On the cusp of collapse: complexity, energy, and the globalised economy

David Korowicz

The systems on which we rely for our financial transactions, food, fuel and livelihoods are so inter-dependent that they are better regarded as facets of a single global system. Maintaining and operating this global system requires a lot of energy and, because the fixed costs of operating it are high, it is only cost-effective if it is run at near full capacity. As a result, if its throughput falls because less energy is available, it does not contract in a gentle, controllable manner. Instead it is subject to catastrophic collapse.

Fragments from a globalised economy

  • The eruption of the EyjafjallajÖkull volcano in Iceland led to the shut-down of three BMW production lines in Germany, the cancellation of surgery in Dublin, job losses in Kenya, air passengers stranded worldwide and dire warnings about the effects the dislocations would have on some already strained economies.
  • During the fuel depot blockades in the UK in 2000, the supermarkets’ just-in-time supply-chains broke down as shelves emptied and inventories vanished. Anxiety about the consequences rose to such an extent that the Home Secretary, Jack Straw, accused the blockading truckers of “threatening the lives of others and trying to put the whole of our economy and society at risk”.
  • The collapse of Lehman Brothers helped precipitate a brief freeze in the financing of world trade as banks became afraid to accept other banks’ letters of credit. [1]

Just as we never consider the ground beneath our feet until we trip, these glimpses into the complex webs of inter-dependencies upon which modern life relies only come when part of that web fails. When the failure is corrected, the drama fades and all returns to normal. However, it is that normal which is most extraordinary of all.

Our daily lives are dependent upon the coherence of thousands of direct interactions, which are themselves dependent upon trillions more interactions between things, businesses, institutions and individuals across the world. Following just one track; each morning I have coffee near where I work. The woman who serves me need not know who picked the berries, who moulded the polymer for the coffee maker, how the municipal system delivered the water to the café, how the beans made their journey or who designed the mug. The captain of the ship that transported the beans would have had no knowledge of who provided the export credit insurance for the shipment, who made the steel for the hull, or the steps in the complex processes that allow him the use of satellite navigation. And the steel-maker need not have known who built the pumps for the iron-ore mine, or how the oxygen for the furnace was refined.

Every café has customers like me who can only buy coffee because we are exchanging our labours across the world in ways that are dependent upon the globalised infrastructure of IT systems, transport and banking. The systems and the myriad businesses upon which they depend are only viable because there are economies of scale. Our global infrastructure requires millions of users across the world, the ship needs to carry more than coffee beans, and my café needs more than a single customer. The viability of my morning coffee requires the interactive economic and productive efforts of the globalised economy.

Thinking this way enables us to see that the global economy, and thus our civilisation, is a single system. This system’s structure and dynamics are therefore central to understanding the implications of ecological constraints and, in particular for this analysis, peak oil.[2] Here are some of its principal features.

The global economy is self-organising

The usually seamless choreography of the global economy is self-organising. The complexity of understanding, designing and managing such a system is far beyond our abilities. Self-organisation can be a feature of all complex adaptive systems, as opposed to ‘just’ complex systems such as a watch. Birds do not ‘agree’ together that arrow shapes make good sense aerodynamically, and then work out who flies where. Each bird simply adapts to its local environment and path of least effort, with some innate sense of desire and hierarchy, and what emerges is a macro-structure without intentional design. Similarly, our global system emerges as a result of each person, company and institution, with their common and distinctive histories, playing their own part in their own niche, and interacting together through biological, cultural and structural channels.

The self-organisation reminds us that governments do not control their own economies. Nor does civil society. The corporate or financial sectors do not control the economies within which they operate. That they can destroy the economy should not be taken as evidence that they can control it.

The global economy has growth-dependent dynamics

We have come to regard continued economic growth as normal, part of the natural order of things. Recessions are viewed as an aberration caused by human and institutional weakness, the resumption of economic growth being only a matter of time. However, in historical terms, economic growth is a recent phenomenon. Angus Maddison has estimated that Gross World Product (GWP) grew 0.32% per annum between 1500 and 1820; 0.94% (1820-1870); 2.12% (1870-1913); 1.82% (1913-1950); 4.9% (1950-1973); 3.17% (1973-2003), and 2.25% (1820-2003). [3]

We tend to see global economic growth in terms of change. We can observe it through increasing energy and resource flows, population, material wealth, complexity and, as a general proxy, GWP. This can be viewed from another angle. We could say that the globalising growth economy has experienced a remarkably stable phase for the last 150 years. For example, it did not grow linearly by any percentage rate for any time, decline exponentially, oscillate periodically, or swing chaotically. What we see is a tendency to compound growth of a few percent per annum, with fluctuations around a very narrow band. At this growth rate, the system could evolve, unsurprisingly, at a rate to which we could adapt.

The sensitivity felt by governments and society in general to very small changes in GDP growth shows that our systems have adapted to a narrow range of variation. Moving outside that range can provoke major stresses. Of course small differences in aggregate exponential growth have major effects over time, but here we are concentrating upon the stability issue only.

The growth process itself has many push-pull drivers: in human behaviour; in population growth; in the need to maintain existing infrastructure and wealth against entropic decay; in the need to employ those displaced by technology; in the response to new problems; and in the need to service debt that forms the basis of our economic system.

The global economy grows in complexity

Complexity can be measured in several ways — as the number of connections between people and institutions, the intensity of hierarchical networks, the number of distinct products produced and the extent of the supply-chain networks required to produce them, the number of specialised occupations, the amount of effort required to manage systems, the amount of information available and the energy flows required to maintain them. By all these measures, economic growth has been associated with increasing complexity. [4]

As a species, we had to become problem solvers to meet our basic needs, deal with status anxiety and respond to the new challenges presented by a dynamic environment. The problem to be solved could be simple such as getting a bus or buying bread; or it could be complex, such as developing an economy’s energy infrastructure. We tend to exploit the easiest and least costly solutions first. We pick the lowest hanging fruit or the easiest extractable oil first. As problems are solved new ones tend to require more effort and complex solutions.

A solution is framed within a network of constraints. One of the system constraints is set by the operational fabric, comprising the given conditions at any time and place which support system wide functionality. For modern developed economies this includes functioning markets, financing, monetary stability, operational supply-chains, transport, digital infrastructure, command and control, health services, research and development infrastructure, institutions of trust and socio-political stability. It is what we casually assume does and will exist, and which provides the structural foundation for any project we wish to develop. Our solutions are also limited by knowledge and culture, and by the available energetic, material, and economic resources available to us. The formation of solutions is also shaped by the interactions with the myriad other interacting agents such as people, businesses and institutions. These add to the dynamic complexity of the environment in which the solution is formed, and thus the growing complexity is likely to be reinforced as elements co-evolve together.

As a result, the process of economic growth and complexity has been self-reinforcing. The growth in the size of the networks of exchange, the operational fabric and economic efficiencies all provided a basis for further growth. Growing complexity provided the foundation for developing even more complex integration. In aggregate, as the operational fabric evolves in complexity it provides the basis to build more complex solutions.

The net benefits of increasing complexity are subject to declining marginal returns — in other words, the benefit of rising complexity is eventually outweighed by its cost. A major cost is environmental destruction and resource depletion. There is also the cost of complexity itself. We can see this in the costs of managing more complex systems, and the increasing cost of the research and development process. [5] When increased complexity begins to have a net cost, then responding to new problems arising by further increasing complexity may be no longer viable. An economy becomes locked into established processes and infrastructures, but can no longer respond to shocks or adapt to change. For the historian Joseph Tainter, this is the context in which earlier civilisations have collapsed. [6]

The global economy is increasing co-dependence and integration

As the globalising economy grows, increased population, wealth and integration opens up the possibility of greater economies of scale and more diverse productive niches. When new technologies and business models (solutions or sets of solutions) emerge, they co-adapt and co-evolve with what is already present. Their adoption and spread through wider networks depends on the efficiencies they provide in terms of lower costs and new market opportunities. One of the principal ways of gaining overall efficiency is by letting individual parts of the system share the costs of transactions by sharing common infrastructure platforms (information and transport networks, electric grid, water/sewage systems, financial systems), and integrating more. Thus there is a reinforcing trend of benefits for those who build the platform and the users of the platform, which grows as the number of users grows. In time, the scale of the system becomes a barrier to a diversity of alternative systems as the upfront cost and the embedded economies of scale become a greater barrier to new entrants, especially where there is a complex hub infrastructure. The lack of system diversity is not necessarily due to corporate monopolies. There is vigorous competition between mobile phone service providers but they share common information platforms and depend on electricity networks and the monetary system, both of which have little or no system diversity.

Our operational systems are integrated into the wider economy. Expensive infrastructure and continual need for replacement components mean that economies of scale and a large number of economically connected people are necessary to make them viable. For example, the resources required to maintain the IT infrastructure on which we rely for critical services demand that we also buy games consoles, send superfluous text messages and watch YouTube. In other words, our non-discretionary needs and the critical systems that support them are affordable because they are being cross-subsidised by discretionary spending, which itself depends on further economies of scale being generated by the globalised economy that provides us with our discretionary income in the first place.

From this perspective, asking about the resource requirements for individual products of the economy (a computer or my morning coffee, say) is akin to asking about the resource requirements for your finger; it only makes sense if the rest of the body is properly resourced.

Each new level of infrastructural complexity implies a new fixed cost in terms of energy flows and resources required for maintenance and operation, and an economy of scale that can support such flows. It also locks into place co-dependence amongst components of our critical infrastructure that integrate the operational fabric. For example, if our IT platform failed, so too would our financial, knowledge and energy systems. Similarly, if our financial system collapsed, it would not take long for our IT and supply-chains to collapse too. The UK-based Institute of Civil Engineers acknowledges that the complex relationships between co-dependent critical infrastructures are not understood. [7]

Finally, as new infrastructural platforms become established, legacy systems are left to shrink or decay. Thus, if suddenly we all were to lose the communications infrastructure introduced over the past ten years, we would not return to the system we had before that infrastructure was introduced. Instead, most of us would be left without any fall-back communication system at all.

The global economy has bounded resilience

An isolated, poor and self-sufficient community is vulnerable to severe risk of a general failure of food production due to flooding or pestilence, say. Even comparatively rich France had 18 general famines in the eighteenth century and hundreds of local ones [8]. Without access to money, weak transport links, markets and communications, surplus production from elsewhere could not relieve local starvation. The growth in the interconnectedness, infrastructure and institutions of the globalising economy meant local risks could be shared over wide networks, and this enhanced local resilience.

One of the great virtues of the global economy is that while factories may fail and links in a supply-chain break, the economy can quickly adapt by fulfilling its needs elsewhere or finding substitutes. This is a measure of the resilience within the globalised economy and is a natural feature of a de-localised and networked complex adaptive system. But it is true only within a certain context. There are common platforms or ‘hub infrastructure’ that maintain the operation of the global economy and the operational fabric as a whole, and the collapse of such hubs is likely to induce systemic failure. Principal among these are the monetary and financial system, accessible energy flows, transport infrastructure, economies of scale and the integrated infrastructures of information technology and electricity.

Our freedom to change can be limited by lock-in

Lock-in can be defined broadly as an inability to deal with one problem by changing a sub-system in the economy without negatively modifying others upon which we depend. For example, our current just-in-time food system and agricultural practices are hugely risky. As the current economic crisis tightens, those involved in food production and distribution strive for further efficiencies and economies of scale as deflation drives their prices down. The lower prices help maintain welfare and social peace, and make it easier for consumers to service their debts, which in turn supports our battered banks, whose health must be preserved or the bond market might not show up at a government auction. As a result, it is very hard to do major surgery on our food systems if doing so required higher food prices, decreased productivity and gave a poor investment return.

However, the primary lock-in process is the growth economy itself. We are attempting to solve systemic ecological problems within systems that are themselves dependent upon increasing resource depletion and waste. We are embedded within economic and social systems whose operation we require for our immediate welfare. But those systems are too optimized, interconnected and complex to comprehend, control and manage in any systemic way that would allow a controlled contraction while still maintaining our welfare.

The problem of lock-in is part of the reason why there is no possibility of a managed degrowth.

The global economy’s adaption to ecological constraints displaces and magnifies stresses

Peak oil is expected to be the first ecological constraint to impact significantly on the advanced infrastructure of the globalised economy. However, it is only one part of an increasingly integrated web of constraints including fresh-water shortages, bio-diversity loss, soil erosion and reduced soil fertility, shortages of key minerals and climate change. As a result, it makes little sense to compartmentalise our focus as we do through the UN Framework Convention on Climate Change, for example. The interwoven nature of our predicament is clearly shown by the Green Revolution of the 1960s that supposedly ‘solved’ the increasing pressure on food production from a growing population. Technology was marshalled to put food production onto a fossil-fuel platform, which allowed further population overshoot and thus a more general growth in resource and sink demands. The result is that even more people are more vulnerable as their increased welfare demands are dependent upon a less diverse and more fragile resource base. As limits tighten, we are responding to stress on one key resource (by, say, reducing greenhouse gas emissions or getting around fuel constraints by using biofuels) by placing stresses on other key resources that are themselves already under strain (food, water). That we have to do so demonstrates how little adaptive capacity we have left.

Our local needs depend on the global economy

Our basic and discretionary needs are dependent on a globalised fabric of exchange. So too is our ability to exchange our labour for the means to pay those needs. The conditions that maintain our welfare are smeared over the globe.

We have adapted to the stability of globalising growth over the decades. Our skills and knowledge have become ever more refined so as to contribute to the diverse niches within the global economy. The tools we interact with — computers and software, mobile phones, machines and payment systems — maintain our productivity. So too do the supply-chains that feed us, provide inputs to our production process and maintain the operation of the systems we depend upon. Our productivity also depends upon the global economy of scale, not just those reaped by our direct customers, but also the conditions that support their economic activity in the wider economy. We are all of us intertwined. For this reason we can say that there is no longer any wholly indigenous production.

Money and credit integrate the global economy

If one side of the global economy is goods and services, the other side is money and credit. Money has no intrinsic value; it is a piece of paper or charged capacitors in an integrated circuit. It represents not wealth, but a claim on wealth (money is not the house or food we can buy with it). Across the globe we exchange something intrinsically valuable for something intrinsically useless. This only works if we all play the game, governments mandate legal tender and monetary stability and trust are maintained. The hyper-inflation in Weimar Germany and in Zimbabwe until it adopted the US dollar shows what happens when trust is lost.

The thermodynamics of the global economy

Like human beings and life on earth, economies require flows of energy through them to function and maintain their structure. If we do not maintain flows of energy (directly, or by maintenance and replacement) through systems we depend upon, they decay. Humans get their energy when they transform the concentrated energy stores in food into metabolising, thinking and physical labour, and into the dispersed energy of heat and excreta. Our globalising economy is no less energy constrained, but with one crucial difference.
When humans reach maturity they stop growing and their energy intake stabilises. Our economy has adapted to continual growth, and that means rising energy flows.

The self-organisation and biodiversity of life on earth is maintained by the flows of low-entropy solar energy that irradiate our planet as it is transformed into high-entropy heat radiating into space. Our complex civilisation was formed by the transformation of the living bio-sphere and the fossil reserves of ancient solar energy into useful work, and the entropy of waste heat energy, greenhouse gases and pollution that are the necessary consequences of the fact that no process is perfectly efficient.

The first law of thermodynamics tells us that energy cannot be created or destroyed. But energy can be transformed. The second law of thermodynamics tells us how it is transformed. All processes are winding down from a more concentrated and organised state to a more disorganised one, or from low to higher entropy. We see this when our cup of hot coffee cools to the room’s ambient temperature, and when humans and their artefacts decay to dust. The second law defines the direction in which processes happen. In transforming energy from a low-entropy to a higher-entropy state, work can be done, but this process is never 100% efficient. Some heat will always be wasted and be unavailable for work. This work is what has built and maintains life on earth and our civilisation.

