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The End of the Industrial Revolution

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What a privilege it is to be alive in these times, in such a significant period in human history. It’s not always easy to see moments of great historical importance when you’re in the middle of them. Sometimes they’re dramatic, like the fall of the Berlin Wall or the landing on the moon. But more often the really big ones appear, from within them, to be unfolding in slow motion. Their actual drama and speed then only becomes clear in hindsight.

That’s how it will be with this. But in the end we’ll look back at this moment and say, yes, that’s when it was clear, that’s when the end game began. The end game of the industrial revolution.

Hang on, you’re thinking. The industrial revolution? With its belching smokestacks, dirty industry and steam engines? You thought we left that behind long ago, right? You look at your smart phone, robots on Mars, the rise of Facebook and Google and think ‘we’re well past all that’. Isn’t this the age of knowledge, when we’re all hyper-connected in a 24/7 information rich economy? Think again.

Hiding behind those entertaining devices, information overload and exciting new companies, the real bulk of the economy is still being driven by those dirty belching smokestacks and is still being shaped by those who inherited the economic momentum of 19th century England – the coal, oil and gas industries. Look at any list of the world’s 20 largest companies by turnover and you’ll see around three quarters are either producing fossil fuels, trading them or converting them into transport or energy. So I’m afraid the proverbial belching smokestacks still underpin our economy. But they are now in terminal decline. Yes, after 250 years, their time is coming to an end – and faster than you, or they, think.

 

For those of us focused on social change, it doesn’t get much more exciting than this. When I was writing my book The Great Disruption during 2010, and even when it was published just a year ago, the ideas in it were still fringe to the mainstream debate – a radical and provocative interpretation of what was happening. Most thought my argument – that a crisis driven economic transformation was inevitable – were, if correct, certainly not imminent and would not impact for decades. Just two years later, we only have to look around to see the disruption underway, as the old economy grinds to a halt, and the incredible opportunity for change that is now all around us.

It’s going to be a wild and exhilarating ride, with winners and losers, crises and breakthroughs. There’ll be a fair amount of chaos and we’ll teeter on the edge for a while, wondering if we’ll get through. But we will, and we’ll then look back to this time and say, yes, I was there.  I was there when the third great wave of human progress began. The first was the domestication of plants and animals, enabling what we today see as civilisation to form. The second was the industrial revolution with its great technological and human progress but inherent unsustainability because it depended on taking energy from the past and ecological capacity from the future.

Now we shift to the third great wave, the world post the industrial revolution. To an economy designed to last, that is built around the present and nurtures the future. This will be an era where we…… well, that’s the exciting bit. We get to decide what comes next. We get to decide what the third great phase of human progress looks like.

Like many, I feel a great impatience sitting here on the edge of it all. Waiting for it to be clear to everyone that it’s time to stop pretending the old models will somehow get back to normal. We lurch from crisis to crisis, but never seem to face up to the reality that old normal is gone, that step change is now our only option. I’m not alone in that impatience. The legendary investment manager Jeremy Grantham recently said “The economic environment seems to be stuck in a rather unpleasant perpetual loop. ……I, for one, wish that the world would get on with whatever is coming next.”

The world actually is getting on with it, at an incredible pace, but building the momentum of the new takes time. And perhaps of more immediate concern, the dismantling of the old economy and the decline of the fossil fuel industry is being fiercely resisted by those who own it. To be fair, you can’t really blame them. I can’t imagine I’d take kindly to everything I assumed about the world being proven wrong and all my success now being blamed for the potential collapse of civilization. Denial and delay would be quite appealing!

But none of that really matters because the end of their world is going to happen regardless of anything they do. You can buy your way to political influence but you can’t buy new laws of physics. So we will change, not because of any great moral battle between good and evil, but because people and economics will respond to physical limits – the limits of the climate’s capacity to absorb our waste, the limits of our food production to keep pace with our demand, the limits of living on one planet.

Thus the need to act is no longer just a moral imperative, it’s now a social and economic necessity.

I will over forthcoming Cockatoo Chronicles unpack this argument in more detail, explore how this is unfolding around us, and why we should be excited rather than fearful. I realise many people look at the world events and feel fear – I certainly have those days. After all, as was argued in a recent oped in the NYT by US scientists: “There can be little doubt that what was once thought to be a future threat is suddenly, catastrophically, upon us.”

But when we look at the current US drought, at what is looking like the third global food crunch in just 5 years, and the extraordinary increases in the melt rates of arctic sea ice, all happening along side debt overload and the endless, lurching economic crises that Jeremy Grantham refers to, you can respond in two ways.  Yes, these things are cause for great concern, reasons to worry about the suffering that is now and will keep unfolding around us.

But they also say, with clarity and finality, the old economic model is dead. This is not a crisis, there will be no “return to normal”. This is the old world, the world that started in 1750 with the industrial revolution and the assumption that more stuff was all we needed for progress, steadily grinding to a halt.  The great economic expansion that drove us through the 19th and 20th centuries, is all but over. Over because it’s physically impossible for it to keep going. This is not philosophy. When things are unsustainable, they stop.

