MuseLetter #248 / January 2013 by Richard Heinberg

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This first Museletter of 2013 is in two parts. First up is the conclusion of the address which I gave to the International Conference on Sustainability, Transition and Culture Change in November. Second are musings on the very topical issue of the “fiscal cliff”. As readers will be only too aware, the last ditch compromise doesn’t address the real crisis. Best wishes to you for the new year. Richard

Conflict and Change in the Era of Economic Decline: Part 2

A theory of change for a century of crisis

The following is the final part of an essay which was originally an address to the International Conference on Sustainability, Transition and Culture Change, November 16, 2012, by Richard Heinberg. For Part 1 see Museletter #247.
If groups seeking to make the post-carbon transition go more smoothly and equitably are to have much hope of success, they need a sound strategy grounded in a realistic theory of change. Here, briefly, is a theory of change that makes sense to me.
For the past four decades, since the release of Limits to Growth, there have been many scattered efforts to develop alternatives to our current fossil-fueled, growth-based industrial paradigm. These include renewable energy systems; local, organic, and permaculture food systems; urban design movements seeking to reduce the dominance of the automobile in our built environment; architectural programs with the goal of designing buildings that require no external energy input and that are constructed using renewable and recycled materials; alternative currencies not attached to interest-bearing debt, as well as alternative banking models; and alternative economic indicators that take account of social and environmental factors. While such efforts have achieved some small degree of implementation, varying significantly from place to place around the globe, they have generally failed to substantially reduce reliance on fossil fuels, to blunt the overall momentum of society toward increased consumption of a wide range of renewable and non-renewable materials, to reduce financial instability, or to curtail profound environmental impacts including climate change, loss of biodiversity and topsoil, and more.
What will it take for the conservers, localizers, and de-growthers to win? They have a lot stacked against them. The interests promoting a continuation of growth-as-usual are powerful and have spent decades honing advertising and public relations messages whose proliferation is subsidized by hundreds of billions of dollars annually. These interests have captured the allegiance of nearly every elected official in the world. Most ordinary folks are easily swept along because they want more and better jobs, cheaper gasoline, more flat-screen TVs, and all the other perks that come with fossil-fueled economic expansion.
The main downside to growth-as-usual is that it is unsustainable: it is destined to end in depletion of resources, economic unraveling, and environmental catastrophe. The hope of the conservers, localizers, and de-growthers must therefore be that if the growth-as-usual bandwagon cannot be turned back with persuasion, its inevitable crash will occur in increments, so that each incremental step-down in industrial output can be seized upon as an opportunity to demonstrate the need for alternatives and to promote them.
Advocates of the post-carbon crisis theory of change can point to several useful historic examples. One is the transformation of Cuba’s food system during the Special Period in the 1990s. The collapse of the Soviet Union and the resulting disappearance of subsidized Soviet oil shipments set the stage with a crisis. Several Cuban agronomists had previously advocated for more localized and organic agriculture, to no avail; but when the country was suddenly threatened with starvation, they were called upon to redesign the entire food system. The moral of the story: advocates of a post-carbon economy are likely to make limited headway during times of cheap energy and rapid economic growth, yet when push comes to shove obstacles may disappear. The Cuban example is encouraging, but it is often called into question on the grounds that what worked on an island with an authoritarian government might not work so well in a large, pluralistic democracy such as the U.S.
Paul Gilding, in his book The Great Disruption, proposes World War II as an illustration of the crisis-led theory of change: “[O]n the objective facts, Hitler represented a clear and undeniable threat long before action was taken to defeat him,” writes Gilding. “Famously, Churchill and others had long warned of this threat and been largely ignored or even ridiculed. Society remained in denial, preferring not to recognize the threat. This was because denial avoided full acceptance and what that meant—war and a strong change to the status quo. Yet once . . . denial ended, the response was swift and dramatic. Things change almost overnight. Without the benefit of a retrospective view, it would be much harder to predict when exactly the denial of Hitler’s threat would end. So it’s also hard to predict when the moment will come [when the need for action on climate change is finally recognized], even though in hindsight it will be ‘obvious.’”
