Guest Post: Growth Is Obsolete

Tyler Durden's picture

Submitted by James H. Kunstler via Peak Prosperity blog,

The word that sticks in the craw of many who cogitate over economics is growth. The condition that the word refers to has proven disturbingly problematic in recent years, especially as world’s population continues to expand exponentially and the global ecology suffers in response. In fact, Thomas Carlyle (1795 – 1881) called economics “the dismal science” in direct reference to the work of the Rev. Thomas Malthus, because the Malthusian conclusions were so unappetizing - that sooner or later rising human populations would outstrip the world’s capacity to provide for them.

Now it happened that the Reverend Malthus’s notorious Essay on the Principle of Population was first published in 1798, which was about exactly the take-off moment for the industrial revolution. That extravagant melodrama was about marshaling mechanical invention with fossil fuel. The first act ran on coal and allowed populations to expand because it extended the extractive reach for resources by colonialist nations. The second act featured exploitation of oil, which was more powerful and versatile than coal. It also lent itself much more directly than coal to being converted into food for people. The use of oil powered farming machines, oil and gas (an oil byproduct) based herbicides, insecticides, and fertilizers, and oil based long distance food transport, has allowed us to convert oil into food pretty directly. This has led to the “hockey-stick” swerve of population growth that took human numbers worldwide from under 2 billion in the year 1900 to more than 7 billion today.

We are in the third act of the industrial melodrama now where the dire sub-plot of peak oil has taken stage. Despite the wishful thinking and happy-talk propaganda lighting up the media-space, we have arrived at the problematic point of the story: the end of cheap oil. This is poorly understood by the public and, apparently, by leaders in business, politics, and the media, too. They misunderstand because they insist on thinking that peak oil was simply about running out of oil. It’s not. It’s about running out of the ability to extract it from the earth in a way that makes economic sense — that is, at a price we can afford in terms of available capital and energy invested (and also ecological destruction). That dynamic is now exerting a powerful influence on modern civilizations. We ignore it -- even at the highest levels of intellectual endeavor -- because we have made no alternate plans for running the complex operations of everyday life, and because the early manifestations of the dynamic present themselves in the realm of finance, which is dominated by academic viziers and money-grubbing opportunists who benefit from obfuscating reality.

The sad, stark fact is that oil is now too expensive to permit further expansion of economies and populations. Expensive oil upsets the cost structure of virtually every system we need to run modern life: transportation, commerce, food production, governance, to name a few. In particular expensive oil destroys the cost structures of banking and finance because not enough new wealth can be generated to repay previously accumulated debt, and new credit cannot be extended without a reasonable expectation that more new wealth will be generated to repay it. Through the industrial age, our money has become an increasingly abstract and complex product of debt creation. As Chris Martenson has put it so succinctly in The Crash Course, money is loaned into existence. Thus, the growth of debt (allowing the growth of money) has played a crucial role at the heart of our banking operations, and the very word “growth” has become shorthand for this process in the lingo of current economic discourse.

It is quite clear that the banking system has been thrown into great disarray as the price of oil levitated from $11-a-barrel in 1999 to the great spike of $140 in 2008, and then settled into a range between $75 and $110 since 2010. Most of this disarray is a result of attempts to offset the failure to create new real wealth with fake wealth generated by accounting fraud, "innovative" swindling, insider chicanery, high frequency front-running, naked shorting of securities, and the construction of a vast untested network of derivative counterparty wagers that give every sign of being booby-trapped. All this private monkey business has been abetted by public mischief in central bank interventions and market manipulations, fiscal irresponsibility, political payoffs for favorable legislation, statistical misreporting, and the failure to apply the rule of law in cases of blatant misconduct (e.g., the MF Global confiscation of segregated client accounts; the Goldman Sachs “Timberwolf” CDO scam… the list is very long).

In short, a society with deeply impaired capital formation has turned to crime, corruption, fakery, and subterfuge in order to pretend that “growth” — i.e. expansion of capital — is still happening. The consequences are many and profound. The chief one is that the manufacture of fake wealth is such an alluring activity that some of the smartest people in society have devoted their waking hours to making a profit off it. It absorbs all their energies and they are simply not available for other work, such as figuring out a sane and practical way to run civilization in the absence of cheap energy. Added to this is the administrative effort and the work-arounds needed to support all this corruption and dishonesty, which occupy the hours of another class of smart people who work in government, academia, public relations, and the media. The sustenance of these parasitical cohorts more and more continues at the expense of everybody else in society, who cannot find work, or cannot make enough money to pay their living expenses, and who have become deeply discouraged, disappointed, demoralized, and disengaged in their losing struggle to thrive. Hence there is little public vigor to even mount a discussion of these vexing problems and the final result is the greater wholesale failure to construct a coherent consensus about what is happening to us and what we might do about it.

