it cannot be a good thing that there is only one scientist in the whole of the British House of Commons. Even 50% would be too low a number. I do not know the relative numbers for other nations, but it has to be similar. I say this because scientists and technologists have to ‘run to stand still’. They simply cannot afford to take time off to do a full-time political job. They would get left behind in their chosen field of scientific endeavour. On the other hand, anyone who has studied non-science subjects, such as the classics, can take a lifetime away from it to no detriment to their career. Unless my Ouija board needs re-tuning, Socrates hasn’t said anything new since I bought it years ago in a jumble sale. All I get is Clara Schumann raving about Brahms’ latest variations. As if I care.

    How important is it that we bring science and technology into the political foreground? I would think the answer to that has to be ‘very important’ when we take stock of where we are. Looking at the growth of the human population, one clearly sees an exponential increase. It may be that exponential decay is likely to follow this exponential growth and there is nothing we can do about it. We either accept that the good times are over and brace ourselves for coming dramatic collapse or we take the view that while decay in our numbers might be inevitable, it need not be exponential in nature. With that mindset we could thus embark on a course that at best avoids such a dramatic decline and at worst reduces its rate at least. In short we either construct a parachute or we all cross our legs left over right so that whatever species rises in our place knows which way to unscrew us.

    It certainly looks as though there are a lot of things that are lining up to create the circumstances where the planet will just not support us in the numbers that now exist and certainly not to the standards to which we generally have become accustomed. For instance, we are facing a warmer world, how much warmer is still the subject of scientific research, but the climate sensitivity seems to be hardening at around 2.5 C for a doubling of CO2 since the beginning of the Industrial Revolution. That figure, however, only fixes the rate of increase. We still need to fix the amount of CO2 above pre Industrial Revolution levels we can achieve and whether that will avoid positive feedbacks that will mean an almost unbearable temperature rise. Business as usual on the CO2 front will likely create dire conditions for us and a whole lot of other species who have the misfortune to share the planet with us. They must see us as the neighbours from hell.

    In addition to climate change we have mineral supply problems. When Dr Hubbert first predicted that oil extraction would peak and then sink into decline, it should have been obvious that we as a species had a problem. That other minerals would follow similar patterns should also have been obvious. It goes without saying that such inevitable declines are each also going give our species a problem.

    When one stands back from the notion of peak oil, it is clear that there should be a limit to the amount of oil that can be extracted and that it should have a peak level of extraction. Surely that follows from the fact that in the early days, all the oil industry had to do was drill a hole in the right place and hey presto a fountain of oil would gush up into the sky while in its later days the industry is having to jump through hoops to extract oil at anything like the rate we are consuming it. All major minerals are requiring more and more energy to extract diminishing yields. It should have been obvious that those hoops existed from the beginning of their extraction. (O.K. perhaps not in the Iron Age, but you get my drift.)

    In addition to these physical constraints on our living conditions as met by climate and mineral supply conditions, which in turn impinge on food production, we have the financial systems adopted by our governments. How long has it been known that the baby boomers were going to retire and need pensions? About sixty years or so. And yet all we hear from the politicians is that pension provision for baby boomers is a problem and they don’t quite know what they are going to do about it. Well, sixty years is such a short time to plan for pension provision, we can hardly blame them for not being prepared, can we?

    From what I can glean from those who comment on financial issues it seems that the whole world’s financial systems are all based on small pieces of paper called bank notes which have little intrinsic value, being too small and too stiff for even their most essential purpose. The vast majority of these pundits take the view that the world’s financial system is about to collapse anyway, which will make these banknotes completely worthless.

    We get a measure of the worth of our politicians when it can clearly be demonstrated, as Gail has done, that economic growth depends on oil supply and that oil supply is struggling to meet demand. This has only been predicted since the mid 1950s so, as is the case with pensions for baby boomers, they have not had time to plan for it. No wonder they are all running around like headless chickens desperately trying to get economic growth into the system when clearly that is a forlorn endeavour. Surely we need better politicians. Politicians who understand how the world works today, not how it may or may not have worked in the days of Socrates (and I do not mean the Brazilian footballer). Politicians who can see that we have hit, or are about to hit, the buffers of economic growth and provide leadership to a better world where we can escape the need to work for ever harder to enable the richest 1% to live in the lap of luxury.

    I cannot speak with any degree of knowledge about the political systems of other nations, other than perhaps America, whose problems are not the puerile behaviour of its politicians, but more the revolving door between industry and government, which, unlike the clownish behaviour of British MPs, is not in the least bit funny. As Bob Dylan so wisely put it: ‘Money doesn’t talk, it swears’.

    Perhaps if we can get a discussion going on the need for far greater scientific representation in government and how that might be achieved, we can set in train a complete revision of how we as a species govern ourselves. Can we really carry on as we are when, as I hope I have shown, we are hardly governed properly at all? I don’t think we can wait until the wheels come off completely.

    • Mel
      your post is interesting—if a bit overlong
      you make the classic mistake of seeing our problem as something that can be fixed by specific action, or that it’s the fault of a specific group of people.
      our current situation derives from the industrial revolution which -eventually- provided the means for all of us to be better fed, clothed and housed, as well as all the luxuries that went with that.
      we enjoy those things, and in our recent history there was no point where we could, or would have stopped.
      Politicians know just as well as the rest of us, that we’re stuffed, but what politician is going to stand on the hustings the the slogan “THE PARTY’S OVER” ?? (but vote for me anyway)
      Just like politicians, we go to work every day knowing that the economic situation can’t be fixed, but what alternative is there?
      There are no ‘other people’ out there who know how to fix things. Industrialists just burn energy to make more money, not to make our future more sustainable.
      we all got ourselves into this fine mess because we enjoyed the ride—and believed (and voted for) those who told us it was forever. When Carter warned it wasn’t forever, he was kicked out of office. Cameron, Obama, Merkel, Putin can’t suck oil out of the ground any faster or make it cheaper. Right now the Arab Sheiks are literally in a fools paradise either with countries disintegrating around them, or (in Saudi) buying off unemployable young men with $billions in freebies, following the classic Dickensian philosophy of Mr Micawber, that ‘something is bound to turn up’ (he ended up in debtors prison btw)
      Too late to cry now, we blew it, bigtime.

      • Mel Tisdale says:

        @End more

        You could well be correct in your overall analysis. Indeed, it would explain why there is so much effort on the part of the fossil fuel industry to maintain business as usual in that such behaviour serves to boost their profits. This in turn would provide the ability of their own families to buy whatever protection there might be from the conditions their actions mean for the mainstream of the population.

        However, I am not about to roll over and ask for my tummy to be rubbed. I still believe that given the political will we can beat climate change. It is fortuitous that beating it will also reduce oil consumption and other fossil fuels..

        If we had a political class that was at least honest and competent, which cannot be said of the current parcel of rogues, we could put all our cards on the table. That would have the object of spelling out in clear detail just what our options as a species are and perhaps arive at a best fit for all of us. Perhaps we can be grateful for nuclear weapons (that is a first for me). I imagine that at least one nuclear armed nation could arrange for a ‘terrorist’ group (a.k.a. special forces) to have such weapons located in prime locations in any nation that might just try to use its military might to try and get a bigger slice of the pie than it deserves, especially when taking into prior efforts (or lack of them) to tackle the problem to date.

        Surely, we must at least try. Can we really take the decision not to act when our own children are so much at risk? Children yet to be born in most cases

        • absolutely we must try. I try to think ahead for my children and grandchildren, but I don’t mention it because of the good humoured derision that would involve.
          We can only hope that our actions have some long term benefit, but ultimately our problem is too many people demanding too much from a finite planet, believing politicians who say we can have it all.
          I don’t think UK politicians are any more dishonest than your average citizen, bearing in mind that in genetic terms we are all bound to be self serving. Their dishonesty is perhaps in repeating that which they know to be impossible–infinite growth for instance. and that our society can carry on as normal
          I am hoping that your nuclear solution is an ironic one===I couldn’t quite decide.

          • Mel Tisdale says:

            @ end of more re: I am hoping that your nuclear solution is an ironic one===I couldn’t quite decide.

            Not ironic at all. I expect to see nuclear armed terrorists at some time in the near future, and when that happens, the world will change. Think about it, ten atom bombs in the hands of terrorists operating at the behest of some nation that has had enough of being told not only to jump, but also how high they should do so could have the U.S.A. belly up before it had used half of them.

            It is something that has concerned me for some time. I first raised it on a visit to NATO headquarters in August of 1990. It was obvious by the facial gymnastics of the Deputy Ambassador to whom I addressed the issue and the reaction of the colonel sitting to his left that they had never considered the possibility. I doubt that it so disregarded today.

            (No, I do not regard nuclear weapons as particularly beneficial to mankind. Some are extremely dangerous, even today in what remains of the peace that broke out at the end of the Cold War, especially the MX and Trident D5 ones. But that is a technical issue and off topic. Let’s just say that MIRV systems should be banned and banned immediately. But with non-scientists making up 99.99% of UK MPs there is no point in expecting any action from them, especially seeing as people will still vote for MPs because they are pro-nuclear weapons.)

        • Climate change will be beaten by collapse. Or at least the kind of reduction of fossil fuels that are being asked for, will come about by collapse. Whether or not this will really fix the climate is not something I know.

          I don’t see that we really can “fix” it sooner. The “fix” is coming quickly to our doorstep, whether we want it or not.

          • Mel Tisdale says:

            I find the idea that we should just wait for the collapseto happen to be somewhat complacent. CO2 stays in the atmosphere for around 60 to 100 years. Even if the collapse comes tomorrow, we have pumped sufficient CO2 into the atmosphere to guarantee that temperatures will continue to rise for decades to come. That in turn means we simply cannot just rely on some collapse that might not come for many years to fix matters. By then we might well have increased the release of methane from the melting permafrost to mean that climate change will continue no matter what we do, collapse or nay. That will be devastating to our species. We are already looking at 4 to 6 degrees by the end of the century and that will be dire enough. If we go up to 12 degrees rise over pre-Industrial Revolution levels that would be game over for us. It would be just too quick for us to adjust to the new norms.