So how is it that an island of locally concentrated and complex low-entropy civilisation can form out of the universal tendency to disorder? The answer is that more and more concentrated energy has to flow through it so as to keep the local system further and further away from the disorder to which it tends. The evolution and emergence of complex structures maximises the production of entropy in the universe (local system plus everywhere else) as a whole. Clearly, if growing and maintaining complexity costs energy, then energy supply is the master platform upon which all forms of complexity depends. [9]

The operational fabric evolves with new levels of complexity. As integration and co-dependency rise, and economies of scale become established, higher and higher fixed costs are required to maintain the operational fabric. That cost is in energy and resource flows. Furthermore, as the infrastructure, plant and machinery that are required to maintain economic production at each level expand, they are open to greater depreciation costs or, in thermodynamic terms, entropic decay.

The correlation between energy use and economic and social change should therefore come as no surprise. The major transitions in the evolution of human civilisation, from hunter-gatherers through the agricultural and industrial revolutions, have been predicated on revolutions in the quality and quantity of energy sources used.

We can see this through an example. According to the 1911 Census of England and Wales, the three largest occupational groups were domestic service, agriculture and coal mining. By 2008, the three largest groups were sales personnel, middle managers and teachers. [10] What we can first notice is 100 years ago much of the work done in the economy was direct human labour. And much of that labour was associated directly with harnessing energy in the form of food or fossil fuels. Today, the largest groups have little to do with production, but are more focused upon the management of complexity directly, or indirectly through providing the knowledge base required by people living in a world of more specialised and diverse occupational roles.

What evolved in the intervening century was that human effort in direct energy production was replaced by fossil fuels. The energy content of a barrel of oil is equivalent to 12 years of adult labour at 40 hours a week. Even at $100 a barrel, oil is remarkably cheap compared with human labour! As fossil-fuel use increased, human effort in agriculture and energy extraction fell, as did the real price of food and fuel. These price falls freed up discretionary income, making people richer. And the freed-up workers could provide the more sophisticated skills required to build the complex modern economy which itself rested upon fossil-fuel inputs, other resources and innovation.

In energy terms a number of things happened. Firstly, we were accessing large, highly concentrated energy stores in growing quantities. Secondly, fossil fuels required little energy to extract and process; that is, the net energy remaining after the energy cost of obtaining the energy was very high. Thirdly, the fuels used were high quality, especially oil, which was concentrated and easy to transport at room temperature; or the fuels could be converted to provide very versatile electricity. Finally, our dependencies co-evolved with fossil-fuel growth, so our road networks, supply-chains, settlement patterns and consumer behaviour, for example, became adaptive to particular energy vectors and the assumption of their future availability.

The growth and complexity of our civilisation, of which the growing GWP is a primary economic indicator, is by necessity a thermodynamic system and thus subject to fundamental laws.

In neo-classical models of economic growth, energy is not considered a factor of production. It is assumed that energy is non-essential and will always substitute with capital. This assumption has been challenged by researchers who recognise that the laws of physics must apply to the economy and that substitution cannot continue indefinitely in a finite world. Such studies support a very close energy-growth relationship. They see rising energy flows as a necessary condition for economic growth, which they have demonstrated historically and in theory. [11] [12] [13] It has been noted that there has been some decoupling of GWP from total primary energy supply since 1979 but much of this perceived decoupling is removed when higher energy quality is allowed for. [14]

It is sometimes suggested that energy intensity (energy/unit GDP) is stabilising, or declining a little in advanced economies, a sign to some that local decoupling can occur. This confuses what are local effects with the functioning of an increasingly integrated global economy. Advanced knowledge and service economies do not do as much of the energy-intensive raw materials production and manufacturing as before, but their economies are dependent upon the use of energy-intensive products manufactured elsewhere, and the prosperity of the manufacturers to whom they sell their services.

Peak oil

The phenomenon of peaking — be it in oil, natural gas, minerals or even fishing — is an expression of the following dynamics. With a finite resource such as oil, we find in general that which is easiest to exploit is used first. As demand for oil increases, and knowledge and technology associated with exploration and exploitation progress, production can be ramped up. New and cheap oil encourages new oil-based products, markets and revenues, which in turn provide revenue for investments in production. For a while this is a self-reinforcing process but eventually the reinforcement is weakened because the energy, material and financial costs of finding and exploiting new production start to rise. These costs rise because, as time goes on, new fields become more costly to discover and exploit as they are found in smaller deposits, in deeper water and in more technically demanding geological conditions. In some cases, such as tar sands, the oil requires very advanced processing and high energy and water expenditures to be rendered useful. This process is another example of declining marginal returns.

The production from an individual well will peak and decline. Production from an entire oilfield, a country and the whole world will rise and fall. Two-thirds of oil-producing countries have already passed their individual peaks. For example, the United States peaked in 1970 and the United Kingdom in 1999. The decline has continued in both cases. It should be noted that both countries are home to the worlds’ best universities, most dynamic financial markets, most technologically able exploration and production companies, and stable, pro-business political environments. Nevertheless, in neither case has decline been halted.

As large old fields producing cheap oil decline, more and more effort must be made to maintain production with the discovery and production from smaller and more expensive fields. In financial terms, adding each new barrel of production (the marginal barrel) becomes more expensive. Sadad al-Huseini said in 2007 that the technical floor (the basic cost of producing oil) was about $70 per barrel on the margin, and that this would rise by $12 per annum (assuming demand was maintained by economic growth). [15] This rapid escalation in the marginal cost of producing oil is recent. In early 2002, the marginal cost of a barrel was $20.

It is sometimes argued that there is a huge amount of oil in deposits such as the Canadian tar sands. The questions this claim raises are “When will it be on-stream?”, “At what rate can oil be made available?”, “What is the net energy return?” and “Can society afford the cost of extraction?” If less available net energy from oil were to make us very much poorer, we could afford to pay even less. Eventually, production would no longer be viable as economies could no longer afford the marginal cost of a barrel. In a similar vein, our seas contain huge reserves of gold but it is so dispersed that the energetic and financial cost of refining it would far outweigh any benefits (Irish territorial waters contain about 30 tons).

Some misconceptions regarding peak oil

The decline curve assumption

The now familiar image of a modelled global oil production curve showing a decline in production of 2-3% per annum (EGross), has led commentators to assume that this is what will be available in future to the global economy. Intuitively this might seem an almost manageable constraint. The assumption on which this curve is based, the decline curve assumption, is incorrect for three reasons. Firstly, it does not account for the increasing energy cost of extracting oil; the net energy (ENet) available to society will decline at a faster rate than the modelled decline.

Secondly, oil exporters, for the moment at least, are growing consumers of oil, and will favour domestic consumption over exports. This will reduce the volume of internationally traded oil.

Energy supply too small to permit economic growth

Figure 1: In this projection of a possible future, the steadily-increasing amount of energy required for economic growth to continue is shown by the line EGrowth. While the gross amount of energy that might be available is indicated by the line EGross and the net amount of energy after the energy required to deliver that energy has been deducted is marked ENet. In theory, the gap between the energy available and the energy required for growth (EGap) grows smoothly and steadily as the graph shows but this ignores powerful feedbacks caused by the gap itself. As a result, the gap is likely to grow far more rapidly and erratically.

The third reason lies at the heart of why we must take a whole-systems approach to peak oil. The decline curve assumption assumes there is no strong feedback between declining production, the economy, and oil production. The modelled assumptions for the declining production, even accounting for declining net energy and producer consumption, assume a stable economy and infrastructure. In most of the modelling, the production curve (EGross) is derived from “proven reserves” or “proven plus probable” ones. “Proven” reserves imply we can afford to pay current real prices and deploy existing technology, while “proven plus probable” reserves are estimated on the basis of assumptions about the growth in technology and the idea that increasing wealth might allow us to pay higher prices more comfortably. In other words, at a minimum, the future production curve assumes that current technology and real prices would allow new oil to be brought on-stream to counter some of the effects of declining established production, without which the so-called natural decline rate could be greater than 7% per annum. [16]

A decline in oil production undermines economic production, thus reducing society’s ability to pay for oil. A decline also, as we shall see, undermines the operational fabric, which in turn constrains the ability of society to produce, trade, and use oil (and other energy carriers) in a reinforcing feedback loop. Energy flows through the economy are likely to be unpredictable, erratic and prone to sudden and severe collapse. The implication is that much of the oil (and other energy carriers) that are assumed to be available to the global economy will remain in the ground as the real purchasing power, productive demand, energy infrastructure and economic and financial systems will not be available to extract and use it.

Energy independence

Another misconception is that the output from other energy sources — natural gas, coal, nuclear, and renewable energy — are largely independent of oil even though oil is part of the systemic fabric of the global economy. At the most direct level, oil is used to transport coal and re-supply the infrastructure of natural gas and coal. More broadly, while oil is predominantly a transport fuel, the demand for it is tied to production in the wider economy, which is dependent upon natural gas and coal. A forced reduction in oil use would reduce economic production, which would induce a system-wide reduction in electricity and heating demand. At a wider level, all energy sources interact to maintain the global economy. If there was a major failure in that economy, the continued production, processing, trade and distribution of all energy sources may be imperiled. There would only be energy source independence if there was perfect real-time substitutability and a real-time net energy surplus in one or more of the alternative sources.

We can fill the gap

If the peak in global oil production is imminent, or occurs within the next decade, we have neither the time nor the resources to substitute for oil, or to invest in conservation and efficiency. This point has been made recently by the UK Energy Research Council [17] and many others [18], [19].

We can outline the general reasons as follows. It is not merely that we are replacing high-quality energy sources with lower-quality ones, such as tar sands and renewables. It is not that the costs of such alternatives are generally greater than established historical sources. Nor is it that the productive base for deploying alternative energy infrastructure is small, with limited ramp-up rates, or that it competes with food. Nor even that as the global credit crisis continues with further risks ahead, ramping-up financing will remain difficult while many countries struggle with ballooning deficits and pressing immediate concerns. The main point is that once the effects of peak oil become apparent, we will lose much of what we have called the operational fabric of our civilisation. For example, any degradation and collapse of the operational fabric in the near future may mean that we already have in place a significant fraction of the renewable energy infrastructure that will ever be in place globally.

The economics of peak oil

The thermodynamic foundations of the global economy are expressed through energy prices. Although the price of oil depends upon many things, supply and demand are the most basic. Speculation can be a major factor in setting prices too, but it may only have short-term effects and, if the world was awash with oil, there would be little incentive to speculate. On the supply side, the price paid for oil must be greater than the marginal cost of a barrel of oil, otherwise it’s not worth producing. On the demand side, the price that users can afford to pay depends on the health of their economy, which can be undermined by high oil prices.

The oscillating decline model is an attempt to describe the effect of peak oil on an economy. In this model, constrained or declining oil production leads to an escalation in oil and food prices relative to available income, which feeds through to the whole economy. But economies cannot pay this price for a number of reasons. Firstly the price rises leave people with less money to spend on discretionary items, causing job losses and business closures amongst suppliers. Secondly, for a country that is a net importer of energy, the money sent abroad to pay for energy is lost to the economy unless it stimulates the export of goods of equivalent value (highly unlikely in this analysis).

The constricted growth leads to rising defaults on loans and to less international trade that would support the servicing of external debt. It would raise interest rates as the future economic outlook became more precarious. There would be a tendency to save against the increased risks of unemployment. The general effect would be deflationary as money supply dropped in relation to available goods and services. This would add to what are already huge deflationary pressures arising from the deleveraging of the hyper-credit expansion of the last two decades. The rising cost of debt servicing, on top of food and energy price rises, would further squeeze consumption. The oscillating decline model assumes such stresses are not great enough to cause a terminal systemic global banking failure or a major monetary collapse.

The decline in economic activity leads to a fall in purchasing power and a decline in all forms of energy demand and a fall in its price. Falling or volatile energy prices mean new production is less likely to be brought on stream. New energy investments in oil, renewable energy, natural gas or nuclear power, for example, become less competitive not just because energy prices are lower but also because existing energy infrastructure and supply has an overhang of spare capacity. Energy companies’ reduced revenue and the bad credit conditions further constrain their ability to invest in new production. [20] The reduced revenue also means that the fixed costs of maintaining existing energy infrastructure (gas pipelines, the electric grid, refineries etc.) is a greater burden as a percentage of declining revenue.

If production falls significantly, companies lose the economies of scale they have been getting from their infrastructure. For example, once the revenue from natural gas sales becomes less than the fixed operating costs of production platforms and pipelines, then continuing to deliver gas becomes no longer viable. That means that loss of economies of scale can lead to an abrupt supply collapse and the withdrawal of supply, leading to a further reduction in production capability, and thus in economic production. This is yet another positive feedback loop.

These same conditions also constrain energy adaptation. For example, customers would find it more difficult to buy electric cars or invest in insulation, and governments to subsidise them. It would also be more difficult for the car manufacturers to ramp-up production and gain economies of scale (in addition to dealing with tight lithium supplies). In general, the tighter the economic and social constraints on an economy, the more likely it is that resources will be deployed to deal with current concerns rather than being invested in something that brings a future benefit. This expresses the generally observed increase in the social discount rate in times of growing stress.

In such an energy-constrained environment, one would also expect a rise in geo-political risks. Bilateral arrangements between countries to secure oil and food would reduce the amount on the open market. It would also increase the inherent vulnerability to highly asymmetric price/supply shocks from state/non-state military action, extreme weather, or other “black swan” events.

When oil prices rise above the marginal cost of production and delivery, but can still be afforded despite the economy’s decreased purchasing power, the energy for growth becomes available again. Of course local and national differences (in, for example, the degree of dependence on energy imports or the export of key production such as food) affect how regions fared in the recession and their general ability to pick up again. Even so, growth begins again, focusing maybe on more ‘sustainable’ production and consumption.

However, the return of growth will not raise the purchasing power of the economy to its previous level because oil production will be limited by resource depletion; the lack of investment in production; the entropic decay of infrastructure and productive capacity; and the lower purchasing power which will reduce the price that the economy can afford to pay for its oil. The recovery will be cut short as rising oil, food and energy prices produce another recession.

The sequence of events in the oscillating decline model is therefore as follows: economic activity increases — energy prices rise — a recession occurs — energy prices fall — economic activity picks up again but to a lower bound set by declining oil production. As a result, the economy oscillates to a lower and lower level of activity.

There are good grounds for believing that this process has already begun. At least one authority links the record oil prices in 2007 to the pricking of the credit bubble. [21]

Collapse dynamics

The oscillating decline model does not account properly for some of the embedded structures of the global economy which, while relatively obvious, have been obscured by the fact that they were adaptive in a growing economy. If oil production declines, and we cannot fill the gap between the energy required for growth and what can be produced, as we saw in the oscillating decline model, this limits the availability of other types of energy, then the global economy must continue to contract. In short, humanity is at, or has exceeded, the limits to growth.

Embedded structures that fail to contract in an orderly manner will break down. The structures that will break down include monetary and financial system, critical infrastructure, global economies of scale, and food production. As argued earlier, these structures are deeply inter-dependent. As a result, they will reinforce each other’s collapse. Their collapse undermines the whole operational fabric and the functioning of the global economy and all it supports.

