What Is the End Game? Exponential Growth in Population, Energy and Debt
Economics / Demographics Dec 02, 2012 - 12:00 PM GMTBy: DK_Matai
As Helen Keller once said, "To be blind is bad, but worse is to have eyes and not to see!" Is the greatest shortcoming of the human race our inability to understand the exponential function? The Earth's human population reached 1 billion in 1804, 2 billion in 1927, 3 billion in 1959, 4 billion in 1974, 5 billion in late 1986 and 6 billion in late 1999. In late 2011, we crossed 7 billion people on this planet and we are projected to cross 8 billion in 2025.
Each new person places additional demands on food, water, energy, and other finite resources. At this level of population we are consuming more than 2 planets worth of resources even though more than 1 billion people live in abject poverty. Simply put, the exponential function means growing like this: 1, 2, 4, 8, 16 and 32. Doubling, doubling again and then doubling again and again. Everyone surely understands that? YES, at a theoretical level, and NO, at a practical level!
World Population Growth Scenarios until 2100, United Nations
Key Challenge
The economic chaos and turbulence we are now experiencing are perhaps the opening salvos in what may yet prove to be a long, disruptive period of adjustment. Our choices now are to either evolve a new economic model that is compatible with limited physical resources, or to risk a catastrophic failure of our monetary system, and with it the basis for civilisation as we know it today.
The Exponential Function
When ATCA 5000 examines the existential threats facing humanity in the short to medium term, it becomes clear that major challenges -- whether local, national, regional or international -- are all tied together by the exponential function! A lack of appreciation for what the exponential function associated increase really means leads our society to be disastrously sluggish in acting on critical issues like countering climate chaos induced extreme floods, fuel and food shortages. Believe it or not, our great survival struggle -- manifest via the exponential growth in population, energy consumption, debt explosion and the end game -- is about understanding the practical meaning and effects of the exponential function. The complexity which is created by the exponential function over time can lead to extremely high probability high impact events that began a long time ago like a small dot or speck of dust and were dismissed originally as extremely low probability event scenarios both in government offices and corporate board rooms.
Impact on Energy Capacity and Consumption
Until the 1970s world oil consumption was growing at seven percent per year. That means doubling every ten years. The doubling time of anything growing exponentially is 70 divided by its annual growth rate -- 70 divided by seven percent is a ten-year doubling time. Every ten years we used as much oil as we had used in all previous history. Every ten years we had to go out and discover as much oil as we had ever discovered before -- and then, to keep going, discover twice that much in the next ten years. We didn't keep going after 1970 because we couldn't have. In 1973, there was a massive oil shock and that global economic crisis began to alter consumption behaviour.
Since then, per capita oil consumption in the US -- which reached a peak in 1978 -- has fallen by 20 percent from that level. As a result, there's still plenty of oil around at present, but we've been burning it faster than we've been discovering it for 20 years now because of the arrival of China, India and other emerging countries as major consumers of oil alongside the G7 and other developed nations. It is well known that we have around a 1,000 years' worth of coal left. However, if we burn 7 percent more of it each year than the year before -- which we may well do post the Fukushima nuclear crisis in Japan and substituting coal for the disappearing oil -- it will last just 60+ years, and it will bring on greater global climate chaos much faster than even the worst case scenario projections.
Exponential Debt
Even financial debt is an inverted pyramid resting on the fossil fuel energy that powers growth. When GDP growth is curtailed, the financial debt pyramid also begins to get oversized and to implode. Over the last 100 years governments around the globe have implemented policies of print and spend in times of economic downturns with great success. This works well when debt is fairly low and organic economic growth is relatively strong, but exponential debt growth becomes an increasing concern every time governments via central banks print their way out of an economic downturn. The larger the downturn, the larger the response.
