Welcome to the age of diminishing returns

Tuesday, February 26, 2013

Elections in Italy: the rise of networked politics


The recent Italian elections have seen the rise of the "five star" movement founded and led by Mr Beppe Grillo (shown in the picture above). The movement is a "non party" completely structured around Internet networking. We may call it "networked politics" and it is surely a revolutionary innovation. But will it make a difference?


The Italian national elections of this week have seen a clear winner: the "five star movement," founded by Mr. Beppe Grillo, former actor now turned politician. The movement didn't gain a majority, but it managed a stunning feat by gathering almost one quarter of the valid votes in its first appearance in a nation-wide election, nearly matching the results of the main traditional parties in Italy. More than that, Grillo and his colleagues were able to make the other parties look old, useless, and worn out in their desperate attempts of gathering votes by making promises that they knew they could never maintain.

This success is all the more surprising if we consider that the national political program of the movement is contained in just fifteen pages of generic proposals. The movement is a "non party" without a hierarchy and where elected members are seen just as spokespersons for the others. Most of the movement's candidates had little or no previous political experience and none of them is a known figure in politics or culture. The movement didn't do traditional media advertising and Mr. Grillo never even appeared on a TV debate. So, most voters seem to have chosen the movement as a reaction against the old parties, perceived as staffed with thieves, sex maniacs, and all sort of criminals. At least, this is the general interpretation of the results of the recent Italian elections. But, probably, the explanation goes somewhat deeper.

When we discuss "politics" we are discussing about ways to control the government. The term "control" may sound nasty, but it is what every voter does when choosing a party or a candidate: it is a way to steer government policies along lines that one finds desirable. But a whole country is an enormously complex system and history has shown that the control of complex systems requires complex control systems. At the level of entire societies, these control systems are mainly what we call "bureaucracy," which is the main factor that makes societies resilient - that is resisting to change. However, the increasing complexity of these control systems originates those "diminishing returns to complexity" that Joseph Tainter describes as the main cause of the collapse of civilizations.

Collapse is the rapid reduction in complexity of all the structures of a society. By collapsing, a society gets rid of its complex control structures that have become a burden and are no more a benefit. It is what happened when the Roman Empire fell: it was the disappearance of the expensive Imperial Court, with its even more expensive Imperial Bureaucracy. The result was the much less expensive set of local control structures that define the period we call "Middle Ages."

However, the collapse of a society doesn't occur all of a sudden: it starts with the weakest links which may collapse without necessarily generating the cascade of events that brings down everything. So, in modern Western society, political parties may have been among the first structures affected by a rapid reduction in complexity.

Think of the communist parties of a few decades ago in Western Europe: they had militants, cadres, leaders, and intellectuals; all focused around a set of ideas written in the ponderous tome called "Das Kapital". But this kind of parties is gone. They collapsed and disappeared because of the diminishing returns of complexity. The standard political party, today, is a simple structure that specializes in vote gathering by controlling the media. It has no strong leaders, rather it has good actors. It has no well defined ideas, except a vague slant on ill-defined concepts such as "left" and "right". Basically, all what it does is transferring money from lobbies into PR firms. No wonder that voters are disaffected with these parties but, so far, they had no choice.

Now, there come Beppe Grillo and his Web adviser Pierandrea Casaleggio, who have this idea of a completely Web-structured political party. It is all built using the "MeetUp" internet platform that is used as the vehicle for information exchange and for the decisional process based on on-line voting. The result is a peer-to-peer, purely horizontal network. The five star movement is the organizational opposite of the standard political parties as they are today. The movement has a base without a leadership, traditional parties have a leadership without a base.

The great advantage of the five star movement over its competitors is its low cost. Controlling the media is extremely expensive, especially in politics; consider that the cost of the last US presidential election ran into several billion dollars, mostly spent in advertising. Mr. Grillo and Mr. Casaleggio, instead, managed this nearly unbelievable feat of almost winning the national elections in a major country without spending a single dollar in traditional media advertising. All the advertising was done by the militants in their peer-to-peer network. It is the awesome power of the Web.

The structure that Mr. Grillo and Mr. Casaleggio built may be called "networked politics" and it may be the start of a new generation of political movements that will largely replace traditional ones. But is this a revolution that will solve our problems of energy, pollution, social unrest, impending collapse and the like? Well, this is a different question.

We known that the Western society is undergoing a profound transformation driven by the reduced availability of natural resources, by the wreckage of the ecosystem, and by the increasing burden of complexity. If traditional political parties have largely collapsed, governments are still resisting change by increasing in complexity, adding layer after layer of bureaucracy. Eventually, the whole thing will crash down but, as Tainter notes, there are no mechanisms in complex societies that can be used to reduce complexity, only mechanisms to increase it.

Facing these problems, what can be done by networked politics? In the commercial sector, networks are known to be sometimes effective, but normally only on a small scale and they are usually short lived. Purely horizontal networks may be subjected to instabilities such as those described as "self organized criticality" and may undergo rapid and uncontrollable changes. These horizontal networks are themselves extremely difficult to manage. So, in politics we would require one of them to manage the gigantic, ponderous, and resilient entity that we call "government" (to say nothing of the powerful financial lobbies that lurk behind it). Not easy, to say the least.

But, who knows? In the great transition that we are living, anything can happen.







Thursday, February 21, 2013

Money and collapse



Paula of Mythodrome has examined the "Solari" concept of money management in a post full of interesting ideas and insights. Before getting to Paula's text, however, some comments from me (U.B.). 



Money does not really exists. Borrowing a metaphor developed by A. Mitchell-Inness, think of a concept such as a "kilogram," a unit of measurement of weight. You can say that a certain object weighs one kg, but you can't have a "kilogram" in your hands any more than Bodhidharma's disciple could show his soul to his master to have it pacified. The same is true for money, which is a unit of measurement for the concept of "credit" and, as such, has no embodiment, alone, in the real world.

