Guest Post: No More Industrial Revolutions, No More Growth?

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The common feature of the transformative technologies of the 20th and 21st centuries is that they were one-offs that cannot be duplicated.

What if the engines of global growth that worked for 65 years (since 1945) have not just stalled but broken down? The primary "engines" have been productivity gains from industrialization, real estate development and expansion of consumption based on the continual expansion of debt and leverage--in short-hand, financialization.
The Status Quo around the globe has responded to the obvious endgame of financialization (the 2008 financial crisis) by doing more of what has failed: expanding credit and leverage, flooding the global economy with liquidity (money available for borrowing), credits and subsidies for real estate development and a near-religious belief in "the next industrial revolution" that will spark rapid growth in employment, profits and productivity.
"The usual suspects" for the next engine of growth include nanotechnology, biotechnology, unconventional energy and Digital Fabrication, i.e. 3-D printing and desktop foundries. But are any of these capable of not just replacing jobs and revenues in existing industries, but creating more jobs and expanding revenues and profits?
There is a growing literature on this very topic, as many start questioning the quasi-religious faith that there will "always" be another driver of growth, i.e. the expansion of wealth, profit, employment and assets.
The Status Quo dares not even entertain this question because the only way to service the fast-rising mountain of debt that is sustaining the Status Quo is to "grow our way out of debt," i.e. expand the real economy faster than debt.
The past 250 years has been one long "proof" that we can indeed "grow our way out of debt" because the low-hanging fruit of industrialization and cheap, abundant energy enabled wealth to be created at a faster pace than debt.
Clueless Keynesians mock those questioning the possibility that the low-hanging fruit has been plucked by noting that doomsdayers were actively decrying the ballooning debt of the British Empire in the mid-1700s. We all know how that story ended: what looked like crushingly massive debt in 1780 was reduced to a trivial sum by the rapid expansion of industrialization.
But suppose the end of cheap, abundant energy (replaced by abundant, costly energy) and the Internet spells the end of centralized models of growth? What if all the innovation currently bubbling away only produces marginal returns?
Take biotechnology for example. Those with little actual knowledge of biotech are quick to latch onto the potential for genetic engineered medications, biofuels, etc. What they don't ask is if these technologies can scale up while costs decline, i.e. the computer technology model where everything progressively gets cheaper and more powerful.
Biofuels may have promise, but it still takes "old fashioned" energy to collect the feedstock, and it is a non-trivial task to keep micro-organisms alive on the scale that would be needed to produce a useful amount of liquid fuels, i.e. a few million barrels every day. Some processes may not scale up, and others may not see any significant reduction in fuel costs once the full input costs are calculated.
Genetic engineering also may not scale up--it may be limited by key barriers of individual patient complexity and by intrinsic costs that do not drop enough to make a difference.
Consider the diseases that have almost been eradicated--polio, for example--and the lifestyle diseases such as diabesity. The wave of diseases that were eradicated were caused by bacteria or viruses: a vaccine or agent that disabled or killed the bacteria/virus wiped out the disease.
Diabesity, cancer and heart disease are not caused by a single virus or bacteria. The "one med/vaccine works for all" model has failed and will always fail because diabesity and other lifestyle diseases have multiple, non-linear causes that are beyond the reach of a single "solution." These diseases may well be tied to epigenetic factors, for example, the interaction of "junk DNA" with environmental stresses that extend back into the individual genome.
What we face is the confusion of symptoms and effects with causes. Lowering cholesterol is not the "magic bullet" many hoped for, and neither was hormone therapy.
In the technology sector, it is clear that the Internet is destroying entire sectors of employment. The jobs that have been lost for good have not been replaced by jobs created by the Internet, nor is there any credible evidence to support this hope: automated software continues chewing up one industry after another, and the politically protected fiefdoms of healthcare (sickcare), education and government have yet to taste the whip of real innovation.
Rather than add jobs, we will lose tens of millions of jobs as faster-better-cheaper breaches the walls of these massive politically protected fiefdoms.
Healthcare spending is clearly in terminal marginal return: our collective health continues to decline in key metrics even as spending doubles, triples and quadruples. The same can be said of defense, education and many other industries.
Sectors such as agriculture have already seen employment decline by 98% even as production rose; there are still improvements in agriculture (robotic milking machine, for example) but the low-hanging fruit in agriculture as well as in medicine, education, etc. have all been picked.
The next wave of innovation will destroy protected profit centers and employment; even the Armed Forces are not immune, as the "ships of the future" will have relatively small crews and robotic drones will replace high-cost, high-employment weapons systems.
The semi-magical belief that technological innovation will create wealth in such quantities that all other problems become solvable may well be false. We may have entered an era of marginal returns, where innovations destroy jobs, wealth, assets and debt--the very foundations of "growth."
I have begun to speculate about a future where energy might be abundant but few can afford to consume much: money and income may be scarcer than energy.
The one innovation that might energize an entirely new field of employment is digital fabrication, the decentralization and distribution of production. But this will also creatively destroy jobs dependent on the present supply chain.
National governments have over-promised entitlements to their citizens on a vast scale, and the current "solution" to the mismatch of promises to national surplus is to borrow monumental sums to fund the promises. If innovations actually shrinks employment, incomes and wealth, then the base for taxes and debt will quickly shrink to the point that the debt is unserviceable. The Status Quo will collapse financially, even if energy and labor are both abundant.
Consider END OF GROWTH - six headwinds: demography, education, inequality, globalization, energy/environment, and the overhang of consumer and government debt.(via Zero Hedge)
The point made in this lengthy essay is a powerful one: the common feature of the transformative technologies of the 20th and 21st centuries is that they could only happen once. They are one-offs that cannot be duplicated. Doing more of what has failed will only set up a grander failure as returns on all our debt-based "investments" become ever more marginal and the return on increasing complexity drops into negative territory. Once complexity yields negative returns, the systems that depend on complexity quickly destabilize and implode.
The Collapse of Complex Business Models