        • Mel Tisdale says:

          So, Gail, do you think we are well governed, because I don’t? If we are to get ourselves out of this mess I don’t think the current breed of politicians is capable of being much use. At least, I see no evidence of same. All I am offering is the notion that in an age dominated by science and technology, we need governance by people who understand science and technology. Yet to get such people into government, we are going to have to accommodate their need to keep the day job, which will mean a major revision to our electoral systems.

          • Jan Steinman says:

            Mel, I think you have an irrational faith in science and technology.

            Science and technology are forms of complexity, no? Howard Odum (et. al.) has shown that complexity itself is a form of embedded energy — as energy declines, so must science and technology.

            So I’m afraid that “governance by people who understand science and technology” is simply replacing one out-dated paradigm with another.

            What we need are politicians who understand the awesome dilemma humanity is facing, and who can communicate that to the public in a way that results in embracing of coping strategies that can result in adequate, but simple life-styles.

            Humanity is way beyond the “change your light bulbs and buy a Prius” stage. We’re more at the “turn off your lights and get rid of your car” stage. Demolish your garage and put in a garden!

            • Mel Tisdale says:

              Jan, you might well be right. All I know with certainty is that the current paradigm is just not working, and hasn’t worked for some time, otherwise we would have had in place the statutes and conventions necessary to avoid getting into the mess we are now in.

              As an engineer (retired) I obviously have leaning towards science and technology because I have worked with such people for more years than I care to count and know their talents. That knowledge leads me to believe that they are well placed to deal with the scientific and technological issues that beset us today. If a better type of person can be found, such as those whom you recommend, then all well and good. The next problem is their lack of a well defined category that the public can be persuaded to vote for. But that is not insuperable.

              Gail and others seem to think it is all too late and collapse is inevitable, so no need to do anything. Even if it is all too late, as they say, then surely we still to have some competent governance in place that can steer us through the collapse so that we come out the other side best placed to rebuild. I cannot see the current U.K. M.P.s being anywhere near up to the task. There are far too many who are professional politicians with little or no experience of real life for a start. They are all, bar one, non-scientists.

              Of course, if Gail genuinely thinks it all too late, what on earth is she wasting her time with this website for? If I felt that way, I would not be bothering with writing this. Instead, I would be out having fun blowing all my savings on wine, women and song, and to hell with the diet!

          • Jan Steinman says:

            Mel, another questionable assumption may be that governments themselves will be able to continue into the future — with any sort of people at the help, technical or no.

            What I see is a return to feudalism, perhaps preceded by a period of oligarchy. I think we are on the edge of the oligarchy phase, as politicians increasingly have ties to moneyed interests. Witness the USDA and the FDA, filled with political appointees who have come from the very businesses they now are supposed to be regulating.

            What happens next is impossible to tell. But I have very little confidence that it will involve the current paradigm of government, except with technocrats in charge!

            One possible future is that corporations will simply take over the government. They are happy enough running the government as-is, but power craves absolute power, and silly things like courts and ballot initiatives get in the way.

            Are you familiar with The Shock Doctrine, by Naomi Klein? I could see corporations following Klein’s script: cause a crisis, claim that the current system is fatally broken because of that crisis, and humbly offer to take over.

            Of course, in the much longer term, globalization is doomed. It just doesn’t know that yet. (I’m hardly a conspiracy theorist, but perhaps the higher-ups in the corporations do know that, and are planning their own “shock” in order to take over regional portions of corporations.)

            What’s past corporatism is feudalism. As declining energy ends globalization, those who can offer work for food will have large armies of indentured servants to do their bidding.

            Is there hope in such a scenario? Perhaps not, but I see cooperative ownership of resources as one possible way that some people will remain free, while the vast majority have no idea that they are already enslaved.

            I resonate with your belief that good government could “solve” things. But I absolutely disbelieve it can happen.

            • Mel Tisdale says:

              Jan, I fully agree with your concerns regarding our future governance or possible disappearance of any governance whatsoever. There are many ways that events could pan out and not many, indeed if any, are particularly pleasant. As the collapse comes ever closer, the worse the outlook seems to get. All we can really do is plan for the worst and hope for the best. It looks very much as though at least some governments are doing just that, considering the incredible amounts of ammunition the Department of Homeland Security has been acquiring lately. I am not a gun expert, but those who are say that they are not training rounds, so the DHS must be expecting quite a lot of civil unrest. It would be nice to know what they know.

              You say that you are not a conspiracy theorist. I am, at least as far as 9/11 is concerned. If my fellow travellers were all babbling about aliens or mini-nukes, I would be worried. But there are a great many architects, engineers and airline pilots who from their individual perspectives just do not believe the official line either. As an engineer myself I know that the official line breaches the fundamental laws of physics and also common sense to a large degree. When one realises that the DHS was only created on the back of 9/11, one can see a motive for the awful crime that 9/11 was and how the above purchase of ammunition might just be evidence of a plan being executed. (And there I will cease any further comments on 9/11 just in case the usual suspects start another endless stream of denial and abuse that passes for intelligent comment in their neck of the woods.)

              While the prospects seem bleak, I will not give up on the possibility that we can come through the coming collapse and possibly even emerge into a better world. I just don’t see that the current political class are up to the job. The problems are different depending on which side of the pond is being discussed, but of the same degree. In the U.K. we have a political class that is in large part made up of professional politicians who have done nothing but go to university and on from there straight into the political system, serving as special advisors for a time until a nice safe seat comes vacant and off they go into parliament having done sweet F.A. for their country. American problems are highlighted in this link to a Bill Maher programme: Also, we must not forget the revolving door between government and industry and the role of lobbyists, with the general public nowhere in the mix.
              I live out in the countryside, Jan, with about two hectares of land, but am becoming increasingly aware of the fact that the food I grow for myself will most likely be harvested by the hungry mobs from the towns and cities if society completely collapses. But I refuse to give up. Had I been on the Titanic, I would have been sitting on the stern rail as the ship sank telling Leonardo DiCaprio and Kate Winslet not to worry, something will turn up.

            • I hadn’t really stopped to think through what is past the current political system too closely, but your reasoning doesn’t seem too far out of line. I agree that the current system cannot continue for long. My thinking was more in the direction of possible breakup. One breakup would be of the Eurozone. There would also be the possibility of some states seceding from the United States, or of the Federal Government delegating so many programs to the states because of financial burdens, that states have all the taxing power and programs. Or I suppose the situation of the Former Soviet Union could take place. The central government could disintegrate.

              Regardless of the situation, it is fairly clear that we cannot count on the political system for leadership. They are much more likely a contributor to the fall.

    • I can’t answer all your questions, but with respect to pensions, we really live in an “energy flow” world. It is not possible to store up in advance, more than a bit. The food that grows in a year, is used to feed people that year. The idea that we can store up for a country’s pension program doesn’t really work. In practice, large pension plans have to be pay as you go. We can try to fund pension plans for a few executives the other way (advance funding), but they are running into difficulty as well.

      • Mel Tisdale says:

        @ Gail “with respect to pensions, we really live in an “energy flow” world. It is not possible to store up in advance, more than a bit. ”

        So, why didn’t the politicians put in place the necessary infrastructure to be able to provide sufficient energy flow in order to meet a known future need? I imagine that they failed to do so because it would have been used by the opposition as something to gain votes over.

        It is just another manifestation of short-term parliaments avoiding the need to make long-term decisions. A problem that has been with us since I was old enough to understand the words in which the problem was expressed. To me that means that we need a new method of govenance. Failing that, we will continue to be treated to politicians rushing around not knowing how to deal with a long-term problem that has reached maturity. Put another way, the music will have stopped and they are the one without a chair to sit on.

        Pensions are one thing, but food production is an order of magnetude more important.

        • I don’t think politicians understand how perilous our energy flows are. The assume that if “technically recoverable resources” are x, certainly we can pull them out for x / current usage years. They don’t understand that we run into a financial problem very much before the exhaustion of the resources.

          The fact that peak oil people have gone about preaching about the possibility of oil decline in the future hasn’t helped the situation. We have a different issue, even before any decline in oil supply, that is affecting us right now. This is that high prices badly affect wages, and not having wage increases affect the ability to continue to raise government funding. Without rising government funding, governments are in a huge amount of trouble. I expect many will collapse. The ones that don’t will want to fight resource wars. It is the issues associated with high prices that will bring about collapse, and I expect, indirectly bring about a collapse in oil production.

        • SlowRider says:

          Sadly, the storyline of “politicians should…” has stopped to have any appeal to me a long time ago. It’s just empty words. Democracy was a nice concept for affluent peacetime, like 1945-1970. In a crisis of any kind, democracy fails. If you want to think they should put together a big strategy, you are welcome. But the best we can expect is that they will clean up the mess after the events have happened – after enriching themselves and their friends, that is.

          • I agree…I have coined the term wishpolitics to cover it

          • Mel Tisdale says:

            EndofMore and Slow Rider

            So, you agree that there is a problem. Well, that’s a start. Any ideas on how to fix it? Or do we just stand back and enjoy the fun provided by the PMQs Comedy Club in the U.K. and whatever is the equivalent elsewhere? I am afraid that the vacuum that would create would very probably be filled by something much worse than the present bunch of self-serving clowns.

