Peak Coal in Britain

This is a paper that I published in 2007 in the issue n. 73 of the ASPO newsletter.  I thought it was appropriate to reproduce it here, because in a recent post I mentioned the question of Italian politics and coal imports from Britain before and during the second world war. It is a subject that I had already touched in this early study. So, here it is, on the whole still valid after some years.

Peak Oil's Ancestor: the Peak of British Coal Production in the 1920s

By Ugo Bardi
ASPO Newsletter n. 73
Dec 10, 2006

Figure 1. British coal production from 1815 to 2004. The data from 1815 to 1860 are from Cook and Stevenson, 1996. The data from 1860 to 1946 are from Kirby 1977; the data from 1947 up to present are from the British Coal Authority (accessed 2006). The production data are fitted with a Gaussian function which approximates the Hubbert curve.

We are just a few years away from Peak Oil; the moment when the worldwide oil production will start an irreversible decline. What should we expect to happen at the peak and afterwards? History is not a direct guide, since there are no past cases of an important global commodity, such as oil, peaking.

However, there have been regional peaks which had global effects. The best known case is that of the US oil production that peaked in 1970 which brought the first great oil crisis in the years that followed. But that was not the first case of a major resource peaking and declining; there was another major peak almost half a century before: Peak Coal in Great Britain, in the 1920s.

The geological past left to Great Britain an endowment in coal unparalleled in any other region of Europe. Exploitation started in the Middle Ages and, already in early 18th Century had become an exponentially growing industry. Coal fuelled the British industrial revolution, and was also connected to political power, allowing Britain to construct the first, and so far the only, truly world empire in history.

The importance of coal is hard to over-estimate. During the period of expansion of the industry, a British miner could produce almost 250 tons of coal per year (Kirby 1977). Even taking into account that about 20% had to be used for mining more coal, the productivity of a coal miner, in energy terms, was hundreds of times larger than that of an agricultural worker. At the height of its empire, Britain employed more than one million miners (Kirby 1977). It was the superpower of the time, being challenged only by other coal-producing States. In the First World War, British coal fought against German coal: British coal won.

But coal couldn’t last forever, even for the richly endowed Britain. Already in mid 19th Century, William Stanley Jevons had predicted, in his The Coal Question (1856), that depletion would one day make British coal too expensive for British industry. Jevons did n’t state explicitly the concept of Peak Coal but, in a qualitative sense, his analysis was similar to that of Marion King Hubbert for the oil production in the United States (Hubbert, 1956). And Jevons had been right: the peak of British coal production occurred in 1913 with 287 M tons. The British coal industry struggled to maintain production but couldn’t reach that level again. The strain on the industry is also shown by the two miners’ general strikes of 1921and 1926 that caused a temporary fall of production. The downward trend became evident in the 1930s and could not be stopped.

The British production followed a classic bell-shaped curve in good agreement with Hubbert’s model, with a best fit of the distribution giving a peak in 1923, only ten years after the actual maximum. Today, coal production in Britain is less than one tenth than it was at its peak.

The peak of the British coal production was a turning point in history; never before had a major energy producing region started its decline. There are impressive analogies for the case of the British Coal Peak of 1923 and that of the American Oil Peak of 1970. In both cases, these countries were producing at peak about 20% of the world total. In both cases, the worldwide consequences were important. Before the peak, Britain was exporting about 25% of its domestic production, and this amount had been growing exponentially together with production. After the peak, exports started to decline causing a shortage of the coal in the world market. In the case of the US, oil exports were not important before the peak. But, after the peak, the US oil imports soared rapidly, leading also to a shortage in the world market.

The oil shortages in the 1970s gave rise to the price spikes causing the Great Oil Crisis. A similar spike took place in the 1920s for coal (Australian Gov., 2006) although it was less pronounced. Most likely, the coal spike was less abrupt because the price controls that had been put in place during the war were only slowly relaxed in the 1920s. Coal prices stayed high in the 1920s, but fell with the market crash of 1929.

Many regions of Europe depended on British coal, so the lack of coal was felt everywhere. Several events that followed the British coal peak may be related to the reduction of the availability of energy: the decline of the British Empire, the Great Depression of the 1930s, as well as the general political upheaval of Europe in the 1920s and 1930s. The Italian newspapers of the 1920s and 1930s are full of insults against Great Britain for not sending to Italy the coal that Italians felt entitled to have. It reflects the kind of attitude that western countries adopted against the Middle East oil producers in the 1970s. But, if British coal was dwindling in the 1930s, German coal was still on the increase; its peak would only arrive in the 1940s. Germany never produced as much hard coal, namely the best quality, as did Britain, but in the 1930s it had the advantage that it could still increase its production, whereas Britain’s was declining.

In the 1930s, Italy abandoned her traditional ally, Britain, for Germany because only Germany could provide the coal that the Italian industry needed at a price that Italians could afford. Only later on, would they realize that the price of German coal was to be much higher than it had seemed. In the 1950s, after the turmoil of the Second World War, the problems caused by the British coal peak were solved ― for a while ― by switching to oil. Likewise, after the turmoil of the oil crisis of the 1970s, the problems caused by the US oil peak were solved ― for a while ― by switching to other productive regions. In both cases, neither the public, nor the politicians, nor the economists saw the relationships between the political and economic events of the time which were related to the peaking of oil and coal production.

In the 1930s, whole books were written on coal (Neuman 1934) but the word depletion was hardly mentioned. In 1977, Kirby wrote more than 200 pages on the history of the British coal industry during the peak period without ever mentioning the question of depletion. Apparently, people could not grasp why, while there was still coal to be extracted, production would decline. They didn’t understand that it is not physical availability that counts, but the cost of extraction that increases with progressive depletion. It was a concept that Jevons had already understood almost a century before but had not survived in mainstream economics. The case of the US oil peak was similar; peaking was generally ignored by economists, even though Marion King Hubbert had predicted it correctly. All that happened afterwards was attributed to political causes. Both peaks were soon forgotten.

Today, it is global oil production which is peaking. It is something we are all seeing, but it is not politically correct to mention the fact. Peaking is a momentous event, but it hints at a reality that most people would rather ignore: the finiteness of mineral resources. We may well ignore the global peak, too, just as most people ignored the British coal peak of the 1920s and the US oil peak of 1970. Yet, we won’t be able to ignore its effects.

References

Australian Government, the Treasury, 2006 (accessed)
www.treasury.gov.au/documents/1042/HTML/docshell.asp?URL=02_Resource_commodities.asp

Coal Authority, 2006 (accessed) www.coalminingreports.co.uk


Cook, C and Stevenson, J. 1996. The Longman Handbook of Modern British History, 1714-1995. Longman 3rd Edition. London and New York:

DOE 1993, DOE/EIA-0572 Report,

Hubbert, M.K. (1956). Nuclear Energy and the Fossil Fuels. Presented before the Spring Meeting of the Southern District, American Petroleum Institute, Plaza Hotel, San Antonio, Texas, March 7-8-9, 1956

Kirby, M. W., 1977 The British Coalmining Industry, 1870-1946, The Macmillan Press Ltd, London and Birmingham.

Neuman A.M. 1934 Economic Organization of the British Coal Industry; Routledge.

Why Italy?

A portrait of my great-great-grandfather Ferdinando Bardi (1822-?). He fought with Garibaldi in the Italian unification war of 1860 and he was awarded the medals you see in this painting. I can only hope that my ancestor didn't kill too many people in order to deserve these medals but, apart from that, I have been wondering about what led him to fight in that war. Was it because he was paid? Was it because he was seeking adventure? Or was it, really, in the name of  "Italy"? And, in that case, what would he have thought if he could have imagined the present situation in Italy? 

In this post, I am rapidly revisiting the history of the Italian unification on the basis of the concept that everything that exists has a reason to exist and that, therefore, some of the recent political events in Italy, from the persistence of Berlusconi to the rise of the "five stars" movement have their roots in ancient history. I apologize for the brevity of this text on a subject that would require a much more in-depth analysis. But I hope it can be taken at least as a starting point to learn more on this matter.