It has been argued so far that our civilisation is a single, complex adaptive system. Complex adaptive systems, and the sub-systems of which they are comprised, are a feature of open thermodynamic systems. And while they show great diversity, from markets to ecosystems to crowd behaviour, their dynamic properties have common features. For most of the time complex adaptive systems are stable, but many of them have critical thresholds called tipping points, when the system shifts abruptly from one state to another. Tipping points have been studied in many systems including market crashes, abrupt climate change, fisheries collapse and asthma attacks. Despite the complexity and number of parameters within such systems, the meta-state of the system may often be dependent on just one or two key state variables. [22]

Recent research has indicated that as systems approach a tipping point they begin to share common behavioural features, irrespective of the particular type of system. [23] This unity between the dynamics of disparate systems gives us a formalism through which to describe the dynamic state of globalised civilisation, via its proxy measure of Gross World Product (GWP) and its major state variable, energy flow.

Catastrophic bifurcation is the name given to a type of transition where once the tipping point has been passed, a series of positive feedbacks drives the system to a contrasting state. For example, as the climate warms, it increases methane emissions from the Arctic tundra, which drives further climate change, which leads to a further growth in emissions. This could trigger other tipping points such as a forest die-off in the Amazon Basin, itself driving further emissions. These positive feedbacks could mean that whatever humanity does would no longer matter as its impact would be swamped by the acceleration of much larger-scale processes.

Small changes can produce a big response

Figure 2: The state of a system responds to a change in conditions. The continuous line represents a stable equilibrium. In A a change in conditions drives an approximately linear response in the systems state, unlike B where a threshold is crossed and the relationship becomes very sensitive. The fold bifurcation (C, D) has three equilibria for the same condition, but the one represented by the dotted line is unstable. That means that there is a range of system states that are dynamically unstable to any condition. Source [24].

Figure 2 shows how the system state responds to a change in conditions. The state of a system could represent the size of a fish population, or the level of biodiversity in a forest, while the conditions could represent nutrient loading or temperature (both effectively energy vectors). The continuous line represents a stable equilibrium; the dotted line an unstable one. In a stable equilibrium, the state of the system can be maintained once the condition is maintained. In figure a) and b) we see two different responses of a stable system under changing conditions. In the first, a given change in conditions has a proportional effect on the system state; in the latter, the state is highly sensitive to a change in conditions. In c) and d) the system is said to be close to a catastrophic bifurcation. In both of these cases there is an unstable region, where there is a range of system states that cannot be maintained. If a system state is in an unstable regime, it is dynamically driven to another available stable state. If one is close to a tipping point at a catastrophic bifurcation the slightest change in the condition can cause a collapse to a new state as in c), or a small perturbation can drive the system over the boundary as in d).

The state of our civilisation necessarily depends on the state of the global economy. I mentioned earlier that the global economy has been in a dynamic but stable state for 150 years or so, because it has had compound economic growth of about 3% per annum within a narrow band of fluctuation during that time. The state of the global economy is indicated by annual GWP growth of approximately 3%, and GWP is absolutely dependent upon rising energy flows.

To argue that civilisation is on the cusp of a collapse, it is necessary to show that positive feedbacks exist which, once a tipping point has been passed, will drive the system rapidly towards another contrasting state. It is also necessary to demonstrate that the state of the global economy is driven through an unstable regime, where the strength of the feedback processes is greater than any stabilizing process. It acknowledges that there may be an early period of oscillating decline, but that once major structural components (international finance, techno-sphere) drop or ‘freeze’ out, irreversible collapse must occur.

In the new post-collapse equilibrium state we would expect a collapse in material wealth and productivity, enforced localisation/de-globalisation, and collapse in the complexity as compared with before — an expression of the reduced energy flows.

Collapse mechanisms

The monetary and financial system

As I write, fears are being expressed that a Greek sovereign default may be inevitable and that, as a result, the markets might refuse to lend to Ireland, Portugal and Spain, causing them to default as well. In Ireland, as in other countries, deflation is continuing as the money supply contracts, and people retrench their spending because of fears of future unemployment. As our debt burden becomes greater in relation to our national income, it adds to the instability in the eurozone. A contagious default would be a major blow to German and French banks, which have lent to all four countries. The economic historian Niall Ferguson argued that US fiscal deficits could lead at some point in time to a rapid collapse in the United States economy, noting “most imperial falls are associated with fiscal crisis”. [25] Such a crisis would drag down every other economy, including those of China and Saudi Arabia.

These examples point to three things. One is that while money may not have any intrinsic value, it can nevertheless decide the fate of nations and empires. The second is that in an integrated globalised economy, a crisis in one region can become everybody’s crisis. Finally, it emphasises that the risks arising from huge indebtedness (and implied trade imbalances) are still with us, irrespective of resource constraints. The latter signifies the necessary irony that never before have we been so indebted, which is essentially an expression of our faith in future economic growth, just as that growth becomes impossible due to resource constraints.

Earlier I explained that the monetary and financial system was a hub infrastructure of the global economy, with no operational alternative. It is based upon credit, interest and fiat currencies. Credit underpins our monetary system, investment financing, government deficit financing, trade deficits, letters of credit, the bond market and corporate and personal debt. Credit, and the promise of future economic growth, supports our stock market, production, employment and much else besides. It is a primary institutional infrastructure of the global economy.

Over the whole of an economy, in order for debt to be repaid with interest, the money supply must increase year on year to replace the money lost to the economy when interest payments are made[1]. Money is injected into the economy when additional loans are taken out. Accordingly, the payment of interest requires an increasing level of debt, and eventually, the level of debt will become unsupportable unless incomes grow as well, either because the economy has grown or because there has been an inflation. If loan repayments including interest exceed the value of the new loans being taken out, the money supply contracts. If it does so, less business can be done, so firms fail and there is less purchasing power in the economy and increasing difficulties with servicing debts. This causes people to spend less, and investment borrowing to fall. In other words, a deflationary spiral develops. On the other hand, if debt, and thus the money supply, increases without a corresponding increase in GDP, money’s purchasing power is reduced by inflation.

Increasing GDP requires increasing energy and material flows. With an energy contraction, the economy must contract. In a growing economy, debts can be paid off as they fall due, because borrowers are prepared to take out enough additional loans to cover the payment of the principal plus interest on old loans as they mature. In a permanently contracting economy, the shrinking income makes the payment of even the interest increasingly difficult as, with inadequate borrowing, the money supply declines. Another way of putting this is that reducing energy flows cannot maintain the economic production required to service debt. The value of the debt needs to be written down to a level appropriate to the new level of production. This write-down can be achieved by either mass defaults or by inflation. Consequently, if the economy is expected to shrink year after year, the number of people prepared to borrow or lend money in the conventional way will dry up, as no-one will be confident that the borrowers will have enough income to make the interest payments.

A bank’s main assets are the loans on its books. If even a tenth of those loans cannot be repaid, that bank is wiped out because making good the losses would take more than its shareholders’ capital and retained profits. Its depositors could not be repaid in full and its government or central bank would have to step in to make good the loss and allow the bank to continue to trade. If the bank’s losses continued as incomes and asset values fell further, the government is likely to reach the end of its borrowing capacity. It would be open to the central bank to create money out of nothing to fill the hole in the bank’s books, but it is likely to be reluctant to do so for fear that the new money would cause inflation.

Unlike previous monetary crisis, one caused by declining incomes and asset values would be systemic and global. There would be no ‘outside’ lender to provide rescue, or external hard currency to provide reserves for important imports. Nor could the system be ‘re-set’ in the expectation of future growth, because those expectations would have little foundation.

As the deflationary pressures would continue as the crisis developed, the prices of oil, food, and debt servicing would rise in relation to people’s falling incomes. There would be an increasing frequency of sovereign defaults, banking collapses and runs, declining production, panic buying and shattered public finances. In such a context, printing money (not necessarily by conventional quantitative easing) and currency re-issues are likely to become necessary. Unless the money issue was tightly controlled, this could open the door to hyper-inflation. However, forecasting and control of money supply may be very difficult due to the intrinsic uncertainty of the monetary and economic environment. An additional inflation risk is that, if people began to have doubts over their bank deposits and future monetary stability, they may start spending on necessities and resilient assets, driving up the velocity of money and further increasing inflation.

Trust is the central principle underpinning the global monetary system and thus the trade networks upon which we rely. Governments can in theory print endless money, at almost no cost, to their hearts’ content. That we trade it for our limited assets, or our finite labours, is a measure of the remarkable trust bequeathed to us through our experience of globalising growth. The economist Paul Seabright argues that trust between unrelated humans outside our own tribal networks cannot be taken for granted. [26] Because trade is, in general, to all our benefit, we have developed institutions of trust and deterrence (‘good standing’, legal systems, the IMF, banking regulations, insurance against fraud, and the World Trade Organization, etc.) to reinforce co-operation and deter freeloaders. Trust builds compliance, which confers benefits, which in turn builds trust. But the reverse is also true. A breakdown in trust can cause defections from compliance, further reducing trust.

Because our governance and monetary policy is national (the Euro is likely to fail), but our basic needs are supplied globally, countries will be tempted to engage in predatory devaluations followed by inflations. This could occur even if governments were directly issuing debt-free money to citizens. Governments act firstly for their own citizens. In an evolving crisis, they are also likely to favour clear immediate benefits over uncertain future ones. Facing pressing immediate and projected national needs, the prospect of a continuing decline in the global productive base, and the risks of collapse in the operational fabric, governments are likely to face the following choice: maintain the value of your currency by limited issuance in the hope that it will in future be more acceptable to foreign traders, or ‘stealth’ print money to make a grab for international assets and inputs before there is a major system failure. Furthermore, if currency crises are seen as inevitable, and hard asset barter or currency backing are likely to supersede it, then the break-up of countries’ dedication to monetary stability becomes a matter of when, not if. In such a manner, the globalising trust dynamics that evolved in the confidence in future growth begin to break down.

Remember, we only exchange something of intrinsic value for currency if we can assume that the money we get can be exchanged later on for something else of intrinsic value. In other words, we need to be able to assume that exchange rates will be stable and that inflation will be low in the period before we spend the money again. The instability of debt money, fiat currencies and competitive devaluations all remove the basis for this assumption. Money becomes very difficult to value in space (for foreign exchange and trade) and in time (for savings and investment). We can say that it becomes opaque.

Bank intermediation, credit and confidence in money holding its value are the foundations of the complex trade networks upon which we rely. The mismatch between our dependencies upon integrated global supply-chains, local and regional monetary systems, and nationalised economic policy, which has not been a problem up to now, will become so as the monetary crisis develops. A complete collapse in world trade is an extreme but not unlikely consequence.

Even if debts are written off or inflated away, a much higher proportion of everyone’s reduced incomes will be absorbed by food and energy purchases. However, a country will only be able to import energy, food and inputs for its production processes by exporting something of equal value, because it will not be granted credit to run a trade deficit. The uncertainty about the value of money, and fears of future degradation of the operational fabric, is likely to mean that commodities such as gold, oil, grain and wood may be used as currency to settle accounts. However, this form of payment is ill suited to the complexity of global inputs.

Exports will collapse along with the level of production within a country, making it even more difficult to import energy or materials to increase production. As I explained earlier, modern economies produce almost nothing indigenously, as supply-chain breakdowns causing key production inputs to become unavailable become increasing likely. This will cause further production problems and make it likely that countries will remain trapped at a very low level of economic activity.

Moreover, because our supply-chains are so complex and globalised, local failures in monetary stability, lack of inputs, or a failing operational fabric would propagate through supply-chain links and other national operational fabrics. In this way, localised failures quickly become globalised.


Global food producers are already straining to meet rising demand against the stresses of soil degradation, water shortages, over-fishing and the burgeoning effects of climate change. [28] It is estimated that between seven and ten calories of fossil-fuel energy go into every one calorie of food energy we consume. It has been estimated that without nitrogen fertiliser, produced from natural gas, no more than 48% of today’s population could be fed at the inadequate 1900 level. [29] No country is self-sufficient in food production today.

The fragility of the global food production system will be exposed by a decline in oil and other energy production. It is not just the more direct energy inputs, such as diesel, that would be affected, but fertilisers, pesticides, seeds, and spares for machinery and transport. The failing operational fabric may mean there is no electricity for refrigeration, for example.

It should be clear even from the above overview that a major financial collapse would not just cut actual food production, but could result in food left rotting in the fields, an inability to link surplus production with those in need, a lack of purchasing power and an inability to enact monetised food transactions.

Our critical reliance upon complex just-in-time supply-chain networks means there is little buffering to protect us from supply shocks. In the event of a shock, unless precautions are taken, it is likely that hunger could spread rapidly. Even in a country that could be food independent or a net exporter, it may take years to put new systems in place. In the interim, the risks are severe.

The primacy of the necessary and reverse economies of scale

We mentioned that more and more of people’s declining income will go on the most non-discretionary purchases, in particular food and energy. What does this mean for developed economies where most energy and a fair amount of food is imported, and which together employ only a few percent of a population? It means not only mass unemployment, but also a tiny amount of purchasing power chasing the declining availability of the necessities we depend upon. A similar position would exist in other countries. Imports and exports would drop rapidly. The unemployed, schooled and adapted to specialised and largely service roles in the globalised economy, would be quite at a loss for a considerable period.

In addition we would face reverse economies of scale. As the size, integration and complexity of the global economy has grown, our local well-being has become more and more dependent upon global economies of scale. Economies of scale work at every level-not just in the good you buy, but in all the components that went into making it, and so on. Similarly, all the hub infrastructures depend on globalised economies of scale. The lower unit prices have led to greater sales volumes and have also a freed up discretionary income to be spent on other goods and services. Thus our purchasing power too is dependent upon economies of scale. The evolution of our economies and economic infrastructure has been predicated upon increasing economies of scale.

If the scaling-up process goes into reverse, reduced purchasing power, and the constriction in non-discretionary consumption, causes purchases to fall and unemployment to rise. Fewer goods and services are sold, which reduces economies of scale, which causes prices to rise, causing further falls in sales. The problem is particularly acute for very complex products and services with limited substitutability, and ones that have high operational costs.

For example, as fewer users can afford to replace mobile phones or computers, or use them less, the cost of the personal hardware and maintaining the network rises per user. Rising costs mean less discretionary use and so on. This is a serious matter for the operators because common IT platforms require a large number of users to keep costs per user low. In effect, the most discretionary use (say, Facebook, texting and Playstation) keeps down the cost for more important uses such as business operations, banking, the electricity grid and the emergency services. Remove the discretionary uses and the cost for businesses and critical services begins to escalate. Furthermore, large hub infrastructure has a fixed cost of operation and maintenance. Once income falls below the operating cost, the system will be switched off unless supported from outside. As government income is likely to fall greatly, this may not be possible.

Critical infrastructure

We are deeply dependent on the grid, IT and communications, transport, water and sewage, and banking infrastructure. In general, these are amongst the most technologically complex and expensive products in our civilisation. Their scale and capacity is determined by current and the projected growth in economies, meaning they have high fixed costs. They are viable because there is purchasing power, economies of scale, open supply-chains and general monetary stability over the world. They both comprise and are dependent upon the operational fabric.

Because of their complexity and scale (implying high levels of entropic decay), this infrastructure requires continuous inputs for maintenance and repair. These inputs are often very complex, have limited lifetimes and require specialised components that depend upon very diverse and extensive supply-chains. For the various reasons discussed, substitutes and sub-components for missing inputs may not exist, causing critical infrastructure to break down. Or, the infrastructure provider or component suppliers may not be able to afford inputs due to loss of purchasing power in economies, loss of economies of scale or monetary collapse.

The tight coupling between different infrastructures magnifies the risk of a cascading failure in our critical infrastructure and thus a complete systemic failure in the operational fabric upon which our welfare depends. At the very least, a failing infrastructure feeds back into reduced economic activity and energy use, further undermining the ability to keep the infrastructure maintained.

Financial system dynamics

Our knowledge and response to expectations of the future shape that future. One area that is most sensitive to this is financial markets.

