Will Peak Oil Spell the End of Capitalism?

Capitalism will end when oil runs out, according to Fleeing Vesuvius, a collection of essays first published in Ireland in 2010. The US and New Zealand editions came out in mid-2011. The basic theme of Fleeing Vesuvius, which is aimed at the growing sustainability movement, is TEOTWAWI (The End of the World as We Know It). The title refers to the volcano that destroyed Pompeii in 79 AD, specifically the large number of residents who failed to save themselves, despite weeks of earthquakes, gaseous clouds and other obvious signs that an eruption was imminent. For more than a decade, a growing body of evidence suggests that the planet is on the verge of economic and ecological collapse. Yet the vast majority of us do absolutely nothing to prepare for the stark conditions ahead.

The authors contributing to Fleeing Vesuvius represent an impressive range of expertise. Six are economists, four environmental scientists, three specialists in green commerce and marketing, two architects, two community organizers, one an environmental engineer, one a psychotherapist and one a former corporate attorney. Others have backgrounds in appropriate technology, ethics and local government. All are in basic agreement around the book’s central premise: the industrialized world needs to urgently downsize its energy use, both to stave off catastrophic climate change and to conserve dwindling fossil fuels.

The first two sections of Fleeing Vesuvius define the problem by outlining the scientific, technological and economic parameters of fossil fuel depletion. The last five focus on solutions, with examples from Europe and North America of pioneering programs local groups and communities are undertaking to wean themselves off fossil fuels.

The Link Between Fossil Fuels, Industrialization and Capitalism

Fleeing Vesuvius deliberately emphasizes fossil fuel depletion more than climate change, owing to the major role it played (according to the authors) in the 2008 economic collapse. The first and most important section of the book, “Energy Availability” addresses the economics of fossil fuel depletion. It lays out hard truths about the link between cheap fossil fuels, industrialization, capitalism and money. We are always taught that the industrial revolution of the late 18th century was the result of British technological innovation, the view promoted by Adam Smith in The Wealth of Nations. Unfortunately Smith totally overlooks the importance of cheap fossil fuel energy, at first from coal and later from oil and natural gas, in running the giant machines that replaced human labor.

In his Introduction, “Where We Went Wrong,” the late Irish economist Richard Douthwaite points out that one barrel of oil provides the equivalent labor of a man working forty hours a week for twelve years. He goes on to stress that before the advent of cheap fossil fuels, capitalism was impossiblean economy relying on human labor and animal power is too inefficient to support it. By definition capitalism depends on capital accumulation, the production of an economic surplus that can be reinvested in new capital (property and machines) to expand production even further. Producing a surplus of this size only became possible because of the vast amount of cheap (practically free) work performed by fossil fuel energy.

The other side of this argument is that industrialization and capitalism will eventually cease when fossil fuel becomes too prohibitively expensive to support it. In fact,

Douthwaite argues that the skyrocketing cost of oil ($148 a barrel) and food – not speculation in subprime mortgage derivates – were the root cause of the 2008 economic crisis.

The End of Industrial Agriculture

Part I of Fleeing Vesuvius also looks at the link between cheap fossil fuels and industrial agriculture. In addition to the fossil fuel energy required for farm machinery, food processing and transportation to market, oil and natural gas are essential in the production of synthetic fertilizers, pesticides and herbicides that are an essential feature of industrial scale agriculture. Doing without them means returning to an era where people produced food and other basic needs with manure, human labor and draft animals. Prior to the industrial revolution, these primitive methods fed a global population of two billion. Many economists question whether it’s possible to provide for our current global population of seven billion without relying on fossil fuels.

Energy Return on Investment (EROI)

In the essay entitled “Future Energy Availability,” environmental physicist Chris Vernon explains the link between Peak Oil and Energy Return on Investment (EROI). EROI is defined as the amount of energy that must be expended to extract or produce surplus energy for business or household use. Although there’s still a lot of oil, gas and coal in the ground, we have reached the point where the reserves that are easy and cheap to extract have been used up. More importantly, owing to the enormous amount of energy required to produce some forms of renewal energy, renewable sources will never have the ability of fossil fuels to produce abundant cheap energy. Although wind, especially off-shore wind, and tidal energy have great promise, energy from these sources will remain quite costly for the foreseeable future. This leads Vernon to draw the conclusion that humankind will have no choice but to downsize their energy intensive lifestyles.

Money and Energy Scarcity

The main focus of the second section of Fleeing Vesuvius, “Innovation in business, money and finance,” is the link between energy availability and money. In it, Richard Douthwaite looks at our current debt based monetary system, which started at the beginning of the industrial revolution. He explains how banks create money out of thin air every time they approve a new loan and why continuous economic growth is necessary in order to pay off the debt created in this way. When economic growth stalls, as it did in 2008, the debt becomes unpayable.

With the end of cheap energy, according to Douthwaite, global leaders must accept that the era of continuous economic growth has also ended. This means our current debt-based system of money creation must also be scrapped. In addition to calling for government to remove control of money creation from private banks, Douthwaite also supports the creation of regional and local currencies. This preserves the ability of low income groups to trade products and services when the national currency is in short supply due to recession and deflation.

The Transition to a Fossil Energy-Free Society

The last five sections of the book focus on solutions, with inspiring examples of new approaches to land use, agriculture and industrial design from individuals, groups and communities who have begun the transition to a less energy-intensive lifestyle. There are two somewhat technical essays on using biochar as a carbon sink and the importance of soil mineral content in localized food production. Other essays look at national and international strategies for reducing carbon emissions, including the innovative “Cap and Share” approach put forward by Fiesta (Foundation for the Economics of Sustainability) in 2008. This would require primary fossil-fuel suppliers (e.g. oil companies) to buy permits to introduce fossil fuels into the economy. As fossil fuel suppliers pass these costs on to consumers, they, in turn, begin to seek out renewable energy alternatives. At the same time, revenue from the permits is used to help low income customers pay their energy bills.

Part 5 “Changing the way we live” includes an excellent essay by community organizer Davie Phillip describing some of the accomplishments of the worldwide Transition movement, started by Rob Hopkins (in Ireland and the UK) in 2002.

Part 6 “Changing the Way We Think” addresses the apathy and inertia that prevents most of the developing world from taking serious measures to address the catastrophic economic, ecological and resource crises we presently face. In “Cultivating hope and managing despair,” psychotherapist John Sharry compares this widespread apathy and inertia to Kubler Ross’s stages of grief in bereavement or impending loss (denial, anger, depression, acceptance). The impending collapse of our current way of life is the worst loss any of us can imagine. It should be no surprise that the initial response to such news is denial. Sharry suggests that Kubler Ross has left out an essential step between depression and acceptance – namely, the hopeful and constructive activity which is often necessary before full acceptance can occur.

Fleeing Vesuvius finishes with an Epilogue in which different authors give suggestions for specific steps people can take on an individual, community, national and international level in preparing for the eventual collapse of our present energy intensive economic system.

The North American edition of Fleeing Vesuvius has a preface by Richard Heinberg, author of the End of Growth and fellow at the Post Carbon Institute.This edition also contains an appendix, “Should the US try to avoid a financial meltdown?”, a dialogue between two of the economists who contributed essays (Richard Douthwaite and Tom Konrad).

Stuart Jeanne Bramhall is a retired American-trained psychiatrist and long time citizen activist living in New Zealand. Substack page https://stuartbramhall.substack.com/. Email her at: stuartbramhall@yahoo.co.nz. Read other articles by Stuart Jeanne.