Kunstler: Growth Is Obsolete

The word that sticks in the craw of many who cogitate over economics is growth. The condition that the word refers to has proven disturbingly problematic in recent years, especially as world’s population continues to expand exponentially and the global ecology suffers in response. In fact, Thomas Carlyle (1795 – 1881) called economics “the dismal science” in direct reference to the work of the Rev. Thomas Malthus, because the Malthusian conclusions were so unappetizing – that sooner or later rising human populations would outstrip the world’s capacity to provide for them.

Now it happened that the Reverend Malthus’s notorious Essay on the Principle of Population was first published in 1798, which was about exactly the take-off moment for the industrial revolution. That extravagant melodrama was about marshaling mechanical invention with fossil fuel. The first act ran on coal and allowed populations to expand because it extended the extractive reach for resources by colonialist nations. The second act featured exploitation of oil, which was more powerful and versatile than coal. It also lent itself much more directly than coal to being converted into food for people. The use of oil powered farming machines, oil and gas (an oil byproduct) based herbicides, insecticides, and fertilizers, and oil based long distance food transport, has allowed us to convert oil into food pretty directly. This has led to the “hockey-stick” swerve of population growth that took human numbers worldwide from under 2 billion in the year 1900 to more than 7 billion today.

We are in the third act of the industrial melodrama now where the dire sub-plot of peak oil has taken stage. Despite the wishful thinking and happy-talk propaganda lighting up the media-space, we have arrived at the problematic point of the story: the end of cheap oil. This is poorly understood by the public and, apparently, by leaders in business, politics, and the media, too. They misunderstand because they insist on thinking that peak oil was simply about running out of oil. It’s not. It’s about running out of the ability to extract it from the earth in a way that makes economic sense — that is, at a price we can afford in terms of available capital and energy invested (and also ecological destruction). That dynamic is now exerting a powerful influence on modern civilizations. We ignore it — even at the highest levels of intellectual endeavor — because we have made no alternate plans for running the complex operations of everyday life, and because the early manifestations of the dynamic present themselves in the realm of finance, which is dominated by academic viziers and money-grubbing opportunists who benefit from obfuscating reality.

The sad, stark fact is that oil is now too expensive to permit further expansion of economies and populations. Expensive oil upsets the cost structure of virtually every system we need to run modern life: transportation, commerce, food production, governance, to name a few. In particular expensive oil destroys the cost structures of banking and finance because not enough new wealth can be generated to repay previously accumulated debt, and new credit cannot be extended without a reasonable expectation that more new wealth will be generated to repay it. Through the industrial age, our money has become an increasingly abstract and complex product of debt creation. As Chris Martenson has put it so succinctly in The Crash Course, money is loaned into existence. Thus, the growth of debt (allowing the growth of money) has played a crucial role at the heart of our banking operations, and the very word “growth” has become shorthand for this process in the lingo of current economic discourse.

It is quite clear that the banking system has been thrown into great disarray as the price of oil levitated from $11-a-barrel in 1999 to the great spike of $140 in 2008, and then settled into a range between $75 and $110 since 2010. Most of this disarray is a result of attempts to offset the failure to create new real wealth with fake wealth generated by accounting fraud, “innovative” swindling, insider chicanery, high frequency front-running, naked shorting of securities, and the construction of a vast untested network of derivative counterparty wagers that give every sign of being booby-trapped. All this private monkey business has been abetted by public mischief in central bank interventions and market manipulations, fiscal irresponsibility, political payoffs for favorable legislation, statistical misreporting, and the failure to apply the rule of law in cases of blatant misconduct (e.g., the MF Global confiscation of segregated client accounts; the Goldman Sachs “Timberwolf” CDO scam… the list is very long).

In short, a society with deeply impaired capital formation has turned to crime, corruption, fakery, and subterfuge in order to pretend that “growth” — i.e. expansion of capital — is still happening. The consequences are many and profound. The chief one is that the manufacture of fake wealth is such an alluring activity that some of the smartest people in society have devoted their waking hours to making a profit off it. It absorbs all their energies and they are simply not available for other work, such as figuring out a sane and practical way to run civilization in the absence of cheap energy. Added to this is the administrative effort and the work-arounds needed to support all this corruption and dishonesty, which occupy the hours of another class of smart people who work in government, academia, public relations, and the media. The sustenance of these parasitical cohorts more and more continues at the expense of everybody else in society, who cannot find work, or cannot make enough money to pay their living expenses, and who have become deeply discouraged, disappointed, demoralized, and disengaged in their losing struggle to thrive. Hence there is little public vigor to even mount a discussion of these vexing problems and the final result is the greater wholesale failure to construct a coherent consensus about what is happening to us and what we might do about it.

