ISBN 978-0-230-34218-7. “The Big Flatline – Oil and the No-Growth Economy” by Jeff Rubin was published by Palgrave Macmillan in 2012. You remember Jeff don’t you? He wrote the outstanding “How Your World is About to get a Whole Lot Smaller” in 2009. It is a work that we recommend everyone reads. Not only was it a good read but it had a certain gravitas being from a man who had spent his career as the chief economist at CIBC Markets in Canada. Sadly no more. Now he is just an author who “blogs for the Huffington Post”. Nowadays he earns his money by writing about energy economics. And if there is one thing he knows it is the energy markets. So how do you follow up a classic?
Jeff has moved his ideas onto the wider economy and what the end of oil means to economic growth. This much is pretty clear from the book title. But has he added anything new? Certainly his thinking is lucid and it is all laid out here. It’s a solid read, but somehow we HAVE read this all before. Anyone familiar with Chris Martenson’s “The Crash Course” will pretty much know the territory. What it lacks is any real sense in which peak oil threatens our financial system. There is no perspective whatsoever on how dwindling cheap energy impacts the way our money supply is created. Not for Jeff any lessons on monetary reform. This seems a little surprising for a guy with 20 years in investment banking. This is simply not THAT sort of peak oil book. In that sense it is quite sanitised. There is no sense of impending doom or collapse, no suggestions of radical reform to the financial system. He does insist that “economists are hooked on growth” but he never quite gets to the heart of WHY. He goes as far as writing:
“Rather than go further into hock, other homeowners chose to pay down their mortgages. That may have meant scrimping on some luxuries, but such restraint pays off when the rough patches inevitably come. That’s the wonderful virtue of being debt free.”
This is economically illiterate. We cannot pay off our debts because our debts are our money supply. If everyone paid off their mortgage there would be no money in the economy. Hence a fundamental change is required but it is not territory this author chooses to explore. Instead Rubin focuses on the narrow aspects of economic performance.
Rest assured – those of you looking of a book that will help entrench your beliefs about climate change and peak oil then there is nothing here to kick you out of your comfort zone. The tale is a familiar one: oil is not about to run out, but it is about to get a whole lot more expensive and price shocks are going to undermine economic growth. It is almost tempting to add “well d’ah…” isn’t it? As Jeff points out Peak Oil is about PRICE not supply. And that is important in this complex, austerity-driven, post-peak-oil world where almost everyone seems to be in denial about the subject yet everyone is living with the consequences. There has been an endless supply of “peak oil has been debunked” nonsense piped into the media these last two years. It really helps to get things back in perspective.
Certainly the worst case scenarios peddled back in 2006 scared the living daylights out of some of us. These scenarios didn’t quite play out. Prediction is a mugs game, forecasts are always wrong. We predicted economic collapse and that is what we got – but nobody sees the cause as energy. There is always something else to blame. The rear-view mirror gives us precisely the collapse expected but the sub-prime market and over-whelming debt are now the popular culprits and bankers all to blame. Even this redistribution of the blame was predicted. We did know that the popular public perception would be driven by a narrative that would blame almost ANYTHING other than the depletion of natural resources. Some how it seemed comforting to blame it on the banking sector and move on – because, that can be fixed. Right?
So we head off now into a period of austerity-without-end. The media will NOT talk about “the end of growth” because everyone has faith that growth MUST return. As sure as day follows night that is accepted as a natural right. We may entertain the concept of the triple-dip recession and we will wrap it inside all kinds of comforting language but the truth is that growth (for us) ended in 2008. We are bumping along the bottom. Hence everyone should be reading a book like this. Unfortunately it seems that few people will take any interest. It won’t be taken seriously now. Not now that Rubin is just another blogger for the Huffington Post. Now he is a nobody. And he remains a nobody despite the fact that his vision remains inside the non-Mad Max comfort zone that most people call the “real world”:
“…the solution to higher energy costs is quite simple: learn to use less energy. That doesn’t mean returning to the stone age.”