Another consequence to these disorders of capital is the massive malinvestment directed into things with no future in themselves or, much worse, things that actively undermine the future of everything needed to support any civilized future. For instance, the "innovation" in securitizing and repackaging mortgages -- which continues to be a boon for the giant banks in concert with the thoroughly dishonest and technically bankrupt "government sponsored enterprises" Fannie Mae and Freddie Mac -- expresses itself in the activity we call "housing starts." Economists overwhelmingly agree that a higher number of housing starts is a good thing for the economy and hence for society. But what do housing starts actually represent? These days they mostly take the form of new suburban housing subdivisions, which are inevitably joined by the kit of the strip mall, the big box store, and all the other furnishings of the highway strip. In short, all that glorious "innovation" by the banks produces more suburban sprawl and destruction of rural land, which is about the last thing this society needs when faced with the realities of peak cheap oil, since it is absolutely certain to make these things obsolete, and very soon. It is not any better, either, if the nominal capital -- nominal because it is sure to someday represent a loss for some bond-holder or stockholder -- gets invested in a 30-story high rise apartment because, contrary to a lot of current delusional thinking, skyscrapers also have no practical future for reasons I have explained in other essays here.

Similarly, the public investments going into "shovel-ready" highway projects, although the fiscal outlays are more transparently based on money that doesn't really exist. The public, as well as leaders all across society, serenely believe that the Happy Motoring matrix will find a way to go on forever, and that therefore we must make provision for it, not to mention the beneficial side of effect of "job creation" for all the additional workers. Yet the dynamic at work must be obvious: oil will never be cheap again; it will impair future capital formation; there will be far fewer car loans; there will dwindling public funds to maintain the roads; and there is no practical substitute for gasoline that scales to the existing system, nor any prospect of one within a time frame that makes sense -- not to mention the gigantic background problem of pouring evermore carbon into the sky.

If these things I mention -- highways, tract houses, condo towers, strip malls -- represent our current idea of "growth," and if they are self-evidently bad investments, then we can infer that our current concept of "growth" no longer applies to a reality-based model of our economic prospects. We ought to junk the term and what it implies about the daily business of mankind, and come up with a new way of understanding the place we're at.

In Part II: Getting To a Future That Has a Future, we take a hard look at the critical task facing humanity if we want to enjoy a future of any worth -- and that's managing contraction. We have to reorganize all the major systems of civilized daily life. We have to produce our food differently, we have to do commerce differently, and so on with any number of ongoing endeavors including transportation, manufacturing, governance, banking, education, health care, and more.

Click here to access Part II of this report (free executive summary; enrollment required for full access).


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debtor of last resort's picture

Came out a few days ago, 565.000 views.

max2205's picture

Note....a lot of momo stocks finished Friday with what look to me like bull trap spikes complete with very non confirming technicals on the daily charts....if Nflx flops and reverses tuesday after ER, we may have seen the highs....


Just saying

boogerbently's picture

Growth, by definition, would be, more people buying your stuff.

People need jobs to buy stuff. You would need to hire more, to keep up with the growth. (catch-22)

Al revs, now, are from reducing inventory and staff.

Vampyroteuthis infernalis's picture

I understand the concept of Peak Oil and someday it will be a reality. Unfortunately, what author overlooks is the oil future's market is being manipulated in such a way that oil is vastly overpriced at this point in time. It is not a lack of supply, it is supply chain fraud. The author is correct in how this limits growth.

James_Cole's picture


the manufacture of fake wealth is such an alluring activity that some of the smartest people in society have devoted their waking hours to making a profit off it


The truth is it's also one of the only games in town these days. Everyone working for the bullshit economy, not that that's a particularly new phenomenon. Do your idiot job and collect your paycheque then enjoy the weekend and don't think about it.

To be fair, there's too many people and horrendously bad capital allocation though, so on balance maybe it's surprising how well things are actually going. Too many smart people doing dumb jobs though.   



We have to produce our food differently, we have to do commerce differently, and so on with any number of ongoing endeavours including transportation, manufacturing, governance, banking, education, health care, and more.

It's happening, just on the small scale. 



strannick's picture

Who needs growth when you monetize Treasuries (debt) and can then layer and leverage them up with repos (fictional, rehypothecated collateral)

Spigot's picture

All I know is that the price of everything in BTC is falling fairly rapidly.

ejmoosa's picture

Peak Oil is a theory, and we can assume that it might have some merit and we can take actions just in case.