Yet, we tend to think that dollars or euros can be somehow owned, hoarded and conserved. It is as if we were seeing ourselves as small Fafnir dragons sitting on our gold hoards, waiting to battle the next Sigfried arriving. That's an illusion creating us endless troubles: money cannot generate anything more than what society can generate. If the society collapses, money collapses with it. The reverse is also true. What we are seeing nowadays is the interactive reinforcing of two elements: the financial crisis and the resource/climate crisis. 

Much work is being made about new forms of money and new ways to manage money. We have local money, ethical finance, alternative currencies, and more. Whether these ideas will work is all to be seen, but they may give us at least a fighting chance to soften the effects of the next financial collapse. In the following, Paula of Mythodrome examines in detail the "Solari" idea developed by Catherine Austin Fitts.


Revisiting Catherine Austin Fitts’ “Solari”


Introducing The Venerable Ms. Fitts


One of the people whose post-9/11 work I most admire is Catherine Austin Fitts. Vocationally she’s an investment banker which, in a lot of peoples’ minds, should automatically make her positively evyle; however, her approach to money and finance is very different from the vampire squid with which we all contend.

I got to meet her at the 2006 Local Solutions conference, and at one point while chatting informally about various ways local communities could finance their own needs without the help of the vampire squid, she exclaimed with a big smile, “I love money!”

Up until that point I would have been horrified at such a blatant declaration of greed. I mean, if nothing else it’s just in really poor taste. But for whatever reason it clicked in my head differently at that moment and I saw that there was not anything like standard bankster greed in her statement. For Fitts, money was not something to hoard out of fear. For her, money was a creative medium. Not a destructive or extractive one. It was a tool to be used for creating beauty and social justice, for healing the Earth, for bringing corruption to heel, for building a door out of our crumbling economic edifice and into the real world of fresh air and living souls. She spoke with the vocabulary of banksters but the words had a different meaning. Fitts was an artist and her medium was money: infinitely useful, infinitely malleable, limited only by our own failure of imagination.

Like all wage-slave types, money for me had always been bondage. And indeed that is how our monetary system is set up, a system of slavery whereby only a few ever gain freedom and everyone else is doomed to flush their lives down the time-card toilet with only two weeks per year to enjoy life, plus another 10 years at the end before death. But after my brief conversation with Fitts I began looking at money and finance differently. Money is indeed useful and malleable; it can be made to behave on any scale, and no special lobbying or social movements or legislation is required. It is the master’s tool that can dismantle the master’s house.

One of the most important things I gleaned from Fitts’ work, though I don’t believe she ever addressed this directly, is that the illusory nature of money is both its great weakness — of which most of us are aware at this point, I’m sure — and its great strength. It is a shape-shifter that can be formed into anything, and can appear or disappear in an instant. It has no shape of its own and it has no allegiances. Indeed, money is so slippery that even under a monetary regime designed for slavery and death it can be turned into life in the hands of an adept practitioner.

Money As Magick


I choose the phrase “adept practitioner” quite deliberately. Money doesn’t really exist — even if it is in the form of gold or other concrete object, its value as money exists only in one’s mind. Money is, ultimately, intention. Harnessing and directing the power of intention is the definition of magick.

While Fitts herself probably wouldn’t like that analogy, I’m going to use it here because I suspect anyone reading this will have dabbled more in magick than in finance.

Like any magick, the key to using money is in learning how to direct intent. In magick, this is done by first identifying your intent; next, gather various objects and/or substances that correspond to your intent; and finally, assemble these into a ritual that sharply focuses your intent and gets it out of your head and into the universe. The ritual process creates a morphic resonance within your morphic field that brings about synchronicities in line with your intent. There are two basic types of intent: sending stuff away from you (yang), and pulling stuff toward you (yin).

The monetary system functions like a morphic field; what you do with your money is akin to a ritual, and the consequences of your financial decisions are like synchronicities within the morphic field. Money obeys the basic intent types: you can send it away from you (yang), or pull it towards you (yin).

For the sake of comparison, let’s say there’s something in your life you want to send away from you… a nosy neighbor perhaps. So what you want to do is a mild banishing spell (you don’t want to kill anybody). For your ritual you collect a black candle and some sage oil, both of which correspond to banishing intent. For the ritual itself you rub the sage oil downward on the candle to symbolize “away from me,” light it, and while it’s burning visualize your neighbor ignoring you. When the candle burns out you collect up the wax scraps, wrap them in a blue cloth to symbolize “peace,” and place these in your freezer to symbolize “chill out.”

Now let’s say you have some money stream coming in that you want to banish. Because money is intent already out in the universe, you do not have to go to the trouble of putting it there; you can work with it directly. Your banishing ritual will involve shutting down whatever is the source of that money. On the flip side, if you want to pull money toward you, your ritual will involve opening up a channel through which it can flow.

In magick, it is crucially important to be very clear about your intent, because if you identify it wrong you’re going to get results you don’t want. In the nosy neighbor example, what you want to banish is not the neighbor but her unwarranted attention; if you get it wrong, you may end up banishing her from her house through fire or foreclosure or whatever. The same is true with money, and I think this is where people start getting tripped up — certainly this is something I have trouble with. Since money is already intention out in the universe & within your morphic field, its results are immediate — resonance need not be established, it is established already. And that means there is no behind-the-scenes, mysterious, invisible process working to manifest your intention; this part you have to do yourself. You may never know what circumstances motivate your nosy neighbor to leave you alone, but if you want to open a channel through which money can flow to you, you have to map out that process from beginning to end and spend the money accordingly on each individual step in order to make that step manifest.

Now all of that might seem like a silly detour, but I’m laying all this out to try to get Fitts’ solari idea into a context that might be more easily understandable than finance-speak.

Money As Magick Applied


Right now our monetary system is set up so that money flows from the less-wealthy masses into the coffers of corporations and billionaires. It does this through various codifications of the principle like attracts like. The most obvious example of this is usury, otherwise known as interest. If you have money, usury causes it to attract more money. If you do not have money, usury depletes whatever money does happen to come your way.

