Since the late 1990s, globalization has seemed to be the great hope for the future. Now this great hope seems to be dimming. Globalization sets up conflict in the area of jobs. Countries around the world compete for development and jobs. If there is not enough cheap-to-produce energy to go around, huge wage disparity is likely to result.
We know from physics and history that economies need to grow, or they collapse. The wage disparity that high-wage countries have been experiencing in recent years is evidence that the world economy is already reaching energy limits. There are no longer enough jobs that pay well to go around. Any drop in energy supply is likely to worsen the job situation.
Most observers miss this problem, because they expect high oil prices to signal energy limits. This time, the signal is low wages for a significant group of workers, rather than high oil prices. This situation is possible in a networked economy, but it is not what most people look for.
Unhappy citizens can be expected to react to the wage disparity problem by electing leaders who favor limits to globalization. This can only play out in terms of reduced globalization.
History and physics suggest that economies without adequate energy supply can be expected to collapse. We have several recent examples of partial collapses, including the Great Depression of the 1930s and the collapse of the Soviet Union. Such collapses, or even more extensive collapses, might occur again if we cannot find energy alternatives that can be quickly scaled up to replace oil and coal in the very near term. These replacements need to be cheap-to-produce, non-polluting, and available in huge quantities.
The story that the economy doesn’t really need a growing supply of very cheap-to-produce energy is simply a myth. Let’s look at some of the pieces of this story. Continue reading