Wednesday, October 29, 2008

Arguments from Ignorance

For some time now I’ve been wondering how to bring up a certain habit of thought that, as I see it, forms one of the taproots feeding the contemporary crisis of industrial civilization. That it had to be discussed here on The Archdruid Report I never doubted, but in the midst of a cascade of dramatic current events, that discussion can seem very nearly beside the point. When the system of hallucinatory finance that propped up the illusion of American prosperity for a quarter century may be going to pieces around us, panic selling in commodity markets by speculators hit with margin calls is sending fossil fuel prices to lows just as unsustainable as their recent highs, and the wheels are coming off America’s global empire, I find myself wondering, is it really a good time to go wandering off in pursuit of intangibles?

Then perspective returns, and I remember that it’s precisely the intangibles, the states of mind and attitudes toward the world that form a culture’s collective discourse, that define what it can and cannot accomplish as the age of oil comes to an end. As I’ve commented before, it’s not technical issues that make our present predicament so difficult; it’s the failure of collective will that keeps even the most grudging acknowledgment of our predicament, and even the most modest response to it, completely off the radar screens of mainstream politics in every nation in the industrial world. Until the “mind-forg’d manacles” of dysfunctional thinking are unlocked and tossed aside, constructive plans for the world after peak oil on anything past an individual level are wasted effort, since they will not be implemented by societies that cannot grasp the need for them.

I had a cogent reminder of this over the past week, when three efforts of mine to spark collective discussion about these issues – my book The Long Descent, a reading and booksigning at a local bookstore here in southern Oregon, and the most recent post here – fielded three responses that used very different arguments to make a common claim. A reader of my book emailed me to tell me he thought I was refusing to give proper weight to the possibility that new technology would save our civilization from the impact of peak oil; a serious young man who attended the reading came up afterwards to ask me what I thought about the possibility that the current crisis would drive humanity to achieve a new stage of spiritual evolution, after which we will easily replace fossil fuels with currently unimaginable resources; a new reader of this blog sent in a comment insisting that peak oil was an illusion manufactured by sinister elites who were suppressing inventions that would allow everyone to have all the energy they wanted.

Mind you, I’d encountered every one of these assertions before. Ever since this blog first started suggesting that the end of the age of cheap abundant energy was the natural and inevitable result of a human ecology hopelessly out of step with the realities of life on a finite planet, I’ve fielded a great many emails and comments insisting, basically, that it just ain’t so – that one way or another, for one reason or another, humanity could have its abundant energy resources and burn them too, and can reasonably expect more of the same forever. The three responses I’ve just cited by no means exhaust the full spectrum of arguments advanced to back this curious claim, but they’re good representative samples of the type.

Now it’s possible to dispute each of these claims on their own terms, and I’ve done that more than once on this blog and elsewhere, but there’s a very real extent to which this is a waste of breath. Each of them is what the old logicians used to call argumentia ad ignorantem, arguments from ignorance. They insist on the presence of a factor that isn't actually present for examination and can’t be proved or disproved – a technological advance that hasn’t happened yet, an imminent spiritual transformation that has to be taken on blind faith, or a conspiracy so secret and pervasive that it can manipulate everything we think we know about the world – to insist that we don’t actually have to do anything about peak oil.

Such arguments prove nothing, of course; they're the precise equivalent of using the phrase "then a miracle happens" to get from one step of a cookbook recipe or a mathematical equation to the next. Their only virtue is that they’re impossible to disprove. I’ve come to think that this last detail is why they’re so popular. It’s a very charming social habit, dating back to the 18th century Enlightenment, to profess the belief that people come to decisions about the world by sitting down with the relevant facts, assessing them calmly, and then making a decision on that basis. I think most of us are aware, though, that few decisions are actually made this way; much more often, people start from the conclusion that appeals to their emotions and intuition, and then go looking for logical reasons to support the belief they’ve already chosen.

Most of the time, this is actually a good thing. Left to itself, the reasoning mind tends to run to extremes; it’s because most human decisions obey the nonrational promptings of emotional patterns laid down in childhood that our lives have any continuity at all. This same process, averaged out over the millions who inhabit a nation, provides a sense of stability and identity essential to our collective life. Still, the emotions’ habit of projecting the past onto the blank screen of the future can become a ghastly liability when the future no longer resembles the past in some crucial sense.

That’s the situation we’re facing now. Between 1980 and 2005, political gimmickry and the reckless overproduction of the North Slope and North Sea oil fields crashed the price of oil to right around US$10 a barrel – corrected for inflation, the cheapest price in history. During that quarter century of unsustainable excess, energy was so cheap that the cost no longer mattered; it seemed to make perfect sense to live in rural Oregon and commute daily by jet to San Francisco or Seattle, or to arbitrage wage costs by manufacturing consumer goods for the American market in Third World sweatshops and shipping them halfway around the world to their customers, or to build internet server farms, thousands of them, each one drawing as much electricity from the grid as a medium-sized town.

That world of unlimited free energy is the world in which nearly all of us in the industrial world lived until very recently, and it’s the only world people who are under the age of 35 or so can remember at all. Thus it’s not surprising that when people are faced with the claim that the future will be very, very different, they tend to reject the notion out of hand, and if the only reasons they can find to justify that rejection are arguments from ignorance like the ones I cited above, then arguments from ignorance are what they’ll cite.