It is quite useful to remind ourselves that so much of the peak-oil-is-collapse dramatic narrative really originated from North America where prolific fossil fuel waste is deemed a birth-right. Let’s not kid ourselves: like other authors of his ilk Rubin is appealing to so many Americans and Canadians to live like Europeans. What can a European learn from this?
Rubin believes we have hit an “energy ceiling” and, what’s more, he is convinced that this is so serious that it will mitigate Global Warming. This certainly puts him at the pessimist-end of the peak oil brigade. Whilst most of us assume that natural limits contain our ability to effect the climate, most of us would guess that we have enough carbon to push us onto catastrophic tipping points. As much as we would like to agree with Rubin his approach seems complacent.
Rubin remains at his best when he is talking about North American oil markets. I certainly never really understood the noise being made about the KXL Pipeline until I read this book. It is eye-opening. Rubin’s writing style seems to require him to wax lyrical about seemingly unrelated anecdotes that can go on for some pages before he reels his readership in to reveal the relevance of his topic. This can be effective but he repeats it too often, gets too rambling and even a little too obscure. We could probably have done without his mind-numbing ode to his passion for Ice Hockey.
Then Rubin is off travelling the world. It is always refreshing to see anyone from North America (yes, I know he is Canadian) actually going over-seas. Denmark appears to have made a really big impression on him. Their devotion to renewable energy is enviable but Rubin reveals their darker-side. Most of their non-renewable energy is generated from coal. Their low carbon footprint is largely a matter of sky-high prices and economic necessity.
“And its not like Danes are flooding foreign embassies on a desperate attempt to emigrate to places with cheap power. Surveys show Danes, who enjoy one of the highest standards of living in the world, are among the happiest people on earth. As could be expected, the amount of out-migration in Denmark is negligible.”
This is one of the healthiest lessons that anyone from North America can take back to their homeland. Cheap energy is not a right. It is a privilege… And do you know what? When that privilege ends it is not the end of the world. People outside of North America live with expensive fossil fuels and life goes on – and that is a GOOD life. Probably GOOD BECAUSE fossil fuel usage is restricted. There are many who believe the opposite. Indeed it is the popular myth of our times that more fossil fuels equal happiness and prosperity. They do not. The opposite has always been true. More than that the battle against fossil fuels is hard to win because a minority make their living from it – a good living that this minority wish to preserve and they are prepared to spend their wealth to maintain that status quo:
“As much Denmark is a living, breathing example of environmental success, it’s only fair to note that the battle against carbon emissions is easier there than it is elsewhere. Denmark has no significant hydrocarbon reserves of its own, which means its politicians don’t need to worry about appeasing a carbon-intensive energy sector. In the same spirit, the country also doesn’t have an auto sector to speak of. In Denmark, no one needs to worry about currying favour with the autoworkers to get re-elected.”
By implication it is these politics that makes it so impossible for Canadians and Americans to find alternatives. Which leads us neatly onto the BRIC countries: Brazil, Russia, India and China. Rubin explains how energy consumption is a zero-sum game. In order for the Chinese to consume more oil (as they are) then everyone else ends up with less. Rubin ably maps out the oil and gas politics or Europe and Russia exposing exactly whose energy policies are exposed and who the winners and losers are. In this his vision is clear cut. If you want an excellent snapshot of what is going on in the world today in the fossil fuel markets then read this book. Using his economic expertise Rubin explains how the relative strengths of different currencies effect the energy markets. He writes in an easy-going way – we found it simple to understand him. No need for complex graphs or indulging in economic textbook-babble. He tells it straight and we are truly grateful.
