Thanks to Gerry Gold for alerting us to what seems to be a very important report:
Below is a summary and here's the link to the entire report http://bit.ly/142DDhl

perfect storm
energy, finance and the end of growth
summary
 
part one: the end of an era
 
the four factors which are bringing down the curtain on growth
 
The economy as we know it is facing a lethal confluence of four critical factors – the fall-out
from the biggest debt bubble in history; a disastrous experiment with globalisation; the
massaging of data to the point where economic trends are obscured; and, most important of
all, the approach of an energy-returns cliff-edge.
 
part two: this time is different
 
the implosion of the credit super-cycle
 
The 2008 crash resulted from the bursting of the biggest bubble in financial history, a ‘credit
super-cycle’ that spanned three decades. Why did this happen?
 
part three: the globalisation disaster
 
globalisation and the western economic catastrophe
 
The Western developed nations are particularly exposed to the adverse trends explored in this
report, because globalisation has created a lethal divergence between burgeoning consumption
and eroding production, with out-of-control debt used to bridge this widening chasm.
 
part four: loaded dice
 
how policies have been blind-sided by distorted data
 
The reliable information which policymakers and the public need if effective solutions are to
be found is not available. Economic data (including inflation, growth, GDP and unemployment)
has been subjected to incremental distortion, whilst information about government spending,
deficits and debt is extremely misleading.
 
part five: the killer equation
 
the decaying growth dynamic
 
The economy is a surplus energy equation, not a monetary one, and growth in output
(and in the global population) since the Industrial Revolution has resulted from the
harnessing of ever-greater quantities of energy. But the critical relationship between
energy production and the energy cost of extraction is now deteriorating so rapidly that
the economy as we have known it for more than two centuries is beginning to unravel.

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Comment by Matt Worsdale on March 20, 2013 at 12:52

Now that I've got the measure of this report, and of other people's opinions on it, the question comes to my mind:

what is the best way to make as many people in the UK and abroad, understand the full gravity of this report, in such a way that they are motivated to act?

Of course, when you're still a young person (like me), it's easy to forget that the basic arguments presented therein are not really new. Judging from comments below, the arguments have been made for a long time but the implications now are becoming too big to ignore.

So while this report has its flaws, not least that it is primarily written for investors, as noted below and perhaps not the public at large, it's basic structure and articulation of the conclusion has really hit home with me, so much so that I would perhaps use it as a 'template' when I try to explain the impending trouble to people.

But even when confronted with a crisis like this, I fear huge amounts of people will bury their heads in the sand for as long as they can- certainly there seems to be a historical precedent for that kind of self-delusion. If Dr Morgan is right though, we are at best 10 years away from chaos.

But what do others think?

Comment by Steve Radford on March 19, 2013 at 16:53

   Now I've had a bit more time to scan through this report I see that it is basically a series of extrapolations from data. There is still nothing that new in what this guy is saying but it is very interesting that a leading adviser to the bankers, financial speculators, stockbrokers and the other assorted parasites and leeches who feed off the rest of us is now saying what some of us have said for many years.

   Of course this guy is coming from the opposite direction to me and his conclusions will lead him to propose a very different course of action (almost diametrically opposed to the course I would opt for) but it is interesting to see that I share much of my own analysis with strategic thinkers on the opposite side.

   I don't accept all of Dr Morgan's analysis or his conclusions. For example, I am dubious about his certainty that peak oil is a long way off as I know that energy industry consultants - possibly including this guy - have been fiddling the figures for so long that it is impossible to believe any statistics they cite. Just as Morgan himself says that financial data and statistics have been distorted out of any relation to reality. However, I do accept the general thrust of much of what Morgan says.

   When I was a very young trade union activist in the early seventies I was told that the best industrial relations news coverage was to be found in the Financial Times. The reason for this was because the FT was not churning out propaganda. It was trying to give hard information to business and investors and they already knew which side they were on. So this report could be seen in the same light. Morgan is advising investors and bankers where to put their money. There is little moralising or propaganda aspect to his report (although obviously his politics and the class interests he represents must colour his conclusions) so he is simply stating the situation as he sees it - and pretty grim reading it is too.