          • I agree with slowrider, and Mel on the ‘vacuum’.
            serious crises throw up dictators, if we’re lucky, we might get a Roosevelt or a Churchill, or more likely next time around get someone worse than Hitler or Stalin.
            In a god-obsessed country like the USA, I can see a theocracy looming in the not too distant future.
            The signs are obvious.
            No conventional government can ‘fix’ the current problems because they were created through a fixation on cheap energy consumption, a fact which the majority simply refuse to accept. everyone demands a return the cheap gas. (it’s the governments fault that it’s not cheap!!)
            As each successive administration sinks the nation deeper into financial crisis, unrest will grow as food and fuel and everything else is priced out of reach of more and more people. I’m guessing that by 2020, maybe earlier, you’ll see a president voted in on the god ticket (there were a few of those hopeful in 2012) they will be voted in because ‘nothing else has worked’.
            Your godbothering president will naturally have to assume ’emergency powers’ to deal with the crisis, that means enforcement of draconian laws to restore the nation to the path of righteousness. (dont scorn the idea, Hitler was a practicing Catholic until 1929, he was voted into office after saying exactly what he intended to do) Fascism fits neatly with religious dogma.
            Already the military is feeling the financial bite, in 4 or 8 years time, some of the unemployed army might be ready for a bit of self-employment to enforce a godcrazy government’s new ‘crisis laws’

            • Mel Tisdale says:

              In response to more of less

              Let us hope that you are wrong about the God brigade. I am not in the first flush of youth and can say with considerable hindsight that those who have done me most harm have nearly always been card carrying so-called Christians. The most awful of whom was one of my directors who even had posters of Billy Graham on his office walls when he was doing one of his happy-clappy tours of the U.K.

              If we do get a breed of such people and they call in redundant military personnel to improve congregation numbers, so to speak, we can only hope that it is consigned to the national level. Unfortunately, as far as the situation in the U.S.A. is concerned, these people will be accustomed to a philosophy of ‘full spectrum dominance’ and thus in a time of resource shortages it could lead to war with other nations, not just the U.S.A.’s proletariat. It is precisely here that we could be in real trouble. Because our incompetent leaders, lacking technical expertise in the main, have believed that because nuclear weapons kept the peace for the length of the Cold War and that because we still have nuclear weapons means that we are safe to push the boundaries as we did then. The reality is that it is very unsafe to push any boundaries, especially those of Russia and any of those nations it supports, or any nuclear armed nation for that matter.

              Nuclear weapons (with satellite surveillance support) kept the peace because of mutually assured destruction, like two feuding land owners facing each other with blunderbusses. Whoever fired first was guaranteed to get a shot fired back at them. There was even a ladder of escalation proposed by Herman Kahn, where wiser counsels could be listened to and nuclear holocaust could be avoided. That lasted up to just before Gorbachev came to power and took us through Polaris (including Chevaline warhead), Poseidon and even Trident C4 (a.k.a. Trident 1) with its MIRV delivery system.

              The world then went crazy and graduated to MX and Trident D5 (a.k.a. Trident 2), both with MIRV delivery. While they look the same, MX and Trident D5 are so deadly accurate they can destroy all, or nearly all, of the enemy’s launch infrastructure and can thus be used to launch a pre-emptive first-strike with a guarantee of success. We have moved from blunderbuss to snipers’ rifle and in so doing have moved from a position where the decision to launch could be put off until the last minute and beyond to a point even where it was best not to launch at all even though you had suffered an attack. Because of the ladder of escalation it will probably only have been on one target. Gone was the slow war of attrition that the ‘blunderbusses’ forced the military strategists to plan for, to be replaced with the instantaneous war that the new ‘snipers’ rifles’ required. Gone the wait and wait and wait some more before pushing the metaphorical button to be replaced by fire first and fire them all so that the enemy cannot retaliate paradigm. And gone too is the notion of deterrence between the U.S.A. and Russia. Then Gorbachev came to power and rained on the neo-con’s parade just before they set off, thank goodness.

              It goes without saying that any nuclear armed nation that feels threatened by any other nuclear armed nation, big or small, might see it as wise to have placed about that nation ‘sleeping’ nuclear weapons capable of remote detonation. I imagine a nuclear armed terrorist group might be inclined to do the same, but put them on timers and simply wait until they go off, presumably at random intervals in order to wreak most havoc.

              If we had better governance, we would by now have banned all MIRV systems and limited all missiles to one warhead each, something easily verifiable as long as the inspector has at least one finger to count them on. Few reading this will be aware of MIRV systems and their relevance combined with the C.E.P. ‘accuracy’. That is because we have a load of politicians who know more about Latin or legal loopholes than they do about the issues that really matter. It is scary to watch the peace that broke out with Gorbachev’s coming to office slip slowly from our grasp because we as a species cannot put people into power who have the ability to grasp the nettle and take us forward. And where is this God creature when we need him, her or it? Working on something less ambitious, I expect.

              Sorry ‘End of More,’ but if I wrote any less, then I would lose the main thrust of what I am trying to communicate.

      • Jan Steinman says:

        The real question is, why has everyone been so wilfully blind about this?

        I’ve “known” since the ’70s that Social Security would be bankrupt by the time I got old enough to collect. I’m five years away, and I’m sticking to that prediction.

        My “pension plan” is to surround myself with young people who find me indispensable. So far, that isn’t working, either. 🙁

        • Actuaries and everyone else assumed that sufficient growth would continue that there would be enough young workers to support the old workers (and indirectly, that energy flows would grow with population to support all of this). No one stopped to think about a finite world, where we would hit limits pretty quickly.

          • Mel Tisdale says:

            Which is why we need to examine how we are governed and seriously consider what improvements can be made.

            As an actuary, Gail, would it not have been better to tie pensions to the average wage in a manner that takes into account the ratio of the number of pensioners to the number in employment? That is just off the top of my head, so I cannot claim that it is thought through in any depth, but it would surely be better than telling pensioners that they are going to receive such and such an amount only to fail to deliver it because it is fiscally impossible to find the money.

            If that makes sense, then we need politicians who are capable of sufficient lateral thinking to come up with such notions early so that transitions can be applied gradually over many years instead of a shock “Sorry, no money to pay you your pension this week” message, which looks likely as things stand.

            • The fall back position that politicians have always had is, “We can always adjust the payout (downward), if we need to.” Not that they would be tell their voters that. The lack of a guarantee is part of the reason that there is no liability item on the balance sheet of the US government related to Social Security.

            • Mel Tisdale says:

              “The fall back position that politicians have always had is, “We can always adjust the payout (downward), if we need to.”…”

              Yes, politicians can always adjust payments either up or down. This is more likely to happen when those in receipt of such payments are treated as numbers in a computer instead of as human beings. Such movements are not likely to be announced more than a few months in advance. A pensioner surely needs more notice of such movements if at all possible so that they can plan their retirement. There will always be abrupt changes due to financial crashes. Yet how many pensioners realised that within a few years of the 2007/8 crash their pensions would be regarded as unaffordable? If a mechanism existed for determining their payments, then it would be possible for pensioners to get at least obtain some indication of what their personal situation was likely to be.

              With periods in office of only four or five years there is no incentive to put in place such mechanisms. If it were only pensions, we could perhaps accept it is as the way things are. But it applies to all aspects of life. Take sea-level rise for example. This is going to make major cities around the world uninhabitable. Imagine just how much that is going to disrupt their populations and the long-term decisions that are necessary. We need a political system that facilitates the long-term planning that such disruption is going to require so that it is reduced to the minimum. Yet in the U.K. we have a government who are currently building a massive tunnel under London to service rail traffic; have plans to build a high speed rail link into London, while London’s mayor wants to build a new international airport in the Thames estuary. Yet we have no way of extracting CO2 from the atmosphere. We are already in excess of 100 ppm above pre-Industrial Revolution levels and no sign in sight of that figure doing anything other than climb higher. Seeing as atmospheric CO2 stays around doing its heating of the planet for a very long time, with 100 years quite possible, and that excess CO2 is not going to be absorbed into the carbon cycle, it is going to continue warming the planet for a very long time and raising the level of the sea as it does so.

              Hansen and Sato tell us that sea-level rise is not smooth and will likely have periods of rapid increase. What kind of politics is it that happily spends tax payers’ money on the above major infrastructure projects for London when it is highly likely that that city will have to be re-sited in the not too distant future? Americans reading this might be interested in a programme about New York broadcast by the BBC last Monday on Radio 4 at 20:00 (available on their iPlayer). While the actual re-siting will not be necessary for some time, the exodus of wealth from London, and any similarly placed habitation, will happen long beforehand as those who own property realise that their freeholds are in effect only leaseholds and not very long-term leases at that.

              I see nothing in any of the responses my original comment attracted that come anywhere near to showing me that the current political system, in the U.K. at least, is deeply flawed not only in terms of the quality of those who practice within it, but also the whole parliamentary structure and the government that that parliament oversees.

              So I remain convinced that even if collapse is inevitable and there are a lot of signs that that is the case, we need to at least embark on providing a better political system and what better time to do so than at a time when the world will be recovering from that collapse and will thus be going through a period of enormous change.

            • I suggest you run for political office.

            • Mel Tisdale says:

              No thanks, I don’t have enough years left to waste on playings silly ‘b’s

          • the weird idea persists that out there–somewhere–are people who somehow know how to ‘fix’ things
            lots of posts on here confirm that–as well as conversations in rt.
            another ‘new deal’ is a favourite, ignoring the fact that Roosevelt tapped into the colossal wealth of the nation and spent it on digging up cheap minerals and turning them into solid infrastructure (roads schools dams etc.) It was a one time burst of industrial activity which cannot be repeated
            It was Hitler and Tojo who brought American and UK out of recession, not some grand political insight and the genius of good government.—yet there is an absolute refusal to accept that.
            Industrialists slobbered over the profits that war delivered.
            WW2 had a momentum that carried on till 1970
            so what happened in 1970?
            that was the year that the USA slipped into oil deficit. (re Hubbert) while there have been booms and busts since then–the economic trend has been steadily downwards.
            oil deficit cannot be ‘fixed’, no matter who is voted into office, this is why I think the godfreaks will be voted in, in one last desperate attempt to pray the country out of trouble.I seem to recall prayer circles round gas pumps when oil hit $4+, stupid I know, but it might be a sign of greater lunacies to come
            Politicians are only people voted into office often on the apathy of everybody else. There eyes are transfixed by the oncoming headlights like ordinary mortals. When the crunch comes, they will only be able to repeat history ie call in the militia to suppress anarchy. (you can’t reason with a hungry mob) they have no other option.
            A godfreak president and government will simply insist we are displeasing jesus, and use any means to bring us back to the path of righteousness.
            Substitute any name you want instead of jesus, the facts remain the same—enforcement of dogma, with violence if necessary.