Money only has value because it can be exchanged for a real asset such as food, clothing or a train journey. As long as we share the confidence in monetary stability, we can save, trade and invest. It is a virtual asset, as it represents only a claim on something physically useful. [27] For most of us, bonds and equities are effectively virtual, as very few shareholders have any meaningful access to underlying physical assets; they are mediated by money. However, the current valuation of virtual assets towers over real productive assets on which their value is supposed to be based. A bond is valuable because we expect to be paid back with interest some years hence; paying 20 times earnings for shares in a company is a measure of confidence in the future growth of that company. Conversely, if a productive asset cannot be made to produce because of energy and resource constraints and the failing operational fabric, it loses its value. This implies that virtual wealth, including pension funds, insurance collateral and debt, will become worth much less than at present, or effectively evaporate[2].

The widespread acknowledgement by market participants (and governments) that peak oil is upon us, coupled with an understanding of its consequences, is likely to crash the global financial system. Initially, just a few market participants will begin to question their faith in the overall stability and continued growth of the system and thus the likely value of their virtual assets. However, the transition can be very rapid from a few market participants accepting the idea that the system could break down permanently, to large-scale acceptance. A fear-driven, positive feedback conversion of a mountain of paper virtual assets into a mole-hill of resilient real assets could develop. This would help precipitate an irretrievable collapse of the financial and economic system.

The re-booting problem

The opportunity to re-boot the globalised economy from a trough in the oscillating decline model, or from a collapsed state, so as to return it to the operation and functionality of its current state, is likely to be deeply problematic. We can consider this from four standpoints.

Entropic decay

As Germany was hit by the global economic crisis, there was a big drop in the need for commercial transport. As a result trains and locomotives were taken out of use. A year later as the economy picked up, the trains were again required. But in the interim, cylinders and engines had rusted. The trains were of no use until repairs could be carried out, which required finance, time and open supply-chains. There was a costly shortage for a while but a fully functioning operational fabric and wider economy ensured there was no disaster [30].

If we have a major economic collapse, the longer it continues the greater the entropic decay of our productive and critical infrastructure, and the more difficult it will be to re-boot.

Loss of co-ordination

The global economy we have now is the result of a self-organising process that emerged over generations. If it collapsed, we would lose the infrastructure that allowed that complex self-organisation to emerge. Post-collapse, we would have to begin with top-down conscious re-building; this would suffice for simple projects but not the hyper-complex products with globalised sourcing we rely upon today.

Loss of resilience & adaptive capacity

In this paper, I have focused on some well-defined collapse mechanisms that are to varying degrees necessary, though they are by no means exclusive. Social stresses, health crises, and the effects of climate change may all add to our difficulties.

By way of illustration we can consider climate change. We are likely to see a major (forced) drop in emissions of anthropogenic greenhouse gases. However, temperature may continue to rises for many decades. Furthermore, we are left with uncertainty as to whether we have crossed tipping points in the climate system that could accelerate terrestrial emissions.

Few studies of the economic impact assume we will be very much poorer in future. The physical effects of climate change, in the form of flooding or reduced food productivity, will amplify the effects of the collapse processes. Being much poorer, and without our current operational fabric, will mean that the relative cost of adaption and recovery from climate induced shocks will escalate beyond our ability to pay much sooner than if our economies continued on their present courses. Furthermore, we will lose the buttressing provided by insurance, and the open supply-chains and strong globalised economies that could re-distribute surplus food from elsewhere.

Focus of the moment

In the increasing stress of the moment, available resources are more likely to be invested in dealing with immediate needs over long-term investment. The stability of the globalising economy has provided the context in which planning and investment could occur. The inherent uncertainty in the collapse process will also tend to favour shorter-term actions. This will reduce the resources for re-booting the system to its former state.


An amalgam of the oscillating decline and the collapse model has been offered as a guide rather than a prediction. The irony is that people may rarely notice they are living under energy constraints. Energy retraction from the global economy can be achieved by production declines or collapses in demand, though as we have seen, they are deeply inter-related. We may experience energy use collapse not as an energy constraint, but as a systemic banking collapse and vanished purchasing power. While energy is generally regarded as non-discretionary, energy use can drop considerably and welfare can, to some degree, be maintained. Food will represent a far more persistent challenge with the strongest real price support. For collapses in food supply and/or demand may well be associated with famine.

Tainter, drawing on historical precedent, defined some of the features of the collapsed state:

  • a lower degree of stratification and social differentiation;
  • less economic and occupational specialisation;
  • less behavioural control;
  • less flow of information between individuals, between political and economic groups, between the centre and its periphery;
  • less sharing, trading, and redistribution of resources;
  • less overall co-ordination and organisation of individuals and groups;
  • smaller territories integrated within a single political unit.

The integration and speed of processes (financial information, capital movement, supply-chains, component lifetimes, etc.) within the globalised economy suggest that a collapse will be much faster than those that have gone before. Furthermore, the level of delocalisation and complexity upon which we depend, and our lack of localised fall-back systems and knowledge, suggests that the impacts may be very severe for the most advanced economies. No country or aspect of human welfare will escape significant impact.

Our understanding and expectations of the world have been shaped by our experience of economic growth. The dynamic stability of that growth has habituated us to what is ‘normal’. That normal must soon shatter. Our species’ belle époque is passing and its future seems more uncertain than ever before.


  1. Here we are referring to the 95% drop in the Baltic Dry Shipping Index. See http://www.globaleconomicanalysis.blogspot.com/2008/10/baltic-dry-shipping-collapses.html.
  2. Korowicz, D. (2010) Tipping Point: Near-term Systemic Implications of a Peak in Global Oil Production. www.feasta.org/Riskresilience/tipping_point.
  3. Maddison, A. (2007) Contours of the World Economy 1-2030AD. Page 81 Oxford Univ. Press.
  4. See Beinhocker, E. (2005) The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics. Rh Business Books.
  5. Jones, B. (2009) The Burden of knowledge and the Death of the Renaissance Man: Is Innovation Getting Harder? Review of Economic Studies 76(1).
  6. Tainter, J. (1988) The Collapse of Complex Societies. Cambridge University Press.
  7. State of the Nation: Defending Critical Infrastructure. Institute of Civil Engineers (2009).
  8. Braudel, F. (1981). The Structure of Everyday Life (Vol. 1): The limits of the possible. Collins. Page 74.
  9. Chaisson, E. (2001) Cosmic Evolution: The Rise of Complexity in Nature. Harvard Univ. Press.
  10. Kinsella, T. Politics must liberate itself for revolution to succeed. The Irish Times. 16th March 2009.
  11. Cleveland, C. et al. Energy and the US Economy: A biophysical Perspective. Science 255 (1984).
  12. Ayres, R., Ayres, L., Warr, B. Energy, Power, and Work in the US Economy, 1990-1998. Energy 28 (2003).
  13. Ayres, R., Warr, B. (2009) The Economic Growth Engine: How Energy and Work Drive Material Prosperity. Cambridge, Edward Elgar Publishing.
  14. Cleveland, C., Kaufmann, R., Stern D., eds, Aggregation and the Role of Energy in the Economy. Ecological Economics 32. Elsevier (2000).
  15. Al-Huseini, S. In conversation at www.davidstrahan.com/audio/lastoilshock.com-sadad-al-huseini-29.10.07.mp3
  16. World Energy Outlook (2008). The International Energy Agency estimates a ‘natural’ decline rate of 6.7%, which would be expected to rise as production became more dependent upon smaller fields.
  17. Sorrell, S. and Speirs, J. (2009) Global Oil Depletion: An Assessment of the Evidence for the Near-Term Physical Constraints on Global Oil Supply. UKERC Report.
  18. Heinberg, R. (2009) Searching For a Miracle: Net Energy Limits and the Fate of Industrial Society. Forum on Globalisation and The Post Carbon Institute.
  19. Trainer, T. (2007) Renewable Energy Cannot Sustain a Consumer Society. Springer.
  20. The evolving credit crisis has led to a drop of 19% in energy investments in 2008 according to the International Energy Agency and the cancellation of many projects that depended upon high oil prices such as the tar sands.
  21. Hamilton, J. (2009) Causes and Consequences of the Oil Shock 2007-2008. Brookings Papers on Economic Activity. March.
  22. Scheffer, M. (2009) Critical Transitions in Nature and Society. Princeton Univ. Press.
  23. Scheffer, M et al. (2009) Early-warning signals for critical transitions. Nature Vol. 461 3 Sept.
  24. http://www.stockholmresilience.org/download/18.1fe8f33123572b59ab800016603/planetary-boundaries-mentary-info-210909.pdf
  25. Ferguson, N. (2010) Complexity and Collapse: Empires on the Edge of Chaos. Foreign Affairs March/ April.
  26. Seabright, P. (2005) The Company of Strangers: A Natural History of Economic Life. Princeton Univ. Press.
  27. Soddy, F. (1926) Wealth, Virtual Wealth and Debt: the Solution of the Economic Paradox. George Allen and Unwin.
  28. Godfray, H et al. (2010) Food Security: The Challenge of Feeding 9 Billion People. Science Vol. 327.
  29. Smil, V. (1999) Long-Range Perspectives on Inorganic Fertilisers in Global Agriculture. International Fertiliser Development Centre.
  30. Germany Faces Freight Train Shortage as Growth Picks Up. Der Spiegel Online. 4th May 2010. http://www.spiegel.de/international/business/0,1518,687291,00.html

Enough: a worldview for positive futures

Anne B. Ryan

While the adoption of new technologies is crucial, so too is the need for a new, self-limiting worldview recognising that “enough is plenty”. This philosophy of “enough” is about the optimum — having exactly the right amount and using it gracefully. Adopting such a worldview would nourish a culture of adapted human behaviour in which social justice could prevail and at least some of the Earth’s ecosystems would have the chance to renew themselves.

It seems that at no time in recent history have people had as many questions as they do today. Here are just a few:

  • How can we live in harmony with nature? How do we stop global warming, associated climate change and the destruction of ecosystems?
  • How can we eliminate poverty, provide security and create sufficiency for all?
  • How do we restore an ethic of care for people and for the Earth?

In short, how can we put human and planetary well-being at the heart of all our decision-making? In this paper I propose a philosophy and practice with the potential to answer these questions. It is in essence a worldview, and I call it Enough. This worldview applies insights from flourishing ecosystems and from moral thinking to the big philosophical questions about how we should live.

Given the crises of ecology and social justice now facing us, the need for a new worldview is as crucial as new technology. We’re all born with the capacity for enough; everybody has a part to play in the creation of a culture of enough, as a way to understand the world and live in it. It is not a new idea, but I believe it has new resonance and value in today’s world and that it should be revisited and revived as a way to deal with life and the challenges it will bring.

In the modern world, we tend to equate happiness with success, and in turn we define success as material possessions and external achievement. We emphasise constant activity and visible, measurable wealth over experience and reflection. Even our notions of what is beautiful are limited: we’re not sensitive to the inherent elegance of restraint and limits. However, many languages have proverbs or sayings that reflect the insight that enough is as good as a feast. In Irish, for example, the same phrase — go leor — means both ‘enough’ and ‘plenty’. Enough is about optimum, having exactly the right amount and using it gracefully. It is about being economical with what we have, without waste of resources or effort, but without being stingy either.

Ideas concerning the beauty and value of enough are not alien or distasteful, although embracing them fully is not a well-developed option either, because they are so countercultural. [1] Many of us recognise the value of enough at the same time as we receive strong messages to keep growing. In the contradiction between two different messages there lies the potential for wisdom. Striving for enough in the midst of a world of more is a way to cope with the demands of the modern world. It can help us to balance the different roles we occupy and the worlds we inhabit, and to make sound decisions and choices.

Modernist culture currently values untrammelled economic growth above all other types of growth. At this time, as many countries experience recession, most people are fixated on getting growth started again. Such growth ‘works’ in the sense that it brings short-term material wealth to small groups in countries where it’s practiced. But we know that many of its activities create the greenhouse gases that cause global warming. We also know that the industrialised agriculture favoured by a growth culture creates food insecurity, puts small farmers out of business and uses cruel practices in ‘growing’ animals. The emphasis on economic growth at all costs has encouraged us to deny the consequences of always using resources from communities and eco-systems, but never giving to those same communities and systems.

This culture also affects our understanding of the term ‘development’. Development comes to mean increasing levels of consumption. It implies that the ideal state for all is to live some version of a suburban lifestyle, commuting to work, with salaries, pensions, cars and various other possessions seen as essential to a modern lifestyle, along with speedy foreign travel. This ideal state is available to anybody who complies with the work-earn-spend system and is willing to be productive and to compete with others. We are required to use our creativity and imagination in the service of profit and ‘growing’ our economies in this narrow sense. But our imaginations have been constrained by this worldview, so that we have largely lost any understanding that progress and advancement for the human race can take many other forms. Throughout the minority world, there is a reluctance to ask hard questions about the nature of progress; as a collective, we’re unwilling to question the very system that is causing our problems.

Within a worldview of enough, it would be more appropriate to say that all societies (the so-called underdeveloped as well as the ‘developed’) require transformation. In other words, all societies on earth today need a fundamental shift in values and worldview: they need to converge around the idea of deep security. And this security has to be based on equity and justice: sufficiency for all, without excess for some and misery for others. It is not simply ‘security of the fittest’ while the weak die off.

In the past, we did not need to make a big deal of enough; it was built into our lives in many ways. Our language recognised it in phrases like ‘enough is as good as a feast’, and ‘waste not, want not’. But in modern life the sense of enough is badly underdeveloped; in affluent societies we have largely forgotten the wisdom captured in the old sayings. Enough is radically different from our current affluent Western obsession with expansion and accumulation. We would benefit from exploring its value for us in the future. It is knowledge recognized by earlier generations; its value has become obscured in the world of more, but it has the potential to be very useful to us at this time. Knowledge takes many forms, including practical skills, interpersonal skills and critical thinking. All forms are essential and of equal importance.

Thinking about progress

This is a time in history when we need to make collective plans in ways we didn’t have to do in the past. Some very serious planning for us as a global, connected species is required, because developments have for the most part gone beyond the optimum. We need to make choices that will ensure all aspects of human security, including climate, food, water and peace.

One of the most important choices we have to make is to stop denying or ignoring the consequences of economic growth. Never has so much information been available to us about the effects of our actions. We know that we need to reduce demand and slow consumption, in order to stop global warming and climate change, and to nurture forms of economic activity that would be more life-enhancing than relentless growth. A second choice is even more important: to apply wisdom and passion in acting on the information we have. We need to examine our situation honestly, profoundly and self-reflectively. This is not about inducing a guilt trip or causing a paralysis of blame, but about acting responsibly.

Part of acting responsibly is to look within and ask how we can promote other ways of knowing the world and acting in it. The philosophy of ‘more’ has channelled human development through a very narrow gate, where the focus is always on outer action and material accumulation. In this channel, the stream gets very fast and turbulent. Survival is difficult and this has resulted in the development of our worst human capacities: indifference, cruelty, denial, a narrow materialism and short-term thinking in an effort to compete with others. In this channel, the claims of ecology, morality, aesthetics and spirituality get lost. We need to reclaim the inner life, where we can reflect on other possibilities for human development, other ways of being in the world, including living according to a philosophy of enough.

It would be easy to dismiss enough as a form of stopping progress or even as a naïve attempt to reclaim the past. But it’s really about creating many different kinds of human growth and expansion. A culture of enough would judge human progress in diverse ways and not just in the quantitative, measurable sense of increasing GDP. Such a culture would always attempt to balance our considerable scientific and scientific achievements with an increase in our moral, ecological, spiritual and emotional development. Humane and ecologically sound cultures would be a mark of progress and human advancement.