The problem is that at this point we don’t have time to wait for hypothetical solutions to show up and save us. The Hirsch Report pointed out in 2005 that, to avoid severe economic disruption, any effective response to peak oil had to get started at least twenty years before the beginning of petroleum production declines. Any less than that, and the result is damage to the economy; the shorter the lead time, the worse the damage, and waiting until production declines actually begin is a recipe for crippling economic impacts that could make it impossible to respond to the crisis effectively at all.

This is dire news, because we no longer have the twenty years Hirsch specified; we most likely have only two years left. By most calculations, in fact, conventional petroleum production actually peaked the same year the Hirsch Report was published; apparent increases since then have happened because biofuels, tar sand extractives, and other alternative fuels that require high energy inputs have been lumped together with conventional oil; and the best estimates suggest that even with the alternatives factored in, production will face serious declines beginning around 2010. That gives us desperately little time to respond, and no time to spare for arguments that insist some unknown phenomenon will pop out of the woodwork just in time.

There are times late at night when I find myself wondering if similar reasonings could have been heard in the Yucatan lowlands as the Terminal Classic period of Mayan history arrived. and the paired jaws of declining soil fertility and catastrophic drought clamped around the throat of Lowland Maya civilization. There were plenty of potential responses as the corn harvests began to fail, centering on a transition from corn culture to less valued foods such as ramon nuts, but ideological factors made such a transition difficult for the ahauob, “divine lords” of the Maya city-states, to contemplate; abundant corn harvests filled the same role in their culture as abundant fossil fuel supplies have in ours.

Thus, instead of facing the crisis, the ahauob responded by hoping that something would provide them with a way out of it. Some of them, anticipating America’s recent neoconservative movement, went to war with other city-states to seize their corn supplies, while others offered up human sacrifices and built ever more grandiose temples in the hopes that the gods would take the crisis away. None of this helped, and much of it probably made the situation worse; one way or another, the result was a “rolling collapse” that, over a century and a half, turned the thriving Maya cities of the lowlands to crumbling, overgrown ruins inhabited by a scattering of survivors.

The idea that the cities of contemporary North America could meet the same fate is quite literally unthinkable to most people today, but then the Maya, the Romans, and the people of other collapsed civilizations all probably found their historical destiny just as unthinkable before it happened. There may be little reason to hope that anything like a majority can be helped to think the unthinkable in time to make a difference, but the effort seems worth making, and challenging the sort of arguments from ignorance I’ve described above might be a good first step.

Wednesday, October 22, 2008

The Tyranny of the Immediate

One of the great challenges that has to be faced in any attempt to make sense of history while it’s happening is the misleading impact of short-term trends. While the late housing bubble was still inflating, for example, soaring real estate values made it easy for most people to fool themselves into believing that it made sense to sink their net worth, and then some, into houses priced at even the most delusional levels. They had seen prices march steadily upwards, month after month and year after year, and that experience made it seem likely that the same steady march would continue for the foreseeable future.

The same mistake on an even more grandiose financial scale underlies the implosion of much of the world’s banking system in recent months. The first generation of derivatives, credit default swaps, and equally exotic financial livestock netted huge profits for their original breeders; so did the next generation, and the next, and before long these dubious securities – valued with an optimism usefully summed up in the phrase “mark to make-believe” – accounted for a very large proportion of the paper assets held by banks, hedge funds, and the like. Because the financial community’s recent experience with such things had been so positive, all too few investors glanced further back and saw what happened every time in the past that financial paper unlinked to sources of real wealth had been allowed to breed beyond the carrying capacity of the market.

The difficulty, as I’ve suggested in previous posts, is that historical change happens at a pace much more leisurely than textbook summaries suggest. Most people who didn’t live through the opening years of the last Great Depression leave school with the notion that when the stock market crashed in the fall of 1929, the economy reached a full stop by the time investors stopped plummeting from Wall Street windows. In reality, it took more than three years for the economy to finish contracting, and scenery en route included a dramatic stock market rally in 1930 and some of the best days of rising prices, in percentage terms, that Wall Street has ever seen. At every point along the course of contraction, furthermore, financial pundits drew false conclusions from short-term changes. The resulting headlines have more than a little similarity to the ones that clutter the financial press today.

This habit of reading too much into short-term conditions has shown itself more than once in the recent economic convulsions, and guesses about the future price of oil – a subject of interest to many peak oil researchers – have been particularly affected. Earlier this year, as the price of oil soared to $143 a barrel, a great many people argued that it would keep on climbing to $200 or $250 a barrel in the near future. Now that the price of oil has slumped below $70 a barrel, the tide of opinion has turned, and some pundits are now predicting a continued slump to $50 or even $35 a barrel. These predictions seem quite plausible at the moment they’re uttered, but then so did the idea that shares in dot-com startups would keep on climbing in value all through 2000.

The problem with linear projections of oil prices is that several factors unrelated to ordinary issues of supply and demand dominate the price of petroleum just now. One of the most important comes out of the crucial but rarely remembered fact that, while oil is priced in US dollars, most of the oil in the world these days is produced and used in countries where the US dollar is not the local currency. Since the value of the US dollar has been anything but stable of late, the price of these transactions in dollars has changed dramatically, while the price in any other terms has remained much more stable.

A barrel of oil for which a Japanese refinery pays 7500 yen, say, would cost US$75 if the dollar buys 100 yen and a bit over US$65 a few months later if the dollar rose to 115 yen. Has oil dropped in price? Only on paper, since the refinery’s bank account changes by the same amount each time. Check out exchange rates, and you’ll find that the period when oil spiked to $143 a barrel was also a period when the value of the US dollar dropped steeply against other currencies, while the plunge in the price of oil since then has paralleled a steady rise in the relative value of the dollar.

