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Collapse, you say? Part 2: Inputs and Outputs
« on: October 11, 2020, 03:43:28 PM »



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Published on The Easiest Person to Fool on September 29, 2020






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Waves breaking along the Lake Huron shore—and this on a relatively quiet day.

 


The title of this series of posts comes from the typical reaction you get when suggesting that our civiiization might be collapsing, "Collapse you say, surely not!" In my last post I said that I am convinced it is already happening or at least will happen at some point soon. Then I went on to explain what I mean by collapse—the process by which a civilization declines in its ability to provide the necessities of life to its members, the end result being that people are forced to fend for themselves or perish.



It seems to me that this is in fact happening today—that for all but a tiny minority at the "top", things are getting continually worse. The how and why of this process is the subject of this post and the ones that follow it.



The means of production and distribution that provide us with the necessities of life in modern industrial civilization require certain inputs and produce certain outputs. Today I want to the look at the problems posed in acquiring those inputs and disposing of those outputs.



I would guess that it's clear that by inputs I mean the energy and materials required to make the things we need. But what I mean by outputs may be less clear. I am not referring to the goods that are produced from the inputs, but the waste products produced in the process and the garbage that is left over when we are done using those goods.



But why should these inputs and outputs constitute problems?



Conventional thinking has our civilization in a box, separate from our planet and its ecosphere. The inputs (energy and materials) our civilization uses come from sources that are seen as essentially infinite and the outputs (waste heat and waste materials) are discharged into sinks that are also seen as being essentially infinite in size. Given all that, no reason is seen for progress—economic growth in this context—not continuing for the foreseeable future. This way of looking at things typifies some of the blind spots of modern thinking on economics and business.














Figure 1


Figure 1 illustrates what I am talking about. As long as there were relatively few people on our planet, and they weren't consuming excessively, it's easy to see how we might have looked at things this way. But now that we are well on our way to filling up the planet—or more likely well beyond that point—this is no longer valid. And sure, many people are aware that this is a very unrealistic picture, but the people who are running things, even those who verbally acknowledge the realities, continue to act as if there are no limits built into the system. In a future post we'll look at why this is so, but for now it suffices to say that it truly is the case.














Figure 2


Figure 2 is a different diagram, which provides a more realistic depiction of things as they exist today.



First of all, our civilization exists on a finite planet, entirely within that planet's ecosphere, with no real separation from it (note the dashed border). Our inputs are taken from that finite source and our wastes are discharged back into that same finite space, used as a sink for waste heat and all our material wastes. This has some truly nasty consequences.



Inputs and outputs come in two forms: energy and materials. Energy flows from more concentrated to less concentrated forms, and regardless of where it comes from, is eventually radiated away from the planet as waste heat. Because of this, at any one level, we only get to use energy once. Materials stay around and can be reused, but generally change from more organized forms to less organized, (and less useful) forms as time passes.



For the planet itself, on the relatively short timescales we are considering, the only significant inputs and outputs are in the form of energy—sunlight in and waste heat out. This means that the planet isn't a closed system and incoming energy can be used to arrange matter into more complex forms, converting the energy used to a less concentrated form in the process. That's the good news—the rest of the news is bad.



Outputs



Let's look at outputs first, since that will make it easier to understand some of the problems with inputs. As I said, the outputs I am talking about are the wastes from processes within our society, and the garbage left over when we are done with the products of those processes. We simply throw these things away, but the trouble is that there is no such place as "away". The sinks into which we dispose of wastes are part of the very same environment where we get our inputs from, so this is much like shitting in our own nest. And in a great many cases it is not necessary at all. Many of these end products could, with relatively little effort, be fed back into the processes, and not treated as "wastes" at all.



That we haven't "circularized" our use of materials is a really bad sign. Why we continue to do this is inherent to the internal workings of our civilization and I'll go into the details of that in a future post. For now it is sufficient to understand that as long as that civilization exists in its present form, it's outputs will continue to be a problem.



There are a great many different types of pollution, but for our purposes today I'll concentrate on two particular type of waste—carbon dioxide and methane.



Carbon dioxide (CO2) is produced in the burning of fossil fuels and biomass, and in the processes we use to make things like steel and concrete, essential building materials of our civilization. CO2 is a major contributor to the greenhouse effect and consequently climate change, and is also the cause of ocean acidification.