But the cost of oil pales in comparison to the cost of government.

And we are not talking about Peak Government.  We are not making any strides to reduce the size or cost of government.

I can park my vehicles and I can walk.  I can carpool.  I can combine trips and order online.  All of those steps can reduce the impact of Peak Oil on me directly.

But there are no economies to be had when it comes to Peak Government.

And government is what this economy suffers from the most, from top to bottom.

Flakmeister's picture

You are free to believe whatever nonsense you choose to...

NidStyles's picture

You are free to go kick rocks and take your religion elsewhere.

Flakmeister's picture

And so are you... Don't you have some Von Mises circle jerk to attend to?

YuShun's picture

Our miliary certainly uses a great deal of oil, so cutting that by two-thirds
would result in a substantial reduction in the price of oil,
maybe enough to allow for economic growth.

Element's picture

Is the cost of production, transport, refining and distribution going to go up or down, if scale of production goes down by 65%? You realise existing invested infrastructure is a long term investment, that has to pay back its cost?

Pump 'gas' would become much more expensive, not less expensive, though hurdles to transitioning to other forms of energy supply may become a bit more viable (temporarily).



And I'm fracked if I know why merikans call petrol 'gas', wtf!? ... it's a bloody LIQUID you fools! ... you even call the liquidity a petro-dollar! lol </slaps forehead>

mkhs's picture

Gas is the lazy word for gasoline, a petroleum product.

worbsid's picture

I generally agree with your assesment that Peak Government is a problem but it is a soft problem that can be fixed and probably will be one way or another eventually.  OTOH, oil companies take the low hanging fruit first and most of the truly inexpensive oil is gone.  Now we are faced with getting oil from deep water, horizontal drilling and fracking, tar sands, etc. and it cost more.  This is not a theory, this is reality.  Peak oil has never been about 'running out of oil'.  A hundred years from now if you want some crude oil, you will be able to get it, someone will get it for you, unfortunately it will cost a million loaves of bread per barrel. 

ejmoosa's picture

I disagree.  We've been running out of oil since the 1940's.  

And a car getting 50 MPG today replacing a car that gets 15 has just reduced the cost of oil by more than a third.  

So measued in the utility it provides, one could just about say oil is getting cheaper per mile, in real dollars.


And there is no sign that we are even close to peak government, or any signs that we are turning government around.  You may think it is a soft problem, but we are experiencing the hard outcomes from their poor decisions.

Government IS the problem as far as the eye can see.  


ElvisDog's picture

Kunstler may ultimately be right on Peak Oil, but he has consistently overestimated when the true crisis will hit. He's been saying we're 1-2 years away from collapse since 2008 or so, and yet the oil-based system keeps humming along. My prediction - we will never give up our cars. Some people may not be able to afford them (and ride buses), the cars themselves may get smaller and more fuel-efficient (already happening), but we're not going back to walking everywhere and riding horses like Kunstler seems to think. 

Notarocketscientist's picture

No - it's not a lack of supply - the problem is that we have extracted most of the cheap easy to reach oil. 


And now we are drilling miles deep in the ocean, fracking and ripping out tar sands.

These are all VERY EXPENSIVE processes.


The era of cheap energy is over ergo growth is over.


The author is dead right

Urban Redneck's picture

Growth would only be over when viewed from the rather limited perspective of CHEAP-OIL-CONSUMPTION.

If you have a relatively under-developed economy, and relatively inexpensive to extract and relatively high quality oil (net of local demand), you have all the fixins required for an economic BOOM.

The rest of the world gets understandably perturbed when people extrapolate "the World" from "the USSA" they are related, but not interchangeable, terms.

Future Jim's picture

Thanks for the heads up on the World-Systems video. I'm SHOCKED that RT is claiming all the world's problems are caused by greedy capitalist countries exploiting other countries. This oversimplified asinine video explains nothing. It is just more FUD.

I think we here at ZeroHedge know the real problem, which I was able to write a few days ago thanks to the second video giving me the final impetus I needed.

lakecity55's picture

R Paul, Bill Still for prez and VP!

Hoist the Flag of Black Bart, Mates!

We sail on high tide!!

NidStyles's picture

Captian Morgan was better, he didn't get caught.


Not sure why everyone cheers the losers of the Pirates...

Cloud9.5's picture

What Kunstler is saying is backed up by the German Army.  They put peak liquids at some where between 2015 and 2020.

