The Productivity Trap

Photo by Homa Appliances on Unsplash

Labor productivity has nothing to do with labor. It was rarely a question of an average worker devising a clever way how to make more widgets per hour. Instead, productivity gains made during the past two centuries were mostly coming from machines producing stuff faster and replacing more and more workers. (Thereby making it appear as if an average worker who could keep their job suddenly became able to produce ten times as before.) As long as energy and raw materials — needed to build and operate those machines — were cheap, this approach predictably resulted in higher profits, ultimately replacing almost all highly skilled manual labor with automatic production lines and robots. This trend is about to end though.

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Mainstream economists, mired in their fantasy world populated with infinite GDP growth, monetary theories, interest rates and stock markets are wholly unequipped to see what’s coming. As the energy cost of energy production keeps rising, using more electricity or fossil fuels to increase labor productivity will soon become impossible. The process, in economic terms, can be described by the extraction of resources becoming more and more expensive with each passing year for producers. Afraid of not being able to sell their commodities at a high enough price to sustain operations, mining companies began to defer new investments, and turned towards buying up each other’s assets instead. The lack of investment in resource extraction — while being an awesome news for conserving Nature — however, has a broad implication on everything we do. 

To make matters worse, almost all resource extraction activities require fossil fuels — from mining lithium, copper or nickel, to refine said metals and to shape them into solar panels or electric vehicles. The energy density of coal oil and gas, together with the high heat and carbon atoms they provide for the necessary chemical reactions to take place, simply cannot be replaced with electricity, not at any meaningful scale at least (1). Sorry, but no carbon — no industry. The steady rise of energy demand when it comes to fossil fuels has thus sounded the death knell to the year-over-year growth in labor productivity — in every area of the economy. The ever-increasing amount of drilling, shoveling, piping, refining, water pumping etc. needed to keep the same amount of coal oil and gas flowing to the market, have started to cannibalize energy which otherwise could’ve been used elsewhere. Again, viewed through a neoclassical economics lens, none of this seems to be problematic. ‘We just need more funds, and all of our energy woes will be solved! And if not, then who cares, we just outsource these activities and become a service economy of lawyers and investment firms, and buy everything we need on the market.’

While this might sound convincing, and can even make GDP statistics look great, the high salary earned by a corporate lawyer has very little to do with real productivity gains. You see, at the end of the day, lawyers still spend their money on real stuff: real cars, real houses, real gadgets—made from real resources and by expending real energy. As more and more energy gets diverted to keep up the extraction of fossil fuels and minerals on a global level, though, the ‘real’ economy turning these resources into stuff will find itself in an ever fiercer competition for energy. Permits to access the grid, for example, are already denied in many cases. This can only lead to one thing: shortages and rising prices. Everywhere.

Funneling more money into the economy thus does not solve a thing. It just fuels inflation at home, and speeds up resource drawdown elsewhere.

A quick glance at the wind and solar power industry tells it all. You see, “renewables” are not the slightest bit renewable: they are just another material intensive way to convert sunlight and wind into electricity… And those materials still come from a fossil fuel powered pipeline of mines, smelters, cement kilns, cargo ships, trucks and cranes. It is exactly this high material and fossil fuel footprint which makes them a losing proposition when it comes to the “energy transition”. To make matters worse still, ore grades (or the ratio of metal to rocks in mines) are falling as rich deposits deplete and get increasingly replaced with ever poorer ones. As a result metal production, too, (not just fossil fuels) will require more and more energy, labor and machines with each passing year. It’s no wonder then, that

the electricity demand for Chile’s copper production is expected to increase by 53.5 % between 2015 and 2026, although the planned increase in copper production over that period is only 7.5 %

And this is just electricity. Combined with a similar energy demand increase of coal oil and gas extraction (all vital inputs to making copper), the question of labor productivity increases simply becomes moot. The relentless rise in energy demand throughout the entire supply chain of “renewables” from fuel to metals will eventually negate any engineering feat aimed at real productivity gains… And while adding robots and automated production lines to the mix surely increases the amount of solar panels made per worker, it also adds a considerable amount to the kilowatts consumed during the process — making energy return on investment worse still. Trouble is, the very same is true for every technology we use, as all require metals, concrete, oil and gas — the essential building blocks of this civilization. (Yes, that includes nuclear reactors and fusion, too.) So, should we ever succeed at making hydrogen atoms fuse in a commercially sustainable manner (about which I’m extremely doubtful) we would still have to face the issue of an exponential rise in energy demand when it comes to building those reactors.