Another consequence to these disorders of capital is the massive malinvestment directed into things with no future in themselves or, much worse, things that actively undermine the future of everything needed to support any civilized future. For instance, the “innovation” in securitizing and repackaging mortgages — which continues to be a boon for the giant banks in concert with the thoroughly dishonest and technically bankrupt “government sponsored enterprises” Fannie Mae and Freddie Mac — expresses itself in the activity we call “housing starts.” Economists overwhelmingly agree that a higher number of housing starts is a good thing for the economy and hence for society. But what do housing starts actually represent? These days they mostly take the form of new suburban housing subdivisions, which are inevitably joined by the kit of the strip mall, the big box store, and all the other furnishings of the highway strip. In short, all that glorious “innovation” by the banks produces more suburban sprawl and destruction of rural land, which is about the last thing this society needs when faced with the realities of peak cheap oil, since it is absolutely certain to make these things obsolete, and very soon. It is not any better, either, if the nominal capital — nominal because it is sure to someday represent a loss for some bond-holder or stockholder — gets invested in a 30-story high rise apartment because, contrary to a lot of current delusional thinking, skyscrapers also have no practical future for reasons I have explained in other essays here.

Similarly, the public investments going into “shovel-ready” highway projects, although the fiscal outlays are more transparently based on money that doesn’t really exist. The public, as well as leaders all across society, serenely believe that the Happy Motoring matrix will find a way to go on forever, and that therefore we must make provision for it, not to mention the beneficial side of effect of “job creation” for all the additional workers. Yet the dynamic at work must be obvious: oil will never be cheap again; it will impair future capital formation; there will be far fewer car loans; there will dwindling public funds to maintain the roads; and there is no practical substitute for gasoline that scales to the existing system, nor any prospect of one within a time frame that makes sense — not to mention the gigantic background problem of pouring evermore carbon into the sky.

If these things I mention — highways, tract houses, condo towers, strip malls — represent our current idea of “growth,” and if they are self-evidently bad investments, then we can infer that our current concept of “growth” no longer applies to a reality-based model of our economic prospects. We ought to junk the term and what it implies about the daily business of mankind, and come up with a new way of understanding the place we’re at.

In Part II: Getting To a Future That Has a Future, we take a hard look at the critical task facing humanity if we want to enjoy a future of any worth — and that’s managing contraction. We have to reorganize all the major systems of civilized daily life. We have to produce our food differently, we have to do commerce differently, and so on with any number of ongoing endeavors including transportation, manufacturing, governance, banking, education, health care, and more.

Click here to access Part II of this report (free executive summary; enrollment required for full access).

11 Comments on "Kunstler: Growth Is Obsolete"

action on Sun, 20th Oct 2013 11:57 pm 



What this makes me think about, being a young person (if indeed 30 is still young), is that since all this is going down the tubes, and will be unusable anyway, and since I will not get to enjoy the frivolousness of previous generations, I would have much rather they not covered the land in asphalt and cement, so at least we would have had nature’s beauty in the absence of oil. People in the near future are really going to be angry at what was done because they won’t get the chance to enjoy it (that being aside from the huge environmental cost that they will have to endure, or try to endure rather).

On a side note regarding population, this will sound harsh and I I’m sure there’s many ways to accomplish this other than what I’m proposing, but there should be monetary and I.Q. requirements for reproduction, with abortion being mandatory for those impregnated not meeting the req’s. Sterilization is punishment for breaking the requirements to prevent the existing amount of stupid people for taking the law as a license to procreate with free abortions. We are at this point I think, something needs to stem the flood of morons, each self entitled to wantonly use our remaining resources without even having the presence of mind to realize what’s happening. But I guess the damage has already been done so why worry about it…

BillT on Mon, 21st Oct 2013 2:45 am 



Action, my kids are your age and I try to get them to think about the future, but…

The ‘growth’ mania is not just in the West or the US in particular. Here in the Philippines, they brag about being 2nd only to China in growth this year. Somewhere around 7%, I think. Condo towers are going up all over Manila and the few other cities by the hundreds. These are being bought up by families who have members working overseas and sending money back. They are ‘investments’ for the future, either to live in or to rent. Fools! Cities have a short shelf life these days.

Now, you can buy a small (~300 sf) studio condo in one of the new towers for about $50,000.00 US, or you can take that same $50,000.00 and buy ~20 acres of land and build a nice, solid, masonry house in the countryside with solar electric for ‘necessities’.

Do they buy land? NOPE! They buy condos! They’ve had too much exposure to the West, and particularly the US, to be rational, I think.

Kunstler has it together. I like his articles and follow his website.

Roman on Mon, 21st Oct 2013 3:45 am 



Intelligence has little to do with genetics and a lot with environment. Why in a world of 7 billion people there is a lack of geniuses compared with a hundred years ago? If you’re a outcast or a misfit you will become a nerd. If you’re a social butterfly you will become one of the clueless sheep. But everyone these days has to get “socialized” and “well adjusted” and get a lot of self esteem and self worth from the group. It takes a village to make you retarded. Also video games and tv kill IQ.

noobtube on Mon, 21st Oct 2013 7:30 am 



Why is it, that in the United States and Europe…

the rich and the racist,

are never the problem.

It’s always those poor black and brown people.

Yet, they aren’t the ones polluting the Earth.

1 American consumes the equivalent of 12 Africans.

So, every American that is born is like eating the food of a small African village.

Take an American family with 4 kids, and that is the food for almost 50 Africans.

