FROM PEAK OIL TO PEAK CIVILIZATION: The Travails of Our Fairy Tale Political Economy

Necessitous men are not free men. People who are hungry and out of a job are the stuff of which dictatorships are made. In our day these economic truths have become accepted as self-evident. We have accepted, so to speak, a second Bill of Rights under which a new basis of security and prosperity can be established for all, regardless of station, race, or creed. _____Franklin D. Roosevelt

When I set out on my career, in the 1970s, I was pretty much a “run-of-the-mill” (Kuhn’s “normal science”) resource economist, with a bit of an eco-systems bent. Many of us were waiting on a “paradigm shift” that we felt would automatically emerge from inherent resource and technological limitations. However, like Becket’s bums Waiting for Godot), it never came. How naive we were, for without exponential growth (even if fake), the enormous slices of the pie that oligarchs cut for themselves would be just too obvious. Rather than our expected shift to resource and societal reality, economics fell under the spell of a retrograde paradigm rooted in ancient and extremely ideological proclivities. Under the confusing label of NEOLIBERALISM (more like neofeudalism), a small cult of anti-government economists, abundantly funded by global oligarchs, captured everything from prestigious academic units and thinks tanks to legislative, executive, and judicial branches of government. Reasoning that merely alluded to the Limits to Growth and the need for progressive political interventions were rendered completely heretical. It amounted to the joke, “how many economists does it take to change a light-bulb? None, the market will take care of it”. Yet, the worse part of these free-market fairy tales, is that they provided a smoke screen for an increasingly rigged economy that actually destroyed labor markets, promoted monopoly power, and made most of us debt serfs, while generally pandering to predators.

Energy Policy was Never Enough

Meanwhile, we semi-brainwashed minions struggled with devices to internalize the externalities of our myopic markets and to somehow price “unpriced values” (e.g. a non-disruptive energy transition). Past transitions (from wood to coal and coal to oil) took about 50 years each, even with a substantial price advantage tail wind. We fought the new ideological headwinds with items like a wellhead tax on oil, or other proposals to extend the shadow of the future. And, we pissed-off a number of folks when we later starting calling our 100 dollars per a barrel bare minimum (needed to incentivize alternative energy technologies), the “Ben Laden Price” (too cute perhaps). You see he maintained that the US had stolen Saudi oil, especially when it paid them 25 cents per barrel for decades, and oddly enough he came up with about the same number.

Our “shadow pricing” efforts were degraded to mostly ill-fated “windfall taxing” proposals. But, we really rubbed oligarchs the wrong way (to no avail) when we labeled our military misadventures as indirect subsidies and a mammoth boondoggle for oil cartels; not to mention welfare for the Military Industrial Complex. Hence, oil remains one the most heavily subsidized industry in US history. Moreover, the US’s gradual loss of the Commanding Heights and the associated drag of an over-militarized empire partially explain how our economy became a total fairy tale. In particular our current game of inflating existing assets, building galactic debt bubbles, and extracting rents (unproductive wealth) from the pockets of future generations are indirect results of our extraordinary efforts to keep the corpse of our carbon-based economy on display. These machinations have, in turn, engendered an even more parasitic economy. In a curious way the masterbaters of the universe accepted limitations to the growth, but only in the dwindling real economy. Yet, they intensified their efforts toward building monstrous financial Ponzi schemes, and to accelerate their proliferation of “phantom wealth”.

Financial and geopolitical shenanigans were also mutually-causal with a protracted commitment to dwindling oil supplies and further retarded the transition to a lower carbon future. Hapless wildcatters and mother-frackers are still inspired to chase after anything that even smells like oil, and then leave the tax payers to clean up the mess. Consider the example of the astronomically subsidized (coming and going) Canadian Oil Sands. They are not actually oil and they are nearly a net energy loser, even in the current surface strip-mining configuration. The in-situ reserves far below ground could require twice as much energy to extract than they will ever yield. Plus, the “Tar Sands” have an even dirtier little secret; they need added hydrogen in the process of becoming oil. This hydrogen comes from expensive supplies of natural gas, a perfectly good and cleaner burning fuel source in and of itself. One wonk referred to reverse alchemy as “turning gold into shit”. Furthermore, just the processing of the sands produces nearly a third more “greenhouse gases” (i.e. climate altering) than standard oil production processes.

As oil loses its allure, the great American debt machine, aided and abetted by banking cartels and corrupt politicians (in both parties) is fully primed to continue creating wealth literally out of thin air. The global financial crisis that came to public attention in 2007 was never really allowed to work itself out, and emergency “zero interest rates” as well as “quantitative easing” are becoming permanent fixtures. Meanwhile, new fairy tale castles (with attached “unicorn” farms) are popping up across the landscape. The new instant oligarchs are employing artificial intelligence (AI) to extract our very souls, pulverize them into digital dust, and then give us loans to buy them back and/or attempt to escape our cohort cages. Not to mention, they are the channeling a huge chunk of society into the “precariat” (precariously employed proletariat) or worse into the demagogue fodder of the “irrelevant class”. In the process, we are adding a number of more perilous peaks amid the downward slope of cheap oil.

