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Why Our Distributism Debates Are Not Exercises in Romanticism

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While there is some justice to the observation that Chesterton romanticized the medieval peasantry - though even this observation can be, and has been, overstated - the notion that economic decentralization and its logical correlate, political decentralization, (whether one wishes to refer to this as old-fashioned American federalism, or, more philosophically, subsidiarity) are exercises in wild-eyed, Jacobinical romanticism is - to put a blunt point on the matter - nonsensical. While I've scant interest in unfolding a lengthy disquisition on the inviability of proposed energy alternatives, suffice it to state that the beginning of the end of the Era of Cheap Energy, with all that cheap energy has made possible, is nigh upon us, if it has not yet dawned. Globalization itself, though it manifestly presupposes cheap energy, promises a steady increase in the costs of energy, and has already occasioned the weakening of Big Oil as a geopolitical force; declining reserves, and the strategic nature of such resources, have precipitated a renewed movement to declare such resources 'strategic', and to shepherd them as forms of sovereign wealth, as opposed to commodities to be auctioned off to multinationals. Even, that is to state, if Peak Oil has not yet come to pass - though it must, in time, if it has not already - there will be exerted a steady upward pressure on energy prices; recessions may develop, but the economies of the world are predicated upon ceaseless expansion, meaning that anything necessary will be undertaken to stimulate Growth, that god of the age. And Growth demands energy; and energy is finite, and certainly only renewable at levels far below the plenitude to which we have become accustomed, and on the presupposition of which our societies constructed.

Herewith, therefore, James Kunstler on the absurdity of our growth-economy and its consequences:

A reader sent me a passle of recent clippings last week from the Atlanta Journal-Constitution. It contained one story after another about the perceived need to build more highways in order to maintain "economic growth" (and incidentally about the "foolishness" of public transit). I understood that to mean the need to keep the suburban development system going, since that has been the real main source of the Sunbelt's prosperity the past 60-odd years. They cannot imagine an economy that is based on anything besides new subdivisions, freeway extensions, new car sales, and Nascar spectacles. The Sunbelt, therefore, will be ground-zero for all the disappointment emanating from this cultural disaster, and probably also ground-zero for the political mischief that will ensue from lost fortunes and crushed hopes.

Continuing with a series of practical measures, Kunstler writes:

Stop all highway-building altogether. Instead, direct public money into repairing railroad rights-of-way. Put together public-private partnerships for running passenger rail between American cities and towns in between. If Amtrak is unacceptable, get rid of it and set up a new management system. At the same time, begin planning comprehensive regional light-rail and streetcar operations.

End subsidies to agribusiness and instead direct dollar support to small-scale farmers, using the existing regional networks of organic farming associations to target the aid. (This includes ending subsidies for the ethanol program.)

Kunstler's policy programme continues in this vein, encompassing the reforms of town planning, education, and the nation's economic architecture - all of which will be eminently necessary once a certain critical threshold of the depletion of energy resources has been surpassed. All the more reason to contemplate the requisite decentralist solutions presently. Additionally, Americans, he writes, would be well-counseled to "prepare psychologically for a sociopolitical climate of anger, grievance, and resentment." When people suddenly find themselves deprived of the material abundance they have presumed to be a birthright - and more than that, a feature of nature itself in operation - they will be quite disturbed, and disturbing. All the more reason...

And the significance of all of this for distributism as a way of thinking about political economy? Simply that a world of enormous unaccountable conglomerates will no longer be feasible once the implications of energy scarcity are assimilated; more localized, small-scale ownership and production will be our principal recourse once the present economic architecture suffers the loss of its material preconditions.

Comments (26)

I largely agree and in fact, this is music to my ears.

Devil's Advocate question - what would you say to the techno-topians who would argue that when oil becomes scarce enough and hence, expensive, there would hence be a market incentive to find a replacement energy source. Thus, the world will continue on without going through an "energy diet".

