The Sloth Economy

Slow and steady wins the race?

Brazil Final Boss. Photo by David Gomez on Unsplash

Let me propose a thought experiment, stemming from last week’s discussion on the fundamental mistake all industrial nations make. Since it slowly becomes common knowledge that infinite growth on a finite planet does not belong to the realm of the possible, let’s play with the idea: what if we indeed “gave up” on economic growth? Could we willingly moderate our economic metabolism to enhance our chances of survival as a civilization?

Recently, I was invited for a chat by Jason S. C. Fung, host of the Vanilla Club Podcast. We had an indulging discussion on the fragility of modern systems and the poly-crisis. Listen in on Spotify or YouTube, and please don’t forget to visit Jason’s Substack as well.

Thank you for reading The Honest Sorcerer. If you value this article or any others please share and consider a subscription, or perhaps buying a virtual coffee. At the same time allow me to express my eternal gratitude to those who already support my work — without you this site could not exist.

Horses for courses

The sloth economy, as the name implies, is an economic model aimed at drastically minimizing energy and raw material throughput. It’s a deliberate slow-down of resource and energy consumption, with an eye on returning to an ultra-low output, ultra-low-tech — but overall, an infinitely more sustainable — economy of the future. Practically, it diverts remaining fossil fuel and raw material flows entirely to maintain agriculture, housing, clothing and a willy-nilly transition to a low-tech economy to elongate the period of adaption as much as possible.

Could such a model succeed in the short run? Of course not. The maximum power principle will ensure that we will use up all available energy and raw materials sooner than we could come to our senses. Countries and companies converting the most energy and resources into products and services faster and more efficiently will always outcompete and outgrow their rivals. Since growing larger also comes with certain efficiency gains of its own, there is a natural tendency for companies to become monopolies, and countries to create trading blocks, or even empires. Sloths, trying to optimize their metabolism to conserve energy, have zero chance of survival in this game. In fact, they become prime targets in an economic system geared towards rapid growth, competition and hegemons. “Industrialize or you will be trampled on” is the name of the game. So, as long as easy-to-get resource and energy reserves last, and as long as we can throw newer and newer sources of power and raw materials on the “problems” we have, no one will seriously consider adopting such a model.

During this race to consume as much as physically possible, however, conditions underpinning the rise of our global economy have started to deteriorate. You see, in our search for rapid growth over the past centuries we have used up the lowest cost material and energy resources first — leaving subsequent generations with ever lower and lower quality, ever harder-to-get stuff. And while technological adjustments did help to unlock previously uneconomic to recover resources so far, physics will ultimately win. Throwing more technology at the problem merely increased energy use, making ever poorer energy returns on investment even worse.

While energy and material throughput increased, economies prospered and grew. Now, as that flow peaks, economies “mature” one after the other, starting with those who used up their cheap resources first. Even as they are trying to preserve their status by climbing up the ladder, and adding more and more high value added activity to the mix, decline has to ultimately set in as the real economy finally succumbs to declining energy and raw material flows. These countries as a result — just like individual living organisms or even complete ecosystems — will in the end have to go through a radical simplification phase (called “collapse” or “release”) as they can no longer afford life as they knew it.

With that said, and just to be on the same page, the collapse of complex societies — just like the ageing of the human body — is an awful long process. To be complete collapse must include a radical decline in social complexity, population and technology use, accompanied by a complete loss of cultural identity. Since we have just passed the peak of our civilization in the West in the early 2000’s, there is still a tremendous amount of accumulated wealth and knowledge to be shed. The collapse of our complex industrial society thus won’t arrive as one big bad event, but will look like a never-ending series of crises and emergencies lasting multiple decades into the future. Thus if you are above forty, like me, chances are you won’t see the end of that “release phase”, let alone the emergence of a new economic model. However, things tend to get a lot messier and happen a lot sooner than predicted in our world, so do not take anything for granted.

The tipping point

The inflection from growth in material and energy consumption to stagnation, then eventually to contraction, has clearly arrived. World crude oil production has peaked 7 years ago, and while it might peak again before 2030, petroleum’s permanent decline is clearly on the horizon. Oil is still the largest source of world energy consumption (at almost 30 percent) besides being a critical input for transportation, where it supplies more than 90 percent of total transportation fuels. According to Rystad Energy it’s production can be expected to be halved by 2050 — and that’s just the gross output volume. Net energy from petroleum products (what remains after drilling, lifting, refining, distribution etc.), might fall from 84–85% of gross output today to less than 50% by the middle of the century — resulting in an overall -70% drop in the amount of net energy derived from oil by the middle of this century compared to today.

Dusk of an era. Photo by Zbynek Burival on Unsplash

Coal production is already on a steep decline in the West due to high costs and low returns on investment, and China’s supply (the world’s largest producer) is also peaking. Global natural gas production is on a high plateau, too, but with the coming end to the US shale boom a decline is clearly in sight. The fossil fuel age is slowly coming to an end, which is a very big problem since these polluting fuels still provide 90% of world energy supply to this very day. Renewables and nuclear are a mere addition to the existing and so far growing energy base. No wonder: they remain fully dependent on fossil fuels for their continued production to this very day. (Mining, smelting, delivery etc. are all done by coal oil and gas for both technical and scalability reasons.) With the coming worldwide peak in fossil fuel output we are thus rapidly approaching not only the high point of the carbon pulse, but also the end of economic growth.