Yet, the Americans are constantly screaming about Africans, when it is the Americans who are stealing the food out of the mouths of Africans.

But, that is why Americans are doomed.

They are determined to be stupid, right until they go over the cliff.

I suppose the American problem will solve itself.

Arthur on Mon, 21st Oct 2013 8:20 am 



“1 American consumes the equivalent of 12 Africans.”

You forget to mention that one Westerner produces much more than 12 Africans. You have been independent for half a century now, but somehow failed to stand on your own feet and are expecting that the white man will play the Albert Schweitzer for ever. Well, you can forget about that.

Learn a trade and stop whining and being a ‘victim’.

“So, every American that is born is like eating the food of a small African village.”

Yeah, the standard Marxist baloney. Every time when an African kid is about to set it’s teeth in a juicy burger, an American extortionist shows up and takes the burger away from the kid, it is sooo unfair.

“But, that is why Americans are doomed.
They are determined to be stupid, right until they go over the cliff.
I suppose the American problem will solve itself.”

When Americans are gone, so will you. Without western influence you will be self-decimated and fall back to the stone age. Maybe you should start to understand that you have a problem as well. Glorification of your own inadequacy is not the solution.

http://en.wikipedia.org/wiki/Dambisa_Moyo

DC on Mon, 21st Oct 2013 9:52 am 



How about we just agree that JHK has hit another one out of the park and not worry about slinging meaningless mud like ‘marxist’ around. Both Africa the continent and amerika the corporate cess-pool, are both doing bang-up jobs of ruining their own lands. Each are doing so in their own unique ways. Except with amerika its a 2fer. Amerika is ruining its lands AND as much of Africa’s as it can as well.

Thats just an honest appraisal of the situation atm, marxism, not really the issue is it?

BillT on Mon, 21st Oct 2013 10:55 am 



Arthur, Westerners waste many, many times as much as anyone else in the world. Production of ‘junk’ is not production, it’s waste and insanity. Most of what the West produces is techie toys that do nothing but entertain and put their buyers deeper into debt. Ditto, cars, TVs, most clothes, food, and other energy and resource wasters. Just the grain to grow the world’s beef for Westerners is enough to feed 6 billion Africans. Do the math.

What the West does have in abundance is arrogance and greed. Maybe if the Empires had not plundered the 3rd world over the last 300 years, the 3rd world would not be the 3rd world today. After all, they now have most of the remaining natural resources. Think about that. How many years can the EU survive without imports from outside? One? Two? None? Karma is a bitch. Keep that in mind.

simonr on Mon, 21st Oct 2013 12:12 pm 



What the West does have in abundance is arrogance and greed

>> And the weapons to take whatever we want

steveo on Mon, 21st Oct 2013 12:33 pm 



Action wrote – “People in the near future are really going to be angry at what was done because they won’t get the chance to enjoy it (that being aside from the huge environmental cost that they will have to endure, or try to endure rather).”

I wish they would get angry about that. Instead they get angry about Obamacare (just another convulsion in the death throes of this society) and the fact that the Patriots lost yesterday.

GregT on Mon, 21st Oct 2013 4:04 pm 



“And the weapons to take whatever we want”

Yup, arrogance and greed.

paulo1 on Mon, 21st Oct 2013 5:24 pm 



@ Action

re: “and since I will not get to enjoy the frivolousness of previous generations,”

Well, Action, I am 58 and most assuredly did not spend my time and efforts in frivolous activities. Having said that, when I see so many young today ensconced with their latest app (regardless of their income), and understand that the newest and latest video games are definitely not consumed by my cohort nor do we lust after big screens, etc., I have to ask which generation is on the frivilous path? I have just retired, but spent my life working very hard acquiring a trade, a technical career, and a profession. I did my undergrad by correspondence (long before the internet) starting work on course work at 5:00 am before the family got up. Then, I left for work at 6:30. Along the way I bought and paid off three houses. By the way, the career changes were a result of seeing current careers becoming obsolete thus forcing a retraining before my family suffered. Now, my kids are your age and well on the way in their own careers. They are both paying off houses and controlling debt. I like to think they are on this track due to the modelling of their parents.

In fact, most of my friends have worked very hard and were quite duitiful in carrying out their responsibilities. There is a mistaken belief that anyone over 50 with a house spent their life on a gravey train when they weren’t playing golf or signing up for a new Club Med. This view is erroneous. We had fun, but our vacations were camping with a tent or day picnics. We ate like kings but grew our food as our ‘hobby’.

My suggestion to young people is get a useful trade for a firm foundation. Then, use those skills to move forward. When I looked for work in my teens I followed what my Dad used to say, “looking for work is a full-time job”. There are good companies always looking for good people willing to work and get ahead. You just have to find them. I know today’s job market can be terrible for the untrained, but with my trade I could have a job by tomorrow if I started applying. I am not inferring you are out of work or not successful, please don’t think that I am, however, I am getting tired of always hearing about how easy it all unfolded for our generation when it didn’t. We worked damn hard and did without. I think our happiest times when we didn’t have a pot to piss in.

regards….Paulo