RafterManFMJ's picture

My debt, my belly and my sense of entitlement are all still growing, so what's the problem? - JQ Public.

knukles's picture

Isn't this what's supposed to happen, anyway?
Too many people taxing too few resources, prices rise such that there is lesser to no access.  That's whats supposed to happen
And if people be-spoil the ecosystem and we all choke to death, so be it.  If we cannot be responsible custodians of our planet then we deserve to become extinct.
And no I don't wanna hear a Goddamned thing about saving the planet.  It'll  be here long after man's gone away

Sleepless Knight's picture

So the US is lying. What's new about that?

NoWayJose's picture

Excellent article, and sadly it is true.

emersonreturn's picture

peak people


fukushima can help us there.

duo's picture

Peak topsoil = peak people

The soil we are depleting today took 10,000 years to form since the last ice age.  90% of it has blown away or as been washed into the gulf.  No amount of oil can bring it back, only time, with wild grasses and maybe some buffalo to trample it down.

We will reach a point, soon, when all the nitrogen fertilizer and Monsanto GMO seed won't do crap because the soil, planted with corn for ethanol every year for 20 years, has not one bacteria or fungus in it that the plants need to grow (or minerals, for that manner).

Ironmaan's picture

Malthusian hogwash. The only things peaking are taxes and regulation and dollar printing. That is what is causing a decrease in capital formation and squelching growth.

Spastica Rex's picture

"Limits to growth" has to be a lie, or capitalism can't work in the future. Or maybe growth can be ephemeralized into infinite phone apps that we write and sell to each other.

Regardless - It's not Nice to fool with The Invisible Hand.

Professorlocknload's picture

"It's not Nice to fool with The Invisible Hand."


Yup. We may not like the method, but left alone, a free market would/will eventually fix it.

At least that might make more sense than financializing the climate, along with every other aspect of life on earth. Lot's of potential, exponential growth for Squids there, though.


Spastica Rex's picture

If they had a fight, The Invisible Hand would kick Mother Nature's ass. Like Superman vs. Batman.

edit: I didn't mean "kick" literally.

GeorgeHayduke's picture

Not sure about that logic. Nature can easily exist without man or the mythical invisible hand. An invisible hand without nature would not exist at all, except maybe in religion and science fiction.

Harbanger's picture

The invisible hand of central planners exists outside of natures laws.  That's the mystical hand that appears to override physical laws.  Fuck Logic.  I fully expect you to find nationalism, not because of understanding or love, but because the well intentioned plans of the globalists start affecting you personally.

NidStyles's picture

The invisible hand is a byproduct of nature, and I find silly that people continually remove humans from nature as if they were in fact separated from it's influence. 

Spastica Rex's picture

You cannot go against nature, because if you do go against nature, it's part of nature too.

No new tale to tell.

Notarocketscientist's picture

The invisible hand is bullshit.   Our current system is bullshit and it will be short lived - the reason we live as we do is because we have had cheap oil for 150 years.

That era is OVER. 

We are at the cusp of a new revolution - one in which energy is rationed because it is expensive - no more SUVs - no more fresh fruit in the winter - no more flying around the world on a whim.


Miss anthrope's picture

when i read your stuff I feel you just jamming out at your keyboard to this....


and I see you BELIEVING, that what you are saying is the God's own purity of truth.......pristine clean!. 


Boy what interlocking clandestine missive will you unleash next.!


MisterMousePotato's picture

They're not mutually exclusive. Your response has that same feel as the Hegelian dialectic.

FeralSerf's picture

Joo-Kunstler is a shill for Big Oil. Kunstler was claiming ten years ago there wouldn't be any oil for the proles and their pickup trucks due to the Dreaded Peak Oil. What we have instead of Peak Oil is the (Big Oil) Dreaded Peak Oil Consumer. Thankfully for Exxon and Chevron they still have Goldman Sachs manipulating the price and supply.

Big Oil loves high oil prices.

Spastica Rex's picture

God would never have created oil as a finite resource. Or if He did, God will uncover our eyes to the miracle of [Nuclear Fusion] [Zero-State Energy] [The Hydrogen Economy] just as soon as our one ton pickups really need it.

edit: "High" oil prices are just a deception of Satan. Like dinosaur fossils.

lakecity55's picture

Ga-ran-tee "they" have all sorts of devices and inventions to create energy with after oil is not economical.

Will there be huge dislocation, though? Probably.

This will not effect those of us who hunt, fish, have small gardens, woodstoves or variants, and who are not interested in money for money's sake.

You can't take it with you. Try to build something for your kidz.

beaglebog's picture



You will not be permitted to hunt, shoot or fish.


You will, in fact, not be permitted to leave the confines of the Metropolis to which you have been re-located.


See Agenda 21, for details.

css1971's picture

1 ton would be a smallish European car. Your typical American pickup is closer to 3 (metric) tonnes.