Another example would be that of the P/E ratio, or price-to-earnings ratio. On the stock market, the price of a company’s stock is determined (in part) by dividing the company’s earnings by the total number of its existing shares — and then multiplying — multiplying! — that number again and again. That multiple is the ratio. The multiple is determined by stock traders in the process of buying and selling the company’s stock: if they think the company is awesome they will drive up the price of the stock, and therefore its multiple, by trying to outbid each other to buy those shares. Higher earnings makes people want to buy, thereby increasing the multiple and the value of the company; lower earnings makes people want to sell, thereby driving down the multiple and the value of the company. Like attracts like.

The most pernicious example would be simply this: the rich get richer, the poor get poorer. Like attracts like.

Fitts’ genius is in her ability to align positive intention with money’s properties of immediacy and like-attracts-like. Like any adept practitioner, she isn’t constrained by notions of fixed space, fixed time, fixed matter; or as in the case with money, notions of fixed value or fixed availability. Her basic idea, as I understand it, boils down to this: money’s like-attracts-like positive feedback loop can be attached to anything, so let’s attach it to the good and the just. Once that attachment is made the upward spiral will take care of itself.

And this is the point where she lost everyone. Because figuring out how to do that attaching requires entrepreneurship — dirty, filthy capitalism. Overcoming the capitalism heebie-jeebies and actually learning to become an adept money practitioner is too much for most self-respecting people of moral principles, but it’s across that chasm that the fun really begins.

For example: in any given community, there are going to be a bunch of people earning .5% on their CD savings accounts, and a bunch of other people paying 20.5% on their credit cards. The bank has the like-attracts-like thing set up in its own favor, ripping off its customers at a 20% spread. Getting the feedback loop working in the peoples’ favor is, in this instance, really obvious: the people with savings lend their money to the people with credit card debt at 10% interest. Bang zoom, problem solved. The savers are earning back an un-fucking-believable rate on their investment, the debtors are paying off their debts at half the standard usury rate and twice as fast as before, and everybody’s extricated from the bank’s feedback loop.

The peoples’ feedback loop fires up when their neighbors find out what’s going on and want to get in on the action. Now more people are extricated from the bank, more savers are earning higher interest and more debtors are getting out of debt faster. Then maybe someone else duplicates the idea somewhere else; then it happens again somewhere else, then somewhere else still. The bank’s feedback loop is shriveling and the peoples’ feedback loop is blossoming. Like attracts like.

Here’s a somewhat bigger example. Say there are a half-dozen independent businesses on Main Street that are struggling in the bad economy. Normally these businesses would go to the bank and establish lines of credit at 15% interest in order to pad the slow times so that they can meet their monthly bills, payrolls and such. Those businesses don’t have the ability to issue stock to raise money like big publicly-traded companies do. What they could do, though, is band together to form a special kind of umbrella business called a Limited Liability Company (LLC) and sell “memberships” — which, for all intents and purposes, function just like stock shares with dividends and the like, but can’t be traded. Now suddenly everyone who’s bought memberships in the LLC has a vested interest in making sure those Main Street businesses do well. The LLC members shop at the stores and encourage others to do the same, because they’ll get bigger dividends, and now suddenly Main Street is prospering again like it hasn’t in years. Then soon enough other businesses want in on the LLC because that’s a fucking awesome setup. Then eventually someone duplicates the idea on some other Main Street; then another and another; and thus the Main Street feedback loop fires up too.

(Aside: the LLC is a really interesting kind of business organization. It’s like a hybrid public-private company with all the advantages of both and none of the disadvantages of either. It can be organized just about however you want. See Chris Cook’s article on the UK’s version of the LLC, called an LLP, and some ingenius ways it has been used for sustainable development. Chris Cook was main architect of the Iranian oil bourse and another of my filthy-capitalist collapse heroes.)

Solari


But Fitts’ crowning achievement, in my opinion, was her blueprint for the solari, a for-profit community financial corporation.

In order to really get how a solari would work, it’s important to understand one thing: information is worth money, and information about money is worth more than money. When Facebook went public, it was valued at something like $100 billion — and that is definitely not because of the money it makes on advertising. It’s because Facebook owns what is arguably the largest database on individual people in the world. That kind of detailed knowledge is phenomenally powerful.

A solari works on the same principle, only its database is filled not with ducky-face photos and cyberbullying, but with detailed information about money flows within its given community. The information is collected from public records, voluntary surveys, various public entities’ budgets and the like. Crucially, it would also include all the black- and gray-market information it could track down. Like Facebook, the solari’s database would grow over time, revealing an ever more detailed picture of the community’s wealth.

Based on this information the solari then identifies areas in the community where cash flow can be optimized in the community’s favor. So for example, say the city hires a big national firm to handle garbage collection; meanwhile, a bunch of people in need of jobs are sitting around fretting about how they’re going to pay rent. The solari would negotiate with the city for its community to opt out of the garbage collection contract, and would rechannel those funds toward hiring some of the unemployed locals instead. So now, the community has saved money and decreased its unemployment rate and, potentially, provided some health insurance for people who otherwise wouldn’t have any. The solari has optimized the community’s cash flow and everybody wins.

And of course, these types of actions go into the database, increasing the database’s value. It is not in the solari’s interest to do things that hurt the community, because a database full of financial failure is worth just about jack shit. The solari’s database is valuable only to the extent that it is successful at contributing to improving the community — in whatever way, shape or form that may take. Thus the solari profits not by extracting wealth from its community, but rather by increasing wealth in the community. This is precisely the opposite of how the economy currently functions.

Once per quarter, the solari publishes a report on the financial health of the community and the projects it is working on. Feedback from people on the ground would be crucial — these folks are the solari’s eyes and ears on the street, and if they are not benefitting, the value of the database is compromised.