Since industrial economies are utterly dependent on both cheap raw materials and affordable energy, a decline in fossil fuel availability means instant de-industrialization. (If in doubt, ask anyone working in an European manufacturing company.) A fall in their supply also naturally means rising prices for both food and manufactured products. And since people have a natural tendency to spend on food and fuel first, and gadgets next, this also means a collapse in demand for stuff — and consequently another round of de-industrialization. This demand destruction, on the other hand, causes energy prices to decline, ruining any remaining economic incentives to drill ever more expensive, ever deeper, ever trickier oil and gas wells... Leading to a self-reinforcing decline in energy production, with no end in sight.

Sure, wars could be waged for resources, but after a short while even that project — requiring a heavy energy and material investment — could prove to be futile. And since de-industrialization also destroys the scientific-technological base of a nation, developing cutting edge high-end weapons systems (such as hyper-sonic missiles) also becomes impossible, leaving these nations only with low-cost systems produced in moderate quantities. Again, no country can de-industrialize and re-militarize at the same time… This is not to say that there will be no wars in the future, quite to the contrary. Instead of large scale high intensity wars, however, we are more likely to see low intensity civil wars waged by small arms, cross border skirmishes, terrorist and cyber attacks, exploding infrastructure and the like — all accelerating those involved towards further de-industrialization and economic / political collapse.

You, too, can a become billionaire one day. Photo by Rob on Unsplash

The banking sector, founded on the illusion of infinite growth, will surely go through its own “release” phase, too. You see, in a world where real economic output declines year after year and unemployment just keeps rising it will be increasingly hard to pay back debt, government and private alike. The incentive to borrow directly from the central bank to finance public spending (i.e. to monetize debt) will become irresistible, and will eventually lead to a cascading currency crisis or hyperinflation (most likely both). Without any prospects for a return of sustained economic growth, the coming financial crash will finally eliminate all the paper wealth amassed during the boom-years and burst the housing and everything bubble for good. Again, I might be wrong here, but what happened to Germany after WWI is a case in point. And although it is heavily denied, something very similar is unfolding in the West as their proxy war on Russia turns out to be what it was from the onset: an epic disaster for the whole of Europe, not just for Ukraine.

What is coming for Western, and especially the West European population will be nothing short of a psychological shock. When the financial and political reckoning finally arrives, the collapse of high living standards and the shattering of people’s deeply held beliefs will most likely lead to a Russia-in-the-1990’s style economic depression. Just like the soviets some 35 years ago, westerners will have to contend with the complete disintegration of their illusions of economic, moral, political supremacy — not to mention their fundamental faith in capitalism itself coming into question. With both economic revival and large scale re-militarization looking increasingly unlikely due to a lack of affordable fuel and resources, we are unlikely to experience the rise of yet another “Reich”. Instead, elite infighting, political chaos and leaders following each other in a rapid succession will most likely be the order of the day.

Sloths to the rescue

Rainy days do not last forever, though. After a few years, perhaps a decade of chaos societies will begin to reorganize themselves. Life in this post financial / political collapse world will be totally different from anything we have seen before, though. Instead of focusing on chasing infinite economic growth, relentless increases in shareholder value, stock market valuations and the like, societies surviving the first wave of collapse will have to focus on stabilizing their internal workings and producing enough food for all citizens. While climate change will lead to more severe droughts, heat waves, floods etc., as long as the global economy can churn out enough fuel and fertilizer to produce large quantities of grain (maize, rice, wheat) and to maintain international food trade (again, a function of diesel fuel availability) widespread hunger can be avoided. That doesn’t necessarily mean that people will be well fed: nutrient deficiencies, together with the number of under- and malnourished, will most likely increase.

With de-industrialization going global on the back of declining resource flows, however, the question will eventually pose itself: what will the average citizen do for a living? You see, the “problem” is that unlike in previous times, modern agriculture requires very little human labor, at least compared to the number of calories produced. Most of the hard work is done by machines: tractors, combined harvesters and trucks doing the work of a hundred people each. Sure, this will be a temporary issue only, since diesel fuel — together with natural gas and mineral based fertilizers — are all subject to depletion, but in the meantime, we will have a few decades when masses will be out of work due to a lack of industrial jobs. The service economy will prove to be an illusion, too. Without cheap products, energy and raw materials to provide services with, and without large swathes of people with money to spend, citizens of “post-industrial” nations will have to learn the hard way what the true basis of an economy is.

Westerners will have a lot to learn from people living in the global south. Photo by Eugene Nelmin on Unsplash

There will be one “resource” we won’t lack, though. Massive piles of equipment, machinery, industrial buildings and infrastructure will provide ample amount of parts, metal, glass and other inputs for the scavenger economy of the future to come. Cars will be converted to horse-drawn carts and their generators will find their way into make-shift windmills. Metals will be melted and new tools will be made out of them. The excess will be exported in exchange for fuel. The cannibalization of the industrial economy will go on for quite a number of decades more, till oil and gas finally runs out and economies once again will have to be fueled by coal — where large-enough easy to access deposits remain, at least. (Europe with its easy to get coal already burned, will eventually have to resort to burning wood and making charcoal again, which will be even harder than living without oil since the continent will be largely deforested by then.) From that point on, the economy will slow further still, since lacking fuel to operate large machines will force people to return to manual labor, and yes hard work in the fields.

Far from being a smooth ride across the globe, the coming de-industrialization of the world will be highly uneven but still a rather protracted affair. Trying to become a hegemon, or to create an empire will become impossible in this world of steady decline, though. Instead, sloths and other small mammals will finally have their day in the sun, as the dinosaurs of the industrial age slowly turn into fossils themselves.

Until next time,

B

Thank you for reading The Honest Sorcerer. If you value this article or any others please share and consider a subscription, or perhaps buying a virtual coffee. At the same time allow me to express my eternal gratitude to those who already support my work — without you this site could not exist.