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Page added on August 24, 2012

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The end of the Industrial Revolution

What a privilege it is to be alive in these times, in such a significant period in human history. It’s not always easy to see moments of great historical importance when you’re in the middle of them. Sometimes they’re dramatic, like the fall of the Berlin Wall or the landing on the moon. But more often the really big ones appear, from within them, to be unfolding in slow motion. Their actual drama and speed then only becomes clear in hindsight.

That’s how it will be with this. But in the end we’ll look back at this moment and say, yes, that’s when it was clear, that’s when the end game began. The end game of the industrial revolution.

Hang on, you’re thinking. The industrial revolution? With its belching smokestacks, dirty industry and steam engines? You thought we left that behind long ago, right? You look at your smart phone, robots on Mars, the rise of Facebook and Google and think ‘we’re well past all that’. Isn’t this the age of knowledge, when we’re all hyper-connected in a 24/7 information rich economy? Think again.

Hiding behind those entertaining devices, information overload and exciting new companies, the real bulk of the economy is still being driven by those dirty belching smokestacks and is still being shaped by those who inherited the economic momentum of 19th century England – the coal, oil and gas industries. Look at any list of the world’s 20 largest companies by turnover and you’ll see around three quarters are either producing fossil fuels, trading them or converting them into transport or energy. So I’m afraid the proverbial belching smokestacks still underpin our economy. But they are now in terminal decline. Yes, after 250 years, their time is coming to an end – and faster than you, or they, think.

 

For those of us focused on social change, it doesn’t get much more exciting than this. When I was writing my book The Great Disruption during 2010, and even when it was published just a year ago, the ideas in it were still fringe to the mainstream debate – a radical and provocative interpretation of what was happening. Most thought my argument – that a crisis driven economic transformation was inevitable – were, if correct, certainly not imminent and would not impact for decades. Just two years later, we only have to look around to see the disruption underway, as the old economy grinds to a halt, and the incredible opportunity for change that is now all around us.

It’s going to be a wild and exhilarating ride, with winners and losers, crises and breakthroughs. There’ll be a fair amount of chaos and we’ll teeter on the edge for a while, wondering if we’ll get through. But we will, and we’ll then look back to this time and say, yes, I was there. I was there when the third great wave of human progress began. The first was the domestication of plants and animals, enabling what we today see as civilisation to form. The second was the industrial revolution with its great technological and human progress but inherent unsustainability because it depended on taking energy from the past and ecological capacity from the future.

Now we shift to the third great wave, the world post the industrial revolution. To an economy designed to last, that is built around the present and nurtures the future. This will be an era where we…… well, that’s the exciting bit. We get to decide what comes next. We get to decide what the third great phase of human progress looks like.

Like many, I feel a great impatience sitting here on the edge of it all. Waiting for it to be clear to everyone that it’s time to stop pretending the old models will somehow get back to normal. We lurch from crisis to crisis, but never seem to face up to the reality that old normal is gone, that step change is now our only option. I’m not alone in that impatience. The legendary investment manager Jeremy Grantham recently said “The economic environment seems to be stuck in a rather unpleasant perpetual loop. ……I, for one, wish that the world would get on with whatever is coming next.”

The world actually is getting on with it, at an incredible pace, but building the momentum of the new takes time. And perhaps of more immediate concern, the dismantling of the old economy and the decline of the fossil fuel industry is being fiercely resisted by those who own it. To be fair, you can’t really blame them. I can’t imagine I’d take kindly to everything I assumed about the world being proven wrong and all my success now being blamed for the potential collapse of civilization. Denial and delay would be quite appealing!

But none of that really matters because the end of their world is going to happen regardless of anything they do. You can buy your way to political influence but you can’t buy new laws of physics. So we will change, not because of any great moral battle between good and evil, but because people and economics will respond to physical limits – the limits of the climate’s capacity to absorb our waste, the limits of our food production to keep pace with our demand, the limits of living on one planet.

Thus the need to act is no longer just a moral imperative, it’s now a social and economic necessity.