The solari raises money for its various projects by selling stock against the value of its database, just like Facebook does. There are two stock tiers: tier A stocks can only be sold to people who live in the community, are very limited in number, they confer voting rights, but do not pay dividends. There is no direct financial gain with A-stocks; any gain to A-stock holders is indirect, by improving the community. Tier B stocks can be purchased by anyone, do pay dividends, but do not confer voting rights. Financial gain is direct in the form of the dividend checks, but because they confer no voting rights, there isn’t any way for B-stock holders to manipulate the solari’s projects for their own advantage over the community.

With this tiered stock system, the solari is able to pull in money from potentially all over the globe to build up the community, while the community itself spends that money wherever it determines some improvement project will benefit the community as a whole. The money can be used for quite literally anything: to bolster failing schools, to clean up an abandoned lot and plant a public orchard, to invest in cottage industry and mom-and-pop businesses, maybe build a local solar-powered electrical grid, set up a low-cost health care clinic, fix up or tear down blighted properties. Anything that improves the community also increases the value of the database, making further B-stock sales more attractive, and bringing in more money.

Because the solari is a standard, run-of-the-mill financial corporation, there’s no reason its stocks can’t trade on a secondary market. In this scenario, the whole community is able to benefit from the P/E ratio madness described above. So, say the earnings of the community as a whole is $10 million, and the secondary market determines the stock to be worth 10 times earnings. Now suddenly the solari — and by extension, the community — is worth $100 million. $100 million! Just like that! A valuation like that makes all kinds of outside investment in the community very attractive indeed, thereby bringing in even more outside money.

In this way, the solari completely reverses the financial drain in a community. Instead of money flowing out of the community and into the coffers of supranational corporations, money flows in, causing more money to flow in, and then more and more. The like-attracts-like positive feedback loop is attached to the community as a whole and everybody benefits.

Solari And Preparations


It is plainly obvious to me that in terms of collapse preparations, a solari is almost infinitely more useful than a Transition initiative. Anything at all that can be done at the community level to slow the descent — that is, to extricate the community from the sinking globalization ship — will contribute to the feedback loop. How about a neighborhood-based solar-electric grid that is not tied to the main grid? How about buying a half-circle of vacant property around the perimeter of the community to establish a public permaculture space? How about a distributed gray- and black-water bioprocessing system that is not tied to the public sewage system? How about a jubilee in which the solari flat-out pays off the consumer debt of its community members?

Even more important is the ability to adapt, and quickly, to whatever black swan event might strike. The solari makes enormous sums of money available at any given time, providing the opportunity for immediate adaptation when required.
None of these things are even remotely possible under the Transition banner. They’re just too expensive, and even if the money were available, would require so much “consensus” on every little detail that nothing would ever get done.

You know, it makes me angry and very sad to survey the level of opportunity lost since Fitts first began circulating her solari ideas. That was long before the economic crash and so much could have been done to cushion the blow. All that was lost, was lost because people did not want to relinquish their notion that money is evil and bad, and they didn’t want to corrupt themselves by even learning about it, much less putting it to use. Solari is the ultimate relocalization; when relocalization got usurped by Transition is right about the time Fitts withdrew behind her paywall. I wonder now if she didn’t simply see the writing on the wall. Transition is just not flexible enough in its ideology to accommodate something so blatantly capitalist as a community financial corporation; there really isn’t any room there to discuss such things, let alone take action on them. The anti-capitalist bent of those with the collapse megaphones has succeeded in cutting off preparations’ nose to spite its face.

Conclusion


Solari represents not just a buffer against collapse, but a complete reconfiguration of how money works. It cannot stop climate change or peak oil; however, what it can do is fund a real and meaningful transition — small “t” — to a way of life that is adapted to the new realities and can thrive more-or-less happily within these. Should the idea catch on at a large scale — unlikely, but not out of the realm of possibility — it could form the basis of a fully adapted, and adaptable, economy. Resilience would become a moot point, because it would simply be built right in.

Maybe it’s not too late for Fitts’ solari ideas to take root. Maybe enough people understand now that “collapse” means financial collapse first and foremost. But given what I have seen, I’m not holding my breath. Old habits of mind are too hard to break.





Friday, February 15, 2013

Ugo Bardi speaks about mineral depletion






Here is the podcast that was posted on "From Alpha to Omega" by Tom O'Brien, after he interviewed me over the phone.

I am not sure that anyone would be interested to listen to me for about 46 minutes, except for the fact that there is some nice music in between my boring ramblings. Anyway, if you really don't have anything better to do, you can listen to me discussing about subjects such as mineral depletion, the history of the Earth, how the ecosystem functions, the future of humankind and the like. All subject that you will find described in detail in my upcoming book "Plundering the Planet".




Wednesday, February 13, 2013

Immoderate Greatness: the narrative of collapse



Not long ago, I was taking a walk with an American friend in the woods near my house. As we walked, I was pointing to him the effects of climate change that could be seen all around us: stressed trees, damaged vegetation, signs of wildfires, and more. After a while, though, I noticed that my statements produced no reply. It was as he was not hearing what I was saying or, if he could hear me, he could make no sense of what I was saying.

My friend is not a climate denier in the sense of someone who is driven by ideological reasons. It was just that, for him, climate change was a totally alien concept. It just wasn't part of his view of the future of the world, which he seemed to see as dominated by more and more powerful smartphones.

The way we see the world, I think, is mostly as if it were a story. We absorb new information by comparing it to the concatenated elements of the plot of a long and complex story that we have in our mind. For some of us, it is a novel of progress and of increasingly sophisticated gadgetry. For others, it is a novel of initial greatness and subsequent failure. And, with my friend in the woods, it was like we were characters of different narratives, as if - say - Prince Hamlet were to meet Homer Simpson.