Even more dramatic, though, has been the effect of commodity speculation on the price of oil. Those economists who still insist that a completely free market will manage production and price with perfect rationality have apparently done their best to ignore the multiple monkey wrenches speculation throws into the market’s machinery. The crucial point to realize is that the results of speculation, unlike most other economic phenomena, are radically asymmetric over time. It’s worth taking a moment to understand how this works.

Consider a poker game in a tavern back room. Like speculation, poker is not a productive economic activity; instead, it is a means of exchange by which money passes from one person to another on the basis of differences in skill and luck. The results of a poker game, however, are symmetric – that is, in each game, the winnings of the winners are equal to the losses of the losers. You’ll never see a poker game in which all the players win and nobody loses, or vice versa.

Yet this is more or less what takes place in the successive phases of a speculative bubble. While the bubble is inflating, nearly everyone wins; the difference between one tulip bulb, internet stock, or condominium and another during the first phase of their respective bubbles was simply how much money you would make from it, not whether you would gain or luse. Once the bubble bursts, by contrast, nearly everyone loses; if you bought tulip bulbs at the peak of the Dutch tulip mania, internet stocks in 2000, or real estate last year, the question a year or two later was not whether you lost money or not, but simply how much of your wealth was gone.

This is what makes unrestrained speculation so serious a threat to the functioning of market societies: it amplifies the extremes of the business cycle out of all proportion. On the way up, it boosts the funds available for investment as well as speculation, and encourages overinvestment in productive capital by fostering unsustainable levels of consumption; on the way down, it slashes the availability of investment funds, helping to drive the vicious circle of contraction and disinvestment that feeds a recession and can turn it into a depression. Still, damaging as these effects are, they are temporary; sooner or later, every boom turns into a bust; sooner or later, every bust bottoms out and yields to the first stirrings of recovery.

This is exactly the dynamic traced by the price of petroleum over the last two years or so. The price spike to $143 a barrel was driven by many factors, including the first stirrings of a decline in the world’s production of conventional petroleum, but speculation played a massive role. For well over a year beforehand, financial pundits had been touting petroleum and other commodities as surefire investment vehicles, and those who got in early often made a great deal of money as oil prices climbed through 2007. This laid the foundations for a dramatic speculative bubble in the first half of 2008. Not that many years before, the idea that oil might break $100 a barrel was unthinkable to most people, and those who argued for it couched the idea in terms of a “superspike” driven by some international crisis like a US assault on Iran; what happened instead was a classic speculative bubble that zoomed far beyond anything the facts would justify, and then inevitably crashed.

That crash brought the price of a barrel of oil down more than 50% from its all-time high. It’s crucial to remember, though, that the bust phase of the speculative boom-and-bust cycle is just as exaggerated as the boom. Generally speaking, speculative busts in the past have tended to drop proportionally as far below the long-term trend line as the preceding boom rose above it, and then revert to the mean. If, as seems likely right now, petroleum is nearing a bottom somewhere around $60 a barrel, the proportional mean between peak and trough – and thus the rough current location of the mean toward which oil prices will tend to revert – is a little above $90 a barrel. Under normal circumstances, this would be the price toward which oil prices would tend to return over the months to come.

The problem, of course, is that these are not normal circumstances. While the US dollar gains in value against other currencies, as mentioned above, the price of oil will dip accordingly; if the dollar begins sliding again, on the other hand, we can expect price increases. Furthermore, not all oil fields are created equal; some of the production brought on line over the last two years or so pays for itself only when oil is well above current prices, and the likelihood that some of these will be shut down or abandoned – to say nothing of the likely impact of the unfolding credit crunch on drilling and production – make a mockery of any attempt at exact prediction.

The governmental response to the credit crunch and the near-implosion of the speculative end of the economy has its own implications, and these also push the situation away from normal. In a truly free market, the bust would have erased most of the capital that had been available for speculation, and destroyed so many businesses that the survivors would be likely to flee the more exotic realms of finance for a generation to come; this is exactly what happened in the 1930s, for instance. In the present case, though, governments around the world have propped up investment banks and speculative markets with huge inflows of cash, preventing the wave of bankruptcies that would normally end a speculative boom as wild as the one just finished. One very likely possibility is that the investment banks will attempt to launch another round of speculative excess in order to improve their balance sheets before the political consensus that supports them comes unglued; if this happens, commodities are a likely target, and could soar upwards again.

Looming over all these factors is the arrival of peak oil. Since 2005, world production of petroleum has been locked into a narrow plateau that not even a 300% increase in prices could breach, and the most believable estimates suggest that by 2010, that plateau will turn into a slow and irrevocable decline. Many of the official figures for oil production lump biofuels and tar sand extractives in with conventional petroleum; since these latter are produced using large amounts of oil and other fossil fuels, there’s a real sense in which some of today’s petroleum production is being counted twice, hiding any early signs of the approaching contraction. The credit crunch and the low price of oil, furthermore have placed additional challenges in the way of the already difficult struggle to replace the world’s rapidly depleting oil fields.