For what its worth, we have known, untapped, oil reserves in America more than 30x larger than all the oil we have used to date.

To elaborate briefly on my previous post, by tapping ANWR, by going to off shore drilling, and by implementing horizontal drilling technologies, we are nowhere near the end of the known oil reserves already available to us. Couple that with future oil deposit discoveries and with technological breakthroughs in refining and in extraction, the scenario you paint is simply false. Your fears are perhaps 300 years premature. Even if they were not, it hardly means that Chesterton's views aren't hopelessly romantic.

"Your fears are perhaps 300 years premature."

Bold statements. Do you have cite for that?

In response to the Devil's Advocate question, I'd suggest that the futurists and techno-utopians are misguided, inasmuch as they ignore the phenomenon of path dependence: we have invested trillions of dollars in an infrastructure which sustains our way of life; any analogous systems predicated upon the widespread availability of alternatives - of which there really aren't any - would cost trillions of dollars to construct; and the transition costs beyond the costs involved in the construction of hypothetical alternatives, namely, the sheer inertia of entrenched interests and patterns of living, are also astronomical. What typically occurs in such instances is that the increase in prices stimulates the development of ever-more-costly technologies for the extraction and exploitation of a dwindling resource; there is also a psychological aspect inherent in the social dynamics - entire societies may be desirous of change in the abstract, but change as a concrete phenomenon is somewhat numinous and disconcerting, and so is deferred by reliance on intensive exploitation of what little remains.

This dynamic is evident in the depletion of certain fish stocks, particularly larger, slower-maturing fish such as tuna; the increase in market values stimulated the development of what amount to industrial harvesting techniques, with aerial spotters and smaller craft employed to corral the fish. The entire process would be better suited to driving the creatures to extinction than to preserving them as integral elements of an ecosystem. Something analogous, absent deliberative action on the part of representative institutions, would occur in the energy sector, inasmuch as the monetary investments and rewards are that much greater, by several (dozen) orders of magnitude. No, it is more likely that wars will be fought over dwindling petroleum reserves than that alternatives will magically appear once the price reaches a certain level.

Most of the proven oil reserves of the United States are in the form of shale, the extraction of which is not merely energy intensive (read: low outputs relative to given input levels), but requires environmentally scarifying extraction procedures. Even were the decision made to tap these resources, globalization would ensure that three-hundred years proved overly optimistic; not only do other nations lack this form of potential petroleum, but unless we intend to construct a literal fortress America, those resources will be sold on world markets, with demand from both the developed world and the developing world burgeoning. We can perhaps modulate somewhat the timing of the scenarios, but we cannot forestall them completely.

Michael, I am glad to see someone other than me saying this about ANWR. I just usually don't have the guts to say it in public. Frankly, it has annoyed me for a long time to see people talking, even in rather a high-toned and alarmed fashion, about the inevitability of severe oil shortage, or the security risk of not going to wind power and other "green" ideas, because of our dependency on Saudi Arabia, or whatever, when one knows perfectly well that at least some of these same people oppose our--i.e., the U.S.'s--making anywhere near full use of the oil that is available to us in without any begging from our enemies. And if Mr. Kunstler is going to be our New Chesterton, you can count me out, that's for sure.

In general I have to say I am quite sympathetic to the moral argument for distributism (which - distributism - I don't really understand yet concretely enough to have much to say about it, but I just received a copy of Business as a Vocation - thanks for the recommendation Maximos! - so it will be interesting to learn more). I am a lot less interested in it as a response to a Malthusian theory of energy, since such prognostications about physical possibility in a context of Providence are notoriously dicey. It isn't that I believe that global warming or peak oil or whatever definitely will not precipitate a civilizational crisis; it is just that, well, frankly I don't think any human being has ever accurately predicted and prepared for such a thing and I have little expectation that some kind of exceptionalism applies now on either the prediction or the preparation.