The concept of the world as a narrative came back to my mind when reading “Immoderate Greatness, Why Civilizations Fail”, a book by William Ophuls. It is all there: our story, the story of our civilization that we are seeing as it goes through its stupendous trajectory that has brought it to heights never seen in the past but that will end in an even more stupendous collapse. The book doesn't try to convince you of anything, it doesn't create models, it doesn't present solutions, it does not advocate that you change your behavior. It is just that: a narrative of our impending collapse in a slim book of less than 70 pages written in a style that much reminds that of the “Decline and Fall of the Roman Empire” by Edward Gibbon.

A couple of excerpts (p. 57)

Bluntly put, human societies are addicted to their ruling ideas and their received way of life, and they are fanatical in their defense. Hence, they are extremely reluctant to reform. “To admit error and cut losses,” said Tuchman, “is rare among individuals, unknown among states”

And (p. 68)

... the hubris of every civilization is that it is, like the Titanic, unsinkable. Hence the motivation to plan for shipwreck is lacking. In addition, the civilization's contradictions and difficulties are seen not as symptoms of impending collapse but, rather, as problems to be solved by better policies and personnel

In a sense, it is a fascinating, dramatic, fast paced story and for many of us it is the correct narrative of the world as we see it. Others, however, will still be seeing smartphones as more important than climate change.





Sunday, February 10, 2013

Hurrah for the free market! (Can you leave now, please?)



The free market has served the world well. But its best time is over.

Guest post by Graeme Maxton


Free marketeers, please take a bow. It is time for those with other ideas to take centre stage.

Let's hear it for the free marketeers!

The free market has been a wonder of our age. Its ideas have been like some remarkable scientific breakthrough that transformed the world. The free market propelled America and the West to global economic dominance, and allowed hundreds of millions of people in China and elsewhere to prosper. It won the 20th century.

But the free market's best time is now behind it. It has made all the easy gains and, after so many years of glorious progress, it is running out of steam. With its principles fully established, it has little new to say. The free market is getting old, and in the face of new challenges, its magic is fading.

The free market is still the best way we know to allocate many resources. It ensures that goods and services are delivered to those that need them in the most efficient way, for the lowest possible price. Moreover, it strives to improve this process continuously, making the system ever leaner and driving prices ever lower. By making every penny go further, this makes us better off and so improves our standard of living. The free market is also exceptional in that it not only pushes down prices, it raises profits too. It serves everyone by stimulating growth, supporting investment and aiding human development. It is also astonishingly flexible, with the ability to respond to the changing needs of the market without falling apart. The system is fair too, or at least mostly fair. It rewards those who are efficient and competitive while stragglers are swiftly killed off.

The free market has its limits however. It works best when focussed on the short term, and where returns can be monetised easily. It is great at meeting the needs of end-consumers, like you and me. But it tends to work less well when it is expected to provide basic infrastructure, like roads, railways or airports. It is also less than perfect when it is asked to provide universal services, like schooling or defence. And it fails completely when there are disasters like Fukushima, where there is a 40 year clean up, life threatening risks and little sense in allowing people to profit.

The free market fails in many other ways, however. Because it depends on little or no regulation, it has allowed the finance sector and others to manipulate markets. It has also allowed whole industrial sectors to become dominated by a handful of firms. Most troubling of all, it is a major cause of many of the biggest and more intractable problems we now face.

Because it focuses on the short term and on price, the free market has ignored many of its own nasty consequences. It has had nothing to say as the gap between rich and poor has grown, in the US, China and much of the rest of the world. It has brushed the cost of nature aside, allowing forests to be chopped down, seas to be emptied of fish and species to be entirely wiped out, because the free market gave them no meaningful value. It also has little to contribute when there is persistently high unemployment, as there is in much of the world today. Most bothersome, the free market is useless when it comes to something as big as climate change, a problem which needs global action today, to allow those living 30 years in the future to prosper.

To address these challenges needs an understanding, not from the ground up but from the top down, from those who see can the bigger picture and take the long term interests of society and the planet into account.

It needs rules and leadership and vision. It needs good governance and the biggest trouble the free market has brought us is that most people cannot now imagine these two words ever being together again. But 'good' and 'governance' do work well together. They work in Germany and they worked in Singapore for many years. They have also worked extremely well in China for most of the last 30 years. But now they need to work harder. We need more and better governance again. It is time for the credits to roll and for the free marketeers to gallop off into the sunset. They were heroes. But they cannot help us as they once did.


Graeme Maxton is the author of The End of Progress and a Fellow of the International Centre of the Club of Rome

Thursday, February 7, 2013

Resilience is brittle?

Ideas such as "relocation", "transition" and, now, "resilience" have generated a lot of interest and the "transition town" movement has gained an important foothold in Europe. It has managed to do that by correctly fusing information and empowering in order to motivate people to become active in changing things. But can the transition movement grow to the point of influencing major political decisions at the global level? Or will its strong focus on middle class people always limit its impact? (especially now that the middle class looks more and more like an endangered species on the brink of extinction). And do we need to shift from the concept of transition to that of resilience? In this post, Paula ("Mythodrome") provides a lot of food for thought: is the concept that "resilience is brittle" just an oxymoron or not? (U.B.)


Thoughts On ‘Resilience’





 

For the past couple of years a new buzzword has been bubbling through the doomosphere: “resilience.” It’s now become a permanently embedded meme thanks to energybulletin.net changing its domain, and its focus, to resilience.org.

Near as I can tell, “resilience” means exactly the same thing as “transition” within a doomy context: an organic gardening club for rich white people with property, investments, and a comfortable lifestyle to protect. It’s an insular clique that requires everyone be on the same page politically in order to participate. It is based on the European idea of “community,” which is very attractive in theory, but which doesn’t port well (if at all) to the deeply ingrained American values of individualism and self-reliance. There are perhaps a dozen or two cities in the US where “resilience” efforts might find an audience, an actual geographic community of like-minded people. For many (most?) people, however, “resilience” looks like hardly more than a suburban organic gardening club for people with a high enough credit score to finance a new Prius.