The obvious implication of peak oil is that the mean price of oil is likely to trend upward over time. The less obvious implication is that changes in the mean price may well be hard to extract from the chaotic data provided by an economy in disarray. Thus when peak oil advocates came to believe that the price of oil would soar upwards from $143 a barrel, they were running ahead of the date; when, as now, some of them are predicting a continuing decline in the price of oil for years to come, they are very likely doing the same thing. The tyranny of the immediate makes these short-term phenomena seem much more significant than they are.

My guess, based on historical examples, is that the price of petroleum and other commodities will find a bottom within the next month or two, stay there for a while, and then begin a ragged upward movement as renewed speculation cuts in sometime in the first half of 2009. Radical changes in the relative value of the US dollar could change that forecast, though the trends I’ve outlined might well still be visible if the price of oil is tracked in other currencies; a concerted attempt to reflate the economy by engineering a new commodities boom, that would have an even more dramatic effect, though the impact of rising commodities prices on a crippled economy could be dire enough that the boom might collapse of its own weight in short order. Over the long run, though, investments in energy conservation and less energy-extravagant infrastructure are likely to pay off in a big way – and the long term is what most needs to be kept in mind just now.

Wednesday, October 15, 2008

The Flight to Abstraction

My decision some two and a half years ago to launch a weekly blog on the future of industrial society has had its share, or more than its share, of unexpected results. The original plan was to start a conversation about the future within the contemporary Druid community, which is not precisely one of the largest religious movements in America these days, and I would have considered the project a success if the blog’s total readership topped fifty. That The Archdruid Report somehow failed to stop there still astonishes me.

Just as unexpected has been the impact on my own writing process. Some writers, like the hero of Edward Gorey’s wry tale The Unstrung Harp, have orderly habits: on November 18th of alternate years, with the creaking predictability of an old orrery, you can be sure that Gorey’s protagonist Mr. Earbrass will start a new novel. By inclination, at least, I fall on the other end of the spectrum, and it happens as often as not that I sit down at the keyboard Tuesday evening with no notion what my next post ought to be about. What astonishes me is that the muse has always come through, though there are times I can almost see her distractedly pulling down random volumes from the bookshelves of Parnassus, looking for scraps to toss me.

Very often, though, it’s her more improbable tidbits that bring the most unexpected insights. I can think of no other excuse for this week’s post, for the idea at its core came out of a moment of mental collision hard to describe in any other way. That moment arrived on the weekend just past, when I looked up from a paperback copy of Giambattista Vico’s New Science to the surreal skyline of Las Vegas at night.

Now it’s probably worth saying up front that of all the cities I’ve ever visited, Las Vegas is my least favorite: a garish urban cancer that apparently exists for the sole purpose of proving that it’s possible to take a barren, scorpion-infested wasteland and make something even worse out of it. I was there for a conference that took advantage of the cheap rates offered by a third-rate casino hotel, and would not have gone there otherwise. What made Vegas an unlikely source of inspiration that evening, I think, is that it takes modern industrial society’s least laudable features to their furthest extreme; its utter disconnection from nature, its insatiable appetite for resources, and its promotion of distraction and greed as the highest goals of human life mirror the worst features of the world three centuries of industrialism have built.

That made Vico a particularly apposite commentator. Giambattista Vico lived from 1668 to 1744; he spent his career as a teacher of rhetoric at the University of Naples, and devoted his off hours to one of the great intellectual projects of his time. His masterpiece, Principles of a New Science Concerning the Common Nature of Nations, appeared in three editions of increasing complexity, the last one after his death, and was almost completely ignored for most of a century thereafter. When it finally found its audience in the mid-19th century, its influence was profound, and continues to this day.

The New Science, as the work is generally known, was nothing less than the first modern attempt to make sense of the laws governing history. Vico was perhaps the first modern Western thinker to recognize the parallel historical trajectories of his own society and that of classical Greece and Rome; using those as his two test cases, he attempted to sketch out “the course the nations run,” the process by which a society rises from barbarism to civilization and falls back to barbarism again. With only two examples to work from, Vico inevitably jumped to many conclusions that don’t always hold up well in the light of a broader view of world history, but some of his ideas are astonishingly prescient, and his basic intuition – that societies go through broadly similar stages on the way from their initial rise to their final collapse – remains central to any attempt to make sense of history on the grand scale.

Vico’s argument is complex and difficult to summarize, but one of its core themes – the one whose relevance to the present struck me most forcefully that night in Las Vegas – is the role of abstraction. A wide range of social phenomena, Vico pointed out, focus entirely on specific concrete realities in the early days of a culture, and evolve toward abstraction over the lifespan of the culture. Law codes start out as lists of rules for specific cases, and broaden into statements of principles covering infinite variation in practice; words leave behind concrete meanings – how many people nowadays recall that the verb “understand” once meant literally “to stand under,” in the sense of upholding or supporting something? – and take on ever more nuanced meanings; religion begins in the shattering impact of the numinous on individual lives, and diffuses into elegant theological notions disconnected from the realities of human experience.

So, too, economics. Vico barely mentions the economic sphere – as a scholar of rhetoric and law, his interests lay elsewhere – but the economic history of the Western world fits his scheme precisely. The cultures that clawed their way back up from the bitter dark ages that followed the fall of Rome knew only one form of real wealth, agricultural land – a habit of thought that still survives in the phrasing that calls land, and only land, “real property.” The warrior aristocracies that threw back the last barbarian invasions from Europe and imposed a tenuous peace on their battered societies defined themselves by their landholdings; possession of a “knight’s fee” – enough land to support a single armored horseman – was the one requirement of noble status in those days. Money existed in the form of coinage, but most people went from one year to the next without ever seeing any; nearly all goods and services moved through customary patterns of exchange in which market forces had no place.