Mind you, the process of depletion has no practical upper limit. As mine after mine is being depleted, ever poorer and poorer deposits must be ‘developed’. And while we sure have a lot of copper, niobium or what have you in Earth’s crust, if extracting the necessary amount to build a fusion power plant would require us to tear down an entire mountain range, it would still make us bankrupt in energetic terms. (Beyond a certain point in the process of resource depletion, a new power plant will eventually require more energy to build and maintain than what it could possibly return.) More importantly, though, taking this path would also lead to a rapid destruction of whatever life remains on this pale blue orb.

Fusion cannot save the planet. It can only make its destruction even more comprehensive.

We have, as a result, found ourselves in a productivity trap, where further gains would require a disproportionate increase in both energy and resource use. Without making steps to increase productivity, however, both resource extraction and manufacturing could soon become unviable. As rich deposits of both fossil fuels and metals deplete, and the energy required to continue the extraction of Earth’s bounty will surpass our energy supply, it will become impossible to continue civilization as it is. So what gives? 

Photo by American Public Power Association on Unsplash

The electric grid, together with other infrastructure, is especially prone to collapse in such an energetic/economic environment. As older components of the network fail, and as depletion makes the price of replacements higher every year, and finding spare parts harder and harder, maintaining a coherent and resilient network made of steel, copper, aluminum, concrete etc. will slowly become impossible. (And we haven’t even talked about doubling the grid’s capacity to accommodate more battery storage, renewables and electric vehicles — not to mention AI with its power demand rivaling entire countries.) Add in ever more frequent and devastating hurricanes, heatwaves or wildfires, and you start to appreciate the immense challenge ahead of engineers responsible for maintaining a stable electricity supply. As a telltale sign, the grid is already suffering from a chronic transformer shortage, a piece of equipment requiring tons of copper and electrical steel to make. 

The collapse of the grid will not come in the form of one massive blackout, though, but rather in the form of a series of planned (and sometimes unplanned) outages and brownouts — taking longer and longer to recover from. First an hour here and there. Then a day. Then for years everything returns to normal as a long overdue repair finally gets done. Then shit happens at a major electrical distribution station, and you receive a calendar in your mailbox informing you about a rolling blackout schedule for the next three months, or till it gets repaired. Then power returns, only to be turned on/off randomly… And so on, and on, and on for years and decades, till you notice that you haven’t switched on the lights for a month now. Then you talk to a friend from another town and learn that electricity supply is more or less OK in their neighborhood — so you decide it’s time to do some coach surfing. 

Collapse rarely happens in an instant, and is almost never uniformly distributed.

Needless to say, this long slow goodbye to the electric grid will result in a massive loss of labor productivity, too. Remember, no electricity, no automation. Should blackouts become frequent enough, jobs previously performed by machines would (again) need to be done by humans. So much for the prodigious gains made during the previous century… 

Out of the gazillion of problems cows, for example, will have to be milked manually. Every day. Sure, you say, we will use backup generators then… but how energy efficient is that? Ten, maybe fifteen percent? You see, only a small portion of the energy contained in a gallon of gasoline could be converted into electricity with a generator, the rest is lost as waste heat. No wonder we burn natural gas in huge turbines to power the grid instead, as these massive power plants utilize as much as fifty percent of the energy released by the fuel in question. Or how about nuclear power plants? These massive generating stations require a stable grid to operate, but once resources prove to be insufficient to maintain the grid in a working order, these, too, will have to be shut down one after the other… Leaving us with tons of nuclear waste, and a range of less energy efficient options, taking us back to the good old genny in the basement…

At least until these, too, start to break down from overuse en masse — making finding spare parts a real pain, and leaving you without power till you finally manage to locate the missing components. Sure, rooftop solar can and will help, but only during daytime and when its not totally overcast outside. Otherwise, you will have to rely on batteries, which are not only energy and raw material intensive to make, but would have to be replaced every ten or so years. Not to mention the panels themselves: in a collapsing economy — which used to import everything from China — these, too, will become harder and harder to come by. 

