What’s the root cause for the disappearance of widespread prosperity in our modern world?
Last week’s post discussed low-wage work as the “new normal” for American workers. This is surely not the vision of resurgent prosperity that drew voters to “Make America Great Again” at the polls, despite overblown promises from the guy who won. Truth is, there’s not very much that Trump – or anyone – can do to bring back a truly booming economy. Why is that?
The economy of a modern industrialized nation as large as ours is a complex system with emergent properties, a juggernaut that can be pushed a bit, but which is hard to command completely. However, the economy still responds to the limits placed upon it by objective reality, even if the people living within it find it comforting or convenient to ignore those hard realities at all costs. At least two distinct fact-based limits are coming to the forefront these days, both of which have dire implications for those whose nostalgia-tinged memories of past prosperity form a default expectation for future returns.
First, there’s the infrastructure life cycle and bills coming due. Historically speaking, cities grew organically, at an incremental rate. As parts gradually wore out, they were replaced one by one (or dismantled to build something else). You can see it in the way the oldest cities look like tangled nests from above. Newer cities, especially sprawling “ring suburbs” built after WWII to give returning veterans and new families a place to live, were constructed relatively quickly, and as such, the infrastructure repairs are coming due in a short timeframe. Having to pony up for all these expensive fixes roughly simultaneously (or deciding not to fix things and, instead, accepting costs that accrue due to crumbling or outdated infrastructure) is a drain on the economy that erodes prosperity no matter what cities decide to do about it.
The second problem is even larger and harder to avoid. EROEI, or “energy returned on energy invested,” is a way of measuring the net gain from producing or extracting energy. It sounds pretty dry, but it’s important to consider in the context of present and future prosperity.
Everything we do and produce takes energy. Consider food: eating is how people gain energy to work, play, and keep their hearts beating. However, some of that energy must be reinvested in obtaining more food, or else it all stops. It’s the same for the energy on which we’ve based our industrial culture, mainly oil. Oil is an amazingly dense, versatile form of energy, and there’s nothing else like it for powering the diversity of tasks that underwrite the prosperity of modern civilization. Still, it takes some energy to get more of it, whether it’s drilling and refining oil, mining coal, or manufacturing and installing solar panels and wind turbines, not to mention transporting everything where it needs to go and cleaning up the mess afterward. After the cost of obtaining energy is paid, the surplus energy is used to power the economy.
Unfortunately, the amount of available surplus energy is on a largely irreversible downward trend. Once upon a time, oil was cheap and easy to get, so the surplus fueled previously unimaginable economic prosperity. Nowadays, we’ve already used the easy oil, and we have to invest more of the energy we extract in order to wring out a little more. We’ve gone so far as to exploit “tight” (hard to extract) sources like shale oil, tar sands, and hydraulic fracturing (“fracking”) in order to slurp the bottom of the barrel as dry as possible in pursuit of now-mandatory growth. The more energy it takes, the more of our economic output must be spent on the extraction effort, with less left over to use for everything else, from rebuilding decaying infrastructure, to replacing lead water lines in a multitude of cities to, yes, increasing the pay of low-wage workers.
Currently, the fracking industry in the United States faces a dismal future. Fracking outfits are running on debt (false wealth) and falling into bankruptcy. Investors are wary, sick of subsidizing a failing industry. This is where our prosperity went, into gaping holes in the ground, poisoned water, and as atmospheric carbon dioxide and methane, disrupting the once-stable climate, another emerging threat to our wellbeing, just as bills from a previous generation’s infrastructure spree are coming due. Imagine what we could have accomplished instead, if we had invested our wealth in more permanent goods for a better future for all.