The waning of the Middle Ages saw the gradual replacement of these customary economies with a new economics of precious-metal currency. Feudal tenure, by which farmers held the right to their land in exchange for specific duties defined by tradition, gave way to cash rents, and a significant part of the population moved away from the land to proto-industrial wage labor in the newly expanding cities. This was a step toward abstraction; gold and silver coins replaced fields of grain as the basic definition of wealth, and made way for concentrations of economic power far more extreme than anything the Middle Ages had seen.

Further abstractions followed. By the 17th century, banks began to issue paper receipts for gold and silver in their vaults, and these receipts could be exchanged like the coinage that backed them. The invention of the banknote was followed promptly by the practice of printing more banknotes than a bank’s gold and silver reserves would cover, on the assumption that most of the notes would never be cashed in for metal; when word of this practice spread, the first bank runs followed. In the same way, companies found they could bring in capital by selling shares of their future earnings; the purchasers of these shares then found that their prices could be bid up or down, and stock speculation was born.

Fast forward a few more centuries, and we arrive at today’s global economy, which consists primarily of the buying and selling of abstractions. The concept of wealth, which was once limited to the immediate means of production, and then shifted to mean the precious metal markers used to denominate the value of production, has now mutated into arbitrary numbers that can be wished into existence by a few keystrokes. When the US government announced a few days ago that it was investing $250 billion in the nation’s banks, for example, that money did not have to be pulled out of some imaginary bank account in the national treasury, much less extracted from the dwindling productive capacities of America’s remaining factories and farms; it was conjured into being by government fiat, in order to replace some even vaster sum of abstract wealth that more or less dissolved into twinkle dust over the preceding weeks.

What makes this pursuit of the abstract so dangerous, of course, is that abstract value is not the same thing as the concrete realities it once represented: green fields and grain in storehouses; strong muscles and the work they accomplish; or for that matter, factories, the resources that keep them running, and the products that come from them. These are real wealth; the layers of economic abstraction piled atop them are simply complex social games that determine who gets access to how much of this real wealth – and those games can become so complex., and so dysfunctional, that they get in the way of the production of real wealth. The flight into abstraction can proceed so far, in other words, that the abstractions interfere with the concrete realities underlying them.

This possibility became appallingly real in the week or so immediately preceding my trip to Las Vegas. The overnight interbank loan market – an economic abstraction so arcane that not even economists seem to be able to explain its function in ordinary English – froze up, and as a result stock markets worldwide panicked and crashed, erasing trillions of dollars in paper wealth in a single week. Desperation moves by the world’s central banks bought a few days of respite, but today’s trading brought another disastrous slump. (Connoiseurs of irony may find it worth noting that today was the birthday of economist John Kenneth Galbraith, whose The Great Crash 1929 anatomized exactly those speculative delusions that were rehashed in the last two decades and caused the current debacle.)

A stock market crash, it bears remembering, does not cause crop failures, labor shortages, or the destruction of industrial machinery. Its impact is purely on the fabric of economic abstractions built atop the real wealth of land, labor, and industrial plant. Yet that impact can be devastating; in the depths of the last Great Depression, the production of goods shrank to a small fraction of what it had been before the 1929 crash. There was still plenty of land, plenty of laborers, and plenty of machines, not to mention millions of families whose breadwinners would have liked nothing so much as a chance to earn money and buy products; the only thing that could not be made to work was the market where abstractions were bought and sold, and without its help, the real economy ground to a halt.

We are facing the same situation now, and official attempts to stabilize the economy are failing because they focus on the abstractions rather than the realities underlying them. The $250 billion just poured down a Wall Street rathole, for example, could have been used instead to pay for the rebuilding of America’s rail network, with dramatic positive effects that would have resonated throughout the economy. Any such project would hire hundreds of thousands of workers across the spectrum of skilled and unskilled trades; locomotives and rolling stock would have had to be built, countless miles of track laid and upgraded, stations repaired or built from scratch, and every dollar spent on all these things would ripple outward through the economy, supporting businesses of every kind and refinancing local banks with deposits rather than loans. Projects of the same kind played a large role in helping many countries in the 1930s begin to pull themselves out of the morass of the last Great Depression.

Instead, the $250 billion has been assigned the task of making up for a portion of the largely imaginary wealth that has already evaporated from the balance sheets of banks. Abstraction has triumphed over economic realities, and the multiple impacts of that failure of imagination will be with us for a long time to come.

Wednesday, October 08, 2008

The Power of the Nonrational

For the release of a book on the end of industrial civilization, it was certainly good timing. Over the last week or so, as my book The Long Descent: A User’s Guide to the End of the Industrial Age hit the bookstores, the wheels came off the global economy. As stock markets crashed worldwide and governments panicked, I found myself wondering if the marketing people at my publisher, New Society, had managed to pull off the great-grandmother of all publicity stunts.

Now of course the crisis now under way has been building since the early 1980s, when politicians who had forgotten the lessons of the Great Depression threw out the prudent regulatory firewalls that kept banks from speculating with other people’s money. Deregulation was the word du jour, driven by a blind faith in markets that did its level best to ignore the lessons of history, and each of the crises that followed – the 1987 stock market crash, the currency implosions of the 1990s, the dotcom bubble and bust at the turn of the millennium, and the orgy of delusional finance that drove the global real estate bubble thereafter – simply brought cries for more of the same deregulation that caused the trouble in the first place.