Again, do not think of losing a stable electricity supply as a one-off event, which you can ride out with a barrel of gasoline and a few cans of corned beef. At the beginning, yes, you might be able to coast through the first few blackouts then resupply. But collapse will take much longer than you can imagine, and will increasingly wear down everything around you — including the corned beef industry.

Towards the end of this century — on the other side of collapse — all the productivity gains the industry has made so far through automation will be lost. Manual labor by then will have already replaced almost all machines. Not all at once, but in a piecemeal fashion: first during outages, then one by one as blackouts and fuel shortages become ever more frequent. Finally, as all generators, transformers and other electric equipment break down, permanently. People will have to re-learn how to do things manually throughout the decades ahead: how to knead bread, how to grow food, how to wash clothes etc. without the magic of electricity. This will also leave much less time for office jobs, forcing more and more people to stay at home tending gardens and doing housework. And as the economy falters due to a lack of power and the loss of productivity, so will the need arise for more locally produced goods and services — requiring even more people working outside the current economic system. First slowly, then all at once as one critical tipping point after the other is crossed, and global supply chains finally break up. I’m not saying that you will live in a Mad Max movie, or in a Hunger Games episode in ten or twenty years from now— most likely not — but this is the direction we are heading. Due to the many variables, such as a financial meltdown, wars, natural disasters (made a thousand times worse by climate change), drastic shifts in geopolitics, the pace of resource depletion etc. it is impossible to provide an exact timeline on the complete deindustrialization of the (once) developed world.

Returning to the land and a low-tech, low-energy lifestyle will not come from a rational decision to reduce energy use, though. As long as there is power in the socket and one has a day job to pay for the electric bill, very few people will give up on their conveniences and the efficiency gains achieved by using external power sources. Heck, if anything, a low-tech economy will be inefficient as hell — at least measured by today’s standards. It will require massive amounts of human labor, and produce much-much less goods per worker — think of harvesting wheat using scythes vs a combined harvester (2). Sure, a low-tech economy will come with much less resource and fossil fuel use in the end, but it will also leave less time and energy for wasteful activities and meaningless bullshit jobs. 

Yet, this is still far-far off in the future. Many of you probably will not see this process fully unfold. The road leading to that future, however, has been already taken: the gradual depletion of rich mineral and fossil fuel deposits will leave us with no other option than to keep on simplifying our lives — implementing more and more low tech solutions — till we eventually arrive at a more or less sustainable state (3). As the saying goes, however, life is not about the destination, but the journey.

Until next time,

B

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Notes:

(1) To be precise: energy is neither produced nor destroyed, it’s just converted from one form to another. Solar panels merely convert light into electricity, while internal combustion engines convert chemical energy released as heat into mechanical work. All we humans do is inserting our machines into this conversion process (from condensed energy to diffuse waste heat). Thus the more dense our input energy is, the more work we can perform by releasing it. Since fossil fuels are hundreds of times more condensed than sunlight (or electricity stored in a battery for that matter), we can derive tens of times more work from them… Even considering the low efficiency of petrol/diesel engines compared to electric motors.

(2) Using solar ovens (or any other weather dependent device) will also make you less productive. Whereas today you could use an electric oven to prepare food 24/7, a solar oven will work for only a limited amount of time (and if the Sun is not shining, not at all). If you run a kitchen for a living, that is a serious problem to overcome. Sure, you can fire up a wood stove, but consider the amount of time spent on collecting and chopping wood… Just to produce the same dish you could make in the electric age by flipping a switch. And this is not to mention the loss of economics of scale: doing everything in local manufactories will be much less efficient in terms of costs than running globe spanning supply chains. The relative price of goods (compared to whatever income you can get) will thus be much higher than today, leaving us with a materially much poorer, but at the same time more meaningful lives.

(3) Knowing that at least half of Earth’s population is fed and clothed by crops grown in rapidly eroding soil, kept ‘alive’ with artificial fertilizers made of methane and a one-off supply of potash and phosphorous (none of which can be replaced, or mined sustainably), by the end of this century we will see only a tiny fraction of the world population compared to what we have today.