Sunday, June 21, 2009

Green shoots: An alternative view

I am seeing green shoots everywhere these days. But not in the places in which Wall Street's strident financial cheerleaders and Washington's happy economists are. I am seeing green shoots in the many cracks in the suburban neighborhood roads I now travel daily by bicycle.

Unlike the supposed financial green shoots, these green shoots are not propitious. It is mid-June and the cities which I traverse by bike do not seem to have the wherewithal to douse the weeds that are cracking their streets. I also ride across many lovely private parking lots that are breaking up like so many crumbled cookies with no one seeming to want to fix them. I am reminded of images from a History Channel series called "Life After People" which depict what the Los Angeles freeway system would look like just one year after the disappearance of people (surprisingly green!) and how it might appear one hundred years after people (like a nature preserve!).

The roads are, of course, crumbling. But this has long been the case in Michigan where the governor and legislature refused to do anything about it throughout the 1990s and the early part of this decade for fear of voter reaction to new taxes. (One can still today close one's eyes and know immediately whether one is on the Michigan or the Ontario side of the Canadian border just by how the car rides.)

Not surprisingly, in the face of the current financial crisis, our local colleges and universities are doing what they can to encourage green shoots of their own on their campuses, namely, deferring even more maintenance.

There are reports, of course, of dramatic declines in capital spending by industry as well, especially by the energy industry. This is a natural response to the financial downturn, and we won't know for some time whether capital spending will recover to previous levels. In the public sphere, however, in the United States there has been a chronic underinvestment in what would be called public capital goods, and it is now getting much worse as governments at all levels are forced to slash spending.

These then are the origins of my green shoots, and they constitute an ominous sign about the ability of the economy to renew itself in the face of financial collapse and energy stringency. Every modern economy has what in economic parlance is called capital stock. That is the stock of goods (buildings, machines, roads, vehicles, power plants, etc.), both public and private, that are used to produce the objects and services we expect and depend on. In order for an economy to grow its output, it must either make the capital stock more efficient or it must simply create more of it. This would include factories, but also ships and trucks to transport goods to and from those factories, and often more roads and ship channels to transport them on or through. But in order for our existing capital stock not to fall into disrepair, we must maintain it or replace it.

If and when we find ourselves unable to increase (or make more efficient) the capital stock and simultaneously maintain the existing stock, we will be at that point in time which the authors of "Limits to Growth" envisioned. We would no longer be able to attain economic growth because the maintenance and/or replacement demands of the existing capital stock overwhelm our resources and prevent us from accomplishing both maintenance and growth at the same time. Ugo Bardi provided an excellent explanation of this problem recently on "The Oil Drum: Europe," dubbing it peak capital.

That's what my green shoots are telling me. Let me repeat it again: We may be nearing the point where the existing capital stock including the public infrastructure has grown so large and our resources, both financial and physical, have become so tight that we can no longer both maintain and expand the capital stock simultaneously. This does not necessarily lead to a dramatic collapse so much as a grinding decline in productive capacity. Over time the economy has more and more difficulty extracting basic resources from the Earth, manufacturing objects from those resources, and transporting those objects to markets, all while maintaining the buildings related to these activities.

It may be too early to sound the alarm on the end of economic growth. But if this is not the moment when we've reached the limits to growth, it looks very much like a dress rehearsal. And, that means that opening night cannot be far away.


Rice Farmer said...

Exactly what I have been saying. All around the world, the extensive infrastructure built with cheap fossil fuels is crumbling, especially in big cities. Governments and municipalities are finding it increasingly difficult to maintain what they already have, let alone build more. Tokyo, for example, has about 1,600 km of sewage pipe laid in the mid-1960s (when high-quality oil was $3 or $4/bbl) and now needs to be replaced. But the Metropolitan Tokyo government admits it is falling further and further behind; they have their hands full just plugging leaks. Obviously this is a disaster in the making.

Scientific American once had an article about what would happen to New York City if humans suddenly disappeared. But humans don't have to disappear for cities to quickly crumble and return to nature. All that need happen is to lose access to cheap energy.

Ironically, we are now hearing about all sorts of new capital stock that needs to be created: the "smart grid," wind farms, vast solar arrays, more nuke plants, and what have you. But because of skyrocketing costs, nuclear power is already on the rocks. And because existing infrastructure is already crumbling faster than it can be repaired or replaced, how would all this new stock be maintained? Much of it will obviously never get off the drawing board.

bdrube said...

It's not just Michigan. I live in Fairfax County, Virginia, which is one of the wealthiest counties in the country in terms of per capiata income.

The weeds are everywhere on the medians of divided streets and other public places. The county government, the school system, the state of Virginia and the Washington Metro system are all running huge deficits and cutting back servies. A commuter bus route closest to my house is being eliminated next week.