I will over forthcoming Cockatoo Chronicles unpack this argument in more detail, explore how this is unfolding around us, and why we should be excited rather than fearful. I realise many people look at the world events and feel fear – I certainly have those days. After all, as was argued in a recent oped in the NYT by US scientists: “There can be little doubt that what was once thought to be a future threat is suddenly, catastrophically, upon us.”

But when we look at the current US drought, at what is looking like the third global food crunch in just 5 years, and the extraordinary increases in the melt rates of arctic sea ice, all happening along side debt overload and the endless, lurching economic crises that Jeremy Grantham refers to, you can respond in two ways. Yes, these things are cause for great concern, reasons to worry about the suffering that is now and will keep unfolding around us.

But they also say, with clarity and finality, the old economic model is dead. This is not a crisis, there will be no “return to normal”. This is the old world, the world that started in 1750 with the industrial revolution and the assumption that more stuff was all we needed for progress, steadily grinding to a halt. The great economic expansion that drove us through the 19th and 20th centuries, is all but over. Over because it’s physically impossible for it to keep going. This is not philosophy. When things are unsustainable, they stop.

This process is going to be very messy. The climate is becoming highly unstable. The fossil fuel industry is going to fight a ferocious rear guard battle to hold on to the old ways. There is an incredible consolidation of wealth and power by the rich. And the economy is facing intolerable debt and financial pressures.

With the earth full, we are now trapped between debt and growth. If we grow, then spiking prices of oil, food and other commodities, along with ecological constraints will bring down the economy as they did in 2007/8. Yet our impossible levels of debt can only be paid off if we grow. Given we can’t, the financial system will soon break again and this time even more dramatically.

But we can no longer prevent any of those things – they are todays’ reality. What we can do, and what will have the most impact on that situation, is to accelerate the process of dismantling the old and building the new. It is true that all the changes we need to make happen, would occur by themselves over time. But because ecosystem breakdown is driven by lagging causes – the impact keeps happening long after the pollution that caused it – we don’t have time. This makes acceleration the key challenge. Within that context there is much we can do

For a start, we can slow down the last gasp expansion of the coal, oil and gas industries. This is a significant question because the carbon budget is nearly all spent. As Bill McKibben recently argued, the science is now very clear that we have a choice – we either face an out of control climate that will decimate society and the economy or we can rapidly remove those industries from the economy. There is no middle path. And the later we start, the more pain there will be.

We can also drive even harder, the incredibly exciting growth in solar. We can encourage investors to shift from the old to the new. We can implore governments to tax stuff more and people less. We can build a new economy that is focused on creating jobs and good lives for people, rather than bonuses for investment bankers and profits for oil companies. We can drive down inequality, a cancer that is now eating away at democracy and social stability.

Just a decade ago, the call to invest in this new economy was driven by the moral imperative or long-term economic benefit. Today it’s up and running, and is looking more like a sprint than a marathon – a sprint any investors who don’t see it underway will lose.

Solar is perhaps the most immediate and exciting example, with enormous investment now flowing. As Giles Parkinson explains in a recent article at ReNewEconomy.com.au it’s hardly a surprise. In many countries, you can now get solar on your rooftop with payments 20% less than your current electricity bill, while still leaving enough for strong profits by those installing and financing the systems. It’s an easy business proposition to understand and as a result, investors are piling in to the space. They look at the risks in fossil fuels with the inevitability of tightening regulation on carbon, then compare it to solar and see annual growth rates there of around 40% and dramatic and ongoing cost reductions. (The total cost of a rooftop solar system has fallen over 20% in the last year and the cost of solar panels fell around 50%!) So it’s no surprise that last year we saw another new record for the amount invested in renewables – over $250 billion. It’s now up over 90% since the start of the financial crisis in 2007. (How much proof do we need that there’s a new world coming?)