   The plain fact is that we in the UK are likely to be faced with a choice. We can have a much poorer but fairer society with greatly reduced inequality and a political and economic system which shares out what we have so that everyone has enough. Alternatively, we can continue to have the gross and obscene inequalities that currently distort our society and descend in a rapid (perhaps catastrophic) economic decline to a brutally violent society where the economy is incapable of sustaining any decent public services or health or welfare system and where the elite and some middle class professionals (but far fewer than those who might put themselves in that category today) live wholly segregated lives which are completely divorced from the rest of us. This is already the situation in some parts of the world and perhaps it would bear some similarities to the division between black and white in Apartheid South Africa, or Jew and Arab in present day Palestine (although here the dividing line would not be primarily race or skin colour).

   This choice has always been there but it is now coming into sharper focus and it is exacerbated by the likely (probable) effects of climate change. Morgan reiterates the well known fact (well known amongst those who care to take any notice) that our agriculture relies on a system which essentially turns oil (or hydrocarbon fuels) into food by a variety of means - from reliance on fertilisers and pesticides to powered irrigation and excessive food miles. Given that climate change may well have a massive impact on world food production (and therefore on food prices) then a substantial proportion of the world population may be priced out of the market and forced to rely on its own (perhaps minimal) resources. For a country which produces only half our current food consumption and which now manufactures relatively little that people around the world want to buy, this should ring some alarm bells. There are various things we can do about this but they all require drastic changes in political direction (and I don't mean replacing the Tory-Liberal coalition with New Labour). To bring in the kind of planning and forward investment needed requires a wholesale change in our political culture as well as our economic system and this will not be easy. Try telling people that they need to embrace rationing to try to avert starvation in the UK in a decade or two.

  At the moment we are seeing a cultural change in the UK but this is entirely driven by political and economic forces who are pushing us in precisely the wrong direction (see the NCIA report on Privatisation). We are being rapidly softened up for the complete dismantling of public services, including those which will become ever more essential for the physical survival of some people and the maintaining of a level of decency for many more.

   Dr Morgan may be good at his job (which is to advise people who care nothing about our fate where to put their ill-gotten gains) but his report does show us that the ruling class are getting nervous and some of them know that their ability to maintain their dominance of supposedly Liberal Democratic societies is coming to an end. The conclusion that some of them will come to might be that they need a Pinochet.

  As I said in my previous comment - action is obligatory.

Comment by Matt Worsdale on March 19, 2013 at 13:57

I finally finished reading 'PERFECT STORM' last night. I decided to take my time with it, it's full of arguments that I would say all need to be understood to gain the full picture of the economic mess the West is really in.

The report cements many views I have had in this whole area that were before less well set in stone.

-We have an energy economy: fundamentally, as it repeatedly is emphasised within the document, we have lived massively outside our means for too long. The deep economic problems over the near future will be shared by all nations, as Steve pointed out below, the lowest common denominator in every case is the energy available. However, Britain, the US and other western economies (including those with a history of stronger economic policy and productive economy, like Germany) are in a very much worse position than the erstwhile developing economies of the South and East, China in particular. It seems to me that as oil becomes more scarce, they will likely be in a position to demand the lion's share of that oil.

-We have little of a productive economy in the West now compared to the south and east. Having recklessly mortgaged it off to the latter over the past 100 years, what real-terms value remains in the west is right now, very tenuous indeed. I think about what, in particular, Britain has that can be readily marketed to the rest of the world and I do not come up with much. Developing economies have long sought what they regard as our superior education and 'knowledge economy' (hence the influx of millions of young people from the far east over the last 10 years), but you wonder how much that counts for when those countries are fast gaining the knowledge they need to solve their technological problems.

-I mentioned oil above, and I do not want to sound in favour of all that because an issue which links strongly to this report is that of climate change, and, a related problem of similar proportions, which is how we are going to solve the energy needs of an increasing population (crucially, without jeapordising the climate, which is already getting close to its limits.) IMPORTANTLY, this report gives a compelling case as to why things like fracking are FUTILE. If western governments are able to follow through with this farce any more, we will have the double calamities of wasting our depleting crude oil deserves on other fuel that gives less energy return, for a false short term advantage, AND we will be burning more CO2 that just must not be burnt. Simple as that.

