Welcome to the age of diminishing returns

Thursday, July 2, 2015

Greece: the bad apple of the bunch?

Image by Vicky Brock

The present debate about the Greek financial situation tends often  to pit Greece against the rest of the Eurozone. As an example, Joergen Oerstrom Moeller writes that:

Since 2010 the Eurozone economy has turned around from contraction to growth - the growth forecast for 2015 is 1.5 percent, work to set up a banking union is well under way, and measures constituting bulwarks have been put in place. The little stroke can fell great oakes was a proverb that ominously sounded in the corridors 4-5 year ago; not any longer.


Unless Greece is willing to restructure its economy implementing policy objectives and instruments used by the majority of the EU member countries why should the Eurozone bail it out? What is the virtue of having a member that consistently and continually refuse to bring its economy into a shape similar to the one that the rest of the club is running. Ireland, Portugal, Spain, and Italy have all gone through painful reforms and been rewarded with a much improved economic situation and a promising outlook for the future. What are the arguments for not asking Greece to do the same?

Unfortunately, the data tell a different story. Greece is not alone in having economic problems and all the Southern European countries tend to show similar trends. For instance in terms of GdP per capita, the Greek decline is sharper than that of the others, but not qualitatively different. (image from Google public data) 

If this were not enough, take a look at the industrial production data (from Bilbo Economic Outlook). Greece is sinking, yes, but so are Italy and Spain, and France is hardly doing better.

There are other data showing similar trends: in short, Greece is not the bad apple of the bunch, but simply the weakest member of a group of countries that could never recover after the 2008 crisis. 

As I wrote in an earlier post about Greece, financial factors may be simply a reflection of a much deeper trouble. And this trouble was already identified long ago in the study titled "The Limits to Growth", published in its first version in 1972. Note how the results of the "Limits" model (below taken from the 2004 version of the study) are similar to the decline observed in the GdP and the industrial production index of the southern European countries.

If the "Limits" model describes the present situation, then the Greek decline is not a direct consequence of problems with the Euro or with wrong policies of the Greek government. Rather, the causes at the root of the decline can be identified as the gradual increase of the costs of production of natural resources - and of energy in particular - coupled with the increasing costs of fighting pollution.

These factors affect the weaker economies first, and there is no doubt that Greece is one. Weaker than others, but not different in its structure. So, the problem cannot be solved by purely financial measures: we need to go to the root of it. We have to free the world's economy from its dependency on fossil fuels and transform it into a "circular" economy, not any more dependent on badly depleted mineral resources. It can be done (it is described, for instance, in this recent report by the Ellen McArthur foundation). But we should have started much earlier;  now it may be too late for Greece to avoid major damage (and, most likely, also for the rest of the world).

h/t Graeme Maxton and Anders Wijkman

Monday, June 29, 2015

The Limits to Growth and Greece: systemic or financial collapse?

The results of the "standard run" (or "base case") scenario of "The Limits to Growth" 1972 study. Could it be that the ongoing Greek collapse is a symptom of the more general collapse that the model generates for the first two decades of the 21st century?

So, we have arrived to an interesting point, to be intended in the Chinese sense of a curse. It is the point where the people of Greece are being asked to choose between starvation and slavery and this is supposed to be a triumph of democracy.

As the tragedy unfolds, people take sides, aiming their impotent rage at this or that target; the Euro, the bureaucrats of Brussels, the Greek government, Mr. Tsipras, some international conspiracy, and even Mr. Putin, the usual bugaboo of everything.

But, could it be that all the financial circus that we are seeing dancing in and around Greece be just the effect of much deeper causes? The effect of something that gnaws at the very foundations not only of Greece, but of the whole Western World?

Let's take a step back, and take a look at the 1972 study titled "The Limits to Growth" (LTG). Look at the "base case" scenario, the one which used as input the data that seemed to be the most reliable at the time. Here it is, in the 2004 version of the study, with updated data in input.

Despite all the criticism that the LTG study received over the years, its basic soundness was repeatedly demonstrated, for instance in "The Limits to Growth Revisited." The LTG calculations were based on a number of assumptions, the main one was that the increasing costs resulting from the gradual depletion of the world's natural resources would bring an increasing burden on the industrial system, forcing it to slow down its growth and, eventually, to start an irreversible decline.

In general, models are most reliable when they are very general (or "aggregated"). So, for instance, it is an accepted challenge that of predicting the Earth's climate in a hundred years from now, but only because the models make no attempt to predict the weather patterns of specific days and specific places. When you are hit by a hurricane, you can say that it is the result of the changing climate, but you also know that it is impossible to predict when and where the next hurricane will strike.