For a quarter century, those who recalled Charles Mackay’s Extraordinary Popular Delusions and the Madness of Crowds and its many successors, and pointed out that uncontrolled speculation always ends the same dismal way, were told that they ought to shut up until they learned something about economics. Sober warnings from distinguished scholars were drowned out by a chorus of cheerleading, while less prestigious voices were pushed out to the fringes of the blogosphere. What is now painfully clear is that those marginalized voices were right all along, and their warnings could have spared us a massive economic disaster if the pundits and politicians who dismissed them had listened instead.

All this raises a question that deserves more attention than it usually receives: what makes a society accept or reject any given set of warnings about the future? At the ASPO-USA peak oil conference last month, a slightly more focused version of this question was much in the air. Several of the speakers expressed their frustration at the way warnings of global climate change have been picked up by the media and turned into an international cause célèbre, while warnings of the imminence of peak oil are still being dismissed as a nonissue by most people straight across the political and cultural spectrum.

It’s a fascinating question, not least because there are at least two serious problems with the case for global extinction via climate change currently being splashed across the media. The first of these was pointed up by several of the presenters at the ASPO conference: the scenarios of drastic climate change being offered by the IPCC, the government-supported panel of scientists responsible for the most widely accepted predictions, assume that the world’s production of petroleum, coal, and natural gas can increase steadily through the year 2100.

That’s a problematic assumption, to say the least. The world’s peak production of conventional petroleum happened in 2005; massive infusions of tar sand products and biofuels have kept the numbers from falling significantly since then, but with production at most of the world’s oil fields dropping steadily, the IPCC’s assumptions of steady increase are hard to support. Natural gas worldwide is expected to hit peak production around 2030. Coal is more complex, because all coal is not created equal; the most energy-intensive coal, anthracite, is all but exhausted already, and most of what remains is low-quality “brown coal,” much of which will cost more energy to extract than it yields; by 2040 at the latest, the energy yield from coal production will have reached its limit and begun an irrevocable decline. By 2100, our total consumption of all fossil fuels put together will have fallen to a very modest fraction of today’s levels, simply because there won’t be enough left to produce.

Yet there’s another difficulty with the scenarios of global ecological collapse being offered by activists and the media just now: even if the IPCC figures for production made sense, a 6°C increase in the Earth’s temperature over a century is well within the normal range of variation for our planet. The latest Greenland ice cores show, for example, that at the end of the last ice age, the Earth’s average temperature spiked up 12°C in fifty years or less; similar jolts up and down, some of them even more extreme, have happened many other times in Earth’s long history, and for most of the last billion years, this planet has been much, much warmer than it is now. Not that many millions of years ago, it bears remembering, alligators lived on the shores of the Arctic Ocean, and tropical and subtropical forests covered most of the planet.

This doesn’t mean, mind you, that we can simply dump CO2 into the atmospere and ignore the consequences. What counts as normal variation for the Earth is far more than a fragile industrial civilization can cope with, and the prospect of drastic food shortages driven by wild climatic swings, plus a 50-foot rise in sea levels drowning every coastal city on Earth, should be reason enough for second thoughts. The point I hope to make, rather, is that extreme scenarios of planetary extinction have been widely accepted in popular culture, despite some very significant weaknesses, while the predictions of the peak oil community – which have a much more solid basis in fact – have been dismissed out of hand. Why?

That question cannot be answered without straying out of simple matters of fact into the murky territory of beliefs and cultural narratives. Many of the critics of these essays, and indeed some of the people who have praised them, have dismissed this side of the conversation I’ve tried to start as irrelevant to our predicament. The problem with this sort of thinking is that it’s only in the delusions of raving economists that human beings make decisions on the basis of a purely rational assessment of objectively known facts. In the real world, facts are never objectively known, and reasoning is the willing slave of its preconceptions; we project our beliefs onto the inkblot patterns of experience, and so understanding those beliefs is essential if we’re to understand the forces driving today’s choices – and thus making tomorrow’s hard facts.

Look at the beliefs underlying the idea of catastrophic global climate change and you’ll find, at their core, a story about human power. We have become so powerful through our technological progress, according to the narrative, that we are able to threaten our own survival and that of the Earth itself. The only limits most climate change advocates seem to be able to imagine are those they think we must place on ourselves; even if climate change leads to our extinction, we will at least have the glory of doing the deed ourselves. It’s almost a parody of the old atheist gibe: to prove our own omnipotence, we made a crisis so big not even we can lift it out of our way.

Underlying the idea of peak oil, though, lies a different and far more sobering view of things, because peak oil is not a story about human power; it’s a story about human limits. If the peak oil narrative is correct, the power we claimed as our own was never really ours; we got it by breaking into the earth’s treasure of stored carbon and burning it up in a few short centuries. Despite the clichés, we never conquered nature; instead, we borrowed her assets and blew them in a three-hundred-year orgy of lavish consumption. Now the bills are coming due, the balance left in the account won’t meet them, and the remaining question is how much of what we bought with all that carbon will still be ours when nature’s foreclosure proceedings finish with us.