I agree with the slow grind concept for now, but I wonder how long it will be before the whole economy bursts like a balloon.

John O. Andersen said...

Thank you for speaking reality. We need this sort of approach many hundred times over in the media.

Anonymous said...

I wondered if you have looked at the collapse of demand for commodities and the fall in population in the USSR after their collapse?
If, as looks likely, America undergoes economic collapse this year, wouldn't that push the global collapse into the future somewhat? I appreciate this is speculation, but given how wasteful America is, using something like 25% of oil resources, if that demand were to fall to 10% or less, that would take huge pressure off world resources. Similarly the population would probably fall quite substantially as well, as happened in the USSR.
Isn't it possible that other countries could maintain growth for another couple of decades without American demand?

Kurt Cobb said...

I think anonymous is on the something, namely, that collapse, if it comes, is likely to be an uneven phenomenon. Some are positing just what anonymous proposes: that Asia will resume growth while the United States and Europe remain in a virtual no-growth economy for many years. I happen to think that the collapse has actually already begun and can be seen most clearly in places such as Russia and central Africa. As it inches its way around the globe it will take different forms in different places because infrastructure, productive capacity, and domestic natural resources differ from country to country.

So, in answer to your question, I don't think collapse will be delayed, but rather played out in various ways and at various rates in various parts of the world.

Anonymous said...

Dear Kurt,
Further to my previous post. I was thinking about the 70's compared to today. As you note the 'Limits to growth' was published at that time, a friend of mine was in a cult which was predicting the end of society, doom was in the air. I was just a child then, i remember the power cuts in Britain, cueing for gas, etc. I mistakenly believed that it was normal!
My point is that today we face a similar situation, but we have no way of knowing if the outcome will be positive or negative. As dysfunctional as Britain was in the 70's, the banks were still open, the power structures remained in place, much like in Mugabe's Zimbabwe.
People like organisation, people want order, even in chaotic times. The only time that this has not been true is in times of plague. So I do not feel we will descend into some Mad Max type scenario.
Looking at recent technological developments, there are reasons for optimism. People are adapting. Water companies are starting to recycle methane from sewage to provide cooking gas. Washing machines that use 10% of the water of previous models are coming on to the market.
A scientist has discovered a fungus that converts plant cellulose into bio diesel

Clearly we are at a transition point, but we have been here before. A large number of people live in tent cities in the US, for lack of money to buy medicine many are quietly dying. I think we need to remember that society will continue regardless, look at Zimbabwe, true many have emigrated, many have died, but it still functions.
If the bio diesel from plants works out, then we will see the collapse of Islam, rather than our own collapse.
Overall we are entering a period similar to the 70's, there will be pain, there will be stress, but most people will assume that things will eventually improve. They will believe that there is a solution, they will believe that things can be fixed. Whilst they maintain this belief, they will adapt to a lot of pain, if they are wrong then society will collapse, but they will believe things can be returned to normal for at least ten years, if not longer. They survived the 70's in this way, the crowd may be right again. The point is that as long as they believe things will improve, society will hold together, because we all benefit from such a belief.
Optimism is better than pessimism, even if it is misplaced.
(Please edit if I've waffled too much)

Kurt Cobb said...

I think Jim makes a very important point. I discuss the issue of the attitude we might take in one my perennial favorites on this blog: Attitude Adjustment: Facing our ecological predicament.

Rice Farmer said...

Certainly peak oil does not mean the end of the world, the end of human civilization, or the end of society. Throughout human history, catastrophes, collapses, pandemics, and all manner of other challenges have confronted humankind, yet here we are.

But that's not to say we should not worry about peak oil. We are in for a wrenching and painful transition. Though human societies will survive, they will have to change. And the real tragedy is that many people -- particularly in poor countries -- are going to be sacrificed. So creating new societies and the post-oil civilization is going to exact a great price in suffering and death.

The most important thing to keep in mind is that in the 20th century crises were overcome thanks in large part to a plentiful supply of cheap energy. We can no longer count on that, and that's why this crisis is different. I agree that optimism is good, but I disagree that it's OK for it to be misplaced. We need to temper our optimism with realism.

Anonymous said...

Rice Farmer, I'm not sure the poor will be hit hardest. I spend a lot of time living cheaply in Thailand, idling on my hammock reading the odd low tech life book. Meanwhile the Thai poor are catching crabs in the river next to my bungalow. In most poor countries the people know how to live from the land, they have survival skills. I am easily pleased with a simple life.
The people who will be hit the hardest will be the middle aged office worker/manager type, in other words the people who invested the most effort in the consumer economy. They will lose their pensions/jobs/status/consumer lifestyle.
But as you point out we need a mix of optimism and realism, but I do feel that this crisis will play out over quite a long time.