Or, in the more succinct words of the Prophet Zevon:

And if California falls into the ocean,
Like the mystics and statistics say it will,
I believe this hotel will be standing,
Until I pay my bill.

Whether or not ANWR should be tapped, a more intensive exploitation of American petroleum reserves will play out in one of two ways. Either the oil and its derivatives will be sold on the world market, at the market prices, in which case the additional American supply will be insufficient to reduce prices to the levels considered optimal for the perpetuation of the status quo, or America, striving to develop some degree of independence from other world producers, will implement de facto sovereign wealth policies, of the sort Americans now decry in nations such as Russia: American production will be oriented towards American market requirements, necessitating an expanded political role in the management of the industry. Americans will expend phenomenal amounts of intellectual capital endeavouring to perpetuate the status quo, to keep the happy motoring paradise running, and a dose of suitably Americanized Putinism might prove to be one of the user fees.

I am a lot less interested in it as a response to a Malthusian theory of energy, since such prognostications about physical possibility in a context of Providence are notoriously dicey.

Well, yes. Such thoughts are always in the forefront of my consciousness when I read Kunstler; but I'm dubious that Providence has ordained another three centuries of petroleum abundance. Providence may well ordain a rather softer descent than Kunstler's prognostications would indicate; even so, it is virtually inconceivable that means could be found to ensure billions of people in the developing world the potentialities of the Western lifestyle.

"For what its worth, we have known, untapped, oil reserves in America more than 30x larger than all the oil we have used to date."

Sure about that? Below is an article that quotes the Energy Dept contradicting your claim.

Please cite your source. Here's mine;

WASHINGTON - Opening an Alaska wildlife refuge to oil development would only slightly reduce America’s dependence on imports and would lower oil prices by less than 50 cents a barrel, according to an analysis released Tuesday by the Energy Department.

The report, issued by the Energy Information Administration, or EIA, said that if Congress gave the go-ahead to pump oil from Alaska’s Arctic National Wildlife Refuge, the crude could begin flowing by 2013 and reach a peak of 876,000 barrels a day by 2025.

But even at peak production, the EIA analysis said, the United States would still have to import two-thirds of its oil, as opposed to an expected 70 percent if the refuge’s oil remained off the market.

I would also like to know Michael's source for his claim. Most estimates online predict anywhere from ten to twenty years for (relatively) cheap oil, twenty to thirty years of very expensive oil, and then market collapse.

It's really hard to believe that supply will continue to meet demand when the International Energy Agency says otherwise. Here's the source;

Fatih Birol, chief economist of the IEA, said at a press conference in Vienna, he believed that the current output in the oil producing countries was insufficient and could not meet the demand of the international oil market. At the same time, he urged the consuming countries to take effective measures to restrain oil consumption.

"[I]t is virtually inconceivable that means could be found to ensure billions of people in the developing world the potentialities of the Western lifestyle."

Surely such matters can't be decided a priori. The lifestyle of the Western world itself would have been "inconceivable" two hundred years ago, simply because people couldn't have conceived a priori of what has now been invented. The Internet was practically inconceivable when I was a child. So, I mean, that's just the wrong way to argue about the issue. At least Kevin and Step2's approach is an empirical approach to an empirical question. One on which I'm not competent to pronounce decisively, by the way, except to say that perhaps we should at least _try_ developing our own energy resources more fully, undeterred by environmentalists. I might also ask whether the IEA is as neutral a source of info as might be hoped.

A priori? It is a matter of empirical fact that proven oil reserves are insufficient to enable billions of present third-world citizens to enjoy the Western lifestyle of relentless mobility, that there is not enough land to support the livestock required to provide them with the protein-heavy Western diet, even if we did the unthinkable and destroyed the remaining rainforests, that there is - similarly - not enough land for the replication of American-style suburban sprawl, and so forth. I do wish that in discussions of this nature, interlocutors would adhere to what is presently known, instead of invoking the quasi- or pseudo-religious notion of inventiveness; too often, such invocations are intended to foreclose upon discussions that are in fact imperative, and amount to a sort of secular faith that "something will turn up." They are too often the sociological analogue of the temptation, "Cast yourself down to the earth, for will not a thousand angels bear you up?"