These differences matter, because the basic assumption of the climate change narrative – the belief in human omnipotence – is a core article of faith in contemporary industrial societies. It’s so pervasive that its effects are rarely noticed, but it undergirds an astonishing range of popular attitudes and ideas. It’s axiomatic in the industrial world that anything unsatisfactory is a problem in need of a solution, and equally axiomatic that a solution can be found for it. The suggestion that some deeply unsatisfactory conditions may not be problems that can be solved but, rather, are predicaments that must be lived with, is at once unthinkable and offensive to a great many people these days.

Yet this is exactly what the peak oil narrative suggests. If the world’s conventional petroleum production peaked in 2005 and faces imminent declines, as all the evidence suggests; if none of the proposed replacements for petroleum can take up the slack, and many of them, especially the other fossil fuels, are themselves closing in on their own peaks and declines; if the technological revolutions and economic boom of the last three centuries were a product of extravagant use of these nonrenewable resources, not of such impressive intangibles as “the human spirit,” and will not outlast their material basis; if, in other words, human life is subject to hard ecological limits – if these things are true, the narrative of human omnipotence falls, and a popular and passionately held conception of humanity’s nature and destiny falls with it.

Now I have to confess that I find the narrative of human omnipotence, and the secular mythology that has grown up around it, utterly unconvincing. From the perspective of my own Druid faith, all that rhetoric about humanity’s conquest of nature is absurd; it’s as though a leaf were to daydream about conquering the tree that brought it into being, presently sustains it, and will let it fall in due time; the attitudes that lead us to picture ourselves as creation’s overlords strike me as nothing more than an extraordinary case of egomania. Still, the fact remains that, in an age that has abandoned the traditional forms of religion without uprooting the emotional needs that religions meet, many people rely on these beliefs as a source of meaning and hope.

In turn, the peak oil movement’s problems finding a hearing in the wider discourse of our time has nothing to do with a shortage of solid facts or compelling reasoning; it has both of these in abundance. Rather, I have come to think, those difficulties are rooted in the movement’s failure, at least so far, to address these deeper, nonrational issues. If the peak oil message is correct, then the Great God Progress is dead; however misguided the faith of his votaries may turn out to be in hindsight, it’s a deeply held faith, and those who rely on it to give their lives meaning and hope can be counted on to cling to it until and unless some convincing alternative comes their way. That their clinging may keep our civilization from finding useful responses to a crisis even more challenging than today’s financial debacle is simply one of the ironies of our present situation.

Wednesday, October 01, 2008

Cassandra's View

As I mentioned in last week’s post, I took the opportunity this year to travel to Sacramento to attend the annual conference hosted by ASPO-USA – the acronym-impaired may want to know that this is the US branch of the Association for the Study of Peak Oil and Gas, the largest and most respected organization in the peak oil field. It was, as the Grateful Dead might have put it, a long strange trip, and ever since my return I have been wondering just how to talk about the experience on The Archdruid Report.

That the conference needed to be discussed here I had no doubt. Some of the presentations at the conference were profoundly insightful. Others were profoundly obtuse – and this very fact is worth noting, as a marker of the extent to which intelligent people with the best intentions in the world can still miss the most crucial implications of the systemic crisis facing the industrial world just now. Still, inspiration chooses its own path; it wasn’t until I unpacked a book I’d found in a very different place the day before the conference, and flipped idly through its pages, that I knew how to say what needed to be said.

Perhaps the most surprising personal discovery I made at the conference was that while many people there had encountered these essays, most of them apparently thought that the word “archdruid” in the title was a cute internet handle rather than a job description. I am in fact the elected head of a Druid order, and in that capacity I travel now and then to events hosted by other Druid organizations around the country. It so happened that the ASPO conference took place just after one such event, a harvest festival for Sacramento’s Pagan community, celebrating the autumn equinox.

That’s where I was on the two days prior to the conference, celebrating the coming of autumn with Sacramento’s Druids and Pagans in a sunny, pleasant park east of town. That’s where I wandered into a bookstall in the row of vendors, and bought a copy of an old favorite, Bulfinch’s Mythology; and it was as I paged through the volume, thinking mostly of the challenges involved in finding a place for it on my already overcrowded bookshelves, that I found a reference to the old story of Cassandra.

Most people nowadays have heard the name, but those of my readers who had what passes for an education in the American public schools may not be familiar with the story. Cassandra was a daughter of Priam, the last king of Troy; Apollo gave her the gift of prophecy in an attempt to seduce her but, when she refused him, put a curse on her so that nobody would believe her predictions. She thus had to watch helplessly as all her warnings were ignored and her father’s city plunged headlong into the catastrophe of the Trojan War.

When Troy fell to the Greeks, the Greek commander Agamemnon took her home with him as a captive. In a scene portrayed with stunning force in Aeschylus’ play Agamemnon, she foresaw his murder – and her own – at the hands of Agamemnon’s estranged wife; no one believed her then, either, and captor and captive died together. The crowning irony is that Apollo’s curse has lost none of its power today; more often than not, when someone is described as “a Cassandra” these days, the phrase implies that the dire events that person predicts will not happen.

In terms of the original tale, though, the whole cast of Cassandra’s story was present and accounted for at the ASPO conference last week. The event took place in an expensive hotel across the street from the California state capitol, with skyscrapers filling in for the fabled towers of Troy, and King Priam played by Arnold Schwarzenegger, who did not attend the conference but prefers a penthouse suite in the same hotel to the less private comforts of the governor’s mansion up the street. Lunches, finger food for breaks, and hors d’oeuvres for the evening receptions all tended toward the overly precious, and the uniformed hotel staff bustled about like servants at a Bronze Age royal court.