Thus, though this report prompts several immediate action priorities, the biggest one imv is to alert the public at large to the fallacy of the dash for gas, as there are too many people out there at the moment who think there is something to be gained from it. This report very strongly suggests the opoosite (the EROEI, when actually measured taking everything into account, would be revealed as very low indeed.)

On this same line of thought, this report gives some very compelling arguments for pursuing particular alternative energies, which I think the public needs to be educated about.

(Concentrated) Solar cells seem to emerge as the best option from this report. Wind, on the other hand, is downplayed. The 'hydrogen economy' is shot down in flames, but I reckon the authors were more talking about hydrogen to generate electricity, rather than hydrogen cars, which could still have an important role to play in solving the glaring transport problem.

Comment by Steve Radford on March 18, 2013 at 11:59

   The report sounds very interesting and I will read it and circulate the link to a few friends and comrades. However, from the summary and comments here it does not seem to be saying anything new. It is simply not true that these arguments and analyses were not being put before. There were people arguing these very points even before the great crash of 2008. I am not an economist but I think my first ever independently formed opinion about national economics was to conclude that arguing for never ending growth, as if this solved all our economic problems for ever, was a deeply suspect and flawed policy. I formed that opinion as a teenager after hearing a speech by the TUC General Secretary of the time, Vic Feather.

   More recently some or all of these arguments have been put by many people. Sometimes in tiny circulation publications such as the one I used to edit (Green Socialist http://www.greensocialist.org.uk/ags/resources/gsm-index.shtml) and some by very well known economists such as Ann Pettifor.  The fact is that the almost total control of mainstream (ie. widely consumed) media outlets by vested interests (and I include the BBC in this) ensures that such analyses are labelled as "extreme" or "fringe" or "radical" or "loony" and simply ignored, or ridiculed if they are mentioned at all.

   A typical example would be a discussion I heard last year on BBC Radio 4 when a panel of commentators (supposedly "balanced" in line with the BBC's impartiality policy) was discussing the crisis of global capitalism and the BBC presenter chairing the discussion stated, as a matter of alleged fact, that no-one was arguing that capitalism itself should be overturned or replaced. What he meant was that no-one sane, no-one reasonable and no-one whose opinion they were obliged to take note of or treat with any legitimacy (or impartiality) was arguing this.

   I won't bang my own political drum in this forum but anyone who is surprised by the revelations that never ending growth and consumption (which is integral to the capitalist system) is unsustainable, that capitalism is based on debt as well as growth and that the crisis of energy (and energy costs) is the key common denominator across modern economies and the globalised economic system has simply not been paying close attention. I don't condemn or denounce those people for their inattention because it is very hard to focus on the important facts and make sensible and informed judgements when we are all subject to the deafening cacophony of the capitalist disinformation campaign from every conceivable angle. However, once some of us have seen though the constant barrage of lies and distortion we are obliged to try and do something about it. Simply rolling over and wringing our hands and moaning about how awful it is won't do.

Comment by Tony Taylor on March 18, 2013 at 8:08

Just to say thanks to Gerry and Joe for the link. I've posted the link on the In Defence of Youth Work site. Fascinating to see advisers to the capitalist class having a doubt or two. It gives me little pleasure to add that such as Cornelius Castoriadis were criticising the the capitalist and Marxist fetish of ever increasing production and consumption half a century ago.

Comment by Peter Goble on March 17, 2013 at 20:16

I read "Perfect Storm" last night in one go.  It's very well written, most of it is easy to grasp. Even if my grasp isn't terribly strong I got the overall message.  The message is stark and compelling.  Its implications are terrible for all those of us who've over-consumed, over-borrowed, over-spent.  And who've turned our faces from the consequences, like using up all the fossil fuels like there's no tomorrow.

By "us" I do mean me.  I've always realised I was living in a fool's paradise, but was too weak and too disengaged to do anything about it.  I just borrowed, spent and consumed and bugger the consequences for the future.  I reckoned I deserved to have what I wanted, for me and for my family, because I grew up poor. And everyone else was on the gravy train anyway.