Enough and ecology

The words ‘ecology’ and ‘economics’ have the same root; ‘eco’ means ‘home’ or ‘household’. Enough returns economics to the scale of the household, makes it focus on the needs of the systems that sustain us and insists that economics recognise how everything is connected in ‘the wider household of being’. [2] Enough treats markets, money, trade, science, technology, competition and profit — all the elements of modern growth economies — as good, creative activities that can be harnessed for the good of people and the planet if they are kept within moral and ecological boundaries. It distinguishes vibrant economic activity from unregulated economic growth.

Ecology differs from environmentalism, which is a modern way of trying to manage and limit the destructive effects of growth-related activities on the natural world. Ecology is a way of looking at the big picture, including the whole person and the place of humans in the systems of the earth. We need to know more about our planet in order to overcome the ways the modern world can cut us off from eco-systems and from diversity. An ecological outlook encourages a sense of belonging, which helps us to create meaning. And for many, meaning is lacking in the cultures that grow up in tandem with growth economies. [3]

Scientific insights into the natural world have made the marvels of healthy ecological systems available to us. They do not waste; they are economical in the original sense of the word; they elegantly and spontaneously [4] observe limits. They are, in other words, truly sustainable. We could take our cues from these organic systems and encourage human, social and economic systems modelled on them.

We should not idealise nature, however, as it can just as easily be co-opted for fascist ends as for justice. Everyone wants their ideas to be seen as ‘natural’; it is a very powerful concept, because it suggests that what is natural is right and unstoppable — it provides a moral justification of sorts. For instance, nature can be employed to suggest that there is a natural hierarchical order of relationships in human society, among different races or ethnic groups, or between the sexes. Proponents of unrestrained global markets and growth economies say that such systems are a natural progression for humans and that there is no alternative to them, even if they sometimes have considerable downsides.

We can use insights from the study of nature as a way to examine the kinds of systems that support life. We know that healthy ecosystems are rich in diversity and that they can provide more for their ‘inhabitants’ (human, plant or animal) than impoverished systems, even if both kinds of system have the same nutrient resources to start with. For example, an ecologically run garden has a closed nutrient cycle; nothing leaves it in the form of waste, and it uses everything it produces to provide nourishment for the soil and the plants. We also know that healthy systems accommodate growth, but of a cyclical rather than an unlimited kind. Nature favours cycles because they come to an organic end after a suitable period of growth. [5] They do not go on growing because in nature, that is a cancer.

Humans today need to consciously self-regulate. Other species and systems, those which have not developed cultures that devalue limits, know spontaneously when enough is enough, but humans have to choose it. For economic development to be beneficial, it has to conform to very strict ecological and moral limits. Of course, we will never reach perfect agreement on the question of what the limits should be. But rather than try to set absolute rules for them, the important thing is that we start and strive to maintain a wide-ranging conversation about limits. The full potential of enough cannot be seen from where we currently stand in affluent countries. It becomes clear only as we travel along its path and put it into practice.

Enough and aesthetics

To appreciate enough, we need an aesthetic sense that recognises the elegance of sufficiency. Enough has a beauty that is completely appropriate for our time. What if the cutting edge came to mean, rather than the never-ending expansion of boundaries, the art of walking that edge between less and more, sometimes balancing, sometimes slipping? It would be beautiful and challenging at the same time. [6] Wealth could come from achieving balance and wholeness, and would include humour, fun, laughter and creativity.

However, if we consider them to be about mediocrity or deprivation, it will be difficult to embrace enough and its recognition of limits. The notion of limits has come to assume certain negative connotations. Enough can put us back in touch with the parts of ourselves that respond positively to the beauty of scale and sufficiency, the parts that empathise with the rest of creation. The arts — the record in music, painting, writing or dancing of what we have found beautiful or meaningful [7] — also work with a notion of limits. The artist has to prevent the work from exceeding itself, from becoming unwieldy or going on for too long. Otherwise the finished product becomes meaningless.

Enough and morality

Cultural and personal appreciations of the beauty of enough also constitute the beginnings of a moral practice. A conversation about morality — the principles and values that underpin our actions — is essential for a different kind of long-term public culture, one that does not rest on the idea that we are fundamentally economic beings. Morality, like ecology, examines how all things can flourish in relation to each other. Both are concerned with connection and the effect that different parts of a system have on each other.

A moral quest asks us to consider things we would often rather ignore. It asks us to reflect on our place in this world, the extent of the damage that humans have done in the world and the responsibility each of us has for creating a just world: what, in short, are our obligations to other people and to the earth itself? We often don’t do enough of this, so enough requires that we do more of what we neglect to do right now. And it requires more than asking what is wrong; it involves going on to ask, ‘how can we behave in ways that are right?’ Morality and ethics require that we examine the consequences of our beliefs and actions in areas beyond ourselves and our immediate environment, and in the long term.

A lack of moral development is distinct from a breakdown in organised religion. Institutional religions have traditionally held a monopoly on moral pronouncements, and indeed have tended to emphasise the guilt and shame aspects of our private lives. Progressive religious leaders are thankfully now recognising the need to broaden moral understanding, and that is to be welcomed. But we must not leave morality to religions; it is something we all need to concern ourselves with, whether we take a religious view of the world or not. Morality can be thought of as another way of naming politics, since politics too is concerned with human and planetary well-being. [8]

World economics needs to be subjected to moral and ecological scrutiny. There is a moral dilemma involved in the way that economics, narrowly understood, has taken away our capacity to live good lives. We produce and consume to ‘keep the economy going’ but in the process, we also destroy many of the less tangible features of life that support and sustain us. ‘Maximum individual choice’ is the big mantra within growth economics: we are promised enormous numbers of choices, which are supposed to make us happy. We often talk about equality as if it means having the right to shop on an equal footing with other people. But many of the choices available are meaningless and cause unwanted and unnecessary complexity in our lives; they are not actually available to all and they often come at a price: ecological destruction and social injustice.

Enough recasts choice as moral decisions that strive for the common good. That means taking into account all other humans, community systems, the earth, and ourselves as individuals or small family groups. This may mean setting limits on certain kinds of expansion and accumulation, because of the ways they close off decent choices for others. Taking a moral stance forces us to inquire into what is really going on in the world around us, not just in our own private or family sphere. So the moral dimension of enough is also concerned with justice and fairness.

Enough and spirituality

Spirituality involves full and constant attention to and awareness of what is happening, even if this is painful. Full attention is spiritual in a sense that has nothing to do with institutional religion. If we truly pay attention to the present, then we cannot ignore what is going on around us, the social and environmental realities that we are part of. And if we stop denying and ignoring, then we will no longer be prepared to live with some of the things we see. [9]

Securing peace of mind is one part of spirituality, and to this end, many contemporary interpretations of spirituality would have us simply acknowledge and accept what we see. But merely to acknowledge the world’s wrongs is more likely to bring despair, when we realise the extent of the wrongs. The only way to find peace is to resist what is wrong [10] and attempt to do right. The public side of the spiritual path — attention to social and economic systems — cannot be ignored in favour of the personal. Spiritual searching today must be infused with a political flavour if it is to be relevant to the contemporary scene.

Many people are already searching for peace of mind in the private realm with activities like yoga, tai chi, reiki, meditation, psychotherapy and poetry. Unfortunately, many spiritual activities, as taught or practiced in the West, emphasise the pleasant and the personal and do not refer to a broader social or cultural search, or offer a sense of the bigger picture. It is not enough to embrace spirituality, if it is only to escape one’s own pain. For example, a spiritual celebration of nature, uplifting and healing as it is, is not complete if it ignores the ways that nature is being violated by economic growth, or if the spirituality fails to defend nature. In any case, ecology teaches us that one part of a system cannot be truly healthy if other parts are in trouble. Spirituality can all too easily become the pursuit of the pleasant, a sort of tranquilliser. It can be used as an excuse for ignoring or denying what is going on in the world. [11]

Morality and spirituality appropriate to our times bridge the gap between public and private. They are political matters, because both are relevant to the world around us and to our inner lives. An ecological outlook enables us to look at context, that is, the bigger picture or web, in which our private lives are lived. The search for enough enables us to broaden our horizons and critique the systems that set the scene for our lives. It brings together resistance to what is wrong in the public domain as well as in the personal; it helps us to see the need for life-giving systems and gives us a desire to work towards them. Spirituality, like morality and ecology, is a recognition of deeper levels within ourselves and between ourselves and the world. [12] All three are concerned with being conscious of how everything in the world functions in relation to everything else.

We cannot know all the aspects of enough without actually doing it. It is a way of being in the world, not a simple set of rules for living. It is like a path whose end point we cannot see before we start out. This is part of its spiritual dimension: although we can understand it cognitively in minutes, it can take a lifetime of practice to come to truly know it. But the beauty of it is that, the more we walk on the road, or practice the philosophy, the more we become aware of the nuances and value of the practice. So enough can be a slow realization along the way, and in the process bring with it dramatic insights or transformations. It can also take the form of new knowledge that nobody has yet envisaged. There are difficult sides to any spiritual way, such as doubt, fear, failure, uncertainty and struggle. These are to be accepted for what we can learn from them; pushing them aside is another form of denial.

Enough has a good history; it is rooted in past generations and has been valued and practised by several great wisdom traditions, including religions, especially those traditions that have an ecological outlook and view humans as part of the great natural systems. Buddhism, Taoism, Jainism, Hinduism, Christianity, and the Ancient Greeks have for thousands of years promoted the virtues of moderation. Although enough does not rely on religious doctrine, neither is it rigidly secular; its spiritual and ecological dimensions take it beyond any view of life and the world that values only the strictly rational, observable and material. Spirituality is about who we are when all inessential trappings are stripped away; it also concerns the most important connections we have in the world.

Enough has an immediate value for individuals in our current culture; it can help us cope with the personal and social effects of what can sometimes seem like a runaway world. Working out what is enough in one’s life is a way to get some peace of mind and capacity to deal with hectic daily activities. It is a way to be content, not in the sense of tolerating poor quality, but in the sense of knowing what is valuable and what is not, and relishing the good things we have already. It provides security in times of boom and recession.

Public policies based on the concept of enough

Enough is at the heart of many concrete proposals and frameworks for making the changes we need in order to live well in the future. Such proposals include Contraction and Convergence and Cap and Share, [13] both based on the idea of a fair distribution of carbon-emissions quotas to all citizens of the globe. Another framework concerns basic financial security for everybody, which can in turn contribute to general security and a global retreat from growth, while also encouraging local development. This has developed into the idea of a universal basic income, which provides sufficient cash for every citizen to have the basics for a decent life. [14] Enough also underpins a growing worldwide food movement, based on intelligent local agricultural practices and the renewal of a food culture in places where it has died out. The basic premise of intelligent agriculture is that food production and food consumption should take place as close together as possible. [15]

In an ideal world, governments make laws based on such frameworks, creating structures for sustainability. With key structures in place, citizens would see an improvement in the quality of life. In turn, this would give a new culture of enough a chance to flourish; its full potential could emerge, co-created by government and citizens. It is important, therefore, that activists continue to push for such frameworks to be formally introduced. In the meantime, though, we live in a gap between what is and what might be, and in the absence of formal public policies based on enough, citizens need to take up the role of leaders and promote a culture of enough.

Citizen-leadership for enough

We cannot all be official, designated leaders, but if leadership is about taking risks and bringing other people along in a new vision, then we can all do it. We need to rid ourselves of the idea that only experts can lead us. A leader is anyone who wants to help [16] and leadership is an everyday thing, not something apart from day-to-day living. It’s not confined to those who have decision-making power in institutions or states. We can all, irrespective of age, occupation or role, regularly ask questions about how we should live, what is good, how we can achieve well-being for everybody, how we can respect the earth and how we can take the long-term view and try to see the whole picture. We can engage in conversation with others about these issues. A society that does not cultivate the art of asking questions cannot count on finding answers to its most pressing issues. [17]

As citizen-leaders, we have to find ways to amplify the attractive identity of enough and related concepts. We have to get them into public awareness and get people talking about them and seeking others who are interested. [18] This includes providing information, but crucially, it is also about building influence for those ideas. We need the world to pick up on the message of enough in a thousand different ways, in all its different expressions, whether in personal or public life. We can draw on key attitudes such as stability, creativity, equity and participation. We can lead a movement for quality, wholeness, sufficiency, well-being, morality, ecology and full human potential. At the same time this movement resists injustice, quantification, monetarism, denial, isolation, cruelty and the deskilling of human beings.

The choice to live by a key attitude like enough is political in the broadest sense of the word. Politics is about public, collective choices and is closely connected to morality. Political and moral concerns include the values, culture and mindset that underpin the overt laws or rules that govern society. Party politics and parliamentary democracy are only a tiny part of politics.


Enough is a concept that is intrinsically moral, intrinsically ecological and intrinsically healthy. Practising it allows us to get what is needed from the world to sustain human flourishing, but without taking too much from individuals or from social and natural systems. It is also about how to give adequately to the world around us. So it is about the relationship between humans and the world, how we get and how we give. In our modern worldview, we have limited our understanding of how everything is connected to everything else.

The problems are all connected with each other. But just as importantly, the solutions are also interconnected. A sense of enough creates the conditions that will allow a critique of growth. It can also nourish a culture of adapted human behaviour which will give at least some of the earth’s ecosystems a chance to renew themselves and at the same time allow social justice to emerge.

Enough is neither cynical nor utopian, but hopeful. It is based on our potential for good. Simple but not simplistic [19], it is a principled way of understanding and being that requires us to get the balance right between the inner world of contemplation and the outer world of observable action. We can think about the future in a hopeful way, grounded in the belief that humans can live up to their potential for good and for moral action. The problems facing us are very serious, but if we look only at the extremely hard realities and avoid the language of possibility, then the realities seem just too much, and we risk slipping into cynicism, denial or despair. We need to lay claim to the notion that human beings have the capacity to intervene in, influence and shape the forces that structure our lives.

There is no perfect worldview; anything taken to an extreme will show its shadow side or become dogma. But a reflexive attitude can prevent the way of enough from becoming rigid. This means sticking with the questions and not flinching from the challenges inherent in them. Enough is a key concept for the future. Living, adaptive and dynamic, it encourages creativity and diversity for groups and individuals around the world. It can help us to forge connections and discover common ground. And right now, as a positive first step towards an increasingly precarious future, it might just be enough to bring us real hope.