Post-Fukushima Japan offers yet another example. In the wake of catastrophic nuclear plant meltdowns, the Japanese people have insisted that other reactors be idled; today only two of the nation’s atomic power plants are operating. That has left Japan with substantially less electricity than normal—enough of a shortfall that economic collapse could have resulted. Instead, businesses and households have slashed energy use, driven by a collective ethical imperative. PV systems have appeared on rooftops across the nation.
The Kansas town of Greensburg was flattened by a tornado in May 2007, but the residents—rather than drifting away or merely trying to rebuild what they had—decided instead to use insurance and government disaster aid money to build what they are calling “America’s greenest community,” emphasizing energy efficiency and using 100 percent renewable energy.
Economist Milton Friedman may have laid down a manifesto for crisis-led theories of change when he wrote: “Only a crisis—actual or perceived—produces real change. When the crisis occurs, the actions that are taken depend upon the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.” In this brief passage, Friedman not only sums up the theory nicely, but also forces us to contemplate its dark side. In her book The Shock Doctrine: The Rise of Disaster Capitalism, Naomi Klein describes how Friedman and other neoliberal economists used crisis after crisis, beginning in the 1970s, as opportunities to undermine democracy and privatize institutions and infrastructure across the world. Somehow, the opportunities presented by crisis need to be seized first by citizens and communities to build local, low-carbon production and support infrastructure.
The post-carbon theory of change doesn’t seek to expedite or exacerbate crisis; instead, it encourages building resilience into societal systems in order to minimize the trauma of rapid change. Resilience is often defined as “the ability to absorb shocks, reorganize, and continue functioning.” Shocks are clearly on the way, so we should be doing what we can now to build local inventories and to disperse the control points for critical systems. We should neither simply wait around for crisis to hit, or hope for crisis as an opportunity to alter the status quo; rather, we should do as much as possible to conserve ecosystems and to re-localize production and trade now so as to minimize the crisis—which, after all, could potentially prove overwhelming for both humanity and non-human nature. If and when crisis arrives, such preparations will be crucial in guiding response efforts and providing a basis for resisting “disaster capitalism.”
What’s the likelihood of success? It depends partly on how we define the term in this context. Many people speak of “solving” problems like climate change, as though we could make a modest investment in new technology and then carry on living essentially as we are. Implicit in the post-carbon crisis theory of change is the understanding that the way we are living now is at the heart of our problem. Success could therefore be better defined in terms of minimizing human suffering and ecological disruption as we adapt toward a very different mode of existence characterized by greatly reduced energy and materials consumption.
Some self-proclaimed “doomers” have concluded that crisis will overwhelm society no matter what we do. Many have joined the “prepper” movement, stockpiling guns and canned goods in hopes of maintaining their own households as the rest of the world comes to resemble Cormac McCarthy’s The Road. Other doomers are convinced that human extinction is inevitable and that efforts to prevent that outcome are just so much wasted motion.
I do not share either outlook. Of course there is no guarantee that crisis will open opportunities for sensible adaptation and not simply wallop us, leaving humanity and nature wounded and reeling. But for those who understand what’s coming to simply give up efforts to protect nature and humanity before the going gets tough seems premature at best. There could hardly be more at stake; therefore extraordinary levels of effort and extreme persistence would appear justified if not morally mandatory. The post-carbon crisis theory of change may appear to be a strategy born of desperation. But we should hold open the possibility that it will prove surprisingly apt and effective—to the extent that we have invested our best efforts.
As we build resilience and prepare to make the most of the opportunities that come our way, it’s important that we celebrate the improvements in quality of life that come with reducing our dependency on consumption, advertising, automobiles, and all the other life-smothering accoutrements of our crumbling industrial existence. Let’s also celebrate our adaptability in times of crisis, and continually remind one another that small committed groups sometimes do make history—just as history makes them.
Giant bar chart image via shutterstock

