common feature of the transformative technologies of the 20th and
21st centuries is that they were one-offs that cannot be duplicated.
What if the
engines of global growth that worked for 65 years (since 1945) have
not just stalled but broken down? The primary "engines"
have been productivity gains from industrialization, real estate
development and expansion of consumption based on the continual
expansion of debt and leverage--in short-hand, financialization.
The Status Quo around
the globe has responded to the obvious endgame of financialization
(the 2008 financial crisis) by doing more of what has
failed: expanding credit and leverage, flooding the global
economy with liquidity (money available for borrowing), credits and
subsidies for real estate development and a near-religious belief in
"the next industrial revolution" that will spark rapid
growth in employment, profits and productivity.
"The usual suspects"
for the next engine of growth include nanotechnology, biotechnology,
unconventional energy and Digital Fabrication, i.e. 3-D printing and
desktop foundries. But are any of these capable of not just replacing
jobs and revenues in existing industries, but creating more jobs and
expanding revenues and profits?
There is a growing
literature on this very topic, as many start questioning the
quasi-religious faith that there will "always" be another
driver of growth, i.e. the expansion of wealth, profit, employment
The Status Quo dares not
even entertain this question because the only way to service the
fast-rising mountain of debt that is sustaining the Status Quo is to
"grow our way out of debt," i.e. expand the real economy
faster than debt.
The past 250 years has
been one long "proof" that we can indeed "grow our way
out of debt" because the low-hanging fruit of industrialization
and cheap, abundant energy enabled wealth to be created at a faster
pace than debt.
Clueless Keynesians mock
those questioning the possibility that the low-hanging fruit has been
plucked by noting that doomsdayers were actively decrying the
ballooning debt of the British Empire in the mid-1700s. We all know
how that story ended: what looked like crushingly massive debt in
1780 was reduced to a trivial sum by the rapid expansion of
But suppose the end of
cheap, abundant energy (replaced by abundant, costly energy) and the
Internet spells the end of centralized models of growth? What if all
the innovation currently bubbling away only produces marginal
Take biotechnology for
example. Those with little actual knowledge of biotech are quick to
latch onto the potential for genetic engineered medications,
biofuels, etc. What they don't ask is if these technologies can scale
up while costs decline, i.e. the computer technology model where
everything progressively gets cheaper and more powerful.
Biofuels may have
promise, but it still takes "old fashioned" energy to
collect the feedstock, and it is a non-trivial task to keep
micro-organisms alive on the scale that would be needed to produce a
useful amount of liquid fuels, i.e. a few million barrels every day.
Some processes may not scale up, and others may not see any
significant reduction in fuel costs once the full input costs are
Genetic engineering also
may not scale up--it may be limited by key barriers of individual
patient complexity and by intrinsic costs that do not drop enough to
make a difference.
Consider the diseases
that have almost been eradicated--polio, for example--and the
lifestyle diseases such as diabesity. The wave of diseases
that were eradicated were caused by bacteria or viruses: a vaccine or
agent that disabled or killed the bacteria/virus wiped out the
Diabesity, cancer and
heart disease are not caused by a single virus or bacteria. The "one
med/vaccine works for all" model has failed and will always fail
because diabesity and other lifestyle diseases have multiple,
non-linear causes that are beyond the reach of a single "solution."
These diseases may well be tied to epigenetic factors, for example,
the interaction of "junk DNA" with environmental stresses
that extend back into the individual genome.
What we face is the
confusion of symptoms and effects with causes. Lowering
cholesterol is not the "magic bullet" many hoped for, and
neither was hormone therapy.
In the technology sector,
it is clear that the Internet is destroying entire sectors of
employment. The jobs that have been lost for good have not been
replaced by jobs created by the Internet, nor is there any credible
evidence to support this hope: automated software continues chewing
up one industry after another, and the politically protected fiefdoms
of healthcare (sickcare), education and government have yet to taste
the whip of real innovation.
Rather than add jobs, we
will lose tens of millions of jobs as faster-better-cheaper breaches
the walls of these massive politically protected fiefdoms.
Healthcare spending is
clearly in terminal marginal return: our collective health
continues to decline in key metrics even as spending doubles, triples
and quadruples. The same can be said of defense, education and many
Sectors such as
agriculture have already seen employment decline by 98% even as
production rose; there are still improvements in agriculture (robotic
milking machine, for example) but the low-hanging fruit in
agriculture as well as in medicine, education, etc. have all been
The next wave of
innovation will destroy protected profit centers and employment; even
the Armed Forces are not immune, as the "ships of the future"
will have relatively small crews and robotic drones will replace
high-cost, high-employment weapons systems.
The semi-magical belief
that technological innovation will create wealth in such quantities
that all other problems become solvable may well be false. We may
have entered an era of marginal returns, where innovations destroy
jobs, wealth, assets and debt--the very foundations of "growth."
I have begun to speculate
about a future where energy might be abundant but few can afford to
consume much: money and income may be scarcer than energy.
The one innovation that
might energize an entirely new field of employment is digital
fabrication, the decentralization and distribution of production. But
this will also creatively destroy jobs dependent on the present
National governments have
over-promised entitlements to their citizens on a vast scale, and the
current "solution" to the mismatch of promises to national
surplus is to borrow monumental sums to fund the promises. If
innovations actually shrinks employment, incomes and wealth, then the
base for taxes and debt will quickly shrink to the point that the
debt is unserviceable. The Status Quo will collapse financially, even
if energy and labor are both abundant.
OF GROWTH - six headwinds:demography,
education, inequality, globalization, energy/environment, and the
overhang of consumer and government debt.(via
The point made in this
lengthy essay is a powerful one: the common feature of the
transformative technologies of the 20th and 21st centuries is that
they could only happen once. They are one-offs that cannot be
duplicated. Doing more of what has failed will only set up a grander
failure as returns on all our debt-based "investments"
become ever more marginal and the return on increasing complexity
drops into negative territory. Once complexity yields negative
returns, the systems that depend on complexity quickly destabilize