So, what will this new static economy look like? Rubin is off globe trotting again and is quick to praise the German Kurzarbeit work-share scheme. People will adapt to having less work explains Rubin. Demographics will kick-in too. Young people will spend more time in education whilst more people in their senior years will remain in the workforce. Manufacturing jobs will return to the local economy. We will start to grow our own food again. High oil prices drives the market to supply CLOSER to demand – but this we already knew as it was a significant topic in Rubin’s first book. The economy will take a step back in time. Governments will simply not have the tax revenues to continue the spending that everyone is used to. Less of us will own cars, those of us who do will have to get used to road-pricing. Our infrastructure is crumbling so the private sector will step in more than it does now. Everything, in a word, is about to get a lot more expensive. Think “demand destruction” on a massive scale. But we have been here before, it started in the 1980’s with Thatcherism and Reagonomics. Just how much further can this spin out?
Not for Rubin any conventional environmentalist’s fears about embodied energy:
“The suburban landscape is defined by energy-sucking McMansions. Before long, these storehouses of consumer goods will be demolished to clear the way for small homes better suited to the finite dimensions of tomorrow’s economy.”
This is a starkly different message from the one in James Howard Kuntsler’s “The Long Emergency“. Maybe we will not abandon our suburbs like refugees from a disaster. Maybe we will rebuild them instead? Mind you the term “McMansion” refers to North American’s homes – not much the average Japanese or European citizen can do if they are already in a shoe box. But overall the message is clear:
“We could all do a lot worse than make the best out of having less. If our incomes stop growing and jobs become scarcer, then at least our leisure time will grow. It won’t be money that makes our world go around, but time. And we may learn to spend our time in ways that are more satisfying than simply looking for opportunities to spend money.”
We will transition beyond consumerism and, do you know what? We could all be better off for it. We can live with less in the OECD countries but others have a bigger challenge.
Much like in the last book we reviewed “How Much is Enough?” Rubin doesn’t really have a lot of time for environmentalists. However his words are much more conciliatory. He prefers not to go as far as comparing them to fascists but he does observe:
“Like the central bankers and finance ministers […] staunch environmental advocates need to recognise that the global economy has downshifted into a much lower gear. And gearing down economic growth, as they’ll see, is the most direct way to reduce carbon emissions.”
THAT is not going to be a popular message. Rubin observes that emissions control doesn’t work so he suggests let austerity do the work. However his message here is less than convincing. He falls for a classic trap of equating the construction of a low carbon economy with some kind of charitable expenditure that leads to no growth in its own right. He suggests that the “environmental high road” taken by the EU will not be withstood by a population “struggling under the weight of a financial crisis”. This confused environmentalism with green infrastructure. The free market is distorted by cheap fossil fuels and is not making the kind of investments in post-carbon infrastructure that we need. Charging for carbon emissions with a carbon price levels the playing field between current and future costs. This is true-cost economics. Would we prefer to simply buy more short terms fossil fuel capacity? We found this section of Rubin’s book seemingly contradictory and didn’t really gel with the narrative he was developing elsewhere. It is like a thought pattern that hasn’t quite matured. There is a link between austerity and carbon emissions but these links are more sophisticated than Rubin suggests. If the fossil fuel economy cannot grow then the sustainable/renewable economy can – and it may be the only sector of the economy that can take of the slack as the old economy dies.
However this is a minor quibble in a quite credible book. This is a workmanlike effort that contains nothing too contentious. Rubin fills in lots of gaps in our knowledge. This is a useful contribution. His conclusions are not dissimilar to those seen from Richard Heinberg:
“…central banks are pumping money into the economy through quantitative easing measures and governments are spending billions on stimulus packages. Add it all up, and it means future tax payers are being hamstrung with mountains of debt that will need to be repaid. And for what? These policies are chasing a vision of the world that’s already in the rear-view mirror. Running up huge deficits to spur economic growth is the wrong move when the high oil prices are inexorably pushing the global economy closer to a static state. Instead of fighting against the tide, we need to swim with the current.”
We are in a great period of re-alignment. Welcome to high price fossil fuels and the no-growth economy. Sit back and enjoy the ride.