Monday, August 20, 2012


Not a lot of people have faith in Jeff Rubin, but to me he makes a lot of sense. He is primarily an economist with sympathy towards environmental concerns.

His last line is a good place to start, "As the boundaries of a finite world continue to close in on us; our challenge is to learn that making do with less is better than always wanting more.''

His contention is that for the near future the high price of energy will force economic growth to slow and in fact that is what is happening now.  We often don't think about how much relatively cheap energy drives our life style.  One of his observations reminds me that near where I used to live in Burlington used to be much more of a fruit belt area, but because we can get cheaper fruit from the other side of the world many orchards have been paved over.  Everyone notices that we can get cheap goods from China and elsewhere and that many jobs have shifted overseas.

Rubin maintains that the recession that started in 2008 was caused in major part by rising energy costs that have caught governments (and corporations) off guard.  The higher gas prices exasperated over extended credit that had in large part been accumulated because of more costly energy. The one thing that allowed gas prices to be lowered was a massive unemployment crisis.  Unfortunately as the economy is struggling to improve the price of energy continues to climb.

A great part of the book explains that affordable sources of energy are diminishing and some powers are taking steps to lock in their sources while others are bending the rules to extract what remains.  Nations are pushed to new alliances to try to maintain access to energy.  The new Egyptian government has cut off natural gas to Israel which in effect cuts off Jordan who will now have to deal with Iran to get its natural gas.  Israel and Turkey will turn their attention to the same section of the Mediterranean  for oil.  China is taking over much of American share of oil from Venezuela and that will increase after a pipeline is built through Colombia.  Here in Canada the notorious Tar Sands are drawing attention not only from United States, but also China and it seems pipeline routes are subject of much calculation.

Food costs will put a further squeeze on the economy.  Hardest hit will be the poorer nations.  Energy is important in transportation, planting, and processing of food.  Americans are using farmland for ethanol and other fuels.  Rich nations, especially oil exporters are taking steps to secure food supplies.

 It is very true that technology is looking for greater efficiencies and sooner or later there will be some breakthroughs.  Rubin feels that it will be a long time before breakthroughs will replace what we are rapidly using up--affordable fossil fuels.

The flip side of this is that as the real cost of fossil fuels goes up consumption will go down.  He points out that many environmentalists extrapolate that fossil fuels will reach a point that they cannot actually reach because of costs and availability.  Rubin feels higher costs will be much more effective than any government agreements at cutting down fossil fuel usage.

This will have a variety of effects.  In his previous book he used an example of China bringing in coal from Brazil and then manufacturing it for steel and shipping back to North America and western Europe.  When the transportation becomes uneconomical manufacturing will come closer to where it will be used.  Agriculture will also become more local.  This is happening on a small but accelerating scale right now.

In Germany he points out how they have maintained relatively high employment while especially retaining skilled workers.  They have developed a job sharing strategy supported by the government and labour unions.  This could be a path for more developed countries.

In a way his thesis is supportive of free market advocates, but with a difference.  He acknowledges we live in a finite world with an increasing population.  Money is not the ultimate goal, but only one tool towards happiness.  The necessity of growth should be looked at more carefully.

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