This is a superb article, I strongly recommend reading the whole thing, which basically captures the new normal we have entered into the next few decades or so.Improbably, the global economy has returned to growth over the past four years despite the ravages of a deflationary debt collapse, a punishing oil shock, ongoing constraint from debt and deleveraging, and stagnant global wages.
The proof of this growth comes from the best indicator of all: the growth of global energy consumption. Halted in 2009, as global trade collapsed from the second half of 2008 into the first half of the following year, the global demand for energy inputs quickly returned to its long-term trend in 2010, growing at approximately 2% per year.
Ecological economics holds that human economies are subordinate to the availability of natural capital. Technology therefore does not create natural resources, nor does human innovation. Instead, technology and innovation mediate the utilization of existing natural resources. In other words, an improvement in the technique of longwall coal mining (late 1700’s), or deepwater offshore oil drilling (late 1900’s), or horizontal natural gas fracking (early 2000’s) are all impressive. But these innovations only matter when the prize of dense energy deposits are actually on offer. No dense energy deposits = no value to innovation.
We are obligated, therefore, to acknowledge that when few natural resources exist or are too expensive to extract, tent very little economic activity is possible. Conversely, we are equally obligated to admit that when resources are available for consumption, then growth will likely result. And lo and behold, that is precisely the explanation for the world’s return to growth since the collapse of 2008: despite the punishing repricing of oil from $25 earlier in the decade to $100, there was enough energy from other sources to get the global economy back to some kind of growth.
Of course, this is not the smooth and well-lubricated growth many in the West had become accustomed to in the post-war era. The nature of today’s growth is highly asymmetric between East and West, and highly imbalanced between rich and poor. Today’s growth is also quite lumpy, or highly clustered, as certain domains and regions are benefiting while other populations are living in very stagnant conditions. We’ll get to these detail shortly.
Yes, its a form of decline, yet not quite the doom and gloom predicted and the world will continue to see growth, even if it is not the quality growth we have seen in the past but a dirty, patchy and increasingly unequal growth which benefits the few not the many.