  1. McKibben, Bill (2004) Enough: Genetic Engineering and Human Nature. London: Bloomsbury, page 227
  2. Le Guin, Ursula K (2003) ‘Life in the Wider Household of Being’, an interview with Ursula K le Guin by Erika Milo for North by Northwest, Nov. www.northbynorthwest.org
  3. O’Sullivan, Edmund V (1999) Transformative learning: Educational vision for the 21st century. Toronto: University of Toronto Press, page 231
  4. McKibben, Bill (2004) Enough: Genetic Engineering and Human Nature. London: Bloomsbury, page 214.
  5. Brandt, Barbara (1995) Whole Life Economics: Revaluing Daily Life. Philadelphia, PA and Gabriola Island, BC: New Society Publishers.
  6. McKibben, Bill (2004) Enough: Genetic Engineering and Human Nature. London: Bloomsbury, page 217
  7. McKibben, Bill (2004) Enough: Genetic Engineering and Human Nature. London: Bloomsbury, page 218
  8. Eagleton, Terry (2003) After Theory. Cambridge, MA: Basic Chapters
  9. Gottlieb, Roger S. (2003) A Spirituality of Resistance: Finding a Peaceful Heart and Protecting the Earth. Lanham, Maryland: Rowman and Littlefield, page 32
  10. Gottlieb, Roger S. (2003) A Spirituality of Resistance: Finding a Peaceful Heart and Protecting the Earth. Lanham, Maryland: Rowman and Littlefield.
  11. Gottlieb, Roger S. (2003) A Spirituality of Resistance: Finding a Peaceful Heart and Protecting the Earth. Lanham, Maryland: Rowman and Littlefield, pages 13-18.
  12. Selby, David (2002) ‘The signature of the Whole: Radical Interconnectedness and its Implications for Global and Environmental Education, pages 87, 88 in O’Sullivan, Edmund V., Amish Morell and Mary Ann O’Connor (eds), Expanding the Boundaries of Transformative Learning. New York: Palgrave Macmillan, pages 77 – 93.
  13. Meyer, Aubrey (2005) Contraction and Convergence: The Global Solution to Climate Change. Schumacher Briefing no 5. Totnes, Devon: Green Books.
  14. Lord, Clive (2003) A Citizens’ Income: a foundation for a sustainable world. Charlbury: Jon Carpenter . Also see www.citizensincome.org
  15. Tudge, Colin (2004) So Shall We Reap: What’s gone wrong with the world’s food — and how to fix it. London: Penguin. Also Tudge, Colin (2007) Feeding People is Easy. Pari, Italy: Paripublishing
  16. cf Cornelius Castoriadis, cited in Giroux, Henry A (2001) Public Spaces, Private Lives: Beyond the Culture of Cynicism. New York: Rowman and Littlefield, page 81.
  17. Meg Wheatley calls this getting the idea into the relational or communication networks, in her chapter (2006) Leadership and the New Science: Discovering Order in a Chaotic World. San Francisco: Berrett-Koehler Publications, page 87.
  18. Distinctions made in Goodman, Anne (2003) Now What? Developing our Future: Understanding our Place in the Unfolding Universe. New York: Peter Lang, pages 303-4.
  19. Distinctions made in Goodman, Anne (2003) Now What? Developing our Future: Understanding our Place in the Unfolding Universe. New York: Peter Lang, pages 303-4.

The supply of money in an energy-scarce world

Richard Douthwaite

Money has no value unless it can be exchanged for goods and services but these cannot be supplied without the use of some form of energy. Consequently, if less energy is available in future, the existing stock of money can either lose its value gradually through inflation or, if inflation is resisted, be drastically reduced by the collapse of the banking system that created it. Many over-indebted countries face this choice at present — they cannot preserve both their banking systems and their currency’s value. To prevent this conflict in future, money needs to be issued in new, non-debt ways.

The crux of our present economic problems is that the relationship between energy and money has broken down. In the past, supplies of money and energy were closely linked. For example, I believe that a gold currency was essentially an energy currency because the amount of gold produced in a year was determined by the cost of the energy it took to extract it. If energy (perhaps in the form of slaves or horses rather than fossil fuel) was cheap and abundant, gold mining would prove profitable and, coined or not, more gold would go into circulation enabling more trading to be done. If the increased level of activity then drove the price of slaves or steam coal up, the flow of gold would decline, slowing the rate at which the economy grew. It was a neat, natural balancing mechanism between the money supply and the amount of trading which worked rather well.

In fact, the only time it broke down seriously was when the Spanish conquistadors got gold for very little energy — by stealing it from the Aztecs and the Incas. That damaged the Spanish economy for many years because it meant that wealthy Spaniards could afford to buy from abroad rather than using the skills of their own people, which consequently did not develop. It was an early example of “the curse of oil” or the “paradox of plenty,” the paradox being that that countries with an abundance of non-renewable resources tend to develop less than countries with fewer natural resources. Britain suffered from this curse when North Sea oil began to come ashore, distorting the exchange rate and putting many previously sound firms out of business.

19th-century gold rushes were all about the conversion of human energy into money as the thousands of ordinary 21st-century people now mining alluvial deposits in the Amazon basin show. Obviously, if supplies of food, clothing and shelter were precarious, a society would never devote its energies to finding something that its members could neither eat, nor live in, and which would not keep them warm. In other words, gold supplies swelled in the past whenever a culture had the energy to produce a surplus. Once there was more gold available, its use as money made more trading possible, enabling a society’s resources to be converted more easily into buildings, clothes and other needs.

Other ways of converting human energy into money have been used besides mining gold and silver. For example, the inhabitants of Yap, a cluster of ten small islands in the Pacific Ocean, converted theirs into carved stones to use as money. They quarried the stones on Palau, some 260 miles away and ferried them back on rafts pulled by canoes, but once on Yap, the heavy stones were rarely moved, just as no gold has apparently left Fort Knox for many years. According to Glyn Davies’ mammoth study, The History of Money, the Yap used their stone money until the 1960s.

Wampum, the belts made from black and white shells by several Native American tribes on the New England coast, is a 17th-century example of human-energy money. Originally, the supply of belts was limited by the enormous amount of time required to collect the shells and assemble them, particularly as holes had to be made in the shells with Stone Age technology – drills tipped with quartz. The currency was devalued when steel drill bits enabled less time to be used and the last workshop drilling the shells and putting them on strings for use as money closed in 1860.

The last fixed, formal link between money and gold was broken on August 15, 1971, when President Nixon ordered the US Treasury to abandon the gold exchange standard and stop delivering one ounce of gold for every $35 that other countries paid in return. This link between the dollar and energy was replaced by an agreement that the US then made with OPEC through the US-Saudi Arabian Joint Commission on Economic Cooperation that “backed” the dollar with oil. [1] OPEC agreed to quote the global oil price in dollars and, in return, the US promised to protect the oil-rich kingdoms in the Persian Gulf against threat of invasion or domestic coups. This arrangement is currently breaking down.

The most important link between energy and money today is the consumer price index. The central banks of every country in the world keep a close eye on how much their currency is worth in terms of the prices of the things the users of that currency purchase. Energy bills, interest payments and labour costs are key components of those prices. If a currency shows signs of losing its purchasing power, the central bank responsible for managing it will reduce the amount in circulation by restricting the lending the commercial banks are able to do. This means that, if energy prices are going up because energy is getting scarcer, the amount of money in circulation needs to become scarcer too if it is to maintain its energy-purchasing power.

A scarcer money supply is a serious matter because the money we use was created by someone somewhere going into debt, and if there is less money about, interest payments make those debts harder to repay. Money and debt are co-created in the following way. If a bank approves a loan to buy a car, the moment the purchaser’s cheque is deposited in the car dealer’s account, more money — the price of the car — comes into existence, an amount balanced by the extra debt in the purchaser’s bank account. Consequently, in the current monetary system, the amount of money and the amount of debt are almost equal and opposite. I say “almost” as borrowers have more debt imposed on them every year because of the interest they have to pay. If any of that interest is not spent back into the economy by the banks but is retained by them to boost their capital reserves, there will be more debt than money.

Until recently, if the banks approved more loans and the amount of money in circulation increased, more energy could be produced from fossil-fuel sources to give value to that money. Between 1949 and 1969 — the heyday of the gold exchange standard under which the dollar was linked to gold and other currencies had exchange rates with the dollar — the price of oil was remarkably stable in dollar terms. But when the energy supply was suddenly restricted by OPEC in 1973, two years after the US broke the gold-dollar link, and again in 1979, the price of energy went up. There was just too much money in circulation for it to retain its value in relation to the reduced supply of oil.

The current “credit crunch” came about because of a huge increase in the price of energy. World oil output was almost flat between September 2004 and July 2008 for the simple reason that the output from major oil fields was declining as fast the production from new, smaller fields was growing. Consequently, as more money was lent into circulation, oil’s price went up and up, taking the prices of gas, coal, food and other commodities with it. The rich world’s central bankers were blasé about these price increases because the overall cost of living was stable. In part, this was because lots of cheap manufactured imports were pouring into rich-country economies from China and elsewhere, but the main reason was that a lot of the money being created by the commercial banks’ lending was being spent on assets such as property and shares that did not feature in the consumer price indices they were watching. As a result, they allowed the bank lending to go on and the money supply — and debt — to increase and increase. The only inflation to result was in the price of assets and most people felt good about that as it seemed they were getting richer, on paper at least. The commercial banks liked it too because their lending was being backed by increasingly valuable collateral. What the central banks did not realise, however, was that their failure to rein in their lending meant that they had broken the crucial link between the supply of energy and that of money.

This break damaged the economic system severely. The rapid increase in energy and commodity prices that resulted from the unrestricted money supply meant that more and more money had to leave the consumer-countries to pay for them. The problem with this was that a lot of the money being spent was not returned to the countries that spent it in the form in which it left. It went out as income and came back as capital. I’ll explain. If I buy petrol for my car and part of the price goes to Saudi Arabia, I can only buy petrol again year after year if that money is returned year after year to the economy from which my income comes. This can happen in two ways, one of which is sustainable, the other not. The sustainable way is that the Saudis spend it back by buying goods and services from Ireland, or from countries from which Ireland does not import more than it exports. If they do, the money returns to Ireland as income. The unsustainable way is that the Saudis lend it back, returning it as capital. This enables Ireland to continue buying oil but only by getting deeper and deeper into debt.

As commodity prices rose, the flow of money to the energy and mineral producers increased so rapidly that there was no way that the countries concerned could spend it all back. Nor did they wish to do so. They knew that their exports were being taken from declining resources and that they should invest as much of their income as possible in order to provide an income for future generations when the resources were gone. So they set up sovereign wealth funds to invest their money, very often in their customers’ countries. Or they simply put their funds on deposit in rich-country banks.

The net result was that a lot of the massive increase in the flow of income from the customers’ economies became capital and was lent or invested in the commodity consumers’ economies rather than being spent back in them. This was exactly what had happened after the oil price increases in 1973 and 1979. The loans meant that, before the money became available again for people to spend on petrol or other commodities, at least one person had to borrow it and spend it in a way that converted it back to income.

This applied even if a sovereign wealth fund invested its money in buying assets in a consumer economy. Suppose, for example, the fund bought a company’s outstanding shares rather than a new issue. The sellers of the shares would certainly not spend the entire amount they received as income. They would place most of their money on deposit in a bank, at least for a little while before they bought other assets, and people other than the vendors would have to borrow that money if it was going to be spent as income. As a result, it often took quite a lot of borrowing transactions before the total sum arrived back in people’s pockets.

For example, loans to buy existing houses are not particularly good at creating incomes whereas loans to build new houses are. This is because most of the loan for an existing house will go to the person selling it, although a little will go as income to the estate agent and to the lawyers. The vendor may put the money on deposit in a bank and it will have to be lent out again for more of it to become income. Or it may be invested in another existing property, so someone else gets the capital sum and gives it to a bank to lend. A loan for a new house, by contrast, finances all the wages paid during its construction so a lot of it turns into income. The building boom in Ireland was therefore a very effective way of getting the money the country was over-spending overseas and then borrowing back converted into incomes in people’s pockets. Direct foreign borrowing by governments to spend on public sector salaries is an even more effective way of converting a capital inflow into income.

We can conclude from this that a country that runs a deficit on its trade in goods and services for several years, as Ireland did, will find that its firms and people get heavily in debt because a dense web of debt has to be created within that country to get the purchasing power, lost as a result of the deficit, back into everyone’s hands. This is exactly why the UK and United States are experiencing debt crises too. The US has only had a trade surplus for one year — and that was a tiny one — since 1982 and the UK has not had one at all since 1983.

Table 1: The worst external debtors per $1,000 of GDP in 2006





United Kingdom


























DEFINITION: Total public and private debt owed to non-residents repayable in foreign currency, goods, or services. Per $ GDP figures expressed per 1,000 $ gross domestic product.
Source: CIA World Factbooks 18 December 2003 to 18 December 2008

Table 2: Ireland’s gross external debt triples over five years

CSO data for the final quarter of each year (m)

















Table 3: The world’s biggest balance of payments deficits at the height of the boom in 2007

Deficit, millions

Ranking of absolute size of deficit

Population, millions

Deficit per head





















United States










United Kingdom

























South Africa










It is notable that all the eurozone countries experiencing a debt crisis — the “PIIGS” Portugal, Ireland, Italy, Greece and Spain — appear in this table and that the three worst deficits on a per capita basis are those of Greece, Spain and Ireland. The countries in italics have their own currencies and are thus better able to correct their situations.

Source: CIA World Factbook, 18 December 2008, with calculations by the author.

The debts incurred by the current account–deficit countries were of two types: the original ones owed abroad and the much greater value of successor ones owed at home as loans based on the foreign debt were converted to income. Internal debt — that is, debt owed by the state or the private sector to residents of the same country — is much less of a burden than foreign debt but it still harms a country by damaging its competitiveness. It does this despite the fact that paying interest on the debt involves a much smaller real cost to the country since most of the payment is merely a transfer from one resident to another. (The remainder of the payment is taken in fees by the financial services sector and the increase in indebtedness has underwritten a lot of its recent growth.)

Internal debt is damaging because a country with a higher level of internal debt in relation to its GDP than a competing country will have higher costs. This is because, if the rate of interest is the same in both countries, businesses in the more heavily indebted one will have to allow for higher interest charges per unit of output than the other when calculating their operating costs and prices. These additional costs affect its national competitiveness in exactly the same way as higher wages. Indeed, they are the wages of what a Marxist would call the rentier class, a class to which belongs anyone who, directly or indirectly, has interest-bearing savings. A country’s central bank should therefore issue annual figures for the internal-debt to national income ratio.

While internal debt slows a country up, external debt can cause it to default. In their book This Time Is Different, Carmen Reinhart and Ken Rogoff consider external debt in two ways — in relation to a country’s GNP and in relation to the value of its annual exports.

Table 4: How oil imports commandeered an increased share of Ireland’s foreign earnings.

Mineral fuel imports


Fuel cost as % of GNP


Fuel cost as % of export earnings

















































Source: CSO data with calculations by the author.

The second ratio is the more revealing because exports are ultimately the only means by which the country can earn the money it needs to pay the interest on its overseas borrowings. (A country’s external debt need never be repaid. As its loans become due to be repaid they can be replaced with new ones if its creditors are confident that it can continue to afford to pay the interest.) The book examines 36 sovereign defaults by 30 middle-income countries and finds that, on average, a country was forced to default when its total public and private external debt reached 69.3% of GNP and 230% of its exports.

Poorer countries lend to the world’s richest ones

Graph 2: Rich countries have borrowed massively from “developing” and “transition” countries over the past ten years. This graph shows the net flow of capital. The funds borrowed came predominantly from energy and commodity export earnings. Source: World Situation and Prospects, 2010, published by the UN.

Table 5: The most over-indebted countries at the height of the boom in 2007


Total state & private external debt, billions


earnings billions



external debt to exports





external debt to GDP


United Kingdom














United States





































































Countries that exceed the average level at which countries in the Reinhart and Rogoff study defaulted are marked in a darker shade.

As Table 5 shows, almost a dozen rich countries are in danger of default by the Reinhart-Rogoff criteria. The total amount of debt in the world in 2010 is roughly 2.5 times what it was ten years ago in large part as a result of the spend-and-borrow-back process. This means that there is 2.5 times as much money about, but not, of course, 2.5 times as much energy. If much of that new money was ever used to buy energy, the price of energy would soar. In other words, money would be devalued massively as the money-energy balance was restored. The central banks are determined to prevent this happening, as we will discuss in a little while.

World debt more than doubles in ten years

Graph 3: Rich-country debt has grown remarkably in the past ten years because of the amount of lending generated by capital flows from fossil energy– and commodity-producing nations was used to inflate asset bubbles. The emerging economies, by contrast, invested borrowed money in increasing production. As a result, their debt/GDP ratio declined. Source: The Economist.