There are many other examples of such progress – too many to cover here. So this longer piece is the first in a series of Cockatoo Chronicles that will explore the great economic transformation now underway. I’ll be discussing more about the solar boom, along with the inevitable crash of the carbon bubble – with its potentially dramatic consequences for fossil companies’ share prices and some national economies. Another area of focus will be the food supply crunch and its implications for conflict and national security but also the economic opportunity for sustainable food production. I’ll also write about the emerging battle between the fossil fuel industry on one side and scientists, environmentalists and the renewables industry on the other. Clear battle lines have been drawn in recent months suggesting a heavily ramped up and economically sophisticated conflict is now emerging.

Sure, there’s plenty to worry about in what’s coming and we should do all we can to smooth the way for 7 billion people to get through this transition. But we must remember, we’re now over the top of the mountain. It’s a long way down and it will certainly be a wild and bumpy ride, but history is on our side and the momentum will take us through. So let’s celebrate and remember – we are privileged to be here now, to be the ones who shape the future. And amidst the chaos and crises, let’s keep our eye on the prize – the third great wave of human progress.

Cockatoo Chronicles



20 Comments on "The end of the Industrial Revolution"

  1. BillT on Fri, 24th Aug 2012 4:00 am 

    Food for thought:
    “… If all else remains the same, the ‘too-costly fuel period’ will occur within five years: it is not likely that all else will remain the same. A breakdown in finance such as banking collapse in the Eurozone will accelerate the process. Right now the cost to produce new petroleum at the well head or at the bitumen pit is very close to the low prices that the market is willing/able to offer. As credit vanishes and prices decline, these expensive-to-produce fuels are shut-in as unaffordable…”

    http://www.economic-undertow.com/

    We are nearing the SHTF moment…

  2. Mike on Fri, 24th Aug 2012 9:24 am 

    First of all, there is no “way for 7 billion people to get through this transition.” These population levels require copious energy inputs. Absent such, there will a retraction.

    Second, we most emphatically do not “get to decide what comes next.” The scale of change is too great and human nature too set to expect that some kumbaya group hug is going to produce “sustainability”, “social justice” and Ecotopia.

    What will happen post-carbon is actually predictable in a general sense.

    1) Population levels will be greatly reduced from the modern but still greatly exceed those of Iron Age empires (like Rome).

    2) Successful populations of the future will mimic successful groups of the past. This means they will breed a lot, fight a lot, and win a lot. And they will do so with or without regard to “sustainability.” Recorded human history has no example of kumbaya transition but hundreds of success by conquest.

    3) Technology. We will regress but not revert. The 18th and 19th Centuries are often offered as analog. But short of an asteroid strike or VEI 8 eruption, we will not revert to bows and arrows. Small arms in particular are easily made with the skills of blacksmithy and simple milling. Electricity, electronics, combustion engines will all survive – in lower quantity and quality. The importance of such to military capability assures they will be retained.

    4) Fuels. What is accessible will be used. Period. When it becomes increasingly rare over the course of decades, solar-to-plant-to-oils will become a baseline military necessity for any emergent nation/empire. National priorities will dictate that the army, national rail, and fuel-producing agriculture will ALWAYS get first access. What’s left in surplus or local production can go to (much, much reduced) local consumption.

    There will be post-carbon people, post-carbon wars and post-carbon empires. Same ol’.

  3. BillT on Fri, 24th Aug 2012 9:54 am 

    Mike, I agreed with you until you said tech will survive. Perhaps you can make guns and ammo, if enough of the system survives, but TVs and I-toys will not be around. Ditto, PCs, etc. You assume that a military will have the financial resources to keep it all going. I don’t. Lack of resources/money killed all of the previous Empires and when this one goes down, it will take the rest of the world with it. Asia included. The struggle over the next few decades will be to stay alive, and billions will not make it.

    Einstein said that WW4 will be fought with stones and clubs. I think he was correct.

  4. gates outcast on Fri, 24th Aug 2012 9:57 am 

    The cycle of destruction will continue, until the REAL END to Mankind comes? How sad the same old bull, but a differnt day, or the different actors playing the same old parts in the same old play. “The Foundation” Series by Asimov touches on this, a continual cycle of growth, decline, death, suffering, or something else. I fear mankind will never evolve because afterall evolution is false, well according to Zeus.