This essay was drawn from Musings Report 48. The Musings are sent weekly to subscribers and major financial contributors (those who contribute $50 or more annually).

My new book Why Things Are Falling Apart and What We Can Do About It is now available in print and Kindle editions--10% to 20% discounts.

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yabyum's picture

Seventh headwind, Too many damned people

knukles's picture

Tesla & Zero Point Energy

true brain's picture

"The point made in this lengthy essay is a powerful one: this essay is crap."

WHo would pay $50 for this crap? Tell us something new. I'm tired of this.

garypaul's picture

I know what you mean. As soon as I see that author's name attached to something I quickly move on. 

mkkby's picture

Yesterday this author wrote BS about being optimistic.  Today the exact opposite???  WTF.

While I agree that expecting science to bail us out is childish, I have yet to see anyone explain how credit and resource growth can be over when the entire continent of Africa (and most of S. America) is largely undeveloped.  Let's talk about "the end" when Africa looks like the US from sea to shining sea...  i.e. covered in roads/houses/farms/cities.

Errol's picture

true brain,

You are mistaken; the topic of this essay is one of the key components of our current predicament.  Automation and industrialization has reduced the number of workers needed to produce everything we need, resulting in large numbers of unemployed workers, who have trouble buying the output of automation and industrialization without resorting to debt.

Society has tried various means to reduce the work force: public education to get the child labor out of the labor pool, delaying the onset of adulthood by requiring college degrees for jobs that really don't require one, having multi-million member standing armies to keep those soldiers out of the labor pool.  But we took this as far as we could, and are now reduced to paying people disability, early retirement, etc to keep them the hell out of the labor pool.

Try using your true brain - maybe you'll understand the issues better...

mkkby's picture

Keeping people out of the work force, intentionally.  Are you fucking retarded?  What do you call a flood gate of immigration, open borders and H1B permits?  Getting women to be more independent so they enter the workforce in the 70s.  Globalization.  The entire plan is to dilute the workforce so wages plunge as low as possible.

Errol's picture

mkkby, you are correct as far as my failure to mention that the time frame I was referring to: the reformist years of late 1800s through the 1930s.  Inasmuch as the average American is no longer capable of logically debating the issues, democracy is no longer functioning in the US. Don't expect the present electorate to support efforts to create and sustain a middle class.  The national political process has been captured by corporations, so you may now expect global wage arbitrage and unlimited immigration.  Banana republic (tiny super-wealthy minority and improverished majority), here we come!

Anusocracy's picture

He didn't mention room temperature superconductivity.

Errol's picture


Show me your working prototypes for "zero-point energy" or take your technocornucopian fantasies to the SciFi blogs where they belong...

Oh, and you too, Mr Room Temperature Superconductivity.