Methane (natural gas, CH4) has been touted as a replacement for coal and oil since it gives off less (but not zero) CO2 when burned. But it is an even more potent greenhouse gas than CO2. Between the wellhead and where it is used a great deal of methane leaks into the atmosphere—probably enough to overshadow any reduction in CO2 released by burning natural gas instead of other fossil fuels. Methane is also produced during the decay of organic matter and by the digestive systems of many animals. Warming due to climate change is releasing methane currently trapped in permafrost and in methane clathrate hydrates at the bottom of the Arctic Ocean, further intensifying the warming process.



Ocean acidification the lesser known evil twin of climate change, occurs when CO2 is dissolved in water. An estimated 30–40% of the carbon dioxide from human activity released into the atmosphere dissolves into oceans, rivers and lakes. Some of it reacts with the water to form carbonic acid. Some of the resulting carbonic acid molecules dissociate into a bicarbonate ion and a hydrogen ion, thus increasing ocean acidity (H+ ion concentration).



Increasing acidity is thought to have a range of potentially harmful consequences for marine organisms such as depressing metabolic rates and immune responses in some organisms and causing coral bleaching. A net decrease in the amount of carbonate ions available may make it more difficult for marine calcifying organisms, such as coral and some plankton, to form biogenic calcium carbonate, and such structures become vulnerable to dissolution. Ongoing acidification of the oceans may threaten food chains linked with the oceans.



(Thanks to Wikipedia for the last two paragraphs.)



These are food chains that we sit at the top of, with many people, especially in poorer nations, relying heavily on seafood for protein.



Climate change has been in the news a lot lately, with a wide range of people expressing concern about its negative effects on our future. If, despite this, you are still a doubter or denier, you're in the wrong place on the internet, and need not bother leaving any comments. In my experience, if you scratch a climate change denier, you will find beneath the surface a rich person who is worried about losing their privilege.



So, climate change is real and it is driven by increases in greenhouse gases (CO2 and CH4 among others) in the atmosphere which cause the planet to retain more of the sun's heat. It has also been called "global warming", since it causes the overall average temperature of the planet to going up. The high latitudes in particular are already experiencing temperature increases. Eventually this is going to cause enough melting of glaciers to make for a significant increase in sea level.



In the meantime, climate change is also causing more frequent and heavier storms, which combined with even small increases in sea level, are causing a lot of damage along the oceans' shores. Such storms are also causing more frequent and serious flooding of many rivers.



Climate change is also intensifying droughts in many other areas, and in some of those areas this is leading to wild fires.



How does all this tie into collapse?



Storm surges, high winds, river flooding and wild fires are doing a great deal of damage to human settlements, at a time when our economy is struggling and the added cost of rebuilding can scarcely be afforded. Especially since we tend to rebuild in the same areas, leaving rebuilt settlements just as exposed as they were before.



The effects of climate change on agriculture are even more serious. In the ten or so millennia since we started practicing agriculture the climate on this planet has been particularly friendly to that endeavour. Farmers have been able to count on reliable temperatures and rainfall. This is now starting to change and as the rate of that change picks up over the coming decades, it is going to be very challenging to adapt to. This at a time when we are struggling to keep up to the demands of a growing and ever more affluent population for food and when there is little left in the way of wilderness to expand our farms into.



Even if climate change was the only problem we faced, it is serious enough to place the continued survival of our species into question. We are facing, to quote Jem Bendell, "inevitable collapse, probable catastrophe and possible extinction."



The threat of climate change is serious enough that most people who worry about such things at all are concentrating on it alone. Unfortunately, they are largely ignoring looming problems with the inputs required by our civilization.



Inputs



The problem with inputs is "resource depletion". We live on a finite planet and we can really access only a small part of it—the lower part of the atmosphere, the oceans and a few thousand feet at the top of the crust. Within that volume, there are finite supplies of the resources that we rely on.



Several problems result from the way we access and use those resources.



We generally access the lowest hanging fruit first. This means that the most convenient, easily accessible and highest quality resources get used up first. That makes sense as far as it goes, but it means as time goes by we are forced to use less easily accessible and lower quality resources. This takes more energy and more complex equipment, and is more costly.



