Economics as if Survival Mattered

John Michael Greer’s new book, “The Wealth of Nature: Economics as if Survival Mattered” is an excellent look at a future of declining fossil fuels and the implications for our economic system. Greer draws heavily on E.F. Schumacher’s work, particularly “Small is Beautiful” which lays out the concept of “appropriate technology” as a way of planning for a future with less energy and different types of energy.

Greer sets up a three part framework for thinking about the economy. The primary economy includes all of the biological, hydrological, tectonic, and other processes of nature that create the natural recourses that the human economy uses. Without nature no human economy would exist. This much seems obvious, but no classical economist—from conservative to Marxist—assigns any real value to nature. All assume that nature is an inexhaustible resource for the human economy.

The secondary economy, according to Greer, consists of the human activities such as farming, mining, and manufacture that create physical goods from natural resources, “the conjunction of human labor and natural goods that produces the goods and services that Nature itself doesn’t provide.” The tertiary economy consists of monetary goods and financial services. These are goods that are produced neither by Nature nor by labor.

The tertiary economy, being removed from physical goods, can grow without limits since governments and banks have the ability to create money out of thin air. However, this ability for unlimited expansion by the tertiary economy can hide the limits of the primary and secondary economies. “Trillions of dollars in credit swaps and derivatives will not keep people from starving in the streets if there’s no food being grown and no housing being built.” A sign that our economy is reaching the limits of growth has been the enormous growth of the tertiary economy compared with the rest of the economy. In recent years the financial industry has accounted for as much as thirty percent of all profits in the U.S.

Of particular importance to the economy, as Greer points out, are fossil fuels which contain highly concentrated energy as a result of millions of years of heat and pressure. There is no alternative source that can deliver such concentrated energy. Renewable energy sources are much more diffuse. The thermodynamic costs of turning wind or solar energy into electricity and then turning the electricity back into a different form of energy is inherently inefficient and requires a high concentration of energy. Generating electricity from wind or solar requires a huge area and much equipment, all of which must be built and maintained using fossil fuels. A recent study even found that there’s a limit to the amount of energy that wind farms can extract from the atmosphere without changing the climate.

Technological fixes will not allow us to continue our profligate use of energy. This is where E.F. Schumacher’s work becomes important. Renewable energy has an important role to play in the future if the appropriate technology is used. Rather than a futile effort to concentrate enough solar energy to make electricity, more efficient uses such as passive solar heat or solar hot water make more sense. Rather than huge windmills requiring significant amounts of resources and energy to build and maintain, smaller windmills to provide electricity for individual homes, such as have been used in decades past, will be more sustainable, although they may require giving up a continuous supply of energy for an intermittent one. Mini-hydroelectric devices could provide power for neighborhoods with access to rivers.

Schumacher’s concept of appropriate technology has largely been ignored in the industrialized nations, but it has made gains in poorer nations that do not have the money for high tech solutions. Through organizations such the Center for Appropriate Technology and the Massachusetts Institute of Technology’s D-Lab, people are working on simple technologies that can replace the tasks now performed by human labor.

Innovations such as replacing wood charcoal with charcoal made from corn cobs or sugar cane waste fibers can reduce pollution and save lives for the 800 million people who still rely on biomass for fuel. A pedal powered grain mill can replace the drudgery of the mortar and pestle. A simple plastic ring lined with ridges can shell corn kernels off the cob, a job that once took women hours.

Perhaps the irony of the appropriate technology movement is that while it provides simple technology to improve the lives of people in poor nations, it may soften the decline from peak energy in the wealthy nations and lead the way to a more sustainable economy.