Resource Depletion at Heart of Economic Woes

By David L. Brown

It continues to amaze me that as the world economy continues to spin down and around in the toilet bowl of history, absolutely nobody seems to be paying any attention to the very clear and simple reasons why this is happening.

There are many “usual suspects” being foisted upon us, including evil bankers, predatory investment advisors, incompetent political “leaders,” Ponzi-scheme promoters, greedy individuals and more. Lift almost any rock and you’re likely to find someone else to blame. Oh, look, it’s that guy over there, behind the tree. Let’s get him!

And all the while the answer has been right there for anyone who has eyes to see, like the proverbial elephant in the living room. For decades the world has been running full-speed ahead on a flawed model of eternal growth, growth based upon the utilization of natural resources, most notably petroleum. And it is an unfortunate fact that the Earth, which does not have an infinite supply of these resources, has been savaged until the amounts of those resources are no longer rising, but are in decline.

The death knell of the runaway, unsustainable “growth” economy was when Peak Oil was reached. Nobody knows exactly when that actually occurred, but the date on which the problem became clearly apparent was Friday, June 6, 2008.

On that date I wrote an essay titled “Black Friday, a Day To Remember.” My comments were based on the fact that petroleum prices had that day spiked by nearly $11, causing the stock market to begin a downward decline that has not ended to this day. Here is a link to that essay, so that I won’t have to repeat it all here. But the core of my message was that the old economy was dead and that the world was in for a long and perhaps endless depression. In fact, I illustrated that essay with the image below, comparing the doomed ships with commerce and industry about to fall off the edge of the world. The image is even more apropos today because that process of economic collapse is now taking place before our very eyes, and doing so at an accelerating rate.
flat-earth.jpg

Now one of the worst things to do when you learn that something no longer works is to keep on trying to make it work. (One definition of insanity is when someone continues to  do the same thing over and over expecting the result to be different.) When the mule is dead, there is no use hitting it with a two by four any longer, and yet that is what our economic and political “leaders” seem intent upon doing. They are focused almost entirely on trying to restore the old economy, the one that broke, the one that used up its fiscal fuel and can no longer function. Meanwhile, virtually no efforts seem to be aimed at exploring and developing new models. Yes, there is some lip service being paid to increasing development of alternative fuels, but that’s like a gnat on the elephant in the living room.

In short, nobody seems to understand what the problem really is, nor do they have any remote idea about what to do about it.

The problem isn’t just Peak Oil. It’s also food. It’s water. It’s arable land. It’s iron and copper and zinc and cobalt and lead and tin. It’s fresh air to breathe. It’s fish in the sea. All those things and more are peaking or have already peaked. I think that with a little patience I could probably in about five minutes explain this situation to a reasonably intelligent twelve-year-old. And yet, what we hear coming out of Washington, London, Paris, Berlin, Beijing, Tokyo and Rio would lead me to believe that the “leaders” there do not understand this basic concept.

How are we to interpret this? Can it be outright damn-fool ignorance, or is it something more deliberate? I guess I have to suspect that it is some of both, combined with the psychological phenomenon of denial, fear of being called a doom-sayer and, of course, political expedience. After all, no one ever got elected to an important position by pointing out problems that were beyond their ability to solve. Unless, of course, they are lying and really have no hope of solving them, in which case their political careers are bound to be “solitary, poor, nasty, brutish, and short,” as Thomas Hobbes characterized the human lot in his 1651 book Leviathian.

Now that the entire economic system is coming apart at the seams, it will eventually become clear that the root cause is resource depletion. That is not something that can be “fixed” by spending trillions of dollars trying to shore up the old, obsolete economic models.

We are presently enjoying low prices for many of the commodities mentioned above, and that fact will no doubt be brought out as evidence that my argument is flawed. Not so, because the current prices for oil and other commodities have been undercut by a collapse in demand. Manufacturing is grinding to a halt all over the world. International trade is not only faltering, it is in free fall, not unlike the ships in the picture above. Do you know what shipping companies will charge you to transport a container from Singapore to Europe? According to the current issue of The Economist, it is, and you have to pay attention now, zero because the shipping companies are in such terrible shape that they will move your container for nothing if you merely agree to pay their associated out-of-pocket costs such as dockage and longshoring fees plus a share of fuel to run the ship. Metaphorically they are in the same situation as the sailing ships in the illustration above.

Globalization and world trade are not only sliding to a screeching halt, they are very likely doomed never to recover. This is the post-Peak Era, and the rules are going to be different from now on. What used to work doesn’t. All the hope and promises in the world will not change that. All the money thrown at broken and failed businesses will do no good. All the political posturing, threats, and incentives will not put Humpty back together. We shall need to find an entirely different egg and start to rebuild the world in a different mold.

Going back cannot work. If the old economic model should start to revive like some Frankenstein monster, rising demand will soon send commodity prices soaring again and the monster will collapse. Unfortunately, that may be the model of the near-term future, with our “leaders” continuously trying to refurbish the old model over and over again, only to have it crash into the brick wall of post-Peak reality.

Read what I wrote last June and you will see the trends of which I spoke coming to pass. Do not be fooled into thinking that cheap oil will continue to be available—although it may, but only if the world economy never recovers to what it was in the past. Frankly, since a sustainable “growth” economy is and always has been an impossibility, let’s hope that the  world soon turns in other directions.

Another essay you might find illuminating was posted here on September 20, 2008. It was titled “Economic Troubles Signal Post-Resources Era.” You can view it here.

Meanwhile, look for more chaos ahead, and particularly in the areas of the world that are poorest and those most dependent upon exports of natural resources and/or manufactured goods. We should be very, very afraid.

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