Mena- A Model of the Future?

Off the keyboard of George Mobus

Published on Question Everything on July 2, 2013

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Political Unrest – Why?

It is interesting the way the MSM characterize the unrest going on in Egypt. The typical perspective is that the people of Egypt are unhappy with the way the Morsi government has turned out to be almost as autocratic as the Mubarak regime had been. Morsi was elected in the first “democratic” election in the country’s history, but he recently declared himself to have powers that were not part of the bargain. He is from the Muslim Brotherhood movement, a supposed Islamic political party-like organization that supports Sharia Law as the foundation of governance. A large majority of Egyptians appear to prefer secular laws and thought originally that Morsi would honor that position.

Thus to the MSM the unrest is political in nature. They focus on the notion that the Egyptians want democracy and that Morsi has failed to deliver. But what this perspective fails to take into account is that politics ultimately come down to who controls the resources. The irony in Egypt is that they really haven’t got much in the way of resources. They cannot sustain a program of development because they have nothing to develop and nothing to drive such development (e.g. net energy). So Morsi is actually incapable of delivering any of the demands that the people are voicing. What is more important to the people of Egypt than whether their governance is based on Islamic doctrine or not is that they need to eat. They need to have shelter and some income. And there is no regime that can deliver that. Even if Morsi capitulates and a new government is installed, or perhaps more likely, the military takes over again, the needs of the Egyptian people will never be met.

The unrest is not about democracy. We only characterize it that way because we, in the west, think that we have democracy and that it the reason we’ve been so successful economically. If the MENA states could have democracy, the reasoning goes, they too would become economically successful. What remarkably shallow, indeed empty, thinking this is. Democracy did not produce food on the table and shiny new cars. The fact that communism failed to do so is not a proof that it did. Growing net energy per capita did that. It is easy to support something that looks like democracy and free markets when you have oil gushing out of the ground.

We are observing a model for collapse unfolding as country after country depletes whatever resources they had. The entire North African, Middle East, all the way to Afghanistan and Pakistan, are facing the exact same forces. Political unrest derives from physical stress. What other part of the world with significant populations better fit this model? I suspect that India, parts of China, and Mongolia are close behind.

Unrest Moving West, North and South

The US’s and Europe’s problems appear to be financial because these countries were part of the industrialization growth of the 19th and 20th centuries where rapid developments of fossil fuels mirrored that going on in the US. Indeed England led the pack with the use of coal even earlier. But as the net energy per capita available from fossil fuels started first to decelerate in growth and then, around the 1970s peak, the reliance on debt to finance production took over. During the period of rapid growth in industrialization we observed that wherever one was in time one could reasonably expect that even more wealth would be produced in the future, enough extra to pay back the principal along with interest (rents paid for using the capital). So borrowing against the future made sense. What nobody paid attention to is the fact that this experience of growth was based on increasing net energy flows and that the majority of that net energy came from fossil fuels, particularly oil. Also what everybody lacked was an understanding of the fact that the extraction and processing of fossil fuels would become increasingly expensive (in terms of usable energy required). Nor did most pay attention to the well understood and predicted peaking in gross production due to depletion of finite resources. The latter has accentuated the problem with declining net energy per capita.

The western nations are stagnant or in deep recession with unacceptable (by earlier standards) unemployment rates. The blame is being put on financial institutions, corporations, governing bodies, all of the usual suspects have been lined up. I suppose this is a failure of imagination to think there might actually be a deeper and more dangerous cause. Ignorance must play a major role as well.

Unrest is popping up in the Southern European region. Whereas in MENA states the blame is supposed to go to non-democratic governance, in the west it goes to finance and political battles between conservatism (austerity required) and liberalism (Keynesianism required). The US Federal Reserve Bank has been trying to put a band aid on the financial system by buying bad paper (quantitative easing) and thus creating money, essentially. But this is only going to cause the crash to be more severe when it comes. The underlying cause in the west as well in MENA states is fundamentally the same. We are running out of net energy per capita at an alarming rate. The MENA states had a slight advantage over the west in that their populations had very low net energy per capita needs (same story for China and India where jobs were shipped from the US to save labor costs). They were more in touch, as it were, with the physical realities and did not have this veil of financialization to confound their thinking. Right now they very much realize that they are at the precipice and being pushed off.

States to the further east are soon to follow. China, using their low energy requiring citizens as enticements and some healthy savings, has succeeded in convincing their population that they SHOULD want to consume more energy! And now that work force is starting to demand more in wages so they can do so. Unfortunately China’s leaders did not really understand the net energy per capita source problem. When they became vaguely aware of it they started scrambling to import oil and coal from other regions. Instead of realizing that depletion would soon render that strategy moot, they blindly go ahead with their ambitions because they are trying to avoid the political unrest that will ensue when their people, promised the “good life,” realize they not only won’t achieve that but that life will get worse (especially for the many who gave up farming for the cities).