Fiscal Cliff: Nowhere to go But Down

Most folks in Washington and on Wall Street are desperate to avoid the fiscal cliff. That’s because the automatic spending cuts and tax increases that would take effect if we go over the edge would mean an end to recovery and a resumption of economic contraction. But the only way to steer clear of the cliff is for the President and Congress to agree on somewhat smaller spending cuts and tax increases that would substantially reduce federal deficits over time. The assumption all around is that deficits are unsustainable, but we can still have economic growth if we rein them in.
But what if, as I have argued in my book The End of Growth (and as Canadian economist Jeff Rubin explains in his book Flatline, and as U.S. economist Robert Gordon speculates in his paper “Is U.S. Economic Growth Over?”), the nation’s ability to expand its economy has effectively dissipated? In the early-to-mid 20th century, cheap oil and electrification fueled rapid growth of manufacturing and trade, but that was a historic anomaly that economists and policy makers mistakenly assumed was the permanent new normal.
Since the 1970s, growth has been maintained to an ever-greater degree simply by borrowing. For most of these past three to four decades, rising consumer debt was the engine: households took on bigger mortgages, higher credit card balances, larger student loans, and steeper home equity lines of credit in order to pay for more consumption—and rising consumption meant a growing economy. During this period, debt rose at three times the rate of GDP growth. As debt ballooned, the financial industry increased in size relative to manufacturing, agriculture, and the other components of the economy. The financial industry got rich, bought Congress, deregulated itself, and started blowing bubbles in order to milk the system for ever more extravagant profits.
The most recent and by far the biggest of those bubbles was of course the housing bubble of the last decade; when it burst in 2007-2008, households lost trillions in wealth. Americans no longer had the ability to increase their indebtedness (in many cases they couldn’t make payments on existing debt, and banks didn’t want to loan them more). Consumption plummeted. The U.S. economy started shrinking.
Since 2008 Federal Reserve actions have forestalled a banking crisis, while government deficit spending (initially via stimulus programs) has generated a faux-recovery. Most new debt entering the system has been government debt. Federal borrowing, at a rate of about $100 billion a month, has kept the economy on a drip-feed of new money, preventing a collapse of consumption, a disappearance of jobs, and the sort of general self-reinforcing contraction that we got a strong taste of in late 2008 and early 2009.
It’s clear that if we go over the fiscal cliff contraction will resume soon and sharply. But what if we go the gentler route? The hope is that, as government reduces deficit spending, private enterprise and household consumption will resume their historic roles as generators of growth. But (if analysts like me are right) that’s just not going to happen. We’ve reached the limits of what private debt can do for us, and there’s no other route to increasing consumption. Moreover, it’s becoming plain that our existing rates of consumption are undermining the planet’s basic life-support systems and we need to back off the accelerator if we are to leave intact ecosystems to provide for future generations.
So what should we do? The first and most important thing is to clarify our aims. The presumptive goal of policy makers is to return to our “normal” condition of growth. But in fact the key thing to do right now is to recognize that growth is over. It was a temporary and anomalous condition that cannot be extended into the future. That doesn’t mean it’s the end of the world. But it does mean we will have to abandon economic thinking that sees growth as inevitable, normal, and essential. We will need new and different economic strategies and ways of measuring progress over the next few years and decades as we transition back to the true historically normal condition of almost-zero growth—different banking models, a less globalized trade regime, and more locally-based cooperative enterprises. Along the way we will have to shed unsustainable debt burdens through a massive, organized jubilee if we are to avoid years of default and decline.
If we recognize the inevitability of this historic moment and embrace a return to an economy running on local enterprise rather than centralized and globalized debt-driven madness, there will be winners and losers (as there always are during moments of great social and economic change), but most people will find themselves better off in ways that really count in the end.
The fiscal cliff may be seen in retrospect as a driver of leadership and adaptive genius if we take it as an opportunity to examine our assumptions. Otherwise it’s a problem without a solution, a game of chicken in which nearly everyone will lose.