So on and so forth. If the governments happen to enter a period of severe irrationality and spending the problems multiply. If the recovery period is not used to pay down debts the problems become exponentially worse. The explosion of government spending and government debt has increased significantly in the past 30 years. In fact, government spending has exploded in a way no one could have imagined 100 years ago. The tipping point comes when the debt burden hinders future economic growth and destroys a nation's ability to spend its way out of any future recessions. It effectively turns into one great pyramid Ponzi scheme if one lets the money printing process get out of hand without any checks or balances.
The End Game
One doesn't get much reaction time when problems such as the exponential growth in population, energy consumption and debt grow simultaneously and propel us ever closer to the end game. This is where we have arrived now. An old French riddle illustrates the point: Suppose one owns a pond on which a water lily is growing. The lily doubles in size each day. If the lily were allowed to grow unchecked, it would completely cover the pond in 30 days, choking off other forms of life in the water. For a long time the plant is almost invisible and so one decides not to worry about cutting it back until it covers half the pond. On what day will that be? On the twenty-ninth day! To solve the problem of a complete covering of the pond, now only one day is left!
What Are the Consequences?
We are accumulating debt at a sovereign, corporate, household and student level exponentially. We are emitting carbon dioxide and several other greenhouse gases in the atmosphere exponentially. We are clearing tropical rain forest at an exponential rate. The human population is growing exponentially. Human energy use, human production of synthetic products, chemicals, deserts and rubbish are growing exponentially. Many emerging national economies are growing exponentially in terms of x percent GDP growth per annum, and we cheer them on, although a worldwide economic growth rate of, say, 3.5 percent per year means another whole industrial world is added to this one in just two decades! We can't keep it up. Many developed economies are struggling to achieve any economic growth in the last five years. If all interlocutors truly understood the consequences of exponential growth, we would have no differences of opinion, no conflicts of interest, within the one world united point-of-view. This is clearly not the case at present which is why the paradigm of sustainability has not replaced the oft-repeated mantra of growth.
Trigger Point
There is a medium to high probability that the demographic youth bulge in the Middle East may cause the present turmoil in Egypt and North Africa; Syria and the Levant; and Iran to spread to some key oil producing countries in the Gulf Co-operation Council at some stage in the near future. The consequences of this will be a rise in the price of oil to $150-$200 per barrel. As a result, global demand for all manner of products and services will fall dramatically as the spending power is eroded swiftly to pay for fuel and food amongst other essentials.
With the prospect of negative growth looming and unemployment rising, the consequences will not be benign for nation states and their economies as well as the debt pyramid at the sovereign, corporate, household and individual levels of society. All these interlinked tensions will be further exacerbated by the speed, severity, synchronicity and scale of the colossal impact which high oil prices will deliver. This may cascade into national, regional and international crises and conflicts by way of an extended end game.
Key Question
How to build the escape velocity needed to break free from the current gravitational pull of influences that limit the capacities of leadership in governments and corporations to plan for such massive scale internal and external crises and conflicts?
Conclusion
The only immediate solution is to educate one and all on the practical relevance and power of the exponential function as it applies to population growth, energy consumption, debt explosion and the end game so that conservation of resources becomes an essential mantra and modus operandi. The sustainable population, ultra energy efficient, debt-in-control conservative nations will be the only ones able to survive, and only just. The human tendency is to focus on technological solutions but what may be necessary in the present context, given that the time left is so limited now, is a fundamental rethink in regard to the resource-hungry and welfare-dependent lifestyles we all lead. What can we do to adapt and to live within a much simpler lifestyle and to spread the recognition that continuous growth and sustainability are incompatible? It is only when we have done that can we embrace a new economic model that is compatible with finite physical resources, to avoid the systemic risk of a catastrophic failure of our monetary system, and with it seek to reinforce the foundations of our increasingly ephemeral and tightly interlinked global civilisation as we know it today.
What are your thoughts, observations and views? We are hosting an Expert roundtable on this issue at ATCA 24/7 on Yammer.
By DK Matai
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