John Michael Greer, the Post Industrial Economy, Peak Oil, and the Law of Value

Once again, with beautifully rendered prose, JM Greer lays out a broad perspective on what we should all be talking about but somehow aren’t talking about anyway–the fact that cheap, abundant energy in the form of oil has left us, is leaving us, or is about to leave us. Along the way, he mentions how we got into this whole “Occupy” predicament, the vast and sudden bifurcation of class in America, and he cites historic precedent, early 20th England,

when the hundreds of thousands of independent spinners and weavers who had been the backbone of Britain’s textile industry were driven out of business by the mills of the English Midlands, the income that used to be spread among the latter went to a few mill owners and investors instead, with a tiny fraction reserved for the mill workers who tended the new machines at starvation wages.

Anyway you slice up an economy, the backbone is no doubt energy. You can have only so many redundant or obsolete or purposeless “jobs” sitting around under fluorescent lights taking up valuable real estate before the cost of housing them, insuring them, and last but not least paying a token wage to these people becomes untenable. After all, the only reason why the vast majority of Americans get to enjoy “valueless” jobs, that is, jobs that don’t really produce and real, usable, needed thing, is because we have some machine somewhere that does that. Or, sadly, some 3rd world citizen laboring under abusive conditions in an Free Trade Zone that does all that. This is why I believe jobs are mostly obsolete, as  we know them, and if not for the demands of Capitalism and its law of scarcity, we could all be living in some kind of technological utopia, free to pursue our dreams and ambitions. But perhaps the rising cost of energy will make human power profitable once again! Or, as JM Greer puts it,

At the same time, the systemic imbalances between rich and poor countries—themselves partly a function of industrial systems in the rich countries, which pumped wealth out of the poor countries and into corner offices in Wall Street and elsewhere—meant that human labor simply wasn’t that much more expensive than fossil fuel energy.

Let’s just cut to the chase–this was my “corporate” experience in every corporation I’ve ever worked for and I could wager every corporation headquarters I’ve ever set foot in as a guest. This is what we talk about when we talk about “jobs.” Giving value-skill-less people valueless jobs just to keep them from starving. That’s how Capitalism has worked for the last forty years, until the advent of the “celebrity CEO” hatchmen, who figured out they can vastly increase the stock value of a company by cutting all this fat, by initiated massive layoffs.

The sickening punchline to the last forty years of abundant oil and cheap foreign (or migrant) labor affording us laughably cushy jobs is what we did with the excess. It wasn’t enough to have your token wage, no, you had to ensure that a surplus of it went into some money-making scheme, some “investment” that made that money grow to the tune of 10% or more per year. And when we wound up with more surplus capital than means of growing it, that’s when we began inventing new investment schemes that in the long run lead to things like collateralized debt obligations and other doomed financial instruments that lead to the 2008 economic collapse. (Previously, it was any old dot-com, the virtual land rush that revealed just how eager we were to inflate a bubble, even when we all knew how foolish it had become.)

Participant in the economic bubble of the last decade, however, was the assurance that the future would hold vastly more prosperity than the present. For example, one could speculate that if we are globally producing at a certain rate, let’s say, 100% of efficiency, then an investment would count out 110% (comparative) efficiency at some later date, let’s say five years. No biggie, we’ve seen that kind of economic growth in the past, China, for example, is growing by about 7-8% per year. After all, babies are born, populations grow, everything increases, right?

And that’s the beauty of JM Greer’s article. The industrial age was powered by mechanical processes, driven by oil/coal burning heat, or

In the case of industrialism, the difference was always fated to be temporary, because the low price of concentrated heat was purely a function of the existence of vast, unexploited reserves of fossil fuels that could easily be accessed by human beings.

The reason why we haven’t seen an economic recovery is because there is no place for the “job creators,” the wealth class, the banks who have a fire hose of next-to-free capital firing at them in the form of “quantitative easing,” to go invest that money to the tune of 10% returns, or whatever-% returns they care to. They aren’t investing. Why? Because the cheap energy that backed it is drying up. Oil has not traded at its “locked in” OPEC-priced controlled levels since 2001:

In order to enjoy economic recovery to the tune of the pre-2001 (pre-9-11) levels, Republicans suggest we lower the cost of doing business in the form of deregulation (more polluting, for example), lower taxes, or slash bloated government entitlement programs. Basically, a call for austerity measures for everybody, a way of saying we can’t live as luxuriously as we have in the past, that is, except for the 1% that finance their campaigns, but it isn’t about what the wealthy have, it’s about what the vast majorities of Americans don’t have. And that’s not a bad strategy because it might just lower the cost of human capital to the point where physical labor can begin replacing machines here in America. Yes, turn America into something that looks more like a 3rd world country, but hey, that’s the breaks. Oh, and let’s not forget “Drill, baby, drill.” The absurd notion that we can sacrifice environmental wealth for newfound sources of petroleum that would have to rival something on the order of Saudi Arabia, or at least Pruhoe Bay, to really be a worthwhile sacrifice (which is why we aren’t going to gamble on ANWR) That the answer lies in the high cost of energy that literally defines the cost of doing every sort of business whatsoever.

Democrats, or at least the 99% movement, see the profits coalescing in the hands of the already super rich and suggest that we simply tap that source of capital, which had been tapped prior to the Bush Tax Cuts in order to regain economic fecundity. Or that we simply move away from subsidizing petroleum companies and figure out how to get the same energy return on investment, that is, the how much energy do we get out of a resource compared to how much we put in, as a ratio, from renewable resources.

Oil once yielded a 100:1 ratio when it readily “gushed” from the ground, and has since declined to 20:1 as we have to work harder to “pump” it out, or, somehow extract it from “tar sands.” We can’t expect a renewable resource to compete with that, after all, all you have to do is set a goddam match to it and see how much energy there is in oil ready to be had, but the previously linked article claims wind can garner a 17:1 ratio and that’s not so bad, but if it is the reality of the future, then we must learn that the economic prosperity of the last 40 years was a once-in-history phenomenon.

And that, in a nutshell, is the Peak Oil Debate.

One of four scenarios will play out in our future:

  1. Technology enables us to find petroleum-based resources so large that they are able to keep up with our current level of “expected” economic growth. For the time being.
  2. Technology enables us to embrace a renewable energy economy that, again, does the same as above.
  3. Wars (traditional or economic) allow us to take any of the above from other nations and hoard them.
  4. Neither of the above happen. We learn to do without the kind of growth we’ve expected. The accumulated debt simply doesn’t get paid off in the future. Currencies fail. Price Inflation. Our money doesn’t grow by virtue of it just sitting around in an investment instrument, thus long-term investments such as pension funds wind up failing. The cost of everything goes up, unemployment goes up, lots of industries that should have been allowed to die with the era of cheap energy, finally can no longer be “bailed out.” This can be mitigated to happen slowly, which is what I believe we are seeing with the current Obama administration, but eventually there will be a shock that teaches us this scenario is indeed happening.

Here is a video I’ll leave you with from James Howard Kunstler that continues the conversation:



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