      • Pensions are an expectation of ongoing future prosperity.
        My ‘pension’ is invested over –say– a 25 year period in stocks that are expected to show a healthy profit. The oil companies have been a favourite for years, we all thought it was infinite profit, but in truth it was the oil itself that paid our pensions. It might be agricultural stocks, or mining, but at every turn, investments/pensions rely on energy producers just like annual salaries.
        pensions are just the excess we’ve had for a few score years.

        • I agree. Before, people worked as long as they were able. Often, a grandmother would help with children and a grandfather would work in the fields. People died rather than living for many, many years in a very debilitated state.

  17. This is a completely Off Topic post, I just stopped by to invite old OFW friends to the 1 Year Anniversary Party we are holding on the Diner. We have an Anniversary Concert underway and a RoundTable chat open to Guests as well as Diners for posting.

    We also Innauguarated a Diner Webzine which features articles from Diner Bloggers on a Monthly basis The first 2 issues are now UP on ScribD.

    Drop in and say Hi!

    Thanks again to Gail for the fabulous articles she has contibuted to the Diner. 🙂


  18. the economy is not about wages or money
    the economy is an energy equation, or more accurately a dynamic of surplus energy
    In a primitive context, I must either grow or kill my energy source, and use that to rear my offspring and support their mother and myself.
    My existence is in a state or equilibrium, and no ‘economy’ can exist because I need to consume most of the energy I produce.
    But if I collaborate with 99 other people who can support 10 to do other ‘work’ then those individuals have to be paid. They are paid with the ‘excess energy’ of the 99 people who can ‘afford’ their support.. Wages are paid to a ‘specialist’ for his skill (blacksmith, soldier, priest or whatever)
    Our ‘civilisation’ has merely scaled up this equation to support all the various trades we engage in, but those trades are still dependent of the surplus energy delivered by those who produce food. A trade-skill loses its value if the food-energy to support it isn’t there. (a brain surgeon stranded alone on a desert island has to go back to food foraging or die)
    This is why our economy is entirely dependent on a constantly expanding surplus energy. In the modern context that means cheap oil. Unfortunately there is no cheap oil left, so we are trying to support all those ‘workers’ on expensive oil. but they are becoming unaffordable. That is why our economic system is collapsing
    Paying higher (paper) wages simply allows the delusion to go on a little longer, but doesn’t change anything.
    Money-value is entirely dependent on surplus energy, It is energy that is the backbone of the world economy, not wages.
    without an energy surplus we do not have an economy

    • Jan Steinman says:

      I don’t think an “economy” has to depend on excess energy. (A “debt-based economy” does.)

      In “Life, Money, and Illusion,” Mike Nickerson defines “economy” as “the means of mutual provision.” It’s simply a way for you to not have to find someone who wants what you have and who has something you want. Barter is pretty inefficient compared to trading for some fungible medium.

      I agree that energy is the root of all life, and yet, an exchange medium based on energy could be the basis for a non-growth, non-inflationary economy. There already exist pilot systems based on kilowatt-hours or megajoules.

      • If a society has no excess energy, then there is nothing to trade. Of course, humans, over 1 million years ago, learned to control fire. This is what gave humans the excess energy needed for a lot of things–cooking some of our food, allowing our brain to grow larger (and our teeth and guts smaller), making tools, making clothing, etc.

        The problem with energy is that both oil and gas are becoming increasingly expensive to extract. This is basically the Investment Sinkhole problem I talked about earlier. I don’t think that the non-growth economy can really hold up, because it is dependent on ever more expensive resources. My impression is that people who talk about a non-growth non-inflationary economy think that they can somehow escape collapse with their plan. I don’t see how this is possible. At best, the people who survive collapse can attempt to have a non-growing economy, by trying not to overuse resources. The story of humans, though, is one of long-term population growth. If the system is going to be truly steady state, it has to fix the continually increasing population problem as well.

        • SlowRider says:

          Four things I like about this blog:
          1) Gail you are getting to the roots of things, without having an “agenda” to defend or trying to sell anything
          2) Your approach is a mix of common sense and intuition, but when need arises you have the charts and details ready
          3) You realized that the financial angle will be the one hitting us first, not what could be technically or theoretically done with unlimited capital
          4) You encourage very good discussions

          I think one reason why many people remain overly optimistic is that we haven’t really seen too many effects of rising energy prices yet (because of cheaper products from China, more debt etc.). 80% of people still have good jobs. It still doesn’t really hurt. I wonder what happens when (not if) mobility and transport as we know it (by car, plane etc.) is priced out of reach for many. The individual car is like the holy grail of our civilization, it’s at the borderline between discretionary and essential spending. Buying smaller or electric cars won’t do it. My only vehicle is a modest motorbike and I was surprised how little it saves you, compard to a car, in the long run. Sometimes I have to go by public transport or rent a vehicle.
          Watch out what happens when maintaining all the transport infrastructure will stop to make sense any more. In every economy as a rule of thumb, when you reduce (or even neglect) infrastructure, consumption of all kind will shrink in a knock-on effect. Then we have little to go toward a global downward spiral that will only bottom out at the very essentials like food and shelter. In a downward economy, it will be very hard to make money for investors in anything even if there is money to begin with, so they go into hiding, making things worse.
          So just from the economic point of view, it looks gloomy for the status quo.

          • One of our problems today is that over the last 200 years, we have gradually raised our expectation of what the present and the future should be like. Solutions that might have been quite acceptable 200 years ago (or 50 or even 10) become increasingly less acceptable. We don’t expect limited medical care by a physician who is a “jack of all trades,” in a hospital with intermittent electricity, any more. We expect that roads will be paved and that governments will be rich enough to pay for modern trains equipped with air conditioning and with doors that “pop back” if a person accidentally gets in the way.

            When I spoke in India in October 2012, I had a chance to see a little how the different expectations worked there. One thing I noticed was that in any building that had water faucets, there was only one handle to turn the water on. The only choice of water was “cold”. In the apartment where I stayed, there was a small heater in the shower that I needed to turn on in advance, if I wanted heated water.

            The roads outside of Mumbai were in deplorable condition. I took this picture of some folks there working on fixing the road.

            Men fixing road near Mumbai

            Driving is a “dodge the hole” experience. There are also quite a few people walking, or pushing carts, and animals pulling carts, that a driver has to contend with.

            Vehicles were something else as well. I took this photo at the place where 9 of us picked up a car with driver to take up to us to our destination a few miles away.

            Auto rickshaws parked in a city near Mumbai

            The car our leader chose was similar to the one shown (with three wheels), except that there were there were two seats in back, besides the bench for the driver, plus a passenger. The ten of us (including driver) crammed into the car. I sat on the edge, and had to hold on to the frame for dear life, because the width was not sufficient for all of us.

            When we arrived at the house where we had lunch, we were asked to sit on the floor around a cloth the hostess put down. Each of us was given a plate, but no silverware or napkin. The hostess gave us a lunch of rice, vegetables, and bread, which we were expected to eat with our hand. (Each of us pulled out our bottle of hand sanitizer.) Afterwords, we walked outside, and the host poured a little water from a pitcher over each person’s hands. There was no rest room in the house. We were told that there was one for the entire village–(without running water, though).

            We also saw workers in the field. This is a picture I took of workers harvesting rice with sickles.

            Workers harvesting rice with sickles.

            Even the ability to make sickles in any reasonable quantity is a gift of the fossil fuel age–something we can easily forget.

      • a debt based economy is really an anticipation of energy production/availability at some future date.
        I take out a 25 year mortgage, I can only repay it if my yearly labour (energy use) gains sufficient payment to meet the monthly instalments.
        But there has to be that energy use factor there (directly or indirectly) to enable me to sustain my employment.
        As for energy as a trading medium, a nice idea, but I think we are too used to the feel of cash to rely on exchanging KwH for buy life’s staples.

        • Jan Steinman says:

          “As for energy as a trading medium, a nice idea, but I think we are too used to the feel of cash to rely on exchanging KwH for buy life’s staples.”

          The schemes I know of use paper proxies for energy. I have come kWh notes here in my desk!

          The hard part is avoiding the temptation to inflate them. We have a planetary “energy budget” that we must live within — the basic productivity of photosynthesis. Over several billion years, evolution has optimized plants for that, and they only collect a few percent. It is sheer arrogance to think we can do better over the long run.

          • money as we know and use it is a paper proxy for energy
            that’s the whole point
            I work x hours, consuming energy to produce 000s of widgets, I cant take my wages in widgets so I take paper proxies instead. I then take those paper proxies and use them to buy gizmos.
            The person selling the gizmos might need a widget or two, so he takes my ‘paper proxy’ money, and uses that to buy them, along with lots of other stuff that lots of other people have made.
            Everyone in employment must consume energy to do their job, and get paid with an energy token. Printing KwH on a note instead of someones head and a number doesn’t actually change what it stands for or what it is

          • The kilowatt hours are going away. How does the scheme handle that problem? I presume the notes need to expire or decline in value over time.

          • Jan Steinman says:

            “The kilowatt hours are going away. How does the scheme handle that problem? I presume the notes need to expire or decline in value over time.”

            That’s what Mike Nickerson proposes, that paper money has a “use it or lose it” date.

            This also encourages circulation and discourages hoarding.

            At first, I reacted with revulsion. But the more I think about it, the more it makes sense.