Russia has never really recovered from the collapse of the Soviet Union. Putin probably has dreams of glory but he has no investment stream to put into developing what resources they have. Russia does have richer biological and mineral resources but in climate and terrain-challenged areas that would require substantial capital for development. Their oil exporting appears to have peaked and if they allow foreign oil companies to participate in further development they have to realize their revenues from export will drop. They are between a rock and a hard place. Their only possible advantage is that the people have already been through a collapse/contraction and probably don’t have the same kinds of expectations that the Chinese and Indian people have for the future. They may simply resign themselves to a worse future.

Will the Earlier Collapse of MENA Trigger the Rest?

Since ME states like Saudi Arabia are still supplying oil to the west it is very possible that major troubles in that region could disrupt the flow of an already declining one. Any sudden shutting off of the spigot is likely to have devastating effects on the western nations.

A lot of people in the US think they are buffered from such a catastrophe. There is a meme floating around the MSM about how the US (with Canada’s help, of course) will achieve energy independence. The tight oil and gas reserves along with the tar sands in Alberta are touted as providing us with huge energy sources into the future. President Obama is making noises about investing in alternative energies, especially to reduce coal-fired power plants to reduce CO2 emissions. It is all wishful thinking. The production profile on tight oil and gas wells suggests (strongly) that they will never produce the abundance being promised. Moreover all of these non-conventional sources have terrible EROIs that cannot be sustained long. Already the companies exploiting these resources are running into financial problems. They cannot fund further development out of profits because their profits are being squeezed tightly. Costs of development are too high — a reflection of the low EROIs. As long as they can hype the investment community they might eke out a little more working capital, but that will not last very much longer.

There is nothing supporting our huge bubble. All it will take is a trigger event, either like the collapse of MENA states, dragging Europe along, or an internal event in the financial markets. My favorite scenario is that graduates who cannot find meaningful employment will simply stop paying back their education debt. That will burst a 1.2 trillion dollar bubble and could take the rest of the financial system down with it.

It is somewhat ironic that Greece was one of the first EU countries to experience severe hardships and the start of collapse. It gives new meaning to the phrase “Greek Tragedy” that the whole world is now embroiled in a demise crafted by our own flaw in character. We are not bad as a species. But we are clearly merely biological when it comes to trying to obtain more resources and grow. We evolved great clever brains that enabled us to do so with abandon. We did not evolve adequate sapience to moderate that cleverness and dampen the biological mandate. That is the flaw — lack of wisdom in pursuing our future. Now we have none, for the most part.

I still won’t make any predictions as to timing of, say, major events that would be clearly signs of collapse well under way. I think collapse is starting and is gaining momentum as we witness unrest spreading around the globe. Some regions, like MENA, will likely collapse very rapidly, possibly taking others with them in a domino effect. Other regions may drag it out a bit as oh-so-clever masters of the universe try more tricks to keep the dream alive. But they can’t do it forever.

All I will say is that if you want to see what collapse looks like on the ground (and this is for every region eventually) watch what happens in Egypt. And for you American readers, enjoy your celebration of the Fourth of July commemorating winning your democracy!

July 3, 2013

How Long Will it Take for the Egyptians to Realize…

… that Morsi and the Muslim Brotherhood were not the root cause of their problems? Now he is out and the military has taken over. They are claiming they want new elections so are still convinced that a democratic government can somehow fix their broken nation. They still think there is a political solution to a physical problem. If only people are free to make choices and live their lives as they want. If only political stability were to return then investment money would come flowing in and tourists would return to the pyramids.

If there was enough time those magical wishes might actually start to come true! After all there are still much richer people in the world who are always looking for an angle to make a buck or have discretionary funds to go on vacation – at least for a while. Unfortunately I don’t think they have the time. People on the ground are already hurting and need relief now. It takes a long time to set the wheels in motion for establishing a truly stable government, time I don’t think their society has.

It is probably the case that both Mubarak and Morsi made matters worse in being so autocratic at a time when people were expecting some more “freedoms”. But you can’t blame their failures strictly on their incompetence, which extends to corruption and cronyism; those surely didn’t help. But as I said in my prior post Egypt’s and the whole MENA region’s troubles go much deeper than lack of democracy. In fact, ironically it is probably an autocratic rule, which does not automatically mean corruption, etc., that would lessen the woes. Democracies have a great deal of difficulty making timely decisions in this crises world. Look at the US Congress as a prime example of what happens when you let a lot of very foolish people with big egos try to agree on important decisions.

Autocrats, if they are competent and wise, can get the right things done in a more timely fashion. But since there are no philosopher kings in the waiting room… This is what makes this predicament intractable. There are no solutions that don’t involve massive population reductions in short order. If a region cannot support its own population and has absolutely no skills that would add sufficient value to what other regions that can produce food need, well, put bluntly, they are screwed.

How long will it take the Egyptian people to discover that things are not getting better? How long will they, and the rest of the world, continue to blame it on a “stalled revolution?” How long will they continue to belive that democracy and a stable government would save them?

So, keep your eyes on Egypt and carefully observe what transpires. You may be looking at your own situation within the next decade if things devolve at an accelerating rate.

Knarf plays the Doomer Blues

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