This process is going to be very messy. The climate is becoming highly unstable. The fossil fuel industry is going to fight a ferocious rear guard battle to hold on to the old ways. There is an incredible consolidation of wealth and power by the rich. And the economy is facing intolerable debt and financial pressures.

With the earth full, we are now trapped between debt and growth. If we grow, then spiking prices of oil, food and other commodities, along with ecological constraints will bring down the economy as they did in 2007/8. Yet our impossible levels of debt can only be paid off if we grow. Given we can’t, the financial system will soon break again and this time even more dramatically.

But we can no longer prevent any of those things – they are todays’ reality.  What we can do, and what will have the most impact on that situation, is to accelerate the process of dismantling the old and building the new. It is true that all the changes we need to make happen, would occur by themselves over time. But because ecosystem breakdown is driven by lagging causes – the impact keeps happening long after the pollution that caused it – we don’t have time. This makes acceleration the key challenge.  Within that context there is much we can do

For a start, we can slow down the last gasp expansion of the coal, oil and gas industries. This is a significant question because the carbon budget is nearly all spent. As Bill McKibben recently argued, the science is now very clear that we have a choice – we either face an out of control climate that will decimate society and the economy or we can rapidly remove those industries from the economy. There is no middle path. And the later we start, the more pain there will be.

We can also drive even harder, the incredibly exciting growth in solar. We can encourage investors to shift from the old to the new. We can implore governments to tax stuff more and people less. We can build a new economy that is focused on creating jobs and good lives for people, rather than bonuses for investment bankers and profits for oil companies. We can drive down inequality, a cancer that is now eating away at democracy and social stability.

Just a decade ago, the call to invest in this new economy was driven by the moral imperative or long-term economic benefit. Today it’s up and running, and is looking more like a sprint than a marathon – a sprint any investors who don’t see it underway will lose.

Solar is perhaps the most immediate and exciting example, with enormous investment now flowing. As Giles Parkinson explains in a recent article on RenewEconomy it’s hardly a surprise. In many countries, you can now get solar on your rooftop with payments 20% less than your current electricity bill, while still leaving enough for strong profits by those installing and financing the systems. It’s an easy business proposition to understand and as a result, investors are piling in to the space. They look at the risks in fossil fuels with the inevitability of tightening regulation on carbon, then compare it to solar and see annual growth rates there of around 40% and dramatic and ongoing cost reductions. (The total cost of a rooftop solar system has fallen over 20% in the last year and the cost of solar panels fell around 50%!) So it’s no surprise that last year we saw another new record for the amount invested in renewables – over $250 billion. It’s now up over 90% since the start of the financial crisis in 2007. (How much proof do we need that there’s a new world coming?)

There are many other examples of such progress – too many to cover here. So this longer piece is the first in a series of Cockatoo Chronicles that will explore the great economic transformation now underway. I’ll be discussing more about the solar boom, along with the inevitable crash of the carbon bubble – with its potentially dramatic consequences for fossil companies’ share prices and some national economies. Another area of focus will be the food supply crunch and its implications for conflict and national security but also the economic opportunity for sustainable food production. I’ll also write about the emerging battle between the fossil fuel industry on one side and scientists, environmentalists and the renewables industry on the other. Clear battle lines have been drawn in recent months suggesting a heavily ramped up and economically sophisticated conflict is now emerging.

Sure, there’s plenty to worry about in what’s coming and we should do all we can to smooth the way for 7 billion people to get through this transition. But we must remember, we’re now over the top of the mountain. It’s a long way down and it will certainly be a wild and bumpy ride, but history is on our side and the momentum will take us through. So let’s celebrate and remember – we are privileged to be here now, to be the ones who shape the future. And amidst the chaos and crises, let’s keep our eye on the prize – the third great wave of human progress.

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  • http://bit.ly/djT522 Nick Sharp

    Paul, tick to all the above, and I look forward to reading The Great Disruption. The looming climate catastrophe seems the greatest threat. In fact even bigger is expecting to live for an indefinite amount of time (many millions more years?) on a finite planet whilst breaking all the key rules:

    * Stop using UP non-renewables (esp. fossil fuels)
    * Stop over-harvesting fragile renewables
    * Nurture the land, waters, air, most species

    Blind Freddie stuff, but we break them all the time, in spades. Is “sustainable mining” the greatest ever oxymoron?

    What scares me is the old saying “We don’t change until it’s too painful not to”, since the rider is “by which time it may be too late”.

    But change to what? Clearly, to me, our massive city and suburban conurbations are unsustainable, are not resilient to major shocks, and most of them might within centuries be under water. If you are in The Maldives, Kiribati, Tuvalu, or substantial parts of Bangladesh, make that years. And how long can The Netherlands afford to go on raising their sea walls? Coastal cities will quite simply have to be abandoned.

    So what’s plan B? We are social creatures who work best in cooperation with many others. Try running an efficient school or health clinic for a few clients. The trouble is, we are living with TOO many others in each area, and consequently are too far from everything we need. Food miles, water miles, work miles, waste miles.