RebelDevil's picture

Go to youtube, and you'll find hundreds of working "Free Energy" technologies. You just need to know where to look.
There about 10,000 around the world on different forums working on this stuff.

Flakmeister's picture

Yep... just like healing crystals and a host of other new age psuedo-science crap...

Jendrzejczyk's picture

...writing books and selling them on the internet?

F. Bastiat's picture

An answer is space exploration and conquest. The ultimate expansion of mankind.  The opportunities for innovation in materials, communications, and energy are legion.  It's time to take seriously getting outposts set up on the moon and then on Mars.  The private sector needs to lead the way.

viahj's picture

asteroid mining is also needed, but most importantly to "human expansion"  is clean water and healthy food.

F. Bastiat's picture

Well, who knows. Those are certainly good possibilities and I'm sure we'll find many more of them as we get out there.  An outpost on the moon seems a reasonable goal for the private sector space companies.  Followed by an outpost on Mars. Hopefully the information coming back from the rover Curiosity will be useful and will be widely shared with the private sector.

GMadScientist's picture

This is the kind of risk/reward evaluation that lead to the crash in the first place.


"....cause there's bugger all here down on Earth!"

Citxmech's picture

Hell, access to clean water and healthy food is a tough prerequisite just for us to survive even at a reduced population in a steady-state, never mind trying to fuel additional growth.

Bicycle Repairman's picture

Technology alone will not save us.  If the political class was able to destroy the gains from the high tech / internet revolution, they can obliterate the gains from any technological revolution.  The political environment must be changed.  And there is no guarantee that the next techological revolution benefits the West.  In fact I believe it is unlikely.  Prepare for third world status.  Thank you, political class.

Seer's picture

It was the political class that helped exploit finite resources.  One could, I suppose, blame them for their decline, but look around and ask if you yourself have had a hand in depleting them...

BTW - TECHNOLOGY is a PROCESS.  What enables it is PHYSICAL RESOURCES, with fossil fuels being one of the key such resources.

BTW2 - The "Third World" lives more sustainably.  We can all thank them for living that way so that we could live unsustainably...

TuPhat's picture

Seer, As for BTW2, that's painting with a very broad brush and is therefore untrue.  Burning forests to plant crops on marginal land is not sustainable for one example.  Living withins ones means no matter the third world or first world is sustainable.

Ident 7777 economy's picture





Seer "BTW2" is a stupid statement.



Bicycle Repairman's picture

The political class helped exploit resources?  You mean "I didn't build that?"  LOL.

The resources are nowhere near being depleted.  As I told you before, three years ago you had no idea what fracking meant.  The revolution in natural gas completely escaped your ilk. 

As for the third world, you like it?  Go live there.  Don't try forcing it on me.

RebelDevil's picture

Hell yeah it's a process, of enlightening the knuckleheaded physicists and defeating the elite at their own game!

Mentaliusanything's picture

Pity Gravity is such a bitch to get around and over

F. Bastiat's picture

True.  But perhaps the "anti" gravity remains to be discovered?  The yang to gravity's yin, the positive to gravity's negative. Who knows. But, we need to be out there doing it in order to innovate.  Despite the superstitions of the socialists in our midst, all knowledge originates from experience.  And there's no better experience than actually doing things.

Seer's picture

The PROBLEM, however, is that in order to apply an equal and opposite force you require FORCE.  Harnessing such FORCE means that you need to harness forces that don't naturally occur (well, they do, but they're based at planetary levels/mass).

"And there's no better experience than actually doing things."

Unless, that is, "doing" results in catastrophic failure and or a waste of energy and resources (such as is typical of all those big projects that are undertaken for the good of the elite- keeping them in grant money etc.).

"Despite the superstitions of the socialists in our midst, all knowledge originates from experience."

Huh?  You're talking about FREE stuff, just like the socialists...  NOTHING is FREE!  The ONLY thing that comes close is solar energy, and even then the most efficient living organisms (evolved over millions [billions?] of years) has only managed to utilize less than 10% of solar [light] energy.

F. Bastiat's picture

You've a bright future constructing strawmen. And tearing them down. Pretty creative, actually.

F. Bastiat's picture

To burn one of your strawmen:

+, - electrical forces exist naturally.  While I'm not fully up to speed on the nuclear forces, one may reasonably suspect that a similar situation exists.  Anti-gravity would seem to be a larger, macro force similar to the naturally occurring "micro" opposing forces of electrical & (assuming) nuclear.