1. Why Italy?

At school, Italians are told the standard version of the events that led Italy to become a unified state in 1861. It says that Italians fought hard and passionately for the ideal of a unified country. After a number of failed attempts, eventually, a thousand brave volunteers followed General Garibaldi in the fight against the backward and dictatorial Kingdom of Naples. With the help of many Neapolitan patriots, Garibaldi's army triumphed and that led to the unification of Italy into a single state ruled by the wise King of Piedmont. Later on, the Italian army also triumphed against groups of bandits who unsuccessfully tried to resist the unification process in Southern Italy.

However, there exists a different version of the same events that seems to be becoming more popular in Italy in recent times (let's call it the "revisionist" version). It says that the prosperous and civilized Kingdom of Naples was stabbed in the back by the attack of a band of mercenaries led by an adventurer named Giuseppe Garibaldi and paid with the gold of the King of Piedmont. By ruse and treachery, and with the help of British money, Garibaldi succeeded in overcoming the desperate resistance of the Neapolitan army and in ousting the King of Naples out of his legitimate kingdom. Afterward, Neapolitan freedom fighters tried to reinstate their legitimate king, but they were ruthlessly exterminated by Piedmont troops.

These are, of course, extreme descriptions of an ongoing debate about the unification of Italy. But these views illustrate at least one of the many fascinating features of history: how easily it is to project our modern feelings on people and events of the past. Here, both the official and the revisionist version see the unification of Italy in light of feelings that were probably alien to the people who actually lived the event. But the limit of both views is not so much in their forcing those ancient events into modern patterns, but in their tendency of seeing history only from a purely Italian perspective.

Perception of history, more than history itself, shapes people's thoughts and actions. So, if we want to understand events such as the rise and the persistence of Mr. Berlusconi as prime minister and leader of Italy, we should try to understand what led Italy to become what it is today: a unified state. It was, under many respects, an unavoidable outcome of the trends of the time, but not exactly for the reasons we are told in school, nor for those we can sometimes read in terms of the revisionist version. International politics played a fundamental role in the unification as modern research is starting to show (1).


2. The black wave of coal

Starting with the 17th century, Europe started to be engulfed by a black wave. It was a wave of coal, a cheap and abundant source of energy never seen before in history. With coal, there came the industrial revolution, and with it, economic growth and military power. But the great black wave didn't arrive everywhere at the same time. Because of remote geological events, it was found mainly in Northern Europe. So the coal revolution started in Southern Britain and in parallel in Northern France.

It was not strictly necessary for a region to have coal mines to industrialize: the black source of energy could always be imported. Coal was expensive to transport on land but it could be travel easily on water. So, the need for transporting coal was one of the main reasons that led to the development of the European network of waterways that started being common in the 19th century. But there was a problem with areas which were too hot and too dry to have waterways. No waterways meant no coal and no coal meant no industrial revolution. And that, in turn, meant being left behind by the phenomenal economic development created by the availability of coal. Of the Mediterranean regions, only Northern Italy and Catalonia could build waterways. The rest was shut off from the industrial revolution.

This unbalance of economic power was to be the key factor that generated the Italian unification. The Kingdom of Piedmont (officially the "Kingdom of Sardinia") in North-Western Italy, had access to waterways and, in 19th, century it became a military and industrial powerhouse in the Italian peninsula, whereas most of the other states, especially in the south, had remained agricultural economies. This power unbalance was not in itself sufficient to create the Italian unification, but a series of external circumstances made it possible and perhaps unavoidable.  


3.  Mediterranean geopolitics in the 19th century.


Before the industrial revolution, the Mediterranean Sea had been in large part a Turkish lake and, in a smaller part, a backwater of the Spanish Empire. But Turkey and Spain couldn't catch up with the coal revolution: they had neither sufficient coal nor good waterways. With the 19th century, the rise of the Northern European industrial powers had created a rapidly developing power vacuum in the Mediterranean region. Britain, France, Austria, and Russia were all looking South with the idea of carving for themselves a chunk of the declining Turkish Empire (formally, the "Ottoman Empire").