Most of the world’s increased debt is concentrated in richer countries. Their debt-to-GDP ratio has more than doubled whereas in the so-called “emerging economies” the debt-to-GDP ratio has declined. This difference can be explained by adapting an example given by Peter Warburton in his 1999 book, Debt and Delusion. Suppose I draw 1,000 on my overdraft facility at my bank to buy a dining table and chairs. The furniture store uses most of its margin on the sale to pay its staff, rent, light and heat. Say 250 goes this way. It uses most of the rest of my payment to buy new stock, say, 700. The factory from which it orders it then purchases wood and pays its costs and wages. Perhaps 650 goes this way, but since the wood is from overseas, 100 of the 650 leaks out of my country’s economy. And so I could go on, following each payment back and looking at how it was spent and re-spent until all the euros I paid finally go overseas. The payments which were made to Irish resident firms and people as a result of my 1,000 loan contribute to Irish national income. If we add up only those I’ve mentioned here — 1,000 + 250 + 700 + 550 — we can see that Irish GDP has increased by 2,500 as a result of the 1,000 debt that I took on. In other words, the debt-to-GDP ratio was 40%.

As debt increases, US economy grows by less and less

Graph 4: Because borrowings have been invested predominantly in purchasing assets rather than in production capacity, each increase in borrowing in the US has raised national income by less and less. The most recent bout of borrowing — to rescue the banking system — actually achieved negative returns because it failed to stop the economy contracting. Graph prepared by Christopher Rupe and Nathan Martin with US Treasury figures dated 11 March 2010. Source: http://economicedge.blogspot.com/2010/04/guest-post-and-more-on-most-important.html

Now suppose that rather than buying furniture, I invest my borrowed money in buying shares from someone who holds them already, rather than a new issue. Of the 1,000 I pay, only the broker’s commission and the taxes end up as anyone’s income. Let’s say those amount to 100. If so, the debt-to-GDP ratio is 1000%.

So one reason why the debt burden has grown in “rich” countries and fallen in “emerging” ones is the way the debt was used. A very much higher proportion of the money borrowed in some richer countries went to buying up assets, and thus bidding up their prices, than it did in the poorer ones. After a certain point in the asset-buying countries, it was the rising price of assets that made their purchase attractive, rather than the income that could be earned from them. Rents became inadequate to pay the interest on a property’s notional market value, while in the stock market, the price-earnings ratio rose higher and higher.

Only a small proportion of the money created when the banks lent money to buy assets was spent in what we might call the real economy, the one in which everyday needs are produced and sold. The rest stayed as what the money reform activist David J. Weston called “stratospheric money” in his contribution to the New Economics Foundation’s 1986 book The Living Economy; in other words, money that moves from bank account to bank account in payment for assets, with very little of it coming down to earth. The fraction that does flow down to the real economy each year is normally balanced — and sometimes exceeded — by flows in the other direction such as pension contributions and other forms of asset-based saving. The flows in the two directions are highly unstable, however, not least because those who own stratospheric assets know that they can only convert them to real-world spending power at anything like their current paper value if other people want to buy them. If they see trouble coming, they need to sell their assets before everyone else sees the trouble too and refuses to buy. This creates nervousness and an incentive to dump and run.

If all asset holders lost all faith in the future and wanted to sell, prices would fall to zero and the loans that the banks had secured on their value would never be repaid. The banks would become insolvent, unable to pay their depositors, so the huge amounts of money that were created when the asset-backed loans were approved would disappear, along with the deposits created by loans given out to finance activities in the real economy. In such a situation, the deposit guarantees given by governments would be of no avail. The sums they would need to borrow to honour their obligations would be beyond their capacity to secure, particularly as all banks everywhere would be in the same situation.

No-one wants such a situation so, since a decline in asset values could easily spiral downwards out of control, the only safe course is to keep the flow of money going into the stratosphere greater than that coming out. This keeps asset prices going up and removes any reason for investors to panic and sell. The problem is, however, that maintaining a positive flow of money into the stratosphere depends on having a growing economy. If the economy shrinks, or a greater proportion of income has to be spent on buying fuel and food because their prices go up, then less money can go up into the stratosphere in investments, rents and mortgage repayments. This causes asset values to fall and could possibly precipitate an investors’ stampede to get into cash.

In effect, the money circulating in the stratosphere is another currency — one that has only an indirect relationship with energy availability and which people use for saving rather than to buy and sell. Because there is a fixed one-to-one exchange rate between the atmospheric currency and the real-world one, the price of assets has to change for inflows and outflows to be kept in balance. As we’ve just discussed, the banking system will collapse if asset values fall too far, so governments are making heroic efforts to ensure that they do not. As 20% of the assets involved are owned by 1% of the population in Britain and Ireland (the figure is 38% in the US), this means that governments are cutting the services they deliver to all their citizens in order to keep the debt-money system going in an effort to preserve the wealth of the better-off.

In 2007, the burden imposed on the real economy by the need to support the stratospheric economy became too great. The richer countries that had been running balance of payments deficits on their current accounts found that paying the high energy and commodity prices, plus the interest on their increased amount of external debt, plus the transfer payments required on their internal ones, was just too much. The weakest borrowers — those with sub-prime mortgages in the US — found themselves unable to pay the higher energy charges and service their loans. And, since many of these loans had been securitised and sold off to banks around the world, their value as assets was called into question. Banks feared that payments that they were due from other banks might not come through as the other banks might suddenly be declared insolvent because of their losses on these doubtful assets. This made inter-bank payments difficult and the international money-transfer system almost broke down.

All asset values plunged in the panic that followed. Figures from the world’s stock markets show that the FTSE-100 lost 43% between October 2007 and February 2009 and that the Nikkei and the S&P 500 lost 56% and 52% respectively between May-June 2007 and their bottom, which was also in February 2009. All three indices have since recovered some of their previous value but this is only because investors feel that incomes are about to recover and increase the flow of funds into the stratosphere to support higher levels. They would be much less optimistic about future prices if they recognised that, in the medium term at least, a growing shortage of energy means that incomes are going to fall rather than rise.

This analysis of the origins of the current crisis leads to four thoughts that are relevant to planning the flight from Vesuvius:

  1. It is dangerous and destabilising for any country, firm or individual to borrow from abroad, even if they are borrowing their own national currency. Net capital movements between countries should be prohibited.
  2. An inflation is the best way of relieving the current debt crisis. An attempt to return the debt-GNP ratio to a supportable level by restricting lending would be a serious mistake. Instead, money incomes should be increased.
  3. A debt-based method of creating money cannot work if less and less energy is going to be available. New ways of issuing money will therefore need to be found.
  4. New ways of borrowing and financing are going to be required too, since, as incomes shrink because less energy can be used, fixed interest rates will impose an increasing burden.

We will discuss these in turn.

1. Borrowing from abroad

We have already discussed the problems that servicing foreign debt can create and, in view of these, it is hard to see why any country should ever borrow abroad at all. Foreign capital creates problems when it enters a country and further problems when it leaves. When it comes in, it boosts the country’s exchange rate, thus hurting firms producing for the home market by making imports cheaper than they would otherwise be. It also hurts exporters, reducing their overseas earnings when they convert them into their national currency. As a result, when the loan has to be repaid, the country is in a weaker position to do so than it was when it took the loan on — its imports are higher and its exports reduced. Foreign borrowing is so damaging that it has even been claimed that the Chinese policy of pegging its currency to the dollar at a rate which makes its exports very attractive and keeping that rate by lending a lot of the dollars it earns back was designed by military strategists to destroy America’s manufacturing base. [2] The strategists are said to have argued that no superpower can maintain its position without a strong industrial sector, so lending back the dollars China earned was a handy way to destroy the US ability to fight a major war.

For a country with its own currency, the alternative to borrowing abroad is to allow the value of its currency to float so that its exports and imports are always in balance and it never need worry about its competitiveness again. As eurozone countries no longer have this option, they have very few tools to keep exports and imports in balance. Indeed, it’s hard to know what they should do to deter foreign borrowing because, while the state may not borrow abroad itself, its private sector may be doing so. In Ireland, for example, the net indebtedness of Irish banks to the rest of the world jumped from 10% of GDP in 2003 to over 60% four years later, despite the fact that some of the state’s own borrowings were repaid during these years. All the state could have done to stop this borrowing would have been to restrict lending that was based on the overseas money. For example, it could have placed a limit on the proportion of its loans that a bank could make to the property sector, or stipulated that mortgages should not exceed, say, 90% of the purchase price and three times the borrower’s income. This would have dampened down the construction boom and limited the growth of incomes and thus import demand. But such indirect methods of control are not nearly as potent as allowing the market to achieve balance automatically. Their weakness is a very powerful argument for breaking up the eurozone.

Although one might accept that borrowing abroad for income purposes comes at the cost of undermining its domestic economy, it could be argued that capital inflows for use as capital will allow a country develop faster than would otherwise be the case. Let’s see if this argument stands up.

The danger with bringing capital into a country with its own currency is that part of it will become income in the ways we discussed and thus boost the exchange rate and undermine the domestic economy. So, if we restrict the capital inflow to the actual cost of the goods that the project will need to import, is that all right? Well, yes, it might be. It depends on the terms on which the capital is obtained, and whether the project will be able to earn (or save) the foreign exchange required to pay the investors. If the world economy shrinks as we expect, it is going to be harder to sell the product and its price may fall. This might mean that interest payments took a greater share of the project’s revenue than was expected, causing hardship for everyone else. So, as we will discuss later, the only safe approach is for the foreign investor to agree to take a fixed portion of the project’s foreign revenue, whatever that is, rather than a fixed sum of money based on the interest rate. This would ensure that the project never imposed a foreign exchange burden on the country as a whole. The foreign capital would be closer to share capital than a loan. This should be the only basis that any country should allow foreign capital in.

At present, however, so much foreign capital is moving around that its flow might need to be limited to prevent destabilising speculation. As Reinhart and Rogoff point out, “Periods of high international capital mobility have repeatedly produced international banking crises, not only famously as they did in the 1990s, but historically.” One solution to this, again for countries with their own currencies, is to have two exchange rates; one for capital flows, the other for current (i.e. trading) flows. This would mean that people could only move their capital out of a country if others wanted to move theirs in. Rapid, speculative flows would therefore be impossible. Ireland had this system when it was part of the Sterling Area after World War 2 until Britain abandoned it around 1979. It was known as the dollar premium. South Africa had a capital currency, “the financial rand,” which gave it financial stability throughout the apartheid period. It dropped it in 1995.

Keeping capital and current flows apart would greatly reduce the power of the financial sector. After they were divided, no-one would ever say as James Carville, President Clinton’s adviser, did about the bond markets in the early 1990s when he realised the power they had over the government, that they “can intimidate everybody.”

Of course, the threat to its power will mean that the financial sector opposes capital-flow currencies tooth and nail. Yet its power, and income, must be reduced, especially if incomes in other sectors of the economy are going fall. According to the OECD, the share of GDP taken by the financial sector (defined as “financial intermediation, real-estate, renting and business activities”) in the United States increased from 23% to 31% between 1990 to 2006. The increase in the UK was over 10% to about 32% and around 6% in both France and Germany.

The rise in the sector’s share of corporate profits was even more striking. In the United States, for example, it was around 10% in the early 1980s but peaked at 40% in 2007. Mentioning these figures, Már Gudmundsson, the deputy head of the Monetary and Economic Department of the Bank for International Settlements, told a conference in the US in 2008 that the financial sector needed to become smaller and less leveraged: “That is the only way the sector can be returned to soundness and profitability in the environment that is likely to prevail in the post-crisis period.” I would put it much more strongly. The British sector’s income is bigger than those of agriculture, mining, manufacturing, electricity generation, construction and transport put together, and the sector’s dominance in other economies is similar. It is a monstrous global parasite that needs to be cut down to size.

The financial tail wags the societal dog

Graph 5: The financial sector in five rich-country economies, the US, Japan, the UK, France and Germany, has been taking an increasing share of national income over the past twenty years, in part because of the increasing debt burden. The sector is now bigger in each country than all the productive sectors put together. Source OECD.

2. Allowing inflation to correct the debt-income imbalance

As the amount of energy in a litre of petrol is equivalent to three weeks’ hard manual work, having power at one’s disposal can make one much more productive. A country’s income is consequently largely determined by its direct and indirect energy use. So, whenever less energy is available, incomes fall and debt becomes harder to service unless an inflation is allowed to increase money incomes and reduce the real burden imposed by the debt.

This has been demonstrated by two real-world experiments. After OPEC’s first oil-supply restriction in 1973, the world’s central banks allowed the inflation created by the higher oil prices to go ahead. By reducing the burden of existing debt, this made room for the commercial banks to lend out the money that the oil producers were unable to spend. The US came out of the recession quickly and Britain did not have one at all. Developing countries did well too even though they were paying more for their oil, because the prices of their commodity-exports increased more rapidly than the rate of interest they were being charged on their external debts and, although they borrowed from abroad, their debt-export ratio stayed constant.

After the 1979 restriction, however, the story was different. This time, the central banks resolved to maintain the purchasing power of their monies in relation to energy and they did all they could to fight the inflation. In Britain, an ultra-tight fiscal and monetary policy was adopted. Interest rates were set at 17% and government spending cuts of £3.5bn were announced for the following year. The result was the “Winter of Discontent” with 29m working days lost through strikes, the largest annual total since the General Strike in 1926. In the US, the prime rate reached 20% in January 1981. Unemployment, which had dropped steadily from 1975 to 1979, began to rise sharply as the deflationary measures were put into effect.

The OPEC countries themselves moved from a small balance of payments deficit of $700 million in 1978 to a surplus of $100 billion in 1980. They put most of this money on deposit in US and British banks. But what were the banks to do with it, since none of their rich-country customers wished to borrow at the prevailing interest rates, especially as their domestic economies had been thrown into recession by the central banks’ policies? The answer was to lend it to the developing countries, since the loans made to these countries after 1973 had worked out well.

The result was the Third World Debt Crisis. In 1970, before it began, the 15 countries which it would affect most severely — Algeria, Argentina, Bolivia, Brazil, Bulgaria, Congo, Cote d’Ivoire, Ecuador, Mexico, Morocco, Nicaragua, Peru, Poland, Syria and Venezuela — had a manageable collective external public debt. It amounted to 9.8% of their collective GNP and took 12.4% of their export income to service. [3] By 1987, these same nations’ external public debt was 47.5% of their GNP and servicing it took 24.9% of their export earnings. This doubling had come about because they had borrowed abroad to avoid inflicting drastic spending cuts on their people like those made in the US and the UK. They could, of course, have avoided borrowing and tried to manage on their reduced overseas earnings but this would have forced them to devalue, which would have itself increased their foreign debt-to-GDP ratio. They really had very few options.

Just how deep the commodity-producing countries devaluations would have had to have been is indicated by the decline in net farm incomes in the US. In 1973, these reached a record high of $92.1 billion but by 1980 they had dropped back to $22.8 billion, largely because of a decline in overseas demand, and by 1983 they were only $8.2 billion. Not surprisingly in view of the high interest rates, many US farmers went bankrupt. In 1985, 62 agricultural banks failed, accounting for over half of the nation’s bank failures that year. The high interest rates were also a factor a few years later when 747 US mortgage lenders, the savings and loans or “thrifts” had to be bailed out. The cost was around $160 billion, of which about $125 billion was paid by the US government.

Money’s exchange rate with energy fell in both 1973 and 1979 because there was too much of it in circulation in relation to the amount of oil available. In 1973, the inflation removed the surplus money by requiring more of it to be used for every purchase. The results were generally satisfactory. In 1979, by contrast, an attempt was made to pull back the price of oil by jacking up interest rates to reduce the amount of money going into circulation and thus, over a period of years, bring down the “excessive” money stock. The higher rates caused immense hardship because they ignored the other side of the money=debt equation, the debt that was already there. So, by setting their faces against allowing money to be devalued in relation to energy, the central banks’ policies meant that a lot of the debt had to be written off. Their policy hurt them as well as everyone else. Yet the same policy is being used again today.

