Predictions Are Always Risky

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L. Hunter Lovins
President, Natural Capitalism Solutions
SEED Fellow, Regis University

The great physicist Neils Bohr is reputed[i] to have warned that predictions are always risky, especially those about the future. This is especially true when fooling with big systems that have opaque feedback loops.

Anthony Gardner, the outgoing US Ambassador to Europe, recently castigated Trump’s promise to destroy international trade frameworks. The Trans Pacific Partnership (TPP) that Mr. Obama had worked so hard to create, based on the North American Free Trade agreement (NAFTA) that Mr. Clinton built in the 90s, are neoliberal monuments to free trade. This “open world trading system, Gardner said, this, “liberal international economic order, where we believe in globalization has made us rich and has made Europe rich…. The Trans-Pacific Partnership Agreement would have been not only important economically to raise economic growth but also, importantly, to help us write the rules of global trade.”

But are continued American economic imperialism and economic growth what we need? The aphorist Kenneth Boulding observed, “Anyone who believes exponential growth can go on forever on a finite planet is either a madman or an economist.”[ii]

Reports ranging from the 1972 Limits to Growth[iii] to Dr Graham Turner’s 2014 report, “Is Collapse Imminent,”[iv] warn that business-as-usual leads to growth in the use of resources, population, and pollution and that leads to collapse. Availability of non-renewable resources begins to fall and at some point, (the 1972 report put it in the 2030s) it all comes apart. At that point human activity and, indeed, populations decline, in some cases precipitously. Historian Peter Turchin now predicts that we will collapse within 10 years.[v] Social instability and political violence, he says, will peak even earlier, in the 2020s.[vi]

In 1992, in Beyond the Limits,[vii] the 20-year up-date to Limits to Growth, Dr. Donella Meadows warned that society is already in a state of overshoot, and that the result will likely not to be a single massive collapse, but the compounding of growing numbers of smaller crises, collectively overwhelming the ability of the world’s managers to cope. Sound familiar?

The Smithsonian Magazine was so unkind as to resurrect the old Limits collapse graph, plotting on top of it the actual data from 1972 until 2000.[viii] The results were a rather nasty warning: we are right on track for collapse.

Graham Turner explained why it matters if humanity remains on the Business As Usual (BAU) trend line. He warned, “The BAU scenario results in collapse of the global economy and environment (where standards of living fall at rates faster than they have historically risen due to disruption of normal economic functions), subsequently forcing population down. Although the modeled fall in population occurs after about 2030—with death rates rising from 2020 onward, reversing contemporary trends—the general onset of collapse first appears at about 2015 when per capita industrial output begins a sharp decline.” Interestingly we appear to be in just such a decline.[ix]

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The dotted lines in this graph are the original collapse scenario. The solid lines are the actual data from the time Limits was published until 2000. Smithsonian Institution Magazine: http://www.smithsonianmag.com/science-nature/Looking-Back-on-the-Limits-of-Growth.html

If scientists tell us that we cannot continue to grow, might it be an interesting experiment to implement a trade policy that constrains growth?

Ambassador Gardner warned, “…now we close our borders, we start taxing imports, we only buy national… Again, just imagine what that means. If Mexico says, we’re not going to buy U.S. goods. Germany says, we’re not going to buy U.S. goods; we only buy German goods, and Mexico only can buy Mexican goods. The international economic system that we’ve built simply falls apart. And a lot of people will suffer, including many of the people who voted for this president.”

Is that such a bad thing? Suppose Mr. Trump does force domestic production of goods. He’s now announced that he will slap a 20% tariff on Mexican goods to pay for his wall.[x] It would, at least, drive a significant improvement in the carbon productivity metric. There will be fewer emissions from shorter transport of raw materials and goods and services. To the bad, Econ 101 tells us that there will be fewer conventional jobs. Despite Trump’s promises, producing cost effective products domestically will require more automation (from robots likely made in China).

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Hunter Lovins at the series for Building an Economy in Service to Life. Co-sponsored by Natural Capitalism Solutions and Colorado State University Institute for the Built Environment.

This will mean fewer jobs and fewer people will be able to buy stuff. But then less stuff would be bought. Again, this will decrease emissions (if also reducing the economic viability of companies). If Trump simultaneously incites a war in the Middle East, (or anywhere else) oil prices will shoot up, plastic and gasoline and jet fuel prices will all rise, too. My electric car will look like an even better deal than it already does, and emissions will decrease further. Demand for recycled materials will increase, the circular economy will gain a stronger business case than it already has,[xi] and Trump would wind up decreasing emissions more than Obama (albeit by increasing suffering significantly.) These are certainly interesting feedback loops.

In this scenario, economic growth sputters. Investor Jeremy Grantham[xii] believes (despite recent unrealistic stock market highs) it has been doing that anyway for fundamental economic reasons. He warns that the era of economic growth may be over, entirely. The years of low growth, he says, are not an aberration, but the durable result of exhaustion of productivity gains that the entry of women into the work force had caused.

Rising capital expenditures needed to extract ever-scarcer ore bodies, oil and gas, Grantham predicts, will durably restrict extraction.[xiii] A recent report on declining discoveries of new oil supports this.[xiv] If oil prices are low, which a recent statement from BP claimed they will be through 2050, then it is not cost effective to search for more oil, drill for it or ever extract or ship it. There go the pipelines Trump seems so intent on ramming through.

Meanwhile costs for clean energy continue to fall. In late 2016 Bloomberg New Energy reported that solar now costs less than wind, which costs less than any fossil energy, saying, “The world recently passed a turning point and is adding more capacity for clean energy each year than for coal and natural gas combined. Peak fossil-fuel use for electricity may be reached within the next decade.” Meanwhile, renewables also generate 12 times the jobs of any fossil energy.

The International Energy Agency reported that in 2015 renewable energy jobs increased six percent, while employment in oil and gas decreased 18%.[xv] The only viable job creation strategy for Mr. Trump will be to unleash the clean energy revolution that climate activists have been calling for.

Ironically the anti-globalist populism of Trump and Brexit may also drive the increase in local self-reliance called for by supporters of Bernie Sanders. The Transition Towns movement[xvi] has argued for years that communities should implement a greater capacity to meet their own needs from local sustainable energy, agriculture and local production. They believed peak oil would force this. Maybe…. BP believes that enough oil has been discovered “to meet world’s entire demand out to 2050 twice over.”[xvii] Regardless, it’s a good idea anyway.

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Finer Future Forum sponsored by Hunter Lovins and Natural Capital Soluations. Boulder thought leaders help to shape her book “A Finer Future in Possible”.

My own work in local economic renewal shows that communities best enhance their prosperity by increasing resilience. Local Action for Sustainable Economic Renewal (LASER)[xviii] walks community leaders and citizens through how to mobilize their community to create regenerative local economies. It creates jobs, strengthens local businesses, and improves quality of life. