14 11 2011

I have never done this before, but here I reproduce an excellent blog post written by George Mobus who kindly permitted me to do this for all you followers of that crazy Matrix guy!

Every System Has a Driver

And it isn’t ideology.

The system in question is the global economic system that has been increasingly based on consumption of goods and services and a capitalistic method for aggregating investments. The former represents a shift from a societal sense of scarcity, husbanding resources, and thrift to one of abundance and growth. The latter started out as a means of funding the development of productive businesses that could sustain the prior societal understanding. Businesses that served the needs of building productive tools (like plows and harnesses) or serving productive needs (like horse shoeing) could only be started by aggregating enough capital (money) to purchase the necessary components and pay the workers. Borrowing from banks and selling stocks started out as ways to do this aggregation. Those who loaned the capital expected to earn some profit from their taking a risk and when the businesses did well enough investors/lenders did profit from the use of their capital. As long as everyone was satisfied with profit margins that could be applied to savings (and future investment) at a reasonable rate, this system worked very well. But, perhaps too well.

Somewhere around the end of WWII we started to see a shift in perceptions. We started to see the growth of a belief that capitalism was the engine that produced increasingly abundant wealth, especially niceties like fancier cars and bigger houses. For a while middle class workers were garnering wages that grew. Companies were making more profits and growing. And investors were making huge profits without doing much in the way of working. President John F. Kennedy famously said that “a rising tide lifts all boats.”, expressing the optimism that the American economic system was producing wealth for all. The sentiment became that as the wealthy investors got even wealthier that was good for everyone. A smaller slice of a growing pie is still more pie. Then came the high technology boom and the rise of the get-rich-quick entrepreneur. This was the changing American dream. It was no longer enough that every hardworking citizen would have a chance to establish a modest, but livable home and have a few simple appliances. People saw other people get more. And they wanted more for themselves. The economic system evolved such that we are no longer citizens, we are consumers. And that means of everything; food, stylish clothing and cars, bigger houses, even education and information (so-called, but what is sold on Fox News and most mainstream media can hardly be called information!). We are even consumers of political posturing.

The belief that capitalism and free markets was the driving force that led to the abundance of wealth is stuck in our collective consciousness. We’ve even sold this belief to essentially every other nation, regardless of their professed political system. Most people sincerely believe that capitalism is responsible for what we have. The reason, I think, is simple. Most people never take enough physics to grasp the relationship between energy and work. But the truth is that capitalism just happened to be at the right place at the right time. I won’t deny that it facilitated what came next. But it was not the driver, not the final cause, as it were. There is, rather, a more subtle driving force that would have produced essentially the same effects under any political system. And that is the simple fact that humans are biologically programmed to consume as much energy as they can get their hands on. Or, more appropriately, get control of. Humans have a unique ability to find ways to harness power for their own uses. All that is necessary is that there exists a concentration of power (energy) that can be discovered and we will find ways to exploit it. Nature abhors a steep gradient it seems (Second Law of Thermodynamics – the entropy version).

The growth of economic activity and wealth has always tracked right behind the discovery of new forms of energy at higher concentrations of power. Fossil fuels, and especially petroleum, was just the latest naturally occurring concentration of energy (fossil sunlight), and very high powered energy at that. And the oil-based economy started to take off during the later part of the 19 century. With the advent of diesel engines (for trains and ships) and powerful aircraft jet engines, the fossil fuel age came into full swing. Electricity produced from coal-powered turbine/generators rounded out the power portfolio that produced the potential for growth. By the middle of the 20th century the economic engine fueled by fossil fuels was in high gear. Every nation that had access to abundant fossil fuels, regardless of their economic model, became richer. It is still a puzzle why this didn’t occur in the middle east but all of those nations seemed content to sell their oil to the western world and use the money to buy luxuries. Perhaps it had to do with the fact that the west, particularly the US had already been investing in oil refineries and had gone through the learning curve before oil was discovered in places like Saudi Arabia. Even the former USSR was on a track to producing more wealth from their oil reserves, until the economic/military race with the west forced them to dismantle what they had and break up into independent (supposedly) countries. Their oil business suffered from the dismantling, not so much from being communistic. It has since started to make a resurgence, but it may be that their reserves are not as great as needed to make a great comeback.

The fundamental economic driver is the combination of biological mandate to consume energy and the availability of said energy. It matters much less what kind of economic theory or model you adopt or believe you have (like us believing we have free markets!). All that matters is humans have access to energy sources and they will then figure out how to exploit that energy to exploit other natural resources. It has always been thus since the first hominids evolved.

All of the rest of the economic system, regardless of what you call it, is the emergence of organization from the flow of energy and the cleverness of humans to exploit that flow. Our current system has gotten so complex and abstract that it is nearly impossible for anyone to actually understand what is going on. But the clue is that when there are problems arising in so many different facets of a system then you can guess the real causes lay deep at the heart of the system.

Energy Flow Decline and the Collapse of Complex Societies

Joseph Tainter has it right. In The Collapse of Complex Societies he developed the thesis that societies try to solve problems by increasing complexity. But complexity has costs associated with it that are sometimes hidden from the normal accounting. These hidden costs often show up as new problems and the societal response is to increase complexity yet more. And increasing complexity follows a law of diminishing returns*. At some point the next unit of complexity has a much greater cost than what it was supposed to fix. That is when things start to break down.

Lately Tainter is speaking to the relationship between problems, complexity, development, and energy flow. He recognizes that it is energy flow that allows humans to attempt solutions to problems. And it is energy flow that is needed to maintain the structures developed. He speaks to the historical patterns of civilizations, fueled mostly from real-time solar flows (i.e., agriculture), growing to a point where the energetic cost of shipping food into the core became too high. The civilizations could not sustain themselves but also could not recognize what was really happening.

Tainter and several other social scientists, are using systems thinking and analysis to see this pattern in all of the collapses. There is invariably a proximal cause or two that everyone can see, such as the invasion by barbarians or climate change, and that everyone concludes is THE cause. But now we are seeing that the real underlying cause of collapse is the decline in energy flow that was needed to sustain the complex organization that had evolved over time and many generations.

Today we are a global civilization even if we still recognize borders between nations. Our commerce is global in scope and is fueled by prodigious amounts of fossil fuel energy. Our agriculture is totally dependent on fossil fuels (the Green Revolution) for growing and delivering the food. Every home in the developed world depends on heating and cooking from advanced power sources like natural gas and electricity (only some of which is produced by nuclear or hydro power). We need powerful transportation vehicles to get us to and from work. Our system is completely and irreversibly dependent of fossil fuels. And guess what is diminishing**?

Our global society is in the beginning stages of collapse. The wealthy sense this even if they can’t put their fingers on what is wrong. They are more motivated than ever to try to aggregate all of the paper wealth they can. I do think most of them believe that their efforts to create paper wealth are on a par with manufacturing, for example, in helping to lift all boats. I suspect some of them feel totally justified in taking home huge bonuses as they attempt to build a hedge for themselves against what seems to be a sinking boat. They are working on their life rafts after all. This is a normal human proclivity and you, dear readers, and I, and all of the occupiers would probably do something similar if we were in a position to do so. None of us has transcended our biology and all of us will do what we can to protect ourselves when we sense the impending loss of the system that gave us our sense of well being. Of course I support their demand that what wealth there is being created now should be more equitably distributed. But it has to be real wealth, not the phony money created by Wall Street gamblers and fractional reserve banking. I continue to urge that real jobs can be created for many of the unemployed in a modern version of the CCC (Civilian Conservation Corp) where the goal is to restore depleted soils for organic agriculture under the permaculture methodologies. So what if these are government jobs. And so what if the rich are taxed heavily to fund it. That would go a long way to doing something worthwhile, investing in real infrastructure. And it would provide incomes for many currently unemployed (it could also be a way to reabsorb the military personnel coming back, at long last, from our foreign adventures.) A program like this could help alleviate the inherent conflict that is boiling up and it would slow down the collapse somewhat.

The occupiers give us a more realistic measure of the nature of the problem we face. They see the many aspects of the situation and sense that those various aspects are all related to one another. They intuitively understand that all of the various problems are systemic in nature but they just don’t go deep enough into that system’s drive. What the bankers do, what the politicians do, and what the OWSers do, they are all reactions to the systemic collapse that we are experiencing. The problems we will all face soon will be from our ignorance of the root cause and a belief that we need to do something that will protect our positions. If we believe we could have things back the way we believe they were then we will take radical actions against whatever proximal cause we think we see. People will come to blows as they blame some other group for what is actually happening to everyone. Even the richest will find they can’t use their paper assets as food. They won’t even buy food. The tide is going out. All boats are lowering. And many of them have sprung leaks and are already sinking. Those in the sinking boats are going to soon try to commandeer the ones that still seem seaworthy. It is coming.

* In my systems science book I describe this in greater detail. It turns out that increasing complexity can, and often does lead to collapse, but it can also lead to reorganization and increases in hierarchical control structures that actually simplify things at the operational level. Thus some societies evolve into seemingly more complex ones, but are organized differently (more hierarchically) to avoid the increasing costs and diminishing returns. Human societies have a harder time doing this because humans are more autonomous agents who invariably fail to do as they are expected. Contrast the organization of a state vs. that of an army. The latter kinds of organizations work because the humans are operating under much stricter discipline rules. The problem with humans in general is that they are not wise enough to grasp the benefit of disciplining themselves to cooperate. Hence, complexity tends to result in collapse vs. reorganization and success.

** We have already reached the peak of oil extraction rates and this can be expected to have an impact on the extraction of coal and natural gas as well. It is already having negative impacts on agricultural photosynthesis and will soon cause the diminishment of food production. A related problem is that the energy costs of obtaining the next increment of energy from fossil fuels is rising. The energy return on energy investment (EROI) is declining faster than the decline in extraction rates. This is the principle driver in rising oil costs. Net energy per capita has likely been in decline since the late 1970s. Aggregate net energy may soon follow even while the population continues to expand, even if at a slower rate.