            • A limit on how long the currency is good for is what is needed to fix any currency. It doesn’t need to be labelled in units of energy (although one note might be worth 5 pounds of flour, for example). One of the characteristics of money has been defined to be “a store of value,” but this is the characteristic that is not possible in a finite world.

          • That scheme would have everyone grabbing their ‘paper proxies’ at the end of every week, (or day–or even hour) then dashing to spend them as fast as possible before the KwH rate changed.
            In it is an inherent part of collective humanity that some are a lot smarter than others, in no time at all you would have the majority working for a minority, just like we have now. The currency would just have a different name
            Even with the nuttiest schemes, it’s best to expose them to the fresh air of sanity

            • Mel Tisdale says:

              There is one area of finance that could sensibly be converted to the use of energy as a currency, namely international development aid. However, it rather relies upon the ability to make super-conductivity operate at ambient temperatures. This, however, might not be too far off, given a fair wind in our favour, so to speak. Certainly operating temperatures are rising steadily.

              So, as Gail has shown with clarity, national development, a.k.a. economic growth, is energy fed, and most closely follows the consumption of the oil used to ‘lubricate’ production and the transportation of that produce. Underdeveloped countries aspire to the living standards of developed ones, and I doubt that many would deny them that aspiration, so we need accommodate such desires.

              Unfortunately, oil production is slowly being outstripped by demand, a situation that does no one any good. Also unfortunately is the fact that other fossil fuels are used as part of the production processes adopted by developing nations. For reasons of scarcity and the environment, cutting down globally on fossil fuel use should be encouraged.

              It is an unusual nation that does not have the potential to generate energy from renewable sources or other non-polluting technology, such as nuclear power. (Use thorium as the fuel stock and state sponsored terrorism ceases to be a problem.) If we had a super-conducting global electricity grid into which developed nations could add energy and developing nations could extract energy, there would be the foundation for a development aid programme that would not involve the transfer of vast sums of money into corrupt leaders’ bank accounts.

              Obviously, this is purely schematic (back of cigarette packet available for inspection on request) and needs much more work. For instance there would have to be a system of encouragement to develop renewable energy production that could be fed into the grid. Similarly, there would need to be a penalty system to deter nations from just free-riding without contributing, or endeavouring to contribute, their portion of renewable energy onto the grid. (Perhaps a system of allotting votes at the UN on a pro-rata basis in line with net energy contributed to, or consumed from, the grid might work.)

              Such a system would have the obvious benefit of dispensing with the storage requirements that are essential due to their variability of wind and solar production at the present. Having a super-conducting grid would make it irrelevant where on the face of the globe the energy was added or subtracted.

              With reference to my previous post on governance; in an age dominated by science and technology, this is the sort of thing I would expect the members of a government comprised of scientists and engineers to suggest or at least be able to consider personally. They would not need to put it out to a committee populated by individuals with vested interests. A committee whose report would likely be unintelligible to most of the current lot, who would nod sagely, claiming to understand every word and simply vote along party lines, regardless.

          • the fundamental; problem with global anything is global people—or to be more accurate partisan people.
            any form of global control implies global governance, and that means somebody somewhere making rules–and of course having the power to enforce them, violently.
            The UN has tried it, but people simply will not work for a common good. Imagine putting down some kind of global powergrid. In no time at all somebody will have blown it up to prove a political point, or to pinch it for scrap.
            In the uk thieves regularly steal copper wire from railways –which wrecks the ‘common good’ of everyone else. It’s so rife that perhaps only death sentence by speeding train will stop it

    • I agree that it is energy that is ultimately behind the whole equation. But I think in the way our current economy is structured, wages still have to play a role.

      I will agree that it is possible to have a hunter-gatherer or other simple economy without money. The problem gets to be when we have an economy as today’s economy. Then workers need to get money with wages. I tried to explain the role of fossil fuels in this post: How High Oil Prices Lead to Recession.

  19. Reblogged this on evolveSUSTAIN.

  20. Mel Tisdale says:

    No mention of climate change. That is something that cannot be ignored for much longer. Just look at last summer. Who knows where the jet stream will end up this year, or the next. It is almost impossible for farmers to produce the food we need when they do not know whether to plan for floods or droughts.

    As for American military might saving the day for the U.S.A., well, let’s see what effect a nuclear armed terrorist group (almost certainly state funded) will have on the situation. You cannot reassemble an atom bomb in order to determine who made it after it has been detonated.

    • Most of our existence (98% of the time, according to one calculation), humans lived as hunter-gatherers. We moved on when the climate changed. In fact, we moved as the seasons changed. A lot of our problem now with climate change is that it doesn’t fit in with the investments we have made, and the plans we have for the world. If there really is collapse coming, these plans are going to be badly wrecked regardless. Most of us likely will not survive. The ones who survive will likely have to migrate to the parts of the world most suitable for habitation at the time–wherever they may be.

      I wish I could be more optimistic that there really is anything humans really can do to mitigate climate change. All of the plans so far have mostly benefited the country putting them in place, but made world CO2 emissions worse. You may have read my earlier post Climate Change: The Standard Fixes Don’t Work.

      Collapse will in many ways benefit climate change, especially if it happens soon and quickly. Of course, after collapse there may not be a whole lot of us around, to take advantage of the climate which has not changed by very much. Avoiding climate change will be sort of an empty victory, if there are few of us around, and we really can’t use our investments anyhow.

      You can see why I don’t talk a whole lot about climate change.

      • Jan Steinman says:

        “Most of us likely will not survive… after collapse there may not be a whole lot of us around… and we really can’t use our investments anyhow.”

        Oh, c’mon now, Gail; don’t hold back — tell us how you really feel. 🙂

        Seriously, isn’t this primarily a view of city-dwellers? And might mass-migration be possible again? Surely, collapse of that magnitude would mean the end of property rights, which might re-enable a hunter-gatherer existence?

        • Even farmers are very limited in what they can do without today’s fossil fuels, banks, and transport systems. Today’s farmers (in the US) are mostly growing one or two crops, to send somewhere else. They are not farming a mix of crops needed to feed people in the area. Changing the system to a system based on more hand labor would require substantial changes–changes that we have not really set up plans for implementing. Even if there are ways that we can support quite a few people without fossil fuels, we have not gone through the exercise of figuring how it precisely could be done. I am not convinced that Cuba is an overwhelming success story. They are importing an increasing amount of food, and pumping their aquifers dry, at least according to the National Geographic version of the story.

          Perhaps some will survive as hunter-gatherers. This number will small, though, because of the carrying capacity issue.

      • Mel Tisdale says:

        Your understanding of the history of humans explains your reticence to discuss climate change. Perhaps a different view might persuade you otherwise.

        We know from the science that for many thousands of years CO2 levels had hovered just at around 280 ppm or slightly lower. We also know from the science that this had the result of a generally stable climate. Also from the science (carbon isotopes particularly) we know that today’s increase in temperatures is directly due to the excess CO2 that we have burdened the carbon cycle with since the start of the Industrial Revolution.

        That excess can be reduced and unless we do so, many are going to suffer. Sadly most of these are in nation states that cannot in all honesty be said to have caused their fate. For example, many Bangladeshis are going to lose their homes due to sea level rise while many Americans, who have done more than most to cause climate change, simply wring their hands and refuse to do anything about it, up to and including denying that climate change is anything other than a hoax, despite the science. It is ironic that many of these people claim to be Christians and supposedly follow Christ’s teaching of ‘Do unto others ….’ It makes me proud to be an atheist.

        I think that if you were to see that the current change in climate is due to our actions and that we could, if we had the political will, act to improve the lot of others you might include it in your analyses. Action to combat it will have a significant effect on fossil fuel consumption and as your articles so clearly show, those fossil fuels have a significant bearing on modern society.

        The thing that amazes me is the number of people who fail to realise that those ‘others’ who are going to suffer the effects of climate change include their own families. Indeed, it is becoming apparent that in fact we, too, are already experiencing the effects of climate change. While no weather event can be specifically stated to be due to climate change, it can be stated with a high degree of confidence that that the increase in extreme weather events that we now experience is in fact due to it.

        I refuse to join in the hand-wringing while there is still any chance of reducing the harm that will be metered out by climate change. Can it really be that my son means more to me than the children of the denier community mean to them? Difficult to believe as it is, it is also difficult to find any other explanation.

  21. dolph says:

    The American worker is like a wife who has a rich, abusive husband. She could leave, but then she would be on her own and may very well be poor. So she stays, and is abused.

    I stand back in back in amazement at what the American worker/consumer is able to take and keep on going. And no, that’s not a complement.

    Oh, and, illegal immigrants are American workers. Keep that in mind. There’s no genuine difference anymore, we all work under the same system.

    • One thing that has amazed me over the years is how much poorer office conditions are. Workers are jammed together to save rent money. At the same time, the same company may have lavish conference room space that is rarely used.

  22. Reblogged this on Economía en tiempo de burbujas and commented:
    Another great article from Gail Tverberg.

  23. Brian Foster says:

    From the graph in the article cited below, we appear to be right on track (as are your observations).
    Science & NatureLooking Back on the Limits of Growth
    Forty years after the release of the groundbreaking study, were the concerns about overpopulation and the environment correct?
    By Mark Strauss,Smithsonian magazine, April 2012

    Inspecting the graph, we appear to be on the cusp of declines in both industrial output and food production on a global basis should these early predictions continue to prove accurate. The updated data through 2000 suggest those early predictions were being fairly closely followed by reality/observations. My concern is that most folks would look at the population curve and note that the decline, or peak if you prefer, does not happen until about 2030 and think we have quite a while until we need to do something. What most do not understand is that the “bad things” start happening to the population far earlier than the peak suggests. Like your actuarial sciences, I have been studying population models (animals rather than humans). In order for a population to grow to a peak and then suddenly decline, the death rates have to accelerate long before the peak to overcome the productivity, i.e. the recruitment or birth rate. After the peak occurs the death rate soars over the birth rate for an extended period – much longer than anyone would like to contemplate. Of course since the limits food production may be rapidly approaching (just about there now by the graph), the fundamental mechanism(s) would likely be starvation with diseases and probably wars with supporting roles. Sex and reproduction are just too strong impulses for us to overcome even when we know what will result.