    We need to change the scale of our society towards medium sized towns. Much lower infrastructure thanks to the blindingly obvious: composting toilets, water and solar power from the roofs, and NO motor vehicles in the fairly small domestic area of The Town itself. Walk, cycle! Surrounding The Town in rings: land for food (and human waste usage), fibre, forestry, and wilderness.

    Don’t like it? Tough. “There is no planET B”.

    More in my “A Zillion Year Plan … for humanity”. Get it via:

    http://bit.ly/djT522

    Rubbish? Tweet me about it: @nickjsharp

  • Peter X

    We are still entrenched in the Industrial Revolution: “Coal’s share of the global energy mix rose to 30.3% in 2011, the highest since 1969″.

    Privilege is not the word I would use. Perhaps macabre misanthropy is a better term.

  • Dave

    Why all the angst over oil? We’d still be in the dark ages without it.. pull it out of the ground for around a dollar a barrel and you have 25,000 man hours worth of energy.. good luck replacing it for another 20 years.. by then solar will have been sufficiently refined to replace it as an almost free energy source according to leading physicist Michio Kaku and then and only then will we leap into the next great phase.. along the way science and technology will combat the green man’s fears, they are already working on airborne nanobot technology to repair the ozone layer, aquatics for oil slicks etc.. after all as you pointed out, we are the animal that built the pyramids and landed on the moon

    • Sleiman Azizi

      Everyone knows that aliens built the Pyramids. Probably the moon too.

      • Dave

        I thought it was Bigfoot?

        • Sleiman Azizi

          I’m sure they built Bigfoot too.

          • Dave

            Nah it’s just a guy in a suit, I’ve seen the footage

  • ibika

    Incredibly optimistic approach..but I understand why..people need hope if they understand at all the enormous gravity of what is taking place..the destruction of the ecosystems on the planet.
    the problem with this optimism is it doesnt really look at the root cause of the problems..which are after all only symptopns of the underlying DIS ease in humanity.
    Its us.. its our self centredness, our greed, our desores for pleasure and to get ahead of others.. To divide ourselves from others with religion, race, nationalism and ideaologies. to create the other… to creat a thought constructed indivdual self who must survive and prosper. the change required is within..
    The outer is only an inevitable manifestation of the inner state of consciousness whichreally has not changed for thousands of years.. its all about ME and mine.
    its humans who drive the cars, build the unsustainable homes, eat the cheap food and sweat shop made clothes and electrical items.. not the companies or fossil fuel industry. WHY? because ultimately when it comes down to it.. we want the slave labour made Iphone, big TV and cheap clothes and house and car for ourselves!!..for the self.

  • Chris Fraser

    Can’t happen soon enough. Good luck !

  • Dave

    Ibika, law of the jungle baby, served us well for 200 million years ;)

  • http://thisnessofathat.blogspot.com.au/ Gillian

    Must be something in the air… My recent blog post touched on the theme of our good fortune to be living at a time of massive change/challenge.

    Don’t ask little of me – you might get it.
    http://bit.ly/NUMUM7

  • Sleiman Azizi

    I have a suspicion that one of the underlying ingredients to all of this energy change is mistrust.

    What I mean is that people can only accept so much spin-doctoring. The establishment, for want of a better word, have spent their careers, if not their lives, coccooned inside their spin. Whether they actually believe it or not is irrelevant – they act and make decisions as if they do believe it.

    Pardon the pun but the long term benefits of solar power are so blindingly obvious that it truly is only a matter of time before the logic of commonsense wins out over the spin.

  • Greg K

    I agree with your reading of the trends, but dont agree with you that this is going to be fun to watch. How much fun is it to watch people starve to death? How much fun is it to watch people have their homes that they worked for all their lives washed away by a flood or river? How much fun is it to watch your retirement savings vanish into thin air?

    How many people can we really sustain on this planet? I bet it is not 7 billion.
    What if it is only 1 or 2 or 3 billion? That wont be fun to watch.

    And here is the key idea that your miss. We dont have a choice. We are stuck in ways you cannot comprehend because most people and I live in Asia have no idea about what you are talking about and are trapped in the economics of the past. They have moved away from subsistence farming to feeding half the population of the world that lives in the cities. And if you think that a grab for resources will not come without blood being spilt you havent been watching the real world for the last 200 years.

    Lets hope this is a beautiful new era, but I dont remember people writing like this about the plague when lots of people died in the past.

    So please tell me how we can support 7 billion and growing sustainably and transition at the same time? If you cant dont think this is a great time to be in.

    • http://www.paulgilding.com Paul Gilding

      Greg
      Yes, it will certainly not be “fun” to watch that suffering that will now surely emerge. But the reason I acknowledge that (extensively) in my book but don’t dwell on it, is because for the reasons you say, it is now inevitable.

      The challenge for us is to manage it as well as we can, but get on with the job of preventing it tipping into a genuine collapse scenario. That requires belief and a dose of optimism as to what’s possible. Churchill for example acknowledged the threat, acknowledged the suffering but also projected a belief in possibility. That’s our task.