Tag: Oil

Economic Growth as Salvation

On By T. Carlos "Tim" AndersonIn CommentaryLeave a comment
For those of us concerned about socioeconomic trends and their consequences, Robert Gordon’s The Rise and Fall of American Growth is one of the most important books we’ll see in 2016. This blog post is the fifth (and final) in a series that touches upon the issues the book covers: inequality, economic growth, and poverty, among others. Click on links for first, second, third, and fourth posts in series.

 

Wouldn’t it be great if the American economy regained the robust growth that it once had? And wouldn’t it be grand if that economic growth could, to quote Donald Trump, “make America great again”?

According to economist Robert Gordon, it’s not going to happen. Gordon, in The Rise and Fall of American Growth, has one major message that he wants to get across: The great inventions and innovations of the late nineteenth and early twentieth centuries that created the incredible economic growth that in turn drove the standard of living higher in the United States was “a revolution that could only happen once.”

The phenomenal economic growth experienced in this country from 1920-1970 was a perfect storm event that won’t be repeated. Neither a Trump nor Clinton presidency has the power to make an economic golden age return.

According to Gordon, here are the reasons why the economic revolution could only happen once:

*Relatively cheap and available energy stores. Oil became the fossil fuel of choice at the beginning of the twentieth century, fueling incredible economic growth. Today, 75 percent of world energy consumption is yet from fossil fuels. Gasoline is cheap currently, but it’s not as cheap as it used to be, and crude oil extraction is much more difficult than ever before.

*The advantages of America, post-World War I and II. The transfer of gold reserves from Europe to the US and the general lack of territorial devastation in the US helped create conditions for an economic boom.

*Worker productivity skyrockets. New Deal pro-labor regulations (the crucial standardization of the eight-hour workday along with increases in wages), the advent of air-conditioning and improved heating in workplaces, and “continuous learning by doing” forced upon the manufacturing sector during World War II all contributed positively toward productivity. As an example, Henry Ford’s mammoth B-24 bomber plant outside of Ypsilanti, Michigan initially produced seventy-five bombers per month in February 1943. By August 1944, the plant achieved its peak rate of production of 432 bombers per month.

*The plethora of subinventions made possible by electricity and the internal combustible engine. Air-conditioning has already been mentioned; additionally the following made for increased economic growth: public transportation, elevators, and all types of electric and machine tools.

*Widespread use of the assembly line in manufacturing. The nascent American automobile industry adapted the disassembly line from nineteenth century meat packers, and Henry Ford perfected the assembly line for production of his Model T in 1913. Modern commercial manufacturing was born.

*Standardization of manufacturing parts. Already begun in the nineteenth century with gun manufacturing, the standardization of parts allowed for interchangeability and afforded easier assembly and repair of machines. The standardization of seemingly mundane nuts, bolts, and screws in the 1920s was an enormous improvement for industrial efficiency.

*Education boom creates better workers. In 1900, only 10 percent of American youth finished high school. By 1940, the graduation rate rose above 50 percent of the first time ever. Today’s rate of 75 percent has held steady since the early 1970s. The post-WW II GI Bill helped swell American college and university rolls, further creating a more capable and highly skilled workforce.

*Construction of the national highway system. Started in earnest under President Eisenhower in the 1950s, and mostly completed by 1972, the US interstate highway system afforded more versatile and efficient transport for American businesses and consumers.

These revolutionary innovations and improvements, according to Gordon, could only happen once. Current and future innovations and improvements are not ruled out; they simply don’t and won’t have the impact on the rate of economic growth as did the revolutionary ones. The rate of economic growth in the US since 1980 is about 1.5 percent. During the 1960s and ’70s, the tail end of the boom, it averaged 3 percent. It’s time we replaced the term economic growth with the more appropriate term economic development, and its accompanying emphasis of quality over quantity.

Monarchs were the guardians of salvation – a strictly earthly variety for a chosen few – in ancient days. The church and its priests succeeded monarchs as the purveyors of salvation – mostly heavenly – during medieval ages. Since the Industrial Revolution, economic growth has brought, and delivered, salvation back to earth. Economic growth has provided food, clothing, housing, goods, and purposeful employment to millions, liberating many of these from poverty. It also has created a small class of economic elites whose financial holdings are historically gargantuan.

But how much is enough? The days of exponential economic growth are over. If we’d truly like to make America great again, future greatness will be determined more so by economic development that favors many, rather than a status-quo economic system (going on thirty-five years) that favors the elite.

 

 

This blog and website are representative of the views expressed in my book Just a Little Bit More: The Culture of Excess and the Fate of the Common Good. Distributed by ACTA Publications (Chicago), JaLBM is available on Amazon as a paperback and an ebook. It’s also available on Nook and iBooks/iTunes, and at the website of Blue Ocotillo Publishing.

isbn 9780991532827

If you’re a member of a faith community – Christian, Jewish, Muslim, Buddhist, or other – consider a book study series of Just a Little Bit More. The full-length book (257 pgs.) is intended for engaged readers, whereas the Summary Version and Study Guide (52 pgs.) is intended for readers desiring a quick overview of the work. It also contains discussion questions at the end of all eight chapter summaries.

Readers of both books can join together for study, conversation, and subsequent action in support of the common good.

The Spanish version of the Summary Version and Study Guide will be available in September 2016. ¡Que Bueno!

¡El librito de JaLBM – llamado Solo un Poco Más – saldrá este Septiembre de 2016!