Scarcity is real, because finitude is real.

"I might also ask whether the IEA is as neutral a source of info as might be hoped."

Lydia, the International Energy Agency came into being after the '73 oil crisis and is the West's attempt to have a reliable resource and counter-point to OPEC's claims and policies. The organization is a recent, albeit cautious arrival to the the Peak Oil Theory. Read their material and it is impossible to take the assurances from Don't Worry School of Perpetual Growth and Good Times too seriously.

Kunstler and Matt Simmons deserve credit for forcing a public discussion that until now, has only been whispered within the corridors of Washington, Wall Street and the Oil Patch. My biggest reservation is that Kunstler often seems excited for his prophecy to be fulfilled and allows survivor bias to creep into work. Not so for Simmons.

Maximos is right to explore the Chestertonian possibilities that come with a radical alteration in the American Way of Life. Hopefully our spiritual reserves are much larger than those of oil.

I do wish that in discussions of this nature, interlocutors would adhere to what is presently known, ...

That isn't really a settled matter for me though. Although it is true that resources are finite, I don't know that we face a Malthusian energy crisis in the near term. Perhaps (in all seriousness) I am simply ignorant about the matter.

I'm not an energy analyst -- indeed I never directly invest in commodities at all, because it isn't an investment class I understand particularly well. But if peak oil were true there would be phenomenal money to be made on long term energy futures, I would think. And some significant number of people would be doing it, simply because they can. Denial is extraordinarily expensive, and there are always significant numbers of people who are unwilling to pay for it. The market is a dubious thing as a moral matter, and it is a long way from ideally efficient; but it is tremendously effective at stamping out denial, since he who stamps out denial makes huge piles of cash.

That doesn't mean I think the peak oil theory is necessarily wrong. But if it isn't wrong, it is a puzzle why it isn't priced into the market.

And if both are true -- it isn't wrong and it isn't priced into the market yet - then I can become a trillionaire by making the right arbitrage moves in energy. That way I'll at least be in a position to annoint whomever is to become king after the energy apocolypse (it won't be me).

So it is an interesting question however you slice it.

This "protein-rich" diet enjoyed by Westerners only is a myth. Lentils can supply all the protein a man can want.

That doesn't mean I think the peak oil theory is necessarily wrong. But if it isn't wrong, it is a puzzle why it isn't priced into the market.

Hindsight is always 20/20, and foresight... isn't. $90 has over the few months come to seem relatively cheap for a barrel of oil. That peak oil will hit is an undeniable fact. When it will hit is another story. Complicating matters is that when supply can no longer keep up with demand, economic growth will suffer, and with it demand. E.g., there will be short term and potentially wild fluctuations in the price of the commodity. We know that oil will be $200 and someday $500 a barrel. But in the mean time it could also bottom out at $50... or $40... or is that $20??? And with all that, what will happen to the dollar, or gold?

So there is little doubt that peak oil is priced in; just as angry Nigerians are priced in, and doubtfulness about Saudi supply claims. The problem is, no one REALLY knows what those premiums should be... just like every other market governed by imperfect knowledge.

Higher commodity and energy prices are a welcome corrective to the unbalanced international economy where heretofore much of the effort and the rewards, such as there are have gone to the purveyors of electronic gizmos, pointless entertainment and the so-called 'knowledge' workers. With higher food and fuel prices people will realise that they can't live on iPods and the latest songs. Countless suckers including myself were taken in with all the talk of a 'weightless world' and 'rational exuberance'. There will now be less time for such solipsisms as we'll be quite busy comparing petrol prices and checking out the bargains at the vegetable markets.

Presently light sweet crude from Saudi Arabia has ~$5/bbl extraction cost. Heavy oil like that in large parts of Venezuela is ~$45/bbl. Oil Shales, tars, and such are right around $70-90/bbl. There is an extraction premium presently in the market. If we removed risk premiums, it seems analysts believe we should be near $40/bbl. It would seem to me that there is a demand premium priced into the market and a rather steep one at that. The Saudi, Mexican, and Russian oil fields appear to be in a steady decline at this point. They aren't going to run soon, but their production can't be expanded due to geophysics that I don't fully understand and can't really expound upon.

As for peak oil itself, yes we do have alternatives; they just aren't better alternatives. If they were, we'd be using them. As far as relatively non toxic, relatively non hazardous, highly mobile energy extraction capabilities go, oil is it. Batteries seem to be where the most development is underway, but they have a very poor energy to weight ratio.

When it will hit is another story. Complicating matters is that when supply can no longer keep up with demand, economic growth will suffer, and with it demand. E.g., there will be short term and potentially wild fluctuations in the price of the commodity.

The thing is, though, if I am sure something that the market at large doesn't yet understand is going to happen I can structure a financial instrument to bet on exactly that. Don't know the exact timing? Hedge that out of the structure: obviously this is a mid- to long-term play. Expect volatility? Factor that in with optioning so that you make money not just on the long term trend but also on the volatility itself. (Options will be underpriced if there will be volatility that the market hasn't priced in, so you can buy up both the upside and the downside and make a pile of money with a kind of "reverse collar").

You can bet on almost anything - and factor out the things you don't want to bet on - with a properly structured financial instrument.

Maybe some of the global macro hedge funds have put this kind of thing together, and I am simply unaware of it. It wouldn't be the first time, believe me. But if peak oil is true and happening now, and it isn't already priced into the markets (it certainly doesn't seem to be), then somebody can make an unprecedented amount of money by betting on it. It would represent among ther things a way to build a 'war chest' for the post-peak-oil future. Of course if it turns out to be wrong (say the 'peak oil' prediction has a horizon of 40 years, which means we'll start seeing the market begin to price it in in ten or so) -- and it never happens -- then money will be lost, not gained.

Speaking of betting, I almost wish I didn't have a conscientious problem with betting directly with friends on events, or I would try to get a concrete prediction about some specific dire thing that will happen by 2020 from some of the doom-sayers and then (probably) be able to crow a bit and win a cup of coffee when it doesn't.

One of the few good things I can find to say about Kunstler's article is that at least he doesn't faint away at the thought of nuclear energy. I've always thought that option should be taken more seriously, and I've thought it more and more often since moving from Washington State, where I had cheap, hydro-provided electricity (from an Evil Anti-Environmental Dam on, I believe, the Snake River) to the Midwest, where I have very expensive electricity that apparently is generated by burning stuff like oil and coal.

...I almost wish I didn't have a conscientious problem with betting directly with friends on events...

I suppose I should clarify that by "bet" I mean "buy contracts or other assets which will increase in value if it is true". :-)

Talk of decentralization and localism strikes me as romantic, not so much because of my confidence in the continued flow of cheap oil, but because it goes against a centuries-long trend of consolidation and centralization that long predates the widespread exploitation of fossil fuels. This was a process driven by war, favoring efficient resource utilization over constitutional niceties such as either the Tenth Amendment or the Aragonese fueros that impeded it. War, not oil, made the state, so that the state could make war. Losers were those states that were either too small or too decentralized to compete. Even if oil disappeared tomorrow, there would still be there would still be coal to power ships and trains, and canals, rivers and railroad tracks. And there would still be this myth of democracy, that conceives of state and society as a unity, and electricity to run the apparatus of surveillance and communication that, more than mere fuel, holds it all together. We might lose our cars and be forced to move into high rises, but be worse off in the bargain.

Wouldn't that be wild-eyed Jacobitical romanticism? Although GKC did seem to go in for both types, oddly.

What on earth is wrong with wild-eyed Jacobitical romanticism, anyway?

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