The same is true for the collapse generated by the LTG models. It is very aggregated: it can predict a general collapse, but it cannot predict where and when exactly local collapses will occur. But it is likely that local collapses would start in the weakest economies of the world; regions with low industrial production capabilities and little or no mineral resources of their own. Greece, indeed.

That doesn't mean that financial factors may not have accelerated the Greek collapse or made it worse. But, if the reason of the Greek disaster is systemic, then no financial trick will cure a disease which is not financial at its core.

If the LTG study is right and the crisis is generated by the gradually increasing costs of production of natural resources, (and there is plenty of evidence that these costs are increasing worldwide, see also here) then, collapse cannot be avoided, at best it can be mitigated by acting at the system level. By means of such measures as renewable energy, efficiency, and recycling, the system can be helped to cope with a reduced resource availability. But the economic contraction of the system is unavoidable. It is a contraction that we call financial collapse, but that is simply the result of the system adapting to lower quality (i.e. more expensive) resources.

And, if the reasons for the collapse are systemic and not financial, then it must be a progressing phenomenon that is going to affect all the vulnerable countries, starting with the Mediterranean European countries: Spain, Italy, and Portugal, which might well be the next in line.  

Is the collapse going to stop, ever? Yes, it will stop when the size of the world's economy will have become compatible with the quality of the energy supporting it (that we can measure in terms of the energy return on energy invested, EROEI). So, we may face a very long and deep descent, indeed, unless we manage to resupply the economy with new sources of renewable energy of comparable energy quality.

It is not impossible, but not cheap either, and most people say that it is too expensive. So, our future will be what our greed will cause it to be. At least, we'll have what we deserve.

Friday, June 26, 2015

The causes of overshoot finally explained in detail

- The more I cut, the more the GdP goes up.

- I say: jobs, not branches!!
 - I can't stop cutting, but I can capture sawdust and sequester it into the tree hollow.
 - Do you really believe in this story of 'gravity'? I am not convinced at all.
- I am not a woodsman, but I say this: if this branch was supposed to fall, why do we see so many branches, up there? 
- The models of the branch mechanical properties are still too uncertain.
 - Such a small cut in this big branch, why should I be worried?
- I have been cutting this branch for quite a while and nothing has happened. Why should anything happen?
- Branches fall all the time; it is a natural phenomenon.

- It is just an engineering problem. They'll find something to keep the branch up.
- If we stop cutting, it will cost us more than the hospital bill for the fractures caused by the fall.
- The Pope? What does the Pope know about trees? He should stick to theology!

- .......................................

Wednesday, June 24, 2015

Prime Minister Matteo Renzi gave a powerful speech on the need of acting against climate change..... or did he?

The international media seem to be fascinated by the similarities in the physical aspect of Mr. Bean and of Mr. Matteo Renzi, prime minister of the Italian Government. There may be some similarities, indeed, but it is also true that Mr. Renzi is a shrewd politician who can be seen as a good example of a political style that privileges form over substance.

A few days ago, Mr. Renzi, Italy's prime minister, attended a meeting on the climate situation. He was praised for having taken a stance against climate change, but I think his speech is a good example of how a smart politician can say a lot and, at the same time, say nothing. It is a political style that is not specific to Italy, but is, rather, universal today.

So, I took the liberty of translating some of Mr. Renzi's statements at the meeting on climate, (as reported here) and adding their real meaning as Mr. Renzi himself could have done. (boldface: Mr. Renzi actual statements)

"I don't believe in a culture of negativity and of pessimism, I am optimist, but it is necessary to assume one's responsibilities and the time of choices is today" - So, I am starting with this remarkable platitude, and don't think I'll stop here!

"...to say that for us climate is a priority means to give back a sense of identity to our country..." which is, of course, another platitude, but it serves a purpose: note that I said "a" priority and I didn't say which are the other priorities so that, as you may well imagine, there will always be some priority higher than climate (and in a moment I'll tell you what these priorities are).

"Today, our enemy is coal", and I can say this because in Italy we use little coal, so that I can make a bugaboo out of it without offending the fossil fuel lobbies that finance my government. Besides, it is an excellent idea because it gives me a chance to say that other fossil fuels are clean in comparison.

"In 40-50 years we'll need to go well beyond the fight against coal"  And notice that what I really mean is that we don't need to do anything for at least 40-50 years. This, at least, explains what I really think about climate change.

"We need to be able to say things as they stand, that is, that renewables, alone, are not enough." Which doesn't mean I know anything about renewables, of course, but just that I represent a different lobby. 

"Neither oil nor gas will run out tomorrow morning" And, if you are really, really dumb, now I am explicitly stating what are my priorities. Are you happy, now?