CH1's picture

Can't believe you're getting dinged for these posts Bastiat. You are dead-on right.

Keep posting a screw the naysayers.

F. Bastiat's picture

Small minds do petty things.

kraschenbern's picture

Space elevators will help; but not overcome the singularity.

F. Bastiat's picture

Gravity sucks, certainly.  But it can be useful when combined with other forces. JDAMs raining down on marxists and islamist barbarians, for example.

Seer's picture

Keep paying your taxes for those JDAMs.  Sooner or later (as the USD collapses) you can be expected to part for nearly ALL of your pay; but, hey! killing all those monsters our there is worth it, right?

F. Bastiat's picture

Actually, the taxes are for killing islamists and marxists. The JDAM is simply one tool for doing so.

Tsk, tsk - you should stick to the strawman business.

Citxmech's picture

Exploitation of space for commerce will be marginal unless or until we can implement a viable space-elevator system to facilitate the efficient movement of serious tonnage into space.

Until a program like this starts to make up for the decline in industries like the airlines - space as a future growth-industry will remain a pipe dream.

I wouldn't recommend holding your breath. . .


Salon's picture

200 mile long rail gun.

Acceleration is slow enough that humans can be shot into space to collect asteroids for their 20 trillion dollar metal content

Citxmech's picture

Hmm.  That could work too - although no need to use people - just automate the whole shebang.  Do you know if the gun have to be straight, or could it follow the contour of the Earth?

knukles's picture




(sigh of relief from Richard Simmons)

blunderdog's picture

Richard Simmons is uh "straight."  He says he suffers unique and unrequited love with Barbara Streisand.  Heh.

kraschenbern's picture

Revolving door employment for beltway insiders/politicians?

CH1's picture

humans can be shot into space to collect asteroids for their 20 trillion dollar metal content

Or just to escape the insanity that rules on this planet.

I mean... obeying government? Giving half your money - your life! - to rulers? How gullible can this species be?

akak's picture


humans can be shot into space to collect asteroids for their 20 trillion dollar metal content

We already have those metal-rich asteroids right here on earth --- they are called "mountains".

Just because x number of tons of this or that metal occurs in any given asteroid is utterly irrelevant --- the metals' ores still have to be mined, the ores concentrated and processed, and the metal refined, and then in the case of an asteroid, the metal brought to earth and THEN brought down to the surface, every step of which requires a significant amount of energy and technological expertise.  The idea of mining asteriods is a red herring and a total non-starter unless and until humanity controls almost unlimited amounts of energy.  It may happen in the future, but today it is nothing but an impossible pipedream.

icanhasbailout's picture

If they could make a 3-D printer that worked with Moon dust that could solve a lot of the tonnage/gravity problem.


The human race needs room to expand - it is in our nature. It is also in our nature to kill ourselves off in large numbers when competition for resources gets too fierce.


It's a race against time, and we need to get off this planet. Necessity will be the mother of the inventions to make it an economically sound proposition.

F. Bastiat's picture

It's going to take big thinkers. Far too many hominids, at least in the states, are solely consumed with cashing their next check derived from the spoils of plunder.

Seer's picture

Maybe a lot of people realize that it's a hoax?

Yeah, let's all sign up for the next pyramid-building operation!

All you techno-heads looking for yet another scheme in which to steal off the toils of the workers...

F. Bastiat's picture

Now it comes out - don't you feel better? Now that you've got your marxist tendencies out in the open for all to see.  Out of the "progressive" closet, so to speak.

I'll happily pay taxes so that Boeing can build JDAMS that kill islamists and marxists.

You see, it's "utilty" that determines value, not "labor". The value of something is mainly determined by how useful it is. If "labor" were the key to value, then hand-made stone tools would be the most valuable things around us.

Back to your strawman operation.

ForTheWorld's picture

Not always. Diamonds are quite expensive, but provide little use, while Silver, with all its uses, is valued at only $30/oz. Surely it can't be too hard to come up with a value of an item that combines both its utility, and the labor required to create the item (even accounting for all externalities).

F. Bastiat's picture

Certainly, utility includes many things and other factors, such as supply and demand, affect the price.  Overall, "labour" is an extremely minor component.  Despite the delusions of those using class warfare to attack Western civilization from within.