    • Colin Jay says:

      How long before the top 2% realize they would be better of without half of the other 98% and come up with a plan.

      • David F Collins says:

        I know a few 0.1%ers, and they are already discussing the possibility, working out justifications for it in their minds. Their plans, so far, are nothing to worry about. Plans worth worrying about will come into being when the 0.1%ers hire Ivy League educated consultants.

      • I hope it is not that bad, but that is the direction that instinctive hierarchical behavior seems to lead people. The plan might just be to cut off support for those without jobs (including elderly, etc.)

        • Alexandre Machado says:

          It´s already happening in Portugal as older people with very low pensions can´t afford to heat their homes and pay for medical services.

      • Jan Steinman says:

        I’m dubious of such conspiracy theories.

        For one thing, as the cost of fossil sunlight escalates, human and animal labour become more valuable. I think the 2% would be foolish to get rid of their slave labour force!

    • Xabier says:

      Sex and reproduction are strong impulses, but as importantly there is also the irrational impulse that sees a child as in some way representing ‘hope’ , and a life without a child as in some way failed or futile. Impossible to overcome I should say.

      The old Spanish proverb: ‘Bread comes with the baby.’ But then, it often didn’t in the past and won’t in the near future for many.

      A likely scenario is perhaps rapidly increasing long-term mal- or under-nutrition leading to acute susceptibility to devastating disease, and of course to a dramatic reduction in longevity to something like quite recent historical levels.

      There is almost no way to raise these questions with people already very stressed and fearful in declining societies and economies. At least one can consider these concepts calmly here!

    • Biological processes are hard to get around. As the world gets poorer, birth control becomes more difficult. If it is clear that the government is not going to take care of you in your old age, there is also a need to have children (usually sons) to take care of you then.

      I’m sure you are right about things getting bad before population actually begins to decline. I’m not sure that the situation will necessarily be starvation, though. I know that in Russia, alcoholism is quite an issue. Diseases can spread pretty easily too, if people are in weakened condition. I am sure various forms of violence will be a problem, as in Egypt and Syria.

      • robert wilson says:

        New book by Jonathon V Last from the Weekly Standard. I first encountered this on C-Span Booknotes

      • SlowRider says:

        Reproduction is such a huge topic. I can think of no society that doesn’t see having children as good. Some biologists say, the human body is just the vehicle for human genes to live eternally.

        A life without children is considered to be kind of “wasted”, even in our liberal western society. A couple with 1 or 2 (not more) children has an image of completeness and responsibility.
        Here in Europe, having children is encouraged and subsidized by already heavily indebted governments in their attempt to maintain the tax base to support an (overshooted) aging population. You get money for every child you have, you get tax cuts if you are married, School and University is free. We won’t elect any government who would stop that model.
        Sometimes I’m surprised that even many people whom I would consider as hedonistic and even decadent, in the end still decide to have children. The biological and cultural model seems to be intact.

        In most non-western societies, the biological and social norms hold even better. Recently, I saw a statistic where they asked Nigerian female and male adults about how many children they would like to have. Males wanted 7, females 6. The average birth rate was 5. So you could say that in the absence of jobs, wages and government support, their social backbone is still the large, multi-generation family. Then young people see the western consumption model in the media, and you get many problems.

        So IMO, there cannot really be any discussion about voluntary population control – it has to be forced either by law or by nature.

        • THe instinct to have children is inborn. It is part of the instinct of all species to have more offspring than are in some sense “needed” to survive to adulthood. This is part of the natural selection problem.

          In some sense, our problem is not having too many children. It is the tendency of humans to defeat early death. In some sense, we are, “Too smart for our own good.” I have written about the issue various places, such as Human Population Overshoot-What Went Wrong and Humans seem to need external energy.

          • GermanStacker says:

            That makes sense, you have very good insights! The same could be said about mass epidemics, famine and the (hopefully) end of big wars since 1945. These things are much less common today than they have been in most of history. So our success story brings all these problems? Strange.
            Keep the good work on!

  24. David Gower says:

    “We seem to have a lot of people today with little clue as to how difficult a problem we are facing.”

    This is the tragedy and frustration many of us have. You can’t begin to make things better until you understand what the problems are.

    Other possible surrogates to track to illustrate the situation might be ratio of unprepared/prepared foods to all foods. Or more particularly basic food preparation ingredients such as flour, sugar, dry beans, etc. sold in grocery stores versus restaurants.

    In addition to and in light of your electric car comment, it is said that some of the Canadian oil is selling at $35 barrel due to transportation/pipeline constraints. Would there be a way to project the effect on our economy if this cheaper oil is allowed to reach market as in the case of the KeystoneXL pipeline?

    • p01 says:

      There won’t be any pipeline because of financial constrains, so why bother projecting? It truly is amazing how people in the first world simply cannot fathom not having money at all and the consequences of this “minor” inconvenience

    • We have been getting the benefit of both unrealistically cheap Canadian oil and unrealistically cheap US shale gas in our energy mix this past year. (This has helped keep the U. S. economy from “tanking,” as badly as Europe, recently.) Part of the unrealistically cheap Canadian oil has gone into higher oil company profits, but this in turn has allowed them to offset losses on their natural gas operations, and to continue to pay dividends which fund pensions plans. Owners of oil company stocks are disproportionately pension plans. If these dividends were to stop, it would causes huge problems in pension funding–something that is already having big problems.

      Better distribution of Canadian oil, as in the KeystoneXL pipeline, would benefit Canadian oil companies (through higher prices) and would perhaps lead to more investment in Canadian bitumen extraction. The pipeline would tend to raise the price that Canadian oil is selling for, thus increasing oil and gasoline costs for US customers, and perhaps reducing US oil company profits. (This seems to be the opposite of what you are assuming.) If US oil company profits are reduced in this manner, this may put more pressure on majors to get out of shale gas. The higher oil price may also push the US more toward recession.

      People can sense we are running into a problem, and don’t know what to do. Everyone wants to do something, and I can’t blame them. The problem is so deep, that it is really hard to fix. The biggest thing people can do is not have children. This is not something governments want to point out. Local gardens are probably somewhat helpful. With other solutions, like picketing the KeystoneXL pipeline, the outcomes may be quite different from what people expect.

      • Andy says:

        “The biggest thing people can do is not have children.”
        While I agree with the sentiment, I think this causes greater problems for the future. Simply put, the forces of evolution will create more ignorant, and destructive humans, by the process of natural selection where concientious humans reduce as a percentage of the population.

        Great work Gail, I always look forward to your posts. You have a good grasp of the situation, and attention to details. It seems to me that there is so much to take in, it’s hard to take it all in, in one post, but breaking it up into smaller pieces makes it hard to see the really big picture. I imagine that one day someone will write up a ‘scare you shitless’ report. Merging the issues raised by the Tullet Prebon report, Jeremy Grantham, Jared Diamond, Jospeh Tainter, Al Bartlet, M.K. Hubbert, Thomas Malthus, increased automation, concentration of capital, unpayable interest bearing debt, sea level rise, climate change, deforestation, species extinction, overfishing, interdepedencies of globalisation, and other issues I have missed that all appear to be comming to a convergence in the liveable future.

        I have to say the best thing people could do, is get out of cities. The further away from mass populations the better. Living in a city only increases the risks.

        • St. Roy says:

          Hi Andy:
          For that “scare you shitless” report, you might want to read “Immoderate Greatness: Why Civilizations Fail” by William Ophuls. It’s short and concise but he captures it all and pulls no punches.

        • I suppose the question is how long the collapse is, and how severe it is. If the collapse goes on for, say, 100 years, with only a small percent increase in death rates, then I would agree with you that having fewer children would complicate the decline. It is possible that the more conscientious humans will not have children, but even current birth rates are selecting for the less educated over the more educated. It is not clear that the more educated are more conscientious. If there is huge die off over, say, the next 20 years, not having children could reduce the number of deaths. In the back of my mind, I am expect a shorter, harder crash, which is why I raised the point.

          Having children is very much part of everyone’s expectation. Children can add a lot of joy to life. So I am not sure the idea would gain much acceptance. I don’t think not having children, by itself, would fix the problem, although it would prevent deaths. The next generation would over-reproduce, just as in the past (and just as is the case for every other species, in order for “natural selection” to occur).

          Putting all of this together would scare any reasonable book publisher to death, not to mention the readers. I agree, though, that more aggregation needs to be done.

          • children have always represented the ultimate support structure in old age, but that was an ‘old age’ that didn’t expect to be nurtured towards 100, and we didn’t make a fuss because granny died at 95 of something ‘curable’
            In our current era we can (mostly)get along without them because we have other energy sources for backup—carers, old people homes, terminal care systems and suchlike. but they are the product of an excess energy economy.
            When we have no excess energy and no younger generations, the consequences will be too awful even for me to write about

      • It’s difficult for people to really get their head around this huge topic. There are so many facets to understand about it even though it basically comes down to “the production tap isn’t big enough.”

        I understand your sentence of “The pipeline would tend to raise the price that Canadian oil is selling for, thus increasing oil and gasoline costs for US customers….”. Yes we wouldn’t save money. The piped-in oil would cost as much as the rest of the world’s oil does, which is higher then we are paying now Today’s Peak Review from ASPO explains this in detail.

        Thursday, February 21, 2013
        Article # 31

        In short, the Canadian oil companies would not sell America the current discounted oil price. With greater Export capabilities they would sell for International prices.


        • I agree. Canada wouldn’t be trying to get increased pipeline capacity through, if the primary benefit were for the American people. The primary beneficiary is expected to be those producing oil in Canada. If the price they get is higher, it may make investment to increase production a reasonable choice. If you want the world to have the additional oil, that is a plus (but not otherwise).