Monday, June 22, 2015

Sustainability is boring! (or: why Wayne Visser is right)

Results of a "google trends" search of the term "sustainability". Note the 6-month periodic oscillations. People regularly lose interest in sustainability in summer and at Christmas time. A clear evidence that they found the concept boring.

Some days ago, I tried a Google Trends search of the term "sustainability" and I was surprised by the regular oscillations you can see in the search frequency.

It doesn't take much head scratching to understand the reasons for this behavior. When it is vacation time (summer or Christmas) people get into a festive mood and lose their interest in things they evidently find boring; probably dedicating themselves to more active pursuits.

I kept checking, and I found similar oscillations for other terms, both related and unrelated tot he environment. Try "Shakespeare", for instance, and you'll see seasonal oscillations; just as you see them for "environment". Try instead "sex" and you won't see anything like that.

Probably, these oscillations could provide a way to measure how boring people find a certain concept but I think this is enough to conclude that most people find the idea of sustainability boring. That explains a lot of things, I believe.

The reason why I made this search on Google Trends is that Wayne Visser was so kind to send me a review copy of his latest book "Sustainable Frontiers", which I read through during a long wait at the airport of Munich (one good thing about airports is that while waiting hours and hours for your plane to arrive, you can do things you wouldn't even dream to be able to do in your office!)

The book is very interesting for its "positive" approach to a better management of the world's resources and I can recommend it to you, although the most catastrophistic readers of this blog will probably find it too optimistic. At least, however, it provides good food for thought on the fact that we are trying to promote boring concepts (sustainability, for one) and on why we should not be surprised if we are not very successful at that.

I wrote a small review of Wayne Visser's book, here it is.

"In Sustainable Frontiers, Wayne Visser hits the target right away when he says that ‘sustainability is boring’. It is true; decades of promotion of the concept of sustainability have led to no discernible change in the way precious and rare resources are rapaciously overexploited on planet earth. Clearly, we have been doing everything wrong and it is not difficult to understand why. We have been telling people either one of two things: 1) stay in the dark and await death; or 2) it is so easy, just install double paned glass in your window, drive a Prius – and we'll slap a carbon tax on fuels, but make sure that gasoline prices will not increase. That just doesn't work. We need to do more; much more. We need to take an active role in promoting positive changes. We need to tell people to step up and do good things. Change things, or things will change you – probably in ways that you won't like. The book is an exploration of how it is possible to take the lead to promote effective strategies for a better and (yes!) more sustainable world.”

Thursday, June 18, 2015

The climate encyclical: should the pope be hanged?

Image above: an internet site with wild accusations against Pope Francis. That's, of course, just the work of an isolated crackpot, but, a hundred years ago, Pope Benedict XV was widely accused of "defeatism" and threatened with hanging when he requested to stop the "useless slaughter" of the first world war. Could something similar occur because of Pope Francis' encyclical on climate change?    

The Pope's encyclical on climate is out. I went through it, I think I agree with just about everything in it. From a scientific viewpoint, it seems to me flawless (at least after a first read). In terms of its ethical and human approach, it is even better. I don't see myself as a very religious person, but I think we badly need ways to overcome that peculiarly evil view of the world that sees each one of us as a mere economic agent, interested only in maximizing profits and accumulating capital. That can't be the way to run things on this planet and if we need a religion to tell us that we should do better than that, then welcome religion!!

This said, now what? It was Stalin who mocked the pope by asking how many division he could muster on the battlefield, but - apart from armored divisions - if I were a denier, I would feel dismayed. The beauty of the pope's intervention is that it demolishes right away one of the main stumbling blocks that prevented most people from understanding the gravity and the seriousness of the situation. So far, the forces of denial could paint the whole story of climate change as a silly idea concocted by an isolated group of crackpot scientists. But, now, not anymore. You may agree or not with the pope, but you can't ignore that he represents more than a billion Christians. Not an isolated group of crackpots, for sure. Clearly, the pope's encyclical has forever changed the terms of the debate.

On the other hand, if I were a climate science denier, I would also start thinking about what I could do to oppose the pope and his ideas. And, for this purpose, there are ways. We have, today, a giant mud-slinging machine in place that's called "public relations" (called propaganda in old times). This PR machine is truly an evil force that can destroy anything it decides to destroy; even the pope.

It is not farfetched. Something similar already happened about one century ago, in August 1917, during the first world war. The pope of the time, Benedict XV, appealed to "the heads of warring peoples" to end the "useless slaughter." He was not heard and, at least in Italy, the reaction of some exponents of the war party was that the pope should have been hanged.