Many of the resources we rely on are non-renewable—there is a finite amount of them on this planet, and "they" aren't making any more. Further, we use them in very wasteful ways. It is important to be aware here that, even at best, there is always some irreducible waste in our use of any resource, but currently we tend to make things, use them once and throw them "away". This means that depletion of many resources is happening thousands of times more quickly than it really needs to, and as I said in the section on outputs, that waste is accumulating in the environment.



Some of the resources we use are renewable, but the processes by which they are renewed work at a limited rate. We are using many of these so called renewable resources at greater than their replacement rate, and so they too are becoming depleted.



Conventional economists will tell you that when a resource starts to get rare, its price goes up, encouraging the development of substitutes. This is true to some limited extent, but many of the most critical resources simply have no viable substitutes. Not unless we are willing to make significant and unwelcome changes to the way we live.



At this point, we should look at some specific resources and the unique problems each of them presents.



Energy, Fossil fuels



Despite what conventional economists would tell you, energy (not money) is actually the keystone resource for our economy. Nothing happens inside our civilization without energy as an input and degraded energy (waste heat) as an output. Money functions as a medium of exchange, a unit of account and a store of value, all of which is very useful, but energy is what makes the economy function and grow. About 80% of that energy currently comes from fossil fuels (primarily coal, oil and natural gas). The remaining 20% comes from sources that we can only access using equipment that is both made using fossil fuels and powered by them.



So, our civilization is utterly dependent on having a cheap and abundant supply of fossil fuels. "Peak Oil" enthusiasts have been saying for decades now that we'll soon run out of oil and things will come to a grinding halt. In fact, though, there are still large quantities of hydrocarbons to be found in the earth's crust, so you might ask, "What's the problem?"



Well, there are two problems with continuing to burn fossil fuels.



One is the consequences for the climate of burning hydrocarbons and releasing ever larger amounts of carbon dioxide into the atmosphere. This is a very serious problem, for which we are having trouble finding and implementing any sort of solution.



The other problem, I'll be calling it "the surplus energy problem", is in many ways more complex and more serious.



Because we use various forms of technology to access energy, many people think that technology makes energy, and with improved technology we can always make more energy. Or, in this case, access the difficult to access hydrocarbons that currently remain in the ground. But in fact, the opposite is true—technology uses energy and won't work without it.



The energy that remains after we've powered the processes used to acquire that energy is referred to as "surplus energy." For instance, the technology used to drill oil wells and pump crude oil out of the ground uses energy. Back in the day, it used to take the energy equivalent of about one barrel of oil to get 100 barrels of oil out of the ground, leaving a surplus energy equivalent to 99 barrels of oil. This is usually expressed as "Energy Returned on Energy Invested" (EROEI), in this case 100/1, giving an EROEI of 100. Another way of looking at this is to talk about the Energy Cost of Energy (ECoE). In this case that would be 1/100, or 1%. Note that both these numbers are just bare numbers without units, and most significantly without a dollar sign in front of them. The "money cost" of energy is another thing entirely and since it is influenced by speculation on future supply and by fluctuations in demand (as we have seen in 2020 during the pandemic) it is not a reliable indicator of the actual cost of energy in energy terms, or the future availability of energy.



Conventional oil discoveries have not been keeping up with depletion for some time and our use of conventional oil actually peaked in the last few years. So we have been forced to switch to lower quality and more difficult to access sources. Conventional oil today has an EROEI ranging from 10 to 30. Tight oil and gas (from fracking), heavy oil and the "dilbit" (diluted bitumen) made from tar sands all have EROEIs less than 5, or ECoEs of 20% or greater.



"So what?" you might say. As long as the net amount of energy available is sufficient to power our civilization, what's the problem? Well, it's not just the amount of energy available from any particular source that really counts, but the EROEI. Or more precisely the weighted average of the EROEIs of all the various energy sources an economy uses. That number needs to be around 15 or more to keep that economy growing.