It's an eye-opener to realise that economics is about energy - and what it's worth - not money.

There's an illustration of how we take energy-fuel for granted.  Put a gallon of petrol in a car, drive the car until it runs out of gas, say 50 miles.  The petrol costs you £6 at most. Then see how much it would cost you to pay a man to push the fuel-free car 50 miles back home.  Maybe he could manage 10 miles a day, working a seven hour day. That's a week's work so - even at the mininum wage - you'd have to fork out £216.65 to get the car home.  If you factored in the daily 4,500 calories of food he'd need to eat to supply the energy he needed to roll the car, it would push the bill up to around £330.00.

Maybe post 2020 our children will be carrying Arab squillionaires around the country in Sedan chairs, as of old.  Happy days!

 

Comment by joe taylor on March 17, 2013 at 9:40

I've finished the whole thing now and I'm glad I read it.  It's 84 pages but a lot of those pages are photos so it's not as long as you might think.  Still a decent amount to read though.  At times you have to zoom in or zoom out to get it comfortably on screen.

I think you will be better off for it if you read it.

Below are the last quotes I'm going to put up:

Financial recklessness (including globalisation) and energy constraint are the two most important factors which have created the current economic slump, so it is perhaps fitting that it was energy markets which drove the first, disastrous wedge into the debt structure which had been created in an attempt to bridge the widening chasm between the West's diminishing production and its ever-growing propensity to consume.

If one asked a representative sample of the public what economics is all about, there is a very strong likelihood hat the consensus answer would be “money”. The vast majority of economists do indeed frame the debate in monetary terms. The problem with this is that the economy is not, fundamentally, a monetary construct at all. Economics is really about the art of combining tangible components (such as labour and natural resources) to meet needs. Ultimately, money is a convenient way of tokenising this process. The process itself, on the other hand, is an energy equation.
 
Comment by joe taylor on March 16, 2013 at 16:34

I'm about a third of the way through this now and it's getting interesting - see below:

Before we can put the credit super-cycle into its proper context, however, we need to appreciate three critical issues, each of which is grossly misunderstood.
.
The first of these is the vast folly of globalisation. This has impoverished and weakened the West whilst ensuring that few countries are immune from the consequences of the unwinding of a world economy which has become a hostage to future growth assumptions at precisely the same time that the scope for generating real growth is deteriorating.

The second critical issue is the undermining of official economic and fiscal data, a process which has disguised many of the most alarming features of the super-cycle.

Third, there has been a fundamental misunderstanding of the dynamic which really drives the economy. Often regarded as a monetary construct, the economy is, in the final analysis, an energy system, and the critical supply of surplus energy has been in seemingly-inexorable decline for at least three decades
Comment by joe taylor on March 16, 2013 at 15:24

I'm a few pages into this; here are a couple of quotes:

No other major economy got it quite as wrong as Britain under Brown, but much the same was happening across the Western world, most notably in those countries which followed the disastrous Anglo-American philosophy of “light-touch” financial regulation
 
For our purposes, what matters here is that reducing production, increasing consumption and taking on escalating debt to fill the gap was never a remotely sustainable course of action. What this in turn means is that no return to the pre-2008 world is either possible or desirable.
 
If the analysis set out in this report is right, we are nearing the end of a period of more than 250 years in which growth has been ‘the assumed normal’. There have been setbacks, of course, but the near-universal assumption has been that economic growth is the usual state of affairs, a rule to which downturns (even on the scale of the 1930s) are the exceptions. That comfortable assumption is now in the process of being over-turned.
 
For a start, anyone who believed that a globalisation model (in which the West unloaded production but expected to consume as much, or even more, than ever) was sustainable was surely guilty of wilful blindness. Such a state of affairs was only ever viable on the insane assumption that debt could go on increasing indefinitely. Charles Mackay chronicled many delusions, but none – not even the faith placed in witchcraft – was ever quite as irrational as the belief (seldom stated, but always implicit in Western economic policy) that there need never be an end to a way of life which was wholly dependent on ever-greater debt
 
 
 
 
 

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