My biggest beef with “transition,” and now with “resilience,” is that it offers very little to those who do not already have resources to spare. Both concepts assume a pre-existing level of property ownership which needs to be transitioned into low-energy operation, and/or made resilient in the face of deep economic contraction. There isn’t any room here for people who have no property to transition or to make resilient.

Some years ago on my long-defunct e-zine Adaptation, I wrote that individuals would experience the long emergency primarily as financial difficulty; failing to adequately address issues related to money, and income specifically — or to ignore these altogether, as was the case back then — is a setup for community failure. At least a year or two before the housing bubble collapse I wrote that a thriving backyard garden is awesome until you lose your job and get kicked out of your house. I look back now and wonder how many “transition” gardens have been lost to foreclosure.

What needs to be transitioned, made resilient, is not property but income. Economic contraction means purchasing power dries up, whether through deflation (lack of money), inflation or hyperinflation (worthless money). If you have property, dried-up purchasing power means relying on your property for things you’d otherwise buy elsewhere. If you live hand-to-mouth, you are basically a conduit through which purchasing power flows from your employer to your creditors and suppliers; when the purchasing power flowing through your conduit life becomes insufficient, your creditors take away whatever it is of theirs you’ve been renting and your suppliers stop supplying you with anything. Without property to fall back on, you’re basically fucked.

“Transition” and “resilience” address this problem only marginally, and so will become increasingly irrelevant as the ranks of people with reduced or eliminated incomes grow. Ultimately the only people who will be able to continue with “transition” and “resilience” efforts will be the fabulously wealthy.
Back in the early 00′s, before the “transition” concept took root, collapse/decline was understood primarily as an effect of peak oil. Peak oil meant two things: first, that prices of everything related to and derived from petroleum would become super expensive, thereby driving up prices across the board; and two, that planetary-wide supply chains would collapse, further increasing prices across the board. The obvious response to these twin sledgehammers was relocalization.

Back then, relocalization meant running globalization in reverse. It meant relearning how to make things close to home and re-establishing long decimated supply chains between the city and the hinterlands. It meant lots of cottage industry, neighborhood- and city-level retail markets, even a renaissance of skilled artisanship, repair, and restoration. It meant extricating local economic activity from oil dependence so that it would be adaptive to decline conditions, thereby providing at least some level of income opportunity for everyone in any given locale.

I suppose there is an argument to be made that “adaptive” and “resilient” are the same thing. They aren’t. A thing is resilient only to the degree that it is adaptive. Resilience maintains as long as conditions do not exceed certain parameters. Adaptation is required when conditions exceed resilience’s required parameters. Cockroaches are resilient because they can adapt to almost any conditions. Their adaptative properties are not the result of their resilience; resilient is something their adaptations evolved them to be.

Relocalization never assumed property ownership as a prerequisite to participation. It was open to everyone of any income level, wealth level, or political persuasion. It did not require joining any group or trying to coordinate with people who have differing goals and concerns. All it required was imagination: what can I sell that others in my locale will want to buy, and where can I sell it locally? If I need raw materials, can I get these locally or regionally? If I have absolutely no money to personally build goods to sell, what kind of service can I provide?

My gut instinct is that relocalization got kicked to the curb in favor of first “transition,” and now “resilience,” because it is overtly entrepreneurial and business oriented. I don’t dispute for a minute that business is the Great Evil that got us into our collapse mess in the first place. It would be simply amazing to live in a society where money serves people and not vice-versa, or even in a society where it isn’t necessary at all. Money’s a fucking drag. However, it is a grave mistake to ignore the fact that money is oxygen within our current economic organism. No money causes death just as surely as no oxygen causes death.

“Resilience” is brittle because because it ignores this fundamental reality and thereby creates a faulty process: first, it tries to first divine the future; second, it projects its political desires into that future; third, it tries to determine the parameters within which it will operate based on its divination and projections; fourth, it creates a path from now to then. Quite obviously this process can create nothing resilient. “Transition” proved itself a failure when it tried to apply this process. More of the same isn’t going to prove any more successful.

I submit that the original idea of relocalization in the service of adaptability was far superior. Its process is tried-and-true: first, determine current and foreseeable-future conditions; second, innovate some way to support yourself within these conditions; third, iterate as conditions change. That’s it. Everything else is wide open. The process is infinitely scalable both up and down and excludes no one on any grounds. This is how adaptation works in nature and, if we are to align ourselves with nature for the long-term survival of the species, it is an excellent breakpoint to extricate ourselves from the idea that we are separate from nature and can plan it, control it, dominate it.

I realize that my protestations about these things fall on deaf ears among those who are into the “transition” and now “resilience” scenes. Nevertheless I find it frustrating that these issues are so thoroughly excluded from the conversations. I do wish those with the bullhorns would pay more attention to the plight and feedback of those outside their propertied, academic circles.






Monday, February 4, 2013

The Twilight of Petroleum

In this post, Antonio Turiel examines the perspectives of oil production in light of some often neglected parameters: the energy density, the energy yield (EROEI), and realistic estimates of new discoveries. As expected, the result are far from supporting the optimism that seems to be prevalent today.