When the average EROEI goes below 15, growth slows and eventually stops and it becomes difficult to raise enough capital to even maintain existing infrastructure. Why our civilization needs to grow is a topic for another day, but it certainly does. This is what most people are missing about energy. Yes, a country can use debt to finance access to low EROEI energy resources in order to keep the economy going. But only for a while, until its economy contracts to the point where things begin to fall apart. This is certainly the case in the US. Fracking has made sufficient energy available, at what seems like a reasonable dollar price, but the real economy is mysteriously contracting, and debt is continually growing. Both economists and politicians, while putting on a brave face, are hard pressed to do anything about it, because they don't understand the surplus energy problem.



As we saw in the section on "Outputs", there are pressing reasons not to continue burning fossil fuels. But even if that were not the case, it would not be possible to continue running a growth based industrial civilization on the low EROEI fossil energy sources now available to us. For this reason alone, collapse seems like a sure thing to me, and I would say it has been underway since oil production in the continental U.S. peaked in the early 1970s.



But, you may say, what about renewable energy sources? Like non-conventional fossil fuels there are large amounts of energy available from sources like hydro, biomass, wind, solar and so forth. A great many people today believe that renewables can replace fossil fuels and solve both our surplus energy and climate change problems. In fact it has become very unpopular to challenge that idea, but I am afraid I must do just that.



This post ened up at over 6000 words long, enough to try the patience of even my most loyal readers. So I have split it in two at this point, leaving the second half for my next post, which will pick up from here and cover renewable energy sources, ecosystem services and fossil water.







Links to the rest of this series of posts, Collapse, you say?




 




Offline John of Wallan

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Re: Collapse, you say? Part 2: Inputs and Outputs
« Reply #1 on: December 31, 2020, 05:37:59 PM »
Just when you wanted some positive news reality strikes...

JOW.

LINK:
https://ourfiniteworld.com/

Text:
2020: The Year Things Started Going Badly Wrong
Posted on December 23, 2020 by Gail Tverberg
How today’s energy problem is different from peak oil
Many people believe that the economy will start going badly wrong when we “run out of oil.” The problem we have today is indeed an energy problem, but it is a different energy problem. Let me explain it with an escalator analogy.


Figure 1. Holborn Tube Station Escalator. Photo by renaissancechambara, CC BY 2.0 https://creativecommons.org/licenses/by/2.0, via Wikimedia Commons.
The economy is like a down escalator that citizens of the world are trying to walk upward on. At first the downward motion of the escalator is almost imperceptible, but gradually it gets to be greater and greater. Eventually the downward motion becomes almost unbearable. Many citizens long to sit down and take a rest.

In fact, a break, like the pandemic, almost comes as a relief. There is suddenly a chance to take it easy; not drive to work; not visit relatives; not keep up appearances before friends. Government officials may not be unhappy either. There may have been demonstrations by groups asking for higher wages. Telling people to stay at home provides a convenient way to end these demonstrations and restore order.

But then, restarting doesn’t work. There are too many broken pieces of the economy. Too many bankrupt companies; too many unemployed people; too much debt that cannot be repaid. And, a virus that really doesn’t quite go away, leaving people worried and unwilling to attempt to resume normal activities.

Some might describe the energy story as a “diminishing returns” story, but it’s really broader than this. It’s a story of services that we expect to continue, but which cannot continue without much more energy investment. It is also a story of the loss of “economies of scale” that at one time helped propel the economy forward.

In this post, I will explain some of the issues I see affecting the economy today. They tend to push the economy down, like a down escalator. They also make economic growth more difficult.

[1] Many resources take an increasing amount of effort to obtain or extract, because we use the easiest to obtain first. Many people would call this a diminishing returns problem.

Let’s look at a few examples:

(a) Water. When there were just a relatively few humans on the earth, drinking water from a nearby stream was a reasonable approach. This is the approach used by animals; humans could use it as well. As the number of humans rose, we found we needed additional approaches to gather enough potable water: First shallow wells were dug. Then we found that we needed to dig deeper wells. We found that lake water could be used, but we needed to filter it and treat it first. In some places, now, we find that desalination is needed. In fact, after desalination, we need to put the correct minerals back into it and pump it to the destination where it is required.

All of these approaches can indeed be employed. In theory, we would never run out of water. The problem is that as we move up the chain of treatments, an increasing amount of energy of some kind needs to be used. At first, humans could use some of their spare time (and energy) to dig wells. As more advanced approaches were chosen, the need for supplemental energy besides human energy became greater. Each of us individually cannot produce the water we need; instead, we must directly, or indirectly, pay for this water. The fact that we have to pay for this water with part of our wages reduces the portion of our wages available for other goods.