    • Selling at $35 a barrel sounds like BS to me. The typical 80,000 GCW highway tractor weighs about 30,000 pounds leaving 50,000 pounds for payload. At 300 pounds per barrel that’s about 165 barrels at about $55 gross profit or about $9000 per around trip.

      Where can I pick up my oil for transport ?

      • There is kind of a long distance involved. The oil really needs to get from Canada to the Gulf Coast, where there are refineries for heavy oil. The distance from Cushing Oklahoma to the coast is particularly a problem. There is also the detail that the refineries on the Gulf Coast are operating near capacity using imported oil from other countries (for example, from Mexico and Venezuela). I am not sure that there is really enough “heavy oil” capacity in Gulf Coast refineries to service all of the heavy oil for the Western Hemisphere (although someone could probably figure that out). There is unused heavy oil refining capacity in China and India, I believe.

        I understand there are pipeline changes to get more oil to the Gulf Coast being worked on, so at least that part of the problem should get fixed.

    • Jan Steinman says:

      It’s not oil, it’s tar sands. It’s cheap because 1) there’s no market where it sits, and 2) it is much more work (energy) to refine than normal crude.

      If there were a pipeline, the price would no longer be $35, rather, it would approach the market price of crude, less the cost of the extra processing required.

  25. Ikonoclast says:

    The fact that we are now hitting some of the limits to growth is part of the current problem. It will of course be ever more of our future problems. But you cannot ignore, for the moment, other contributing causes to low ages. Are not high profits (too high) a big cause of current low wages? The wages-profits ratio of the US economy has skewed heavily in favour of profits since the early 1970s. In addition, the income of the top 1% has vastly increased. The 90%, if not the 99% have lost share of nation income-profits.

    So, it is a complex situation. Yes, we are hitting the limits to growth. And at the same time the US is doing everything else wrong too. Screwing workers and the middle class. Subsidising fossil fuels, ignoring alternatives (whether they be renewables or nuclear or both), ignoring infrastructure needs and so on.

    • Profits of corporations are definitely high, and taxation of profits has declined. I know I have made some charts of this, but I don’t remember putting them in posts yet. (I always end up making at least twice as many charts as I use.) I think that part of the problem is that corporations are now nimble–they can and will move elsewhere if taxation is high, so governments have gone out of their way to make taxes lower for them. Many corporations have incorporated in “tax havens” which required practically no taxes. Some of them set up their own insurance companies in countries such as the Cayman Islands and Bermuda. This creates lots of business trips to nice vacation spots for executives and lots of consulting fees for actuaries.

      If we think about the tendency toward hierarchical behavior when there are shortages, corporations are like very big versions of humans, at the top of the resource pyramid. They can grab resources, and have figured out a way to avoid taxation. About the only ones who can’t are the resource extraction companies. If governments want to crack down, all they can do is raise taxes on resource extraction. This makes our investment sinkhole problem worse, and forces us to shift even more of our resources into resource extraction, if we hope to stay level.

  26. Kenneth says:

    “With each month, the US economy becomes steadily more automated. In January the US economy added just 4,000 manufacturing jobs, and the net increase since July is zero. Yet last month, manufacturing activity rose by its fastest rate since April, according to the Institute for Supply Management. The difference boils down to robots, which pose an increasingly nagging paradox: the more there are, the better for overall growth (since they boost productivity); yet the worse things become for the middle class. US median income has fallen in each of the last five years.”

    “Things cannot continue as they are. Yet change is speeding up. Manufacturing employment is shrinking around the world. Among other countries, China is moving even faster towards industrial robotics, an area in which German and Japanese manufacturers dominate. Last year Foxconn, the Shenzhen-based assembler for Apple, Nokia and others, said it was buying 1m robots in the next three years to substitute for workers performing repetitive manual tasks.”

    “The bulk of US jobs growth since mid-2009 has been in low-skilled areas, such as food preparation and domestic aides. In the second place is jobs growth in high-end services. Middle income jobs have cratered. According to the National Employment Law Project, low wage jobs (that pay between $7.69 and $13.83 an hour) formed 22 per cent of job losses in the recession but 58 per cent of recovery jobs since then.”

    “Unsurprisingly, people are reverting to borrowing to stay in the game. Last week, Hero Wallet, a financial advisory firm, showed that one in four US workers were dipping into their retirement funds to meet current spending needs – in spite of the penalties that accrue. This usually involves taking out loans against their retirement accounts. The median income is almost 9 per cent lower today than when Mr Obama took office. It is unclear what he can do to prevent it from falling further, even if the US returns to a higher rate of economic growth.”

    The net result will be a future long term trend of falling wages and a declining standard of living. Government revenue will fall and deficits will rise as governments try to borrow their way into prosperity or just maintain basic social benefit levels. Falling wages will drive recessions, agravate unemployment levels and force companies to increase automation to cut costs – thus creating a negative feedback loop. Welcome to the future!

  27. BC says:

    Gail, excellent. You put most eCONomists to shame.

    Now, allow me to add a perspective to suggest that the situation is worse than you imply.

    Today’s typical college grad, i.e., those finding paying employment, receives an average salary of $44,000. If one adjusts this salary in terms of higher payroll taxes and higher debt service and housing costs as a share of after-tax income, the typical college grad receives a salary in terms of equivalent purchasing power of the national MINIMUM WAGE in 1970.

    Shall I repeat that?

    It requires a university credential today to have any chance at selling one’s labor time at the purchasing power equivalent of minimum wage in 1970.

    Imagine if eCONomists, CEOs, politicians, and the financial media proclaimed in the 1970s that peak US domestic crude production, the end of industrialization, and resulting onset of financialization and feminization of the labor force, economy, and society would result in your college-educated children 40 years hence receiving no higher wages/salaries in purchasing power equivalent than the wage received by the guy pumping gas or the person cleaning the toilets and changing the bed linens at the Sleep EZ Motel in 1970.***

    At today’s official “minimum wage”, those receiving this wage are earning incomes adjusted for reported CPI and historical US$ devaluation of factory workers in the 1880s-90s and less than subsistence equivalent purchasing power of Southern black slaves in the 1820s-50s. A black slave in the 19th-century South earned more (and an equivalent discounted labor product value) from his “free labor” in terms of room and board than an American receiving “minimum wage” today, and he didn’t have to pay taxes or rentier taxes, i.e., compounding interest in perpetuity. In this context, the bottom 50% of the US population would be no worse off as chattel bondmen in terms of subsistence than selling his/or labor time today after taxes, compounding interest, and housing costs. Can we be certain that we are not headed back to human slavery?

    The “end of growth” in the US began in the 1970s, and now the rest of the world is about to catch up . . ., uh, rather, catch down.

    ***Thus one can infer why the economy of the South was not viable in the long run: even “slave labor” was too expensive for agrarianism to continue versus rentier and industrial capitalism!!!

    But this informs today’s “transition”, “sustainability”, and “resilience” movements in that no system they can envision can be sustained without land, capital, and labor costs per capita at or below that of 19th-century slave labor in purchasing power terms per capita. Unless one can devise a highly net energy efficient slave-labor-like system of extraction, production, consumption, trade, and some form of equitable income distribution per capita, it won’t last long.

    • I am not certain whether your numbers are exactly right, but your general point probably is.

      We seem to have a lot of people today with little clue as to how difficult a problem we are facing. I think there is a fair amount of belief that our only problem is likely to be a 2% decline in liquid fuels. If we can mitigate that, perhaps through the use of more electric cars, we will be in good shape.

      • BC says:

        I don’t blame you for being incredulous to the figures I presented; they are unbelievable in more ways than one. See links above for SS and Medicare taxes, minimum wage, housing cost, avg. hours and wages, etc.

        The CPI is not a good measure of the actual increase in the “cost of living”, which is more closely reflected in the rate of bank lending, deposits, and nominal GDP and how closely the rate tracks wages/salaries.

        Avg. hours worked are 8-9% fewer today than in 1970.

        Avg. hourly earnings for production and non-supervisory personnel have risen 4.2%/year vs. 5.5% for house prices (much more on the coasts). (Salary and other income is heavily skewed to the top 1-10%, with this group receiving 45% of all income and possessing 85% of all financial wealth.)

        The median house price in the US in 1970 was 3.5 times the avg. earnings and hours worked; today, the ratio is 6.8 times, i.e., housing costs nearly twice as much today as it did 42 years ago vs. comparable hours worked and wage/salary.

        As a share of wage/salary at avg. hours worked, it costs 50% more for housing today than in 1970, even with the very low mortgage rates.

        Payroll taxes are 60% higher today than in 1970.

        Debt services as a share of avg. wages and hours is 40% higher than in 1970.

        Given these dismal comparative figures, it should be no surprise why so many millions of Americans are unemployed/underemployed, on food stamps, have been foreclosed upon, can’t afford medical insurance and services, have to borrow so much to obtain a post-secondary credential, and so on.

        48% of first marriages end in divorce by year 20 of marriage. 67% and 73% of second and third marriages end in divorce, meaning that more than 70% of ALL MARRIAGES in the US eventually end in divorce, no doubt associated with the long-term decline in the after-tax purchasing power of wages, salaries, and benefits for the bottom 90% of US households.

        Income and wealth concentration in the US is Third World-like shameful, assuming the rentier elite possess the capacity to be shamed, which is not apparent these days.

        • I think that part of what happened is that there has been enormous inflation in what people consider “good enough,” as well as much greater shift toward hierarchical income disparities. Also, the whole physical set up was to accommodate living with not a whole lot (for everyone) so there wasn’t nearly the issue of “needing” two or three cars, or “needing” to take children to school.