Napoleon had started the fireworks with the invasion of Egypt in 1798. That attempt failed, but it had just postponed the French plans and, in 1830, France invaded Algeria. The Algerians put up a stiff resistance but they received no help from the fading Ottoman Empire and they were overwhelmed by superior firepower and numbers. This time, it was clear that the French were in North Africa to stay.

The fall of Algeria changed the Mediterranean power game. Now, what would prevent the French from carving for themselves a Mediterranean empire? It could have included North Africa from Morocco to Egypt and, why not, also the Kingdom of Naples, another non-industrialized region that could have opposed very little resistance. None of the world powers were in the position of stopping France; not easily, at least. Russia was too far away, Austria was bottled in the Northern Adriatic, and the British were heavily engaged in controlling the Middle East.

It didn't take much effort for British diplomats to see that there was a solution that didn't require direct military intervention. What was needed was a strong, unified Italy. As a state, Italy would remain too weak to challenge the world powers, but it would be strong enough to prevent a French invasion and to resist the attempts of France to dominate what the Italians would see as their country's sphere of influence in North Africa. So, the British interest in Italian unification became a driving force in Italian politics.

That was not the only factor at play in the mid-19th century in the Mediterranean power game, but the British plans were perfectly consistent with those of Piedmont, which aimed at expelling Austria from Northern Italy and expanding in the Italian Peninsula. Even outside Piedmont, Italians remembered very well of the times, a couple of centuries before, when the Italian territory had been little more than a battleground for foreign powers fighting for supremacy. Many in Italy understood that only a unified Italian state could muster enough military power to maintain Italy independent from foreign rule.

There were economic reasons, too. Italians could see that a unified country could get rid of the archaic borders and tariffs, build a streamlined transport infrastructure, and create a single currency to facilitate commerce. Again, a unified state was widely seen as the only way for Italy to fight the threat of foreign domination.


3. The unification of Italy

The converging interests of Britain, Piedmont, and of several movements of ideas in Italy led to the unification of Italy in 1861. It was the result of a series of successful military campaigns and the triumph of the coordinated diplomacies of Piedmont and of Britain. Of the world powers that could oppose unification, Austria was defeated and France was appeased with some land (Savoy and Nice). The other Italian states could not put up a significant resistance; they were peacefully integrated into the new state or they were rapidly swept away. That was the destiny of the Southern "Kingdom of the Two Sicilies" (also known as the "Kingdom of Naples"). It was neither the backward dictatorship nor the prosperous and civilized land described today by different visions of history. Simply, it was economically too weak to survive alone.

For some years after the unification, a stubborn resistance remained active in the inland regions of what had been the Kingdom of Naples, but it was ruthlessly crushed. Then, the newly created Italian state turned out surprisingly resilient. Of course, Italy never was powerful enough to compete with the major powers, but it played its expected role in the Mediterranean region. Italy stopped French attempts to expand in Tunisia and, in 1911, Italy went on to gain a foothold in Northern Africa by defeating the Ottoman Empire and annexing the region that today we call Lybia. That created a buffer state between the spheres of influence of France and Britain in Northern Africa.

For a long time, the alliance between Britain and Italy remained strong; so much that it was referred by Italians as "Bella Fratellanza" ("beautiful brotherhood)". Italy remained a good customer for British coal and a favorite spot for British tourists and expatriates. But things were to change with the end of the Great War.


5. The decline of coal (and of Italy)

As long as Italy could import coal from England, its economy thrived and the alliance with Britain remained strong. But, with the end of the First World War, the British mines started having depletion problems: Britain was going through its "peak coal." In Italy, this event was perceived as a betrayal and Italians simply couldn't understand why Britain wouldn't give them the coal they needed. The result was a generalized distrust that was to turn into hate against the "Perfidious Albion," as the Italian press started to refer to Great Britain in the 1930s.