Original post by Antonio Turiel from “The Oil Crash
Translation By Max Iacono
(translated from a previous translation to Italian from Spanish by Massimiliano Rupalti. We're not professional translators, so please, take this into account while reading it :-) )




 


Dear Readers,
I begin this post as my preceding one ended: with the graph of the forecast for petroleum production contained in the last annual report of the International Energy Agency (IEA), referring to its central (or main) scenario on New Policies. This graph, as earlier mentioned, shows that on a global level production of crude oil soon will begin its decline. The forecasts of the IEA contain certain elements which are at the very least “slightly optimistic”, to not say outright fanciful, regarding the expected future production from reservoirs yet to be discovered and developed as well as considerably inflated prospects regarding non-conventional oil; based on the latter the IAE obtains a daily production level of 100 million barrels of oil per day (Mb/d) in 2035 compared to the almost 87 Mb/d in 2011. All of this already was commented in my last post.
Carlos de Castro made an interesting comment to this same post about the correct interpretation of the figures in this scenario. It made me think of a small exercise, with simple numbers, to demonstrate that even in the marvelous scenario envisioned for the future by the IEA, the figures don’t add up. And that even in the best of hypotheses for the future, we are entering already the stage of petroleum decline. Let’s have a look:
I took the above graph, and I brought it to high definition (600 dpi) and measured the relative height of the bars. Then by a simple rule of 3, I converted the bars to an equivalent amount of production for each year shown, expressed in Mb/d. Here are my results:
2000 65.9 65.9 65.9 73.8 74.9 74.9 76.7
2005 70.0 70.0 70.0 79.7 82.0 82.0 83.9
2011 68.2 68.2 68.2 80.2 83.2 84.4 86.2
2015 64.1 68.2 68.2 82.6 86.8 89.3 91.7
2020 56.3 65.3 66.5 82.1 88.0 91.1 94.0
2025 48.0 61.1 65.9 82.1 89.2 93.3 95.8
2030 36.7 56.4 65.3 82.1 90.9 94.6 97.6
2035 25.9 52.2 65.3 83.2 93.3 97.0 100.0

Logically, and given the method used, these figures have a certain margin of error, but it is certainly small enough. (for instance, for 2035 the total production of petroleum I obtain is 100 Mb/d whereas the report indicates that it is 99.7 Mb/d and therefore the error in the figures I provide relative to the actual ones by the IEA should be less than 0.5%)
With this as my starting point I prepared a continuous graph (a simple linear extrapolation for the years for which we don’t have data); the colors approximately correspond  to those of the IEA graph:



Let us recall the various categories: The black band at the bottom shows the production of crude oil currently in production (2011). The band in light blue shows the production of crude oil reservoirs which are known already but which are not being exploited either because of lack of demand or due to excessive production costs. The band in blue shows the production of crude oil which should come from reservoirs yet to be discovered. All the other bands represent non-conventional oil and imperfect petroleum substitutes. The purple band represents the production of liquids from natural gas, the yellow one comes from the production of all main non-conventional petroleum except shale oil, the red band represents shale oil and the green one (different from the color used in the IAE report) represents improvements in refining.
Represented in continuous form, even if with a linear extrapolation between consecutive points, one can obtain a more complete idea of the scenario which the IEA considers the closest to the future course of events. In particular, the gentle decline in crude oil production becomes more noticeable.
But coming back to the comment by Carlos de Castro, this graph obscures a fundamental fact. We are adding various categories of hydrocarbons assuming they are equivalent, when in fact, they are not. Non-conventional oils, (all of them) have lower energy densities per volume, and roughly 70% that of crude oil. In addition, the refining improvements refer to the increase in volume of products derived from the refining of petroleum, and such an increase in volume obviously does not assume an increase in the energy which is extracted from the petroleum. This does not mean that the products refined starting from a barrel of oil contain exactly the same energy as a barrel of oil, or even less, given losses during the transformation process. (the Second Law of Thermodynamics is ever present and operative) In reality such products contain more energy than that of the original barrel because their processing uses natural gas for the hydrogenation of the less saturated hydrocarbons. What obviously occurs is that the energy of the refined products from a barrel of oil is equal to the energy of the original barrel plus that of the natural gas used in refining it. Making these adjustments (non conventional oils have about 70% of the energy by volume as normal crude oil(*), the improvements in refining do not increase the energy of the petroleum), we then obtain the following graph in millions of barrels of oil equivalents to crude oil per day:



This is the graph which the IEA should have presented if it had counted properly, that is, by reporting energy flows, not volumes. As one easily can see the prospects for an increase in production when expressed in terms of associated energy are much more meager and less attractive: We will go from 79.5 Mb/d (now understood as energy equivalents) in 2011 to 87.5 Mb/d in 2035.
Notwithstanding all of this the graph still does not tell the whole story given that it is a graph of gross or total energy that does not tell us how much energy actually remains available to society once the energy required for its mere production - the energy required to maintain such energy flows- is subtracted out.
To do an estimate of the net energy we need to know the EROEI (Energy Returned on Energy Invested) of the various sources of hydrocarbons mixed in with the petroleum. Remembering that the EROEI is obtained using the following formula:
EROEI = Te/Ep
Where Te is the total energy produced by a source and Ep is the energy required for its production with both taken over the entire usable lifetime of the source in question. I will assume that given the elevated number of reservoirs and production systems, that the overall production system is in dynamic equilibrium and that both Te as well as Ep can be taken as snapshot values (a simplification which in reality softens the decline). With this formulation, the net energy En which an energy source delivers during its useful life (and if we have many sources at different moments of their useful lives it is equally valid as a snapshot of the whole) is:
En = Te - Ep = Te x (1 – 1/EROEI)
We only need to know the EROEI values for all the various categories in the graph of the IEA. Coming to know those values is a difficult task and not exempt from controversies, depending on the methodology used. I will not present an in-depth discussion of all such values. I simply will propose a few which appear reasonable to me. Since the numbers are on the table, anyone can play with them and propose those changes which appear most reasonable and valid to them, and thereby obtain one’s own version. It also can be said that this exercise should have been done by the IEA itself, so as to provide a clearer idea of what will be the future of the actual availability of energy to society. (because providing the gross figure which includes the cost for the implementation and maintenance of the systems of production for petroleum, is rather deceptive) Here are my own values; they are all constant over time, which in reality makes the decline more gentle;
+ For crude oil presently in production I assume an EREOI value of 20, in keeping with the most typical estimates. Such a high value has little impact, given that it subtracts out only about 5% of the net energy.
+ For the more expensive crude oil which is not being extracted I assume an EROEI of 5. Some authors quantify it as even 3 or 2, others 10. The value of 5 seems to me a reasonable compromise: sufficiently small to explain that some of these reservoirs could not be developed economically up to now, but sufficiently large to allow that now, with higher prices, they can be brought into production. All this implies a return of net energy about 80% that of the gross energy.
+For the petroleum which is yet to be discovered I assume an EROEI of 3. The reservoirs to be discovered are mainly in deep waters, where typically one has to drill 4 or more dry wells before drilling one which actually produces petroleum. In addition such oil has rates of decline which are more rapid than those of petroleum through simple platforms or on land, which implies having to drill more, or do horizontal drilling. It also has greater problems of maintenance and much of it is found in tropical areas where hurricanes can require periodic shut-downs and also can do damage thereby increasing the production costs in terms of Ep. Arctic petroleum is also part of this category and with analogous difficulties. Here the return of net energy is roughly 66% that of gross energy.
+For non-conventional petroleum, including shale oil, I assume an EROEI of 2. This category includes mainly bio-fuels with an EROEI of 1 or less and the shale oils which have an EROEI of 3 or less. This means that only 50% of the gross energy comes to be utilized as net energy.
Taking into account all of these values one obtains the following graph:



This graph too should have been produced by the IEA if it took seriously its own work and, as you can see, explains a story quite different from the official one. According to this same graph the net energy from all petroleum liquids, even according to the highly inflated future forecast by the IEA, would reach its peak around 2015, with a maximum value of 79.7 Mb/d in 2035. In short, we would find ourselves very close to the zenith of net petroleum energy, an extremely alarming message.
What would happen if instead of suggesting such inflated estimates as those of the IEA, we took a little bath in cold realism? It is difficult for me to do a precise estimate of how the production of the various categories of liquids assimilated in petroleum will proceed in reality. (at least for myself who is not a geologist, although the members of ASPO have good estimates for all of them) Nonetheless it is rather easy to do a slightly more realistic approximation regarding the real future of petroleum production. (An approximation which of course could be discussed, if one wishes). Here I leave the hypotheses and the numbers so that whomever may wish to, can repeat the calculations as they prefer.
+According to the 2010 edition of the annual report by the same IEA and according to the CEO of Shell, Peter Voser, the decline of crude oil wells recently in production is of 5% per year and not of 3.3%, as one would conclude from the current report. I am rectifying this tendency.
+ Regarding wells that at present are not being exploited, surely not all will be able to put into production, in part also because the price per barrel at which it would be convenient to do so, is excessive for society to be able to pay it, (we already have said that contrary to what is affirmed by economic orthodoxy, energy is not just any good and not all prices can be paid by our current system) and in part because there are no effective methods for processing this potential production (the most obvious case being that which we already have commented many times regarding the Manifa reservoir in Saudi Arabia, whose petroleum has such a high vanadium content that there isn’t a refinery in the world that can process it). I believe that the IEA is guilty of excessive optimism regarding the potential of such sources. Taking all of this into account, I reduce this quantity by half.
+Regarding those reservoirs yet to be discovered, it is well known that the estimates of the IEA assume a pace of discovery which is four times greater than that of the past 20 years. Add to this also the fact that in a context of economic instability the tendency of large oil companies is not to invest further in exploration and development, but instead invest less. (from 2008 to 2009 investment has fallen by 19% recovering only by a small amount during the following years when it should have grown enormously to compensate for the growing difficulties in production. In fact many oil companies have pulled in their oars and have renounced the continuing search for more petroleum. Consequently I reduce this quantity by one quarter of that estimated by the IEA.
+With respect to the natural gas liquids, only one third of their mass content contains sufficiently long hydrocarbon chains to allow being utilized as fuel for present cars, refined as gasoline (but not diesel, a fuel which poses many specific challenges). One would have to do significant modifications to existing gasoline engines so they could use directly the lighter gasses (the name “natural gas liquids” is fairly deceptive) that is, the propane and the methane (one also can synthesize ethanol starting with ethane and use it directly). The costs of adaptation are not that high but nonetheless require a certain amount of investment, towards which society is little predisposed in times of crisis and, moreover, is something only effective for gasoline engines (whereas in Europe the greater part of private transport runs on diesel oil and all heavy transport vehicles throughout the world run on diesel). To be generous I accept that one third of these natural gas liquids can be used as petroleum substitutes.
+Regarding shale oil, we have indicated already that these estimates are very inflated. I reduce them by half.
+The rest of conventional petroleum I leave as is.
With these premises, the graph of net energy that we obtain is as follows:


The results are easily visible: The year of the beginning of terminal decline in net energy is already here. In reality it could be any year from now until 2015 since the data which I provided are discretized by 5 year periods and moreover the dating cannot be more precise than that shown. On the other hand it also should be said that the peak in net energy does not mean the peak of all energy, given that a great part of the sources still have somewhat of a margin for their decline and in part will compensate for this fall. Nonetheless, to the extent that the decline in petroleum will be stronger, the fall will be more difficult to compensate and at a given moment not far away, - also associated with the exhaustion of growth of the major portion of the sources-, the fall will be inexorable. As a final point I also would like to highlight that the fall in net energy from petroleum will not be recognized until the fall in its volume also becomes evident (as was shown in the first graph), given that the concept of net energy is more difficult to grasp. We know already that classic economic education cannot recognize the concept of EROEI and therefore the explanation which will be given when petroleum production will decline, will be that there is insufficient investment in exploration and development (as already is occurring in Argentina), without understanding that the economic accounting cannot come right, if the energy accounting doesn’t. This will give rise to heated debates which will lead to wrong policies that will do more harm than good, to more radicalized positions, and to the final adoption in many cases of draconian measures of populist character, which will resolve nothing and in fact will aggravate the lot.
The final fact is that the petroleum era has come to its end. Petroleum will continue to be available for many decades but always in lesser quantities and in the end it will become a luxury good. Our epoch of accelerated economic development based on inexpensive petroleum is already over. It is the sunset of petroleum. And if we are unable to recognize it, it could also very well be our own.
Cheers.
AMT
























-->