In this setting, the presentations and talk at the conference took on a surreal quality, as though the global civilization we were discussing – the one running out of cheap and easily available fossil fuels – was on some other planet. I’m not at all sure how many of the attendees took the time to connect the energy that provided climate-controlled air, fluorescent lighting, PowerPoint slideshows and overabundant snacks for the conference with the sinking lines on graphs that tracked our world’s rapidly depleting oil, coal, and natural gas reserves. I’m even less sure how many of them traced out those graphs to their logical conclusions and thought through the likely impacts on their own lives; even in peak oil circles, this is surprisingly uncommon

Some of the presentations, certainly, showed no trace of such reflections. To my mind, at least, the most pathetic of them – and I use this word with its full meaning of “evoking pathos,” not in its current sense as a general-purpose insult – was offered by Christer Lindstrom, a pleasant Swedish businessman who wants to solve peak oil by building countless millions of little four-seat computer-guided monorail cars to replace today’s urban automobiles. No hint of the fantastic capital expenditures needed to build a new transportation grid in cities sprawled across three continents, no reference to the immense burden on the electric grid such a project would impose, darkened his presentation.

Instead, we watched pretty computer graphics and video footage of prototypes circling a little test track in Uppsala. In a world blessed with cheap abundant energy, some such thing might be worth considering. Still, one of the core implications of peak oil is precisely that the huge projects of the recent past – the interstate highways and the Apollo programs – are slipping out of reach as the surplus energy that made them possible depletes out from under us. Ignore this essential point, and it’s easy to come up with technological fixes that will solve the peak oil problem; applying them to the real world is another matter.

None of the other presentations were quite so detached from the realities of our predicament, but some came close, clinging to a model of business as usual that has already been outstripped by events. Other presenters showed a clearer grasp of the situation Among them were geologist Ken Verosub, who provided a crisp summary of the fundamentals of petroleum science and the steep and ongoing decline in American oil reserves; David Hughes, another geologist, who put coal into the energy picture and showed the dubious figures behind claims that coal – currently being used at the same rate per capita as in 1910, and itself subject to drastic depletion – can replace our declining oil supplies; and engineer Robert Rapier, familiar to readers of The Oil Drum, who sorted out sales hype from reality in the biofuels industry.

What set these presentations and others apart from the more facile ones, at least from my viewpoint, is that the former recognized that we are long past the point of ready answers. The cry for solutions is a common one, and understandably popular. Still, thinking of peak oil as a problem we can solve by some grand project, or combination of projects, misses some of the most crucial features that define the crisis of the contemporary industrial world.

The essence of that crisis is that we no longer have the resources or the time to bring about changes in our infrastructure or technology large enough to make a significant difference on a national or international scale. We threw away that opportunity when the industrial world abandoned the steps toward sustainability taken in the 1970s. The quarter century from 1980 to 2005, when energy was cheaper and more abundant than ever before in human history, could have been used to launch the transition to sustainability, but that opportunity was wasted – along with all those billions of barrels of oil – and all the wishful thinking in the world will not bring either one of them back.

The Limits to Growth, the most insightful (and thus the most vilified) of the warnings issued during the Seventies, outlines the resulting predicament in detail. One of the central themes of that study was that constructive change had to happen while there was still a surplus of energy and other resources to fuel it. By the time significant shortfalls begin, all available resources are already committed to current needs, and any attempt to free up resources for some new project comes into conflict with the demands of existing economic sectors. The US government may be in a position to loan Wall Street $700 billion it doesn’t have – in today’s economic world, money is so close to a mass hallucination that it’s not surprising to see it wished into being so casually – but actual resources such as fossil fuels, trained labor forces, and time are not so flexible.

The recent troubles set in motion by attempts to promote ethanol production show how the resulting limits work. Diverting corn to ethanol production boosted US gasoline supplies over the short term, but sent food prices soaring, sparking inflation across a wide range of products and causing a cascade of problems elsewhere in the economy. This was a relatively modest example, because ethanol production for motor fuel used existing pipelines, gas stations, and other infrastructure; something on the scale of an attempt to replace gasoline with hydrogen – which would require a completely new infrastructure from top to bottom – could draw down remaining resource stocks so drastically that, pursued with enough misplaced enthusiasm, it could drive an economic collapse all by itself.

Thus a focus on grand solutions is self-defeating, even when those solutions are not as obviously beside the point as Lindstrom’s dream of a mini-monorail in every garage. We need to start with a close look at the resources that are actually available for change in the real world, with all its political, economic, and cultural complexities. We need to recognize that the apportioning of resources to any economic sector, however absurd it seems, has a constituency that backs it and can be counted on to fight against attempts to divert it. We need to accept that no one is likely to agree cheerfully to cuts in their standard of living unless they themselves see a very good reason for the change – and after so many decades of predictions of imminent doom by purveyors of apocalyptic fantasies, another round of warnings just isn’t cutting it.

These hard limits sketch out the range of action available to today’s industrial societies in the first years of the age of peak oil. They do not make a cheerful picture; Cassandra’s view never does, and this is why clear assessments of unpleasant realities so often get pushed aside in favor of grand, elegant, and optimistic visions flawed only by the minor fact that they are unworkable in the real world. I don’t claim to know whether this habit will one day bring down Sacramento’s towers in flames, as it did the towers of Troy; still, as those towers shrank in the rear window a week ago, the possibility was hard to dismiss out of hand.