But insults against the British could not be transformed into the coal Italy needed. The country was starting to behave like a starved beast locked in a cage: it went crazy. According to the old say "whom the gods want to destroy, they first turn mad" in the 1930s the Italian government behaved as if its stated purpose was to destroy the country. A series of wars bankrupted an already crippled economy and the invasion of Ethiopia in 1936 was a hugely expensive campaign that provided little or no gains for Italy, except for the doubtful honor for the King of Italy to gain the title of "Emperor of Ethiopia." The government finished the job with the second world war, where an unprepared Italy was utterly defeated and destroyed.

After the end of the war, Italy managed to rebuild her economy on the basis of crude oil. But the oil crisis that started in the 1970s, was in many ways a repetition of the coal crisis of the 1920s. Without cheap oil, the Italian industrial economy simply cannot survive and this is probably one of the reasons for the streak of craziness that pervades Italian politics nowadays. Fortunately, this time, Italy can't react to the crisis by becoming aggressive, as it happened in the 1930s.


6. Why Italy in the 21st century?

The reason why large and complex political structures, such as national states, exist is because they provide benefits that justify their cost. But all political systems are subjected to what Joseph Tainter calls the "decreasing returns of complexity". With the decline of the resources that created the system, complexity ceases to be an advantage and becomes a burden. The result is normally that rapid decrease in complexity that we call "collapse".

Italy as a unified state is a complex political system that was created because of strategic and economic reasons valid at the time of its creation. A centralized government produced advantages in terms of territorial defense and economic integration that justified its cost. But things have deeply changed in both areas.

First, in the age of superpowers, Italy cannot maintain a competitive military power, not alone, at least. Today, the Italian military system is completely embedded in the North Atlantic Treaty Organization. In terms of foreign policy, Italy is embedded in the European Union and we can reasonably say that Italy does not have an independent foreign policy anymore.

Then, with the growth of the European Union and the birth of the Euro, the Italian government lost the possibility of an independent monetary policy and with it most of its capability of intervening in the national economy. Being part of the World Trade Organization (WTO), then, the Italian government has further limits on what it can do in economic terms.

What is left to the central Italian government is the ability to collect taxes and, indeed, most of the present political debate in Italy is about who should pay taxes, how much, and what these taxes should be used for. Of course, there is a general agreement that taxes should be used for such services as police, schools, roads, courts, hospitals and the like. But the Italian state is a top-heavy and expensive structure. Despite the decline of the national GDP, taxes keep steadily increasing and, today, tax revenues in Italy eat up nearly 45% of Italy's GDP (in the US it is less than 30%) at a cost for Italian citizens of about 500 billion euros (some 650 billion dollars) per year in taxes. Nevertheless, the quality of public services is perceived as declining and Italians are being asked more and more to pay for services that, once, were free. At this point, it is a legitimate question to ask if these same services could not be provided at lower costs (and possibly of better quality) by regional governments; without the burden of a centralized state system.


As usual for governments, the Italian one doesn't know how to cut costs and reform itself. It keeps asking more money to citizens while it dreams of fabulously expensive mega-projects such as a bridge over the strait of Messina, a high-speed rail from Turin to France, and many more. At the same time, the government has been unable to implement even simple gestures such as reducing the privileges of parliament members. That would have changed little in the overall state budget but would have at least sent a signal to Italians that sacrifices were to be shared. No wonder that Italian citizens are angry and confused and that they react with voting patterns at national elections that look confusing to foreigners (and to Italians as well). Events such as the rise of Mr. Grillo's "five-star" movement are the result of these feeling and of the need for a redistribution of the sacrifices that the difficult economic situation imposes.

Are we going to see Italy collapse as a centralized state to give way to regional governments? That doesn't seem to be on the political horizon right now, but it can't be ruled out either, as shown by the diffusion of the "revisionist" view of the Italian unification. What we can say for sure is that the Italian economic crisis is getting deeper and that big changes are looming ahead.


______


1. The notes on the role of Britain in the  Italian unification are based mainly on the book by Eugenio di Rienzo "Il Regno delle due Sicilie e le Potenze Europee" -Rubbettino 2012

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.

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.). 

(Above, the "Scec" local currency developed in Italy)

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”

from Mythodrome by Paula

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.

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".

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.

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