(b) Metals. Whenever some group decides to mine a metal ore, the ore that is taken first tends to be easy to access ore of high quality, close to where it needs to be used. As the best mines get depleted, producers use lower-grade ores, transported over longer distances. The shift toward less optimal mines requires more energy. Some of this additional energy could be human energy, but some of the energy would be supplied by fossil fuels, operating machinery in order to supplement human labor. Supplemental energy needs become greater and greater as mines become increasingly depleted. As technology advances, energy needs become greater, because some of the high-tech devices require materials that can only be formed at very high temperatures.

(c) Wild Animals Including Fish. When pre-humans moved out of Africa, they killed off the largest game animals on every continent that they moved to. It was still possible to hunt wild game in these areas, but the animals were smaller. The return on the human labor invested was smaller. Now, most of the meat we eat is produced on farms. The same pattern exists in fishing. Most of the fish the world eats today is produced on fish farms. We now need entire industries to provide food that early humans could obtain themselves. These farms directly and indirectly consume fossil fuel energy. In fact, more energy is used as more animals/fish are produced.

(d) Fossil Fuels. We keep hearing about the possibility of “running out” of oil, but this is not really the issue with oil. In fact, it is not the issue with coal or natural gas, either. The issue is one of diminishing returns. There is (and always will be) what looks like plenty left. The problem is that the process of extraction consumes increasing amounts of resources as deeper, more complex oil or gas wells need to be drilled and as coal mines farther away from users of the coal are developed. Many people have jumped to the conclusion that this means that the price that buyers of fossil fuel will pay will rise. This isn’t really true. It means that the cost of production will rise, leading to lower profitability. The lower profitability is likely to be spread in many ways: lower taxes paid, cutbacks in wages and pension plans, and perhaps a sale to a new owner, at a lower price. Eventually, low energy prices will lead to production stopping. Without adequate fossil fuels, the whole economic system will be disrupted, and the result will be severe recession or depression. There are also likely to be many job losses.

In (a) through (d) above, we are seeing an increasing share of the output of the economy being used in inefficient ways: in creating deeper water wells and desalination plants; in drilling oil wells in more difficult locations; in extracting metal ores that are mostly waste products. The extent of this inefficiency tends to increase over time. This is what leads to the effect of an escalator descending faster and faster, just as we humans are trying to walk up it.

Humans work for wages, but they find that when they buy a box of corn flakes, very little of the price actually goes to the farmer growing the corn. Instead, all of the intermediate parts of the system are becoming overly large. The buyer cannot afford the end products, and the producer feels cheated by the low wholesale prices he is being paid. The system as a whole is pushed toward collapse.

[2] Increasing complexity can help maintain economic growth, but it too reaches diminishing returns.

Complexity takes many forms, including more hierarchical organization, more specialization, longer supply chains, and development of new technology. Complexity can indeed help maintain economic growth. For example, if water supply is intermittent, a country may choose to build a dam to control the flow of water and produce electricity. Complexity tends to reach diminishing returns, as noted by Joseph Tainter in The Collapse of Complex Societies. For example, economies build dams in the best locations first, and only later build them at less advantageous sites. These are a few other examples:

(a) Education. Teaching everyone to read and write has significant benefits because it allows the use of books and other written materials to disseminate information and knowledge. Teaching a few people advanced subjects has significant benefits as well. But after a certain point, the need for additional people to study a subject such as art history is low. A few people can teach the subject but doing more research on the subject probably won’t increase world GDP very much.

When we look at data from about 1970, we find that people with advanced education earned much higher incomes than those without advanced degrees. But as we add an increasing large share of people with these advanced degrees, jobs that really need these degrees are not as plentiful as the new graduates. Quite a few people with advanced degrees end up with low-paying jobs. The “return on investment” for higher education drops increasingly lower. Some students are not able to repay the debt that they took out in order to pay for their education.

(b) Medicines and vaccines. Over the years, medicines and vaccines have been developed to treat many common illnesses and diseases. After a while, the easy-to-find medicines for the common unwanted conditions (such as diabetes, high blood pressure and inflammation) have already been found. There are medicines for rare diseases that haven’t been found, but these will never have very large total sales, discouraging investment. There are also conditions that are common in very poor countries. While expensive drugs could be developed for these conditions, it is likely that few people could afford these drugs, so this, too, becomes less attractive.