A Peek at a Range of Peaks

If we can see a bit beyond the fairy tales, we might see that our cancerous political economy now confronts us with the most mountainous region we have ever faced. It is important to point out that the notion of peak merely implies a the half way point in the depletion of a vital resource. However, once past the summit the downhill pace of decline obviously quickens dramatically and often leads to cataclysmic consequences. Moreover, the complex interaction of the various peaks amplifies distortions and greatly aggravate the level of social as well as financial destruction. Cascading effects, amid our exceedingly “brittle” institutions, rapidly overwhelm the residual “resiliency” of the entire system of civilization. These peaks include, but are not necessarily limited to the following:

1. Declining supplies of cheap and clean energy required to fuel the sprawling, auto-addicted suburbs in search of cities, or to drive new waves of industrial expansion globally, amid a mounting climate catastrophe (peak carbon);

2. Hyper-leveraged credit and default systems, mark to magic accounting, and massive transfers of debt from private to the public institutions, amid astronomical levels sovereign liability (peak finance);

3. Over-capacity and widespread redundancy amid accelerating automation and the rise of precarious employment systems (peak work);

4. Imperial over-reach and decline signaling a “hegemonic transition” to non-democratic states amid the widespread rise of authoritarian leadership (peak democracy);

5. Over-reliance upon mythical beliefs systems and pseudo scientism amid widespread corruption, inequality, and a general restoration of medieval oligarchic arrangements (peak enlightenment);

6. Declining societal integration amid climate induced mass migrations, and social media algorithms that magnify hate and fear. Plus, the rise of populist demagogues that exploit these fissures, fueling xenophobia, misogyny, and virulent nationalism (peak community); and,

7. Proliferation of weapons of mass extinction and the further financialization of conflict amid the engineering of perpetual warfare and the widespread militarization of society (peak war).

If these do not seem damn daunting, then you need to check your meds. However, the rejection of the fumbling fascism of Donald Trump and the continued health and financial crises provide a chance, albeit a slim one, to begin some relatively radical experiments.

Let Us Get Real

We face real crises and it is high time that we extricate ourselves form our horribly fake economy. It would be nice if we had an economics profession that fully accepted the science of complex adaptive systems, rather than maintaining their magical mystery tour. It would be exceedingly grand if their macroeconomics prognostications sought to include (endogenize) the overwhelming influence of money and banking as well as the social implications of our fraudulent and hyper-financialized society (note: and ). But we cannot wait for them to come around. Mainstream economists have proven themselves worse than recalcitrant in defense of their mythology. Our leaders (corporate as well as governmental) need to ignore politics and punditry and start experimenting widely and wildly with systems which enhance the “resiliency” of our economy in the face of exponentially increasing turbulence. Of course, anarcho-capitalists and uniformed citizens will label any type of intervention socialism. Yet, since our current system only maintains competition and free enterprise for the poor, we should ignore them as well. Banking and corporate oligarchs have hidden behind the cloche of fake libertarianism and the myth of the “self-made man” long enough.

Joe Biden is no FDR, but he might at least realize that history has placed him at a critical turning point. Even Roosevelt could not achieve passage of his Economic Bill of Right; however, he surrounded himself with mad (social) scientists and encouraged the testing of numerous devices to enhance the distribution of prosperity and a less tumultuous functioning of the economic eco-system. Moreover, FDR was well aware of the consequences for our larger experiment with democracy if he did not try to develop a more equitable society.

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We cannot await the passage of a Green New Deal. We can, however, start chipping-away at our fairy tale economy in fairly short order (as in executive order). For example, before the current crises subside, we will probably need a new “Works Progress Administration” pursing multiple projects (installing solar panels as well as repairing our crumpling infrastructure). Like the GI Bill, service to the nation could earn rewards, such as funding for college or help in buying a home, as well as subsidized technical training. We could immediately begin such rewards for our “first responders”, including non-police social services along with healthcare workers.

These efforts might be trivial in comparison to the threats we face, however, once we begin to start experimenting, bolder devices may emerge. Public banking (via post offices) and interest free and/or non-fiat currencies (e.g. Lincoln’s “Greenbacks” of JFK’s Silver Certificates) could also be accomplished with executive orders. Furthermore, the independence of the Federal Reserve (little more governmental than the Federal Express) is more a matter of custom than law, and it is past time to review its charter. Likewise, the “too big to fail banks” are completely illogical by any economic or practical theory. We should carefully evaluate their speculative and “self-securitized” excesses before we even begin to consider offering such unparalleled protections. Something like the Glass-Steagall Act (which erected a firewall between investment and commercial banking) needs to resurrected. The revolving door between bankers and regulators must end. The various “shadow banking” activities (especially hedge and private equity funds) should never even be considered for relief as long as they insist on remaining unregulated. Investigations like the eye opening Pujo Commission should be a regular occurrence and lead to direct actions. Our penchant for perpetuating our fairy tale political economy goes way beyond “voodoo economics”, it is like a neutron bomb that leaves the oligarchy intact while destroying everything else. The oligarchs of the last Great Depression referred to FDR as a “traitor to his class”. To me this was a good thing and is infinitely better than being a traitor to humanity. Carpe diem President Biden and Secretary Yellen.

Gregory A. Daneke, Professor Emeritus, School of Business, Arizona State. Other teaching posts: Michigan & Stanford. Gov. service: GAO, DOE, and White House.

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