So, it is not difficult to imagine ways to use the mud-slinging machine to paint the pope as feeble-minded, misguided, or perhaps much worse than that. Will we see again people asking for "hanging the pope", as it happened in 1917? (*) We can only say that the present situation is even more dramatic than it was at the time of the first world war. There is still time to avoid a climate disaster, but we still face a hard fight. What is sure, anyway, is that the pope's intervention is a big push in the right direction and a great hope for all humankind.

(*) Something like that seems to be already ongoing here.

Monday, June 15, 2015

The coming "tipping point" of the climate perception: enough to solve the problem?

Recognizing the existence of world scale problems takes time. For instance, the above Google "Ngram" search show that world hunger was not recognized as a serious problem until relatively recent times. However, starting in the 1960s, considerable efforts were dedicated to increasing agricultural yields (the "Green Revolution"), with a certain degree of success. But was the problem really solved? Or was it only postponed - or even worsened - as a result of agriculture becoming totally dependent on fossil fuels? Something similar may happen in the future for the problem of climate change; it may be recognized, at last, but that doesn't mean it will be solved. 

Apart from a small number of diehard deniers, most people are perfectly aware that we have a serious problem with climate change. The public is just confused by a bombardment of contradictory statements pushed in the media, but probably that all what is needed to change the terms of the debate is just a push in the right direction. The pope's encyclic on climate - expected for this week - could do just that, reaching a "tipping point" in the general perception of the problem.

After the tipping point, a consensus may be reached that the idea that climate change doesn't exist or is not caused by human activity is not just wrong, but positively dangerous for society. Something comparable to such ideas as - say - that there is really no evidence that smoking causes cancers, that wearing a seat belt while riding a car is useless, and that crack is no more dangerous than coffee as a recreational drug.

Of course, we can't be sure that the pope's encyclic will have this effect; but, suppose it does, then what can we expect to happen? Optimistically, we could think that most of the work is done and that, from then on, something serious and effective will be done to stop global warming. Unfortunately, things will not be so easy.

How hard acting against climate change is likely to remain may be understood by considering another big and serious problem affecting humankind: world hunger. It had not been always recognized and it was only with the 1960s that it became a standard feature of our intellectual horizon. At that point, nobody would have dreamed to say that world hunger was a hoax designed by a conspiracy of scientists who wanted to keep their fat research grants to study a problem that doesn't exist. The debate was effectively over, but that, alone, didn't solve the problem.

Mainly, the attempt to eliminate world hunger was based on brute force; that is, on increasing agricultural yields. It was what we call today the "Green Revolution." As you know, the results of these efforts are often described in glowing terms, a triumph of human ingenuity over the limits of nature. It is also true, however, that the world hunger problem was never completely solved; it could not be if every increase in agricultural yield was matched by a corresponding increase in human population. And it may well be that the Green Revolution was not just a "non-solution," but something that made the problem worse by turning agriculture into an industrial activity wholly dependent on fossil fuels and artificial fertilizers.

Something similar could happen if we pass the turning point of the perception of climate change. The Google Ngram data, below, indicate that the interest in the problem is rapidly growing and we may be close to reaching the tipping point in perception that world hunger reached in the 1960s.

If we compare the result of the Ngram data for "world hunger" and for "Climate Change", we see that the perception of climate change trails that of world hunger by some 30 years. So, it may be high time for arriving to a general consensus on the climate problem.

The result, however, may not be as good it could be hoped. The sudden appearance of the dramatic reality of climate change in the mediasphere could lead to forget that the best (and probably the only) way to get rid of fossil fuels fast enough to avoid a climate disaster is to make them obsolete by means of renewables. So, we could see a mad scramble toward quick and dirty solutions; actually, non-solutions or solutions that worsen the problem.

One of these non-solutions is "geo-engineering" as it is normally described, that is spreading a reflective layer in the upper atmosphere. That would do something to reduce global warming, but nothing to avoid the acidification of the oceans and its regional climatic effects (e.g. droughts) are all to be discovered. Or think of carbon capture and storage: a desperate and expensive attempt to keep using fossil fuels ("eat the cake and still have it") by literally sweeping the problem under the carpet - where nobody can guarantee for how long it will stay. And what about biofuels? An excellent way to starve a great number of people in order that a small elite could keep using their expensive metal toys called "cars".

We all know that climate change is a wicked problem. Probably, in the near future we are going to discover how exactly wicked it is. Maybe the Pope himself would tell us not to expect miracles. We need to keep working hard at it, and we still have a fighting chance to avoid catastrophe.



Ugo Bardi is a member of the Club of Rome and the author of "Extracted: how the quest for mineral resources is plundering the Planet" (Chelsea Green 2014)