If research is to continue, it is important to keep expanding work on expensive new drugs, even if it means completely ignoring old inexpensive drugs that might work equally well. A cynical person might think that this is the reason why vitamin D and ivermectin are generally being ignored in the prevention and treatment of COVID-19. Without an expanding group of high-priced new drugs, it is hard to attract capital and young workers to the field.

(c) Automobile efficiency. In the US, the big fuel efficiency change that took place was that which took place between 1975 and 1983, when a changeover was made to smaller, lighter vehicles, similar to ones that were already in use in Japan and Europe.


Figure 2. Estimated Real-World Fuel Economy, Horsepower, and Weight Since Model Year 1975, in a chart produced by the US Environmental Protection Agency. Source.
The increase in fuel efficiency between 2008 and 2019 (an 11 year period) was only 22%, compared to the 60% increase in fuel efficiency between 1975 and 1983 (an 8 year period). This is another example of diminishing returns to investment in complexity.

[3] Today’s citizens have never been told that many of the services we take for granted today, such as suppression of forest fires, are really services provided by fossil fuels.

In fact, the amount of energy required to provide these services rises each year. We expect these services to continue indefinitely, but we should be aware that they cannot continue very long, unless the energy available to the economy as a whole is rising very rapidly.

(a) Suppression of Forest Fires. Forest fires are part of nature. Many trees require fire for their seeds to germinate. Human neighbors of forests don’t like forest fires; they often encourage local authorities to put out any forest fire that starts. Such suppression allows an increasing amount of dry bush to build up. As a result, future fires spread more easily and grow larger.

At the same time, humans increasingly build homes in forested areas because of the pleasant scenery. As population expands and as fires spread more easily, forest fire suppression takes an increasing amount of resources, including fossil fuels to power helicopters used in the battles. If fossil fuels are not available, this type of service would need to stop. Trying to keep forest fires suppressed, assuming fossil fuels are available for this purpose, will take higher taxes, year after year. This is part of what makes it seem like we are trying to move our economy upward on a down escalator.

(b) Suppression of Illnesses. Illnesses are part of the cycle of nature; they disproportionately take out the old and the weak. Of course, we humans don’t really like this; the old and weak are our relatives and close friends. In fact, some of us may be old and weak.

In the last 100 years, researchers (using fossil fuels) have developed a large number of antibiotics, antivirals and vaccines to try to suppress illnesses. We find that microbes quickly mutate in new ways, defeating our attempts at suppression of illnesses. Thus, we have ever-more antibiotic resistant bacteria. The cost of today’s US healthcare system is very high, exceeding what many poor people can afford to pay. Introducing new vaccines results in an additional cost.

Closing down the system to try to stop a virus adds a huge new cost, which is disproportionately borne by the poor people of the world. If we throw more money/fossil fuels at the medical system, perhaps it can be made to work a little longer. No one tells us that disease suppression is a service of fossil fuels; if we have an increasing quantity of fossil fuels per capita, perhaps we can increase disease suppression services.

(c) Suppression of Weeds and Unwanted Insects. Researchers keep developing new chemical treatments (based on fossil fuels) to suppress weeds and unwanted insects. Unfortunately, the weeds and unwanted insects keep mutating in a way that makes the chemicals less effective. The easy solutions were found first; finding solutions that really work and don’t harm humans seems to be elusive. The early solutions were relatively cheap, but later ones have become increasingly expensive. This problem acts, in many ways, like diminishing returns.

(d) Recycling (and Indirectly, Return Transport of Empty Shipping Containers from Around the World). When oil prices are high, recycling of used items for their content makes sense, economically. When oil prices are low, recycling often requires a subsidy. This subsidy indirectly goes to pay for fossil fuels used to facilitate the recycling. Often this goes to pay for shipment to a country that will do the recycling.

