Rob’s comments below are in italics.Derek’s comments below are in normal font.
We talked about the role of energy in the economy. If you missed last week’s conversation, we were talking about how we really need to rethink how energy is harnessed, captured and distributed.
Since then, I read an article from Caitlin Johnstone, called ‘Advanced Technology Will Not Save Us’. She makes the point that even if Nikola Tesla was right, and we might somehow discover a source of infinite free energy, the powers that ought not to be would still find a way to commandeer it, hide it and make it expensive. It wouldn’t filter down to us. The system is set up the way it is because energy is one of the levers of control, along with money and food. I wonder what your thoughts are on that, Derek.
Well, I thought that was a great article. This has been a recurring argument since the early seventies, when the first report called The Limits to Growth came out. At the time, I thought the arguments it put forward were unassailable. At its most basic level, it boils down to the fact that in a finite world, or a finite subset of the universe, there is nothing material that can carry on growing forever. Not only that, but the mechanisms we operate invariably lead to exponential growth. Indeed, many economic projections are worked on the assumption that growth will be exponential and will continue indefinitely.
An important point to note is that with exponential growth, the situation can turn around and bite you much faster than you expected.
The faster the bus is going, the more likely the wheels are to fall off.
Yes, exactly. From the word go, the backlash against The Limits to Growth came down to three points. One was simply to say, “Well, Malthus said this in 1798, and look how wrong he was.” That’s no argument at all.
We’ve covered that in a previous episode.
The short answer is that he was wrong because we were on the eve of the Industrial Revolution. Britain made a great many goods that it could sell to the rest of the world, and it imported food to keep the country going. Now, though, we’re dealing with the same situation on the planet as a whole.
Another argument put forward against The Limits to Growth hypothesis was that human ingenuity has always come up with solutions, so maybe - hopefully - it will this time, too.
That’s called hopium, isn’t it? Hopeium is endemic among business owners.
Yes, it’s called hopium, exactly. The third argument was that some technological fix would come along and solve the problem. That misses the point of the argument, which is that these things are all interlinked. The outputs of one thing, like the birth rate, feed through to something else, such as population size. That feeds through to the amount of food required, which feeds through to the amount of energy, industrial capital and transportation required. All of these things are interconnected. Apart from anything else, the essential idea that technology will fix it is fanciful unless you’re more specific about what technology you have in mind. How will the new technology work? What are its inputs, and where will they come from? What are its waste products, and where will they go? These are the things we’ve got to address.
In a way, we’re being forced to address them far faster than we otherwise would have done. We were dead set on barreling along in the same old way until the conflict between the United States and Iran blew up. That caused major disruptions to the world’s energy supplies. In a way, particularly in Europe, we’ve had a foretaste of this for the last few years. All the European nations, including Britain, scored an own goal by cutting off their noses to spite their faces. They interrupted the supply of energy from Russia, which was a major supplier.
It surprises me that nobody has really connected the dots publicly. Our electricity bills are three times what they were a few years ago, and we’ve sabotaged ourselves by cutting off the most economical energy sources. At least it’s brought those of us who are awake face to face with the fact that, sooner or later, we’ll have to bite the bullet and address where we get our energy and how we supply it.
It’s much easier to have ostrich syndrome when you have a steady stream of tankers coming in.
Yes. Related to this is the vogue for enthusiasm about artificial intelligence. As far as I’m concerned, the jury’s out on how beneficial artificial intelligence is going to be.
Very beneficial if you want to surveil everyone, apparently.
Yes. Or target your missiles.
I can say that I use AI in a limited capacity in my work and my business. However, there’s a micro level and a macro level to how it’s being used - especially in the context of energy requirements for data centres. These are not being built for our benefit.
Well, they’re simultaneously expecting huge growth in the amount of energy going into the data centres being built to support artificial intelligence. The question I would ask is, first of all, where is the real wealth being generated?
With a lot of the technology we’ve developed so far, it’s been fairly obvious what the real wealth is. Go back to the Industrial Revolution and the automation of spinning and weaving machines. This obviously produced more fabric, providing clothes more efficiently with less physical labour involved. There was a clear indication of the resulting increase in wealth. In all other aspects of mechanisation, whether machinery, transport or manufacturing, there was a very clear, direct effect on the wealth being produced. Similarly, with the arrival of microcomputers, all sorts of things were being done far more efficiently. It was easy to see how wealth, in the sense of things people want, was being produced more efficiently.
With AI, there are an awful lot of trivial applications.
There are a lot more words in the world!
However, it’s far from clear that the energy being consumed is commensurate with the benefits being produced. We’ll just have to see how this works out. At the same time, energy is becoming increasingly expensive and problematic to obtain in the ways we have, through the explosion in fossil fuel consumption. We’ll also have to see to what extent we can continue in this form.
I guess the authorities are expecting pushback on data centres at some point. They’re expecting a lot of anger about it, especially with energy bills so high. They seem braced for that.
This is, in fact, distorting the marketplace. If they require huge amounts of energy and supply can’t expand at that rate, they’ve obviously got to bid against you and me heating our homes.
Super. Well, you’ve just been chopping down trees in your garden, so you can always burn that this winter!
Well, I certainly will be.
Thanks for reading Sovereign Finance! Subscribe for free to receive new posts.
