We are not running out of energy; capitalism is.

Stephen Hinton 2016, photo Maj-Lis Koivisto

Most of the energy used in the world economy comes from non-renewable sources. Analysts fear that the expanding extraction of energy will not keep up with the expanding economy and …well… the the economy will deflate like a balloon and everyone will be worse off. Worst for the poor who have very little already. Or they fear that the climate will collapse because we are pouring too much carbon dioxide into it just to stay alive. Either way, the economy is so dependent on energy, they say, that we will go into a period of recessions and undermine peace is many ways. Not strictly true in my opinion  that there is too little energy: there is enough energy to keep everyone fed and housed within planetary boundaries. It’s just that there is not enough to keep capitalism going. And it is the failings of capitalism that we need to address if we are to make this peace project real, not energy supplies.

This is the rub: most of the energy used in the global economy is not used directly to produce food for people or to house them. It is used to extract economic value from business operations, which is not, as I will attempt to explain, exactly the same thing.

The use of energy in the global economy is about everything other than efficient provision of essential services. To illustrate the point, research by Andreas Malm at Lund University uncovered correspondence from James Watt, the inventor of the steam engine, wondering how he could sell his engines to factory owners when driving factories with coal was far more expensive and less efficient than using water-power ( by the way more environmentally friendly).

It turns out he didn’t have to worry: factory owners snapped up the machines because they could relocate factories to areas where there were potential workers. They could  use the threat of moving to keep wages down. Put crudely, steam power allowed better exploitation of workers.

If you are going to go through the trouble of setting up and owning a factory, you want to see it making money for you. Big investments like that need deep pockets to start with and a good few years to pay off, so anything that can keep wages down and productivity up is a good thing for you. In real terms, (kWh per product from raw material to in the hands of the customer) production does not need to be  efficient – in energy terms – if it is efficient in monetary terms, ROI, return on investment.

It was at this same time in history Adam Smith was writing to friends bemoaning that workers would rather make their own shoes (took them half a day) and laze around, rather than working in a factory so they could buy shoes (took them three days). The thing to aim for, then, was to get workers into the factories and keep them there and keep them from producing their own stuff.

Fast forward to today; for every calorie of food you eat, ten or more calories of fossil fuel are needed to get it onto your plate. That is vast inefficiency in use of energy. But the system gives a good return on investment. And food is anyway so comparatively cheap,  there is no way you could produce your own alone. The state is complicit in this. At least in Sweden if you run a market garden you get taxed on the food you take for yourself from your operation. So you have to pay the state for the privilege of eating your own food.

Today, everything is tied up in supply chains, so much so that small market gardeners (the ones who pay tax for eating their own food) have difficulty finding customers. Supply chains are a giant system of factories, trucks, containers and ships, feeding distribution centers that feed big box stores that you jump into your car to drive to. These giant chains are good for capitalism. You can use giant factories to make tons of goods that you know , with mass marketing, will be snapped up in big box stores generating not just a margin for you to pay your bills, but a surplus return on your investment.

From Micheal Roberts Blog: The next recession. G7 rate of profit.

There is more than one problem with the whole set-up. To start with, you need to invest a lot of money ring-fencing your business from competitors. For another you need to do a lot of marketing to get people to buy your stuff. As everyone gets better at competing profits fall. In fact, profits have been falling all the time as you can see from the diagrams above and below for the UK.

From Micheal Roberts: UK rate of profit since Marx

Desperate times call for desperate measures so cutting wages is always an option. And that is how capitalism has responded. Workers are getting less and less of the value of the products. This diagram below shows developments in Germany.

From Micheal Roberts blog. Germany, real wages vs real GDP/Capita

If workers are getting less money in their pockets they will have less money to buy your factory products. And so we have almost turned full circle from Adam Smith. It is getting so you might as well stay at home and make your own shoes because 1) there is little work available and 2) you are going to have to work many days to afford those shoes.

We are not quite there. And most people, thanks to modern education, can hardly tie their shoelaces let alone make their own stuff. Still, the lack of energy to keep the whole system moving is going to be a crisis of capitalism. It does not have to be a crisis of humanity. Together we can find ways out of the mess. But we have to be prepared to ditch most of the main ideas of capitalism.

One great thinker on this topic is George Monbiot whose latest book, Out of the Wreckage, addresses just this.

My personal suggestion is to look to commoning.

 

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