Monday, November 03, 2008

Small is (Still) Beautiful: A Tribute to E.F.Schumacher.

E.F.Schumacher looks to be proved right about oil after all. In his forward to the edition of Small is Beautiful (SIB), reprinted in 1993 and 20 years after the original, Jonathon Porritt discusses how E.F.Shumacher’s original thoughts and contemplations have unfolded in fact since then. He stresses particularly the essay on Buddhist Economics, and that the underlying principles are still true, i.e. the proverbial system endorsed by the subtitle of SIB, “...a study of economics as if people mattered.” This remains and will ever be applicable and must be the true aim of any sustainable economic system, not only from the moral perspective of equanimity and fairness, but for the simple reason that the capitalist ideology of limitless growth and expansion, as accounted by compound interest, is a nonsense. Agreed, it has worked certainly for the rich nations for over two hundred years, but that is only because the exhaustion of ultimately limited resources was a long way off.

This is no longer the case, and it is becoming relentlessly clear that many of the resources which we take for granted have by now been used-up in significant proportion; sufficiently so that even if their end is not in sight, the rule of economics is being felt by huge price-hikes, for example in metals, oil and gas. There is a knock-on from this too, which is that the price of food has soared during the past couple of years, both because the cost of producing oil, which underpins most of modern mechanised agriculture is increasing, and that the world population and its aspirations has elevated to such an extent that the resource of arable land now has its limits in our sights. Changes in land use too, for example its conversion of purpose from crop land to golf courses, have impacted on this scene as populations become more affluent, as is their habit of consuming more meat, which requires more land to produce than is the case for an equivalent calorific value of vegetables.

Living creatures obey the second law of thermodynamics, as do their inanimate counterparts, and energy losses are to be expected in the conversion of all forms of energy from one to another. Thus only one third of the energy in coal is recovered in terms of the energy of the electricity output when it is used to fire a power station, and the amount of energy recovered in meat from an animal that has grazed a given quantity from energy from grass, is far less than this.

Porritt states that Shumacher was wrong about one thing, and this is the aftershock of the “oil crises” that beset the industrialised nations in the 1970s. The causes of the oil shocks at that time were political . In 1973, the largely Arab OPEC nations decided to punish the U.S. for its support of Israel in the Yom Kuppur war. To Effect a suitable castigation, the supply of oil was reduced by 5%... this caused a price spike of 400%. In 1979, the war between Iran and Iraq resulted in a similar loss of oil to the world markets and its price soared in similar degree. As Porritt surmises in SIB:

“On some other issues, however, his views have not weathered quite so well. Like every other environmentalist writing in the early seventies, Schumacher was convinced of the imminence of serious oil shortages and deeply fearful of the economic and social dislocation that these would cause. Twenty years on [1993], the emphasis now is not on oil running out (current resources will almost certainly last at least until the middle of the next century), but rather on the environmental damage that will be done if they continue to be used up at current rates.”

Now this is most telling. Even fifteen years ago, neither peak oil nor global warming were on the public radar. It was global warming that first hit the headlines toward the end of the 1990s, and more recently peak oil, although the first warnings of it were made in the mid 1950s.

The two ills go hand in hand and the cure is the same for both, i.e. to burn less fossil carbon in the form of oil since this is the most vulnerable resource. The oil companies were certainly of the opinion that we had plenty of oil left and enough to last until the mid-00's. Now it seems clear that cheap oil will run-out long before then, albeit hydrocarbons will still be produced in quantity by various means in 2050, but at increasing cost and in a supply less than we need to maintain current western lifestyles. In the latter regard of an "oil crisis", Schumacher may be proved right after all. While the event was postponed by a few decades, the economic logic still applies.

Related Reading.

"Small is Beautiful," E.F.Schumacher, Vintage Books, London, 1993.


Blogger said...

eToro is the ultimate forex trading platform for novice and advanced traders.

Susan said...

Its an unbelievable delight examining your post.Its overflowing with information I am looking for and I need to post a comment that "The substance of your post is radiant" Great work. What are some of the cheapest places to travel to in the world? From Asia to Africa and Europe, Things to do 's got budget breakdowns for the cheapest places.