So which policy should be adopted instead to remove the current surplus stratospheric money? Incomes in the real economy need to be increased so that they can support current asset values in the stratosphere and, since there is insufficient energy to allow growth to increase them, inflation has to be used instead. Attempts to use 1979-type methods such as those being promoted by the Germans for use in the eurozone will only depress incomes, thus making the debt load heavier. A lot of the debt would then have to be written off, causing the banking system to implode. Even if this could be avoided, such a policy can never work because the money is being taken from the real economy rather than the stratospheric one.

The choice is therefore between allowing inflation to reduce the debt burden gradually, or trying to stop it and having the banking system collapse, overwhelmed by bad debts and slashed asset values. In such a situation, account holders’ money would not lose its value gradually. It could all disappear overnight.

The inflation we need cannot be generated with debt-based money as it was in 1973 because in today’s circumstances that would increase debts more rapidly than it raised incomes. As Graph 4 shows, each $100 borrowed in 2006-7 in the US only increased incomes by around $30 whereas in 1973, the return was higher and the level of debt the country was carrying in relation to its income was about half what it is today. The same applies to most other OECD countries; their public and private sectors are already struggling with too much debt and do not wish to take on more.

The solution is to have central banks create money out of nothing and to give it to their governments either to spend into use, or to pay off their debts, or give to their people to spend. In the eurozone, this would mean that the European Central Bank would give governments debt-free euros according to the size of their populations. The governments would decide what to do with these funds. If they were borrowing to make up a budget deficit — and all 16 of them were in mid-2010, the smallest deficit being Luxembourg’s at 4.2% — they would use part of the ECB money to stop having to borrow.

They would give the balance to their people on an equal-per-capita basis so that they could reduce their debts, or not incur new ones, because private indebtedness needs to be reduced too. If someone was not in debt, they would get their money anyway as compensation for the loss they were likely to suffer in the real value of their money-denominated savings. Without this, the scheme would be very unpopular. The ECB could issue new money in this way each quarter until the overall, public and private, debt in the eurozone had been brought sufficiently down for employment to be restored to a satisfactory level.

The former Irish Green Party senator, Deirdre de Burca, has improved on this idea. She points out that (1) we don’t want to restore the economy that has just crashed and (2) that politicians don’t like giving away money for nothing. Her suggestion is that the money being given to ordinary citizens should not just be lodged in their bank accounts but should be sent to them as special credits which could only be used either to pay off debt or, if all their debts were cleared, to be invested in projects linked to the achievement of an ultra-low-carbon Europe. These could range from improving the energy-efficiency of one’s house to investing in an offshore wind farm or a community district heating system.

Creating money to induce an inflation may seem rather odd to those who advocate buying gold because they fear that all the debt-based money that has been created recently by quantitative easing will prove inflationary by itself. What they have failed to recognise is that most of the money they are worried about is in the stratosphere and has very few ways of leaking down. It is in the accounts of financial institutions and provides the liquidity for their trading. The only way it can reach people who will actually spend it rather than investing it again is if it is given out as loans but, as we saw, that is not happening. Even paying it out to an institution’s staff as wages and bonuses won’t work too well as most are already spending as much as they can and would use any extra to buy more assets, thus keeping it stratospheric.

A common argument against using inflation to reduce debts is bound to be trotted out in response to this idea. It is that, if an inflation is expected, lenders simply increase their interest rates by the amount they expect their money to fall in value during the period of the loan, thus preventing the inflation reducing the debt burden. However, the argument assumes that new loans would still be needed to the same extent once the debt-free money creation process had started. I think that is incorrect. Less lending would be needed, the investors’ bargaining position would be very weak and interest rates should stay down. Incomes, on the other hand, would rise. As a result, if the debtors continued to devote the same proportion of their incomes to paying off any new or remaining loans, they would be free of debt much more quickly.

3. The end of debt-based money

Output in today’s economy gets a massive boost from the high level of energy use. If less and less energy is going to be available in future, the average amount each person will be able to produce will decline and real incomes will fall. These shrinking incomes will make debts progressively harder to repay, creating a reluctance both to lend and to borrow. For a few years into the energy decline, the money supply will contract as previous years’ debts are paid off more rapidly than new ones are taken on, destroying the money the old debts created when they were issued. This will make it increasingly difficult for businesses to trade and to pay employees. Firms will also have more problems paying taxes and servicing their debts. Bad debts and bankruptcies will abound and the money economy will break down.

Governments will try to head the breakdown off with the tool they used during the current credit crunch — producing money out of nothing by quantitative easing. So far, the QE money they have released, which could have been distributed debt-free, has been lent to the banks at very low interest rates in the hope that they will resume lending to the real economy. This is not happening on any scale because of the high degree of uncertainty — is there any part of that economy in which people can invest borrowed money and be sure of being able to pay it back?

Some better way of getting non-debt money into the real economy is going to have to be found. In designing such a system, the first question that needs to be asked is “Are governments the right people to create it?” The value of any currency, even those backed by gold or some other commodity, is created by its users. This is because I will only agree to accept money from you if I know that someone else will accept it from me. The more people who will accept that money and the wider range of goods and services they will provide in return, the more useful and acceptable it is. If a government and its agencies accept it, that increases its value a lot.

As the users give a money its value, it follows that it should be issued to them and the money system run on their behalf. The government would be an important user but the currency should not be run entirely in its interest, even though it will naturally claim to be acting on behalf of society, and thus the users, as a whole. Past experience with government-issued currencies is not encouraging because money-creation-and-spend has always seemed politically preferable to tax-and-spend and some spectacular inflations that have undermined a currency’s usefulness have been the result. At the very least, an independent currency authority would need to be set up to determine how much money a government should be allowed to create and spend into circulation from month to month and, in that case, the commission’s terms of reference could easily include a clause to the effect that it had to consider the interests of all the users in taking its decisions.

This raises two more design questions. The first is “Should the government benefit from all the seignorage, the gain that comes from putting additional money into circulation, or should it be shared on some basis amongst all the users?” and the second is “Should the new money circulate throughout the whole national territory or would it be better to have a number of regional systems?” I am agnostic about the seignorage gains. My answer depends on the circumstances. If the new money is being issued to run in parallel with an existing currency, giving some of the gains to reward users who have helped to develop the system by increasing their turnover could be an important tool during the set-up process. On the other hand, if the new money was being issued to replace a collapsed debt-based system, giving units to users on the basis of their previous debt-money turnover would just bolster the position of the better off. It would be better to allow the state to have all the new units to spend into use in a more socially targeted way.

A more definite answer can be given to the second question. Different parts of every country are going to fare quite differently as energy use declines. Some will be able to use their local energy resources to maintain a level of prosperity while others will find they have few energy sources of their own and that the cost of buying their energy in from outside leaves them impoverished. If both types of region are harnessed to the same money, the poorer ones will find themselves unable to devalue to improve their exports and lower their imports. Their poverty will persist, just as it has done in Eastern Germany where the problems created by the political decision to scrap the ostmark and deny the East Germans the flexibility they needed to align their economy with the western one has left scars to this day.

If regional currencies had been in operation in Britain in the 1980s when London boomed while the North of England’s economy suffered after the closure of its coal mines and most of its heavy industries, then the North-South gap which developed might have been prevented. The North of England pound could have been allowed to fall in value compared with the London one, saving many of the businesses that were forced to close. Similarly, had Ireland introduced regional currencies during the brief period it had monetary sovereignty, a Connacht punt would have created more business opportunities west of the Shannon if it had had a lower value than its Leinster counterpart.

Non-debt currencies should not therefore be planned on a national basis or, worse, a multinational one like the euro. The EU recognises 271 regions, each with a population of between 800,000 and 3 million, in its 27 member states. If all these had their own currency, the island of Ireland would have three and Britain 36, each of which could have a floating exchange rate with a common European reference currency and thus with each other. If it was thought desirable for the euro to continue so that it could act as a reference currency for all the regional ones, its independent currency authority could be the ECB. In this case, the euro would cease to be the single currency. It would simply be a shared one instead.

The advantages from the regional currencies would be huge:

  1. As each currency would be created by its users rather than having to be earned or borrowed in from outside, there should always be sufficient liquidity for a high level of trading to go on within that region. This would dilute the effects of monetary problems elsewhere.
  2. Regional trade would be favoured because the money required for it would be easier to obtain. A strong, integrated regional economy would develop, thus building the region’s resilience to shocks from outside.
  3. As the amount of regional trade grew, seignorage would provide the regional authority with additional spending power. Ideally, this would be used for capital projects.
  4. The debt levels in the region would be lower, giving it a lower cost structure, as much of the money it used would be created debt free.

In addition to the regional currencies, we can also expect user-created currencies to be set up more locally to provide a way for people to exchange their time, human energy, skills and other resources without having to earn their regional currency first. One of the best-known and most successful models is Ithaca Hours, a pioneering money system set up by Paul Glover in Ithaca, New York, in 1991 in response to the recession at that time. Ithaca Hours is mainly a non-debt currency since most of its paper money is given or earned into circulation but some small zero-interest business loans are also made. A committee controls the amount of money going into use. At present, new entrants pay $10 to join and have an advertisement appear in the system’s directory. They are also given two one-Hour notes – each Hour is normally accepted as being equivalent to $10 – and are paid more when they renew their membership each year as a reward for their continued support. The system has about 900 members and about 100,000 Hours in circulation, a far cry from the days when thousands of individuals and over 500 businesses participated. Its decline dates from Glover’s departure for Philadelphia in 2005, a move which cost the system its full-time development worker.

Hours has no mechanism for taking money out of use should the volume of trading fall, nor can it reward its most active members for helping to build the system up. It would have to track all transactions for that to be possible and that would require it to abandon its paper notes and go electronic. The result would be something very similar to the Liquidity Network system that Graham Barnes describes in the next article.

New variants of another type of user-created currency, the Local Exchange and Trading System (LETS) started by Michael Linton in the Comox Valley in British Columbia in the early 1990s, are likely to be launched. Hundreds of LETS were set up around the world because of the recession at that time but unfortunately, most of the start-ups collapsed after about two years. This was because of a defect in their design: they were based on debt but, unlike the present money system, had no mechanism for controlling the amount of debt members took on or for ensuring that debts were repaid within an agreed time. Any new LETS-type systems that emerge are likely to be web based and thus better able to control the debts their members take on. As these debts will be for very short periods, they should not be incompatible with a shrinking national economy.

Complementary currencies have been used to good effect in times of economic turmoil in the past. Some worked so well in the US in the 1930s that Professor Russell Sprague of Harvard University advised President Roosevelt to close them down because the American monetary system was being “democratized out of [the government’s] hands.” The same thing happened to currencies spent into circulation by provincial governments in Argentina in 2001 when the peso got very scarce because a lot of money was being taken out of the country. These monies made up around 20% of the money supply at their peak and prevented a great deal of hardship but they were withdrawn in mid-2003 for two main reasons. One was pressure from the IMF, which felt that Argentina would be unable to control its money supply and hence its exchange rate and rate of inflation if the provinces continued to issue their own monies. The other, more powerful, reason was that the federal government felt that the currencies gave the provinces too much autonomy and might even lead to the break-up of the country.

4. New ways to borrow and finance

The regional monies mentioned above will not be backed by anything since a promise to pay something specific in exchange for them implies a debt. Moreover, if promises are given, someone has to stand over them and that means that whoever does so not only has to control the currency’s issue but also has to have the resources to make good the promise should that be required. In other words, the promiser would have to play the role that the banks currently perform with debt-based money. Such backed monies would not therefore spread financial power. Instead, they could lead to its concentration.

Even so, some future types of currency will be backed by promises. Some may promise to deliver real things, like kilowatt hours of electricity, just as the pound sterling and the US dollar were once backed by promises to deliver gold. Others may be bonds backed by entitlements to a share an income stream, rather than a share of profits, as Chris Cook describes in his article in this book. Both these types of money will be used for saving rather than buying and selling. People will buy them with their regional currency and either hold them until maturity if they are bonds, or sell them for regional money at whatever the exchange rate happens to be when they need to spend.

These savings currencies could work like this. Suppose a community wanted to set up an energy supply company (ESCo) to install and run a combined heat and power plant supplying hot water for central heating and electricity to its local area. The regional currency required to purchase the equipment could be raised by selling energy “bonds” which promise to pay the bearer the price of a specific number of kWh on the day they mature. For example, someone could buy a bond worth whatever the price of 10,000 kWh was when that bond matured in five years. The money to redeem that bond would come from the payments made by people buying energy from the plant in its fifth year. The ESCo would also offer other bonds with different maturity dates and, as they were gradually redeemed, those buying power from the ESCo would, in fact, be taking ownership of the ESCo themselves.

These energy bonds will probably be issued in large denominations for sale to purchasers both inside and outside the community and will not circulate as money. However, once the ESCo is supplying power, the managing committee could turn it into a bank. It could issue notes for, say, 50 and 100 kWh which locals could use for buying and selling, secure in the knowledge that the note had real value as it could always be used to pay their energy bills. Then, once its notes had gained acceptance, the ESCo could open accounts for people so that the full range of money-moving services was available to those using the energy-backed units. An ESCo would be unlikely to do this, though, if people were happy with the way their regional currency was being run. Only if the regional unit was rapidly losing its value in energy terms would its users migrate to one which was not.


Up to now, those who allocated a society’s money supply by determining who could borrow, for what and how much determined what got done. In the future, that role will pass to those who supply its energy. Only this group will have, quite literally, the power to do anything. Money once bought energy. Now energy, or at least an entitlement to it, will actually be money and energy firms may become the new banks in the way I outlined. This makes it particularly important that communities develop their own energy supplies, and that if banks issuing energy-backed money do develop, they are community owned.

As energy gets scarcer, its cost in terms of the length of time we have to work to buy a kilowatt-hour, or its equivalent, is going to increase. Looked at the other way round, energy is cheaper today than it is ever likely to be again in terms of what we have to give up to get it. We must therefore ensure that, in our communities and elsewhere, the energy-intensive projects required to provide the essentials of life in an energy-scarce world are carried out now. If they are not, their real cost will go up and they may never be done.

Working examples of both backed and unbacked forms of modern regional and community monies are needed urgently. Until there is at least one example of a non-debt currency other than gold working well somewhere in the world, governments will cling to the hope that increasingly unstable national and multinational debt-based currencies will retain their value and their efforts to ensure that they do will blight millions of lives.

Moreover, without equitable, locally and regionally controllable monetary alternatives to provide flexibility, the inevitable transition to a lower-energy economy will be extraordinarily painful for thousands of ordinary communities, and millions of ordinary people. Indeed, their transitions will almost certainly come about as a result of a chaotic collapse rather than a managed descent and the levels of energy use that they are able to sustain afterwards will be greatly reduced. Their output will therefore be low and may be insufficient to allow everyone to survive. A total reconstruction of our money-issuing and financing systems is therefore a sine qua non if we are to escape Vesuvius’ flames.


  1. Petrodollar Warfare: Oil, Iraq and the Future of the Dollar, William R. Clark, New Society Publishers, British Columbia, 2005. p31. See http://books.google.com
  2. Qiao Liang and Wang Xiangsui, both colonels in the Chinese army, wrote a book, Unrestricted Warfare, which appeared on the Internet in English 1999 about strategies China could use to defeat a technologically superior opponent such as the United States through a variety of means including currency manipulation. Extracts from the book can be found at http://www.cryptome.org/cuw.htm
  3. Debt Crisis in the Third World, by Yanhui Zhang, 2003.
    See http://www.grin.com/e-book/39036/debt-crisis-in-the-third-world

Featured image: Stone money of Uap, Western Caroline Islands Source: Wikimedia Commons