          I graduated from college in 1968, got a master’s degree in 1969, and left the university and started working in 1970, so I am well aware of the difference between then and now. Living in a small town, everyone could walk everywhere, on streets with sidewalks laid out in a grid. Even in a big city like Chicago, it was possible for almost everyone to walk to school and grocery stories, with the grid layout streets, and small shops nearly everywhere. In the town where I lived, grocery stores also delivered, so there was no need for a car for groceries. The grocery store “ran a tab” (in a box, on the top of the cash register) for people buying groceries, and the local merchants had a lay-away plan for people who didn’t have enough money to buy something with cash now, but that was mostly the extent of credit.

          Houses were simple and small. The house we lived in in Wisconsin had an oil-fired furnace in the basement with at grate over the top in the living room. (A younger sister of mine got badly burned on the grate.) There was a register over a hole in the ceiling of the living room, to let a little heat into the upstairs bedrooms. A house we lived in in Missouri had a space heater in the living room–perhaps natural gas, I don’t know. I am sure neither of these was very technically advanced. There was no ductwork to leak. Repairing them would be pretty simple.

          In each house, there was one bathroom, which was shared by all. Children were expected to share bedrooms and beds.

          The local doctor (which my father was) handled almost everything that came up. If someone broke an arm, he set it, with the help of the X-ray unit in the clinic. If someone’s baby needed delivering, he delivered it. He did pretty much every kind of surgery, plus psychiatric counseling.

          Most of the people working in the school were teachers. If a teacher was absent, perhaps the principal would step in for a day, but that was rare. There were also one or two women working in the “office,” selling lunch tickets, and doing various administrative tasks. (There probably was a mimeograph machine there and a paper cutter.) The class rooms were simple. None of them even had a clock, because the wiring was so limited. Needless to say, we didn’t use audio visual equipment. We didn’t have field trips, although we occasionally did have a group come in and perform, and everyone watched in the gymnasium. In high school, when I received my class schedule, it was hand written by the principal. He had picked out the classes he thought I should take (considering that I wanted to continue to take “band”). I may have asked for some courses, but ultimately, he was the one who decided. I know that he decided I needed “typing” more than “world history”.

          Without all of the layers of administration, and all of the fancy medical stuff, and the fancy houses, people could live on “normal” salaries. There were some trade-offs; no one got perfect medical treatment, or houses that were warm in every room, or exactly the courses they thought they wanted. But the system worked, and the principal knew every student by name. Taxes could be low, and salaries went a lot farther.

          • David F Collins says:

            “…the system worked…” — I grew up under similar circumstances, except the school was one building with one room and one teacher, kindergarten thru 9th grade. (If we wanted to go to high school, our parents had to work out how to get us to one and also to pay for it.) When the school needed roof repair, the community did it. Likewise, repairing desks, fixing up the playground, etc. Starting in 4th Grade, I was «allowed» to help paint the school. (Everybody knew I could paint well around windows.) Work parties tended to end more as parties than as work. And overall, the community was quite resilient. Limited financial resources were far less of a handicap than for most folks today. Perhaps it would be more accurate to say our economy was more efficient and less monetary.

            Perhaps the experience makes me less of a doomster. It is hard to commit suicide by jumping out of a basement window.

          • BC says:

            Thanks for sharing that, Gail, in such illustrative detail. I am younger (“Joneser”), but I experienced much of what you describe growing up in the Ohio Valley in the 1960s-70s.

            David writes: “Perhaps it would be more accurate to say our economy was more efficient and less monetary. . . . Perhaps the experience makes me less of a doomster. ”

            Yes, and I suspect that a growing majority of us and our progeny will by necessity be required to return to similar arrangements, although it could potentially be highly net energy efficient and at a much lower standard of material consumption per capita without resulting in privation; at least that is my working hypothesis, the frame within which I personally attempt to adapt, and in some small way influence others.

            The vast majority of Americans could live at comfortable subsistence per capita and at a durable sense of well-being at a much lower level of net energy consumption and waste per capita, but it would require effectively ending the mass-consumer, auto- and oil-based economic model, including high mobility, obsolescence, and shopping as recreation. Of course, the onerous costs of the imperial US military machine are directly related to sustaining the unsustainable global mass-consumer model, which in turn is dependent upon oil supplies and shipping lanes.

            • The problem I see is that much of what has been built in recent years is based on the idea of everyone having automobiles. The little stores in the center of town have been replaced by mega-stores that can only be reached by cars. The general practitioner doctor has been replaced by a whole army of specialists and support staff, all working out of a fancy building. The little houses with two or maybe three bedrooms and one small bathroom have been replaced with huge, open floor plan houses with four bathrooms including a jacuzzi and granite counters in the kitchen. The schools are huge schools with layers of administrators, that require buses to get to them. There is a need for lots of testing, to see that students are actually learning something.

              If we scale down, it is hard to do this very optimally. Two families can share a home, but with open floor plans it is hard to heat just one part of the home. The huge stores can be replaced by stores in what are now empty houses. I don’t think they will be as easy to walk to, though, because the streets are cul de sac streets that don’t go anywhere. Schools will probably need to be in homes as well, or in other vacant property that students can walk to.

              It is hard for people to think of the possibility that things won’t be as good in the future, and plan for this kind of thing. The assumption is nearly always, “This is a temporary aberration. The economy will get better.”

  28. Jack says:

    Gail-Very interesting post,however, I would also address the crushing debt created over the past 25 years. The private and public debt may be the result of demographic trends that are now reversing. Baby boomer growing families required extensive borrowing. Of course, a government flushed with tax money encouraged overspending on a variety of programs.



    • I expect that a lot of what borrowing did was simply to cover up lack of growth in wages. You remember that the years when Bill Clinton had budget surpluses were the years when oil prices were at record lows, and wages were going up.

      Sometime I need to look at the debt situation in this context, but I didn’t have time/space in this post.

    • This post from the ASPO group sheds a lot of light as to how our International Monetary System works. I found it very interesting.

      It explains the ups and downs a paper money gold backed system and why that doesn’t really exist anymore.

      • That is a very interesting post. I saw it earlier, and tried to get The Oil Drum to post it. (Didn’t work.) An interesting point Erik Townsend makes is that moving away from imported oil doesn’t help us. It is the fact that we are a big oil importer that allows us to keep our dollar as reserve currency (and this in turn allows us to borrow a lot of money).

      • yt75 says:

        Yes this is a really good post. One remark though is that he doesn’t even mention the US peak in 1970 which for sure had a serious impact on US trade balance, instead he puts the trigger on Vietnam war spending.
        Would be interesting to compare this with the import spike that started right after US peak :

        Otherwise thanks to Gail for yet another great overview.
        Even if sometimes a bit scary “such as making survival possible for a subset of humanity, if not everyone.”, what ? 😉

        • I started to put in a graph about this, and even made a new graph showing estimated production in 2012 based on current information, broken out between Alaska, tight oil, and all other. I ultimately decided to take it out though, because I thought the topic needed more coverage, and adding a few paragraphs more would make the post too long for a lot of readers. (Readers seem to spend a maximum of five minutes on posts, regardless of how long.)

    • GermanStacker says:

      The western high-income middle class was a short, one-time thing, made possible exclusively by cheap energy. Every innovation, every invention only brought us more wealth if it could be scaled up to mass production, and that always involved cheap fossil fuels. As you have explained so well, the peaking of that wealth has been postponed by DEBT for a while, so WE ARE STILL NEAR THE TOP! As you also explained very convincingly, the real impact will come only when our infrastructure built on cheap energy starts to crumble.

      I think readers of this blog share the view that, if there is any period in time that we should better use to prepare for what is coming, individually and as a society, that would be right now.
      Meanwhile, governments try to “restart growth”…

  29. Jan Steinman says:

    “We may not be able to find solutions, but we can at least eliminate some approaches as being unrealistic… If we don’t understand our predicament, there is no way we can rationally address it.”

    Is this John Michael Greer’s influence? In The Long Descent, Greer argues convincingly that we in the first world — particularly, the US — are great at “solving problems,” but that what’s coming at us is something for which we have no particular aptitude: a “predicament” or “dilemma.”

    Predicaments and dilemmas have no “solution,” they only have “coping strategies.” Hope for the best; prepare for the worst; take what comes.

    In The Anatomy of Collapse, Dmitry Orlov argues that the US is particularly ill-equipped for a negative-growth future, especially when compared with the Soviet Union, which proved more resilient during its recent collapse due to multiple coping strategies available to most people. They produced much of their own food, they had guaranteed housing, they had a history of “making do” through networking, barter, and opportunism.

    Any who lived through the ’70s should recall the term “stagflation,” used by befuddled economists to describe the simultaneous inflation of things whose cost was primarily energy-related, combined with deflation of wages, goods, and services that were primarily energy-consuming.

    I’ve long held that food, and that connected to it, will hold its value as long as population is not in decline. I wonder if farm worker wages will attach itself to the unrelenting need for food, or if their wages will stagnate and fall like everything else. I’m banking on the former. 🙂

    • I think more of us are going to have to work at growing food. Whether or not the wages for this will buy much more than food is not clear. Without quite a lot of fossil fuel use, it is hard to keep yields up. But it seems like food workers should do as well as anyone.

      Dmitry Orlov talks about there being a market for security workers as well, as increased violence erupts.

      • Jan Steinman says:

        I’d rather take my chances stepping on a rake than dealing with bad guys.

        But maybe farms will need defending. Now that’s a sobering thought…

        • Xabier says:

          Well Jan, my ancestors in Spain were knights, and when you think about it what did they really do? defend agricultural land and their rights over the people who worked it; ‘chivalry’ came later!

          In German lands, many knights were originally a kind of bonded slave warrior, defending their lord’s lands. The knights later became lawyers, and other such shysters, and got more land through trickery and graft……….

          The people who talk blithely and hopefully of ‘getting some land, some livestock, a well’ etc, do seem to forget the security aspects of this scenario which jump out at one throughout history. What was the Biblical curse? may you till your land and another man harvest it…….

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