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Economic Growth: The Good, the Bad, and the Ugly

On By T. Carlos "Tim" AndersonIn Commentary11 Comments

In this current day when congressional Republicans and Democrats don’t agree on much of anything, there is one thing that creates a rare kum bay ya moment of unity for the two groups: economic growth. Don’t get me wrong – healthy economic growth provides jobs, creates necessary goods, and keeps the majority of us fed, clothed, and sheltered. Healthy economic growth is a many-splendored thing! However, for reasons I will explain below, we tend to become fixated with economic growth to the point where we proclaim it our societal salvation: the elixir to ameliorate all social problems from unemployment to social program funding deficits. To the contrary, I propose that the unexamined pursuit of economic growth in a finite world only makes our problems worse and hinders us from seeking and implementing actual solutions.

Let’s cut to the chase. As the Depression eventually gave way to post-World War II, vibrant economic growth in America lifted many out of poverty and pretax incomes between the richest and poorest Americans narrowed. Economic growth (annual GDP) hummed along at 4% and 5% yearly rates.  The US government published the first national poverty rate – 22.4% – in 1959, a significant improvement over the poverty rate estimates of 40-60% during the Depression. One of the main factors contributing to this strong growth was cheap and plentiful oil. As US production of oil was not able to keep up with demand, reliance upon cheap and plentiful foreign oil increased in the 1960s. The OPEC oil embargo of 1973 changed all that. Economic growth decreased to 3% during the 1970s and ’80s, and for the fifteen years of the new century it has hovered around 2%. One of the main factors for the decrease of the growth rate is the increasing price of energy due to the difficult and costly process of extracting energy sources.

Have you ever heard of the term EROEI? It’s an acronym for energy returns on energy invested. Back in the days of Rockefeller and the early American oil boom, EROEI was 100:1, meaning the energy equivalent of one barrel of oil input produced one-hundred barrels output. The area surrounding Titusville, Pennsylvania attracted oil drillers in the 1860s because of the ubiquity of oil springs – little creeks of oil! Those were, as they say, the good old days. Today EROEI for oil is about 15:1. Extracting petroleum from the bottom of the North Atlantic, for example, can be classified as an engineering miracle – albeit an expensive and extremely complex one. As the Keystone XL pipeline continues to be a point of contention in US Congress and American society, check if the sites from which you source information actually report on the EROEI of the Canadian tar sands. I’ve yet to hear a mainstream news organization mention EROEI. Some of the tar sands have a ratio as low as 3:2. Joseph Tainter and Tad Patzek, in their excellent treatise on our current energy dilemma, Drilling Down (Springer, 2012), tell us that to power a complex modern society a net energy ratio of at least 5:1 is required. Yes, the completion and implementation of the pipeline will create jobs – but at what cost? I’ve not even mentioned the accompanying pollution and strains on water supplies that the production of these energy sources entails, and the additional release of carbon into the atmosphere upon their eventual consumption and use . . .

To complicate matters, the Saudis are flooding the market with – just like the good old days – cheap oil. As I write this post in January 2015, gasoline prices in America are hitting long-time lows as the price of oil crashes the $50/barrel barrier for the first time since 2005. And, on cue, economic growth is up. Some are hoping (reports come out at the end of January) for a 5% growth rate – just like the good old days – for the fourth quarter of 2014. Will it last? Has the American economy made its long-awaited comeback to 1950s’ era growth? We’d be foolish to expect a return to what used to be. Cheap, high quality energy – coal powering the industrial era before oil became dominant at the turn of the 20th century – provides strong economic growth and is the essential foundation of the highly advanced society of which we are accustomed. A gallon of gasoline has the energy equivalent of four hundred person hours of work. Giddy up and then some!

So, YES, economic growth is a good thing. BUT, the good and strong growth we’ve experienced has been based principally on a cheap energy source. The fossil fuels coal and petroleum, essentially millions of years of chemically stored sunlight, have made possible a 200-year run of high-phase energy gain. Social commentator Richard Hienberg says we’ve gotten accustomed to a “perpetual growth machine.” For those who think the next high-yield energy source – methane hydrate is currently being touted – will pick up the slack when fossil fuels run their inevitable course of completion, I ask: Is it not narcissistic and irresponsible to think we have to continue on the same trajectory of consumption we’ve been on for the past 200 years? Financial advisor and writer Paul Kedrosky wisely opines: “I want to believe in innovation and its possibilities, but I am more thoroughly convinced of entropy.” In other words, the unlimited growth machine can’t and won’t last forever.

Australian economist Clive Hamilton calls our commitment to unlimited growth above all other things a fetish, “an object worshipped for its magical powers.” Unlimited growth is known by another name: cancer. The defining characteristic of a cancer cell is its inability to self-regulate. Healthy cells follow an established cycle of division, multiplication, and then, inevitably, death. Cancer cells are interested in only one thing: unlimited growth. Similarly, over-commitment to economic growth makes us susceptible to bubbles – the 1990s’ dot.com and the 2000s’ housing bubbles being the most recent examples. Economic bubbles are like cancer cells – they don’t know when to stop and they damage the common good.

What I’d really like to hear from a politician – a president, no less – is talk about a steady state economy. In this day and age, an elected leader – Republican, Democrat, or independent – tempts political death if he or she were to speak common sense and encourage steady state economics. That’s why it’s left up to authors and bloggers like me to do it.

My next blog post will cover steady state economy. Until then –

T. Carlos Anderson

And, in case you’re wondering, the EROEI of wind and solar energies are 20:1 and 13:2, respectively.

 

My book, Just a Little Bit More: The Culture of Excess and the Fate of the Common Good, is available at http://www.blueocotillo.com and wherever books and ebooks are sold, including Amazon.