When oil prices were high (prior to 2014), part of the revenue from recycling could be used to transport mixed waste products to China and India for recycling. With low oil prices, China and India have stopped accepting most recycling. Instead, it is necessary to find actual “goods” for the return voyage of a shipping container or, alternatively, pay to have the container sent back empty. Europe now seems to have a difficult time filling shipping containers for the return voyage to Asia. Because of this, the cost of obtaining shipping containers to ship goods to Europe seems to be escalating. This higher cost acts much like diminishing returns with respect to the transport of goods to Europe from Asia. This is yet another part of what is acting like a down escalator for the world economy.

[4] Another, ever higher cost is pollution control. This higher cost also exerts a downward effect on the world economy, because it acts like another intermediate cost.

As we burn increasing amounts of fossil fuels, increasing amounts of particulate matter need to be captured and disposed of. Capturing this material is only part of the problem; some of the waste material may be radioactive or may include mercury. Once the material is captured, it needs to be “locked up” in some way, so it doesn’t pollute the water and air. Whatever approach is used requires energy products of various kinds. In fact, the more fossil fuels that are burned, the bigger the waste disposal problem tends to be.

Burning more fossil fuels also leads to more CO2. Unfortunately, we don’t have suitable alternatives. Nuclear is probably as good as any, and it has serious safety issues. In my opinion, the view that intermittent wind and solar are a suitable replacement for fossil fuels represents wishful thinking. Wind and solar, because of their intermittency, can only partially replace the coal or natural gas burned to generate electricity. They cannot be relied upon for 24/7/365 generation. The unsubsidized cost of producing intermittent wind and solar energy needs to be compared to the price of coal and natural gas, not to wholesale electricity prices. There are a lot of apples to oranges comparisons being made.

[5] Among other things, the growth of the economy depends on “economies of scale” as the number of participants in the economy gradually grows. The response to COVID-19 has been extremely detrimental to economies of scale.

The economies of many countries changed dramatically, with the initial spread of COVID-19. Unfortunately, we cannot expect these changes to be completely reversed anytime soon. Part of the reason is the new virus mutation from the UK that is now of concern. Another reason is that, even with the vaccine, no one really knows how long immunity will last. Until the virus is clearly gone, vestiges of the cutbacks are likely to remain in place.

In general, businesses do well financially, as the number of buyers of the goods and services they provide rises. This happens because overhead costs, such as mortgage payments, can be spread over more buyers. The expertise of the business owners can also be used more widely.

One huge problem is the recent cutback in tourism, affecting almost every country in the world. This cutback affects both businesses directly related to tourism and businesses indirectly related to tourism, such as restaurants and hotels.

Another huge problem is social distancing rules that lead to office buildings and restaurants being used less intensively. Businesses find that they tend to have fewer customers, rather than more. Related businesses, such as taxis and dry cleaners, find that they also have fewer customers. Nursing homes and other care homes for the aged are seeing lower occupancy rates because no one wants to be locked up for months on end without being able to see other members of their family.

[6] With all of the difficulties listed in Items [1] though [5], debt based financing tends to work less and less well. Huge debt defaults can be expected to adversely affect banks, insurance companies and pension plans.

Many businesses are already near default on debt. These businesses cannot make a profit with a much reduced number of customers. If no change is possible, somehow this will need to flow through the system. Defaulting debt is likely to lead to failing banks and pension plans. In fact, governments that depend on taxes may also fail.

The shutdowns taken by economies earlier this year were very detrimental, both to businesses and to workers. A major solution to date has been to add more governmental debt to try to bail out citizens and businesses. This additional debt makes it even more difficult to maintain promised debt payments. This is yet another force making it difficult for economies to move up the growth escalator.

[7] The situation we are headed for looks much like the collapses of early civilizations.

With diminishing returns everywhere, and inadequate sources of very inexpensive energy to keep the system going, major parts of the world economic system appear headed for collapse. There doesn’t seem to be any way to keep the world economy growing rapidly enough to offset the down escalator effect.

Citizens have not been aware of how “close to the edge” we have been. Low energy prices have been deceptive, but this is what we should expect with collapse. (See, for example, Revelation 18: 11-13, telling about the lack of demand for goods of all kinds when ancient Babylon collapsed.) Low prices tend to keep fossil fuels in the ground. They also tend to discourage high-priced alternatives. Unfortunately, all the wishful thinking of the World Economic Forum and others advocating a Green New Deal does not change the reality of the situation.


 

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