  5. BillT on Fri, 24th Aug 2012 10:00 am 

    BTW: There are no easily accessible fuels left. Wood, maybe, if the droughts/climate change doesn’t kill off most of the forests. We have to move mountains to get any of the others.

    You seem to assume too many impossible things will happen just because you want them too. Militaries will be more like the native tribes than any mechanized activity. Militaries only exist when there is an organization that can pay for them. Those days are also drawing to a close. When a man has a family to support, he will go home and support them. He will NOT fight for his country. Stop paying the military and see how quickly they dissolve.

  6. SOS on Fri, 24th Aug 2012 12:28 pm 

    Utopian thought with little if any basis in reality. Change will come, it comes every day. Mike has a handle on things except for the fact carbon fuels are in ample supply for a long, long time.

    Even with the production evidence clearly at hand many refuse to admit ample supplies exist. Some people still think the earth is flat.

  7. BillT on Fri, 24th Aug 2012 2:56 pm 

    Ample supplies…yes, they exist but recoverable? I doubt it. You are not looking at the full picture as usual, only the view you want to see. The US economy is bankrupt. The West is bankrupt. Asia is gaining ground as the Empire sinks into the ooze. You can claim that there is also plenty of gold and other minerals in sea water, but that does not mean they will ever be recovered.

    The Age of Petroleum is about over. It is in the extinction ICU and all the BS & Propaganda spit out by Big Oil does not change the facts.

    There is little or no oil around the world that the oil companies did not know about decades ago, especially in the US. But it was not recovered because they knew it was going to be almost impossible for a number of reasons that have not changed. If they were not so desperate, it would not even be on the radar.

  8. Stephen on Fri, 24th Aug 2012 3:28 pm 

    I predict that we will have to abandon the “price tag on each piece of matter” philosophy. I am not sure the military industrial complex will go last, people may dictate the remaining fuel be used for quality of life, food, and not to make bullets.

  9. SOS on Fri, 24th Aug 2012 6:34 pm 

    The oil industry will provide us with all we need. There would have been no drop off in production starting in the 1970s up to 2000 or so if the United States government had allowed on going planned, logical development of American resources. but, unfortunately for everyone they did not.

    As a result new reserves that weren’t under federal control had to be developed. The Bakken and tracking are tremendously valuable resources and totally unintended consequences of the peak politics=peak oil movement.

    The other great unintended consequence of the peak politics=peak oil movement is the huge effort world wide to find new, less politically sensitive reserves. In a huge concession to the truth and a ridiculous display of NIMBY our president fronted 10 Billion to Brazil to develop huge, new off shore reserves while at the same time shutting down the Gulf and ignoring the huge assets in the Arctic.

  10. James on Fri, 24th Aug 2012 9:08 pm 

    Bottom line is that society will revert back to the Pre-Industrial Revolution where farming will be the mainstay of daily life for many people. However, we may be able to retain some of the sustainable inventions to enhance life on the farm. We will probably resort to human and animal power to grow our food and fiber, utilize crop rotation to replace the soil fertility, localize the economy to provide food for that local area. Bottom Line, we will become localized and produce food and fiber for our families and local peoples.

  11. James on Fri, 24th Aug 2012 9:13 pm 

    Also, we need to get real and start developing and revitalizing the rail system. This will be our only efficient, dependable means for transportation when the Industrial Revolution finally dies.

  12. SOS on Fri, 24th Aug 2012 10:00 pm 

    James, all of that is being done.

  13. James on Sat, 25th Aug 2012 12:32 am 

    No SOS, very little of what I proposed is being done. Agriculture is corporate agriculture which is using large amounts of petrochemicals and oil, Pesticides derived from oil, fertilizers from natural gas, all farm power from oil rather than animal power. No crop rotations is being done instead they are using corn-corn rotation which means they plant the same corn crop 2-3 times in a row while using immense amounts of fertilizers to preserve the soil fertility. Most of the food crops are transported 2,000 miles from where they are grown, by trucks which use oil. Need I say more?

  14. Tomasz on Sat, 25th Aug 2012 2:12 am 

    The military will try to maintain a presence in the middle east in order to secure America’s piece of the ever-dwindling and ever-more heavily contested fossil fuel pie, but ultimately the machine will run out of gas and the combatants will limp off into their separate corners of the world. People will starve without fossil fuel based farming equipment, nitrogenous fertilizers, and powered irrigation ie industrial agriculture, and the result will not be pretty. Nature red in tooth and claw. The process by which industrial technology becomes lost to us will be so traumatic that the tenuous arrangement called civilization (non-antagonistic social relations underwritten by fossil-fuel based preternatural abundance) may not survive in any meaningful sense. This is our extinction event. Not some damn zombie apocalypse, but boring old 1st and 2nd laws of thermodynamics.

  15. Tomasz on Sat, 25th Aug 2012 2:17 am 

    and sorry but “alternative energy” is a pipe dream, a pleasant fantasy that allows people to kid themselves that the WalMarts will stay open for business. There is no alternative to fossil fuels. any plan to “swap out” some AE technolgy and keep running business as usual is in glaring contradiction with some fairly well-understood laws of physics, namely entropy. Fossil fuels represent millions of years of stored solar energy and there is simply no way to produce this kind of energy output on a realtime renewable basis. You can’t get something for nothing. Meanwhile peak oil is becoming peak everything and resource scarcity is going to disrupt societies and topple governments.

  16. Tomasz on Sat, 25th Aug 2012 2:20 am 

    forget about ultimate recoverable fossil fuels — look at the export horizon. US imports 75% of its oil. As reserves arc toward depletion, exporting countries will be reluctant to keep selling it to the US and want to use it for internal consumption and industry. Result: total world exports reach zero within 10 years.

  17. sparky on Sat, 25th Aug 2012 3:59 am 

    .
    Mike has said it all
    there is plenty of example of hunter gatherers society trashing their environment
    giving them access to modern technology make them trash it even faster .

    There will be no restrain , the more energy expanded the better one can fight and win against the competition
    predatory wars can only be checked with superior force , IE superior energy expenditure .

    a society has the political structure of its energy consumption .
    an energy consumption of the 1900 will see a society akin to the 1900
    a society with the roman energy profile will have slaves and genocidal war of conquest

  18. Kenz300 on Sat, 25th Aug 2012 1:45 pm 

    The influence of big oil and coal in the political process is detrimental to our energy security and national security. They love it when oil prices spike. They make huge windfall profits. They are doing all they can to block any competition from alternative sources of energy.

    http://www.smartplanet.com/blog/energy-futurist/energy-policy-follow-the-money/547?tag=nl.e660

  19. SOS on Sat, 25th Aug 2012 10:01 pm 

    Politics decides your energy future. Politics stole about 1 billion from you on this administrations attempts to stimulate the solar industry. That money was all wasted. There is no lay you can pass to make solar/wind as efficient and cost effective as conventional fuels.

    There is no limit to these conventional supplies. A quick examination will show you that politics is the number one influence on energy supplies.

    Peak politics causes peak oil. Change the politics and you will have all the reasonably priced energy you will need. North America will be energy independent by 2020 if you make the correct voting decision.

  20. DC on Sat, 25th Aug 2012 10:21 pm 

    Great post by Mike, we should sticky it. If we could!

    But the author is spot on about one thing. The smokestacks never went away, they just got moved out-of-sight out-of-mind(ie China, for now!) Our technology has barely progress much in last century outside of a few areas, IT being one of the few. All the products and services I see around me on a daily basis have little changed over the last few decades of my life. Most are still primitive, wasteful, and largely un-necessary. A few minor exceptions, here and there, but for the most part, wasteful, and pointless consumption in 2010 look identical to wasteful, pointless consumption in 1980, or 1960 even if your that old. Were finally being allowed to buy sorta efficient light bulbs after nearly a 75 years of suppression by the industry.

    But walkable, bikeable cities that can feed themselves, or electric trams and rail transport are still off the agenda. The 1% will let the world die in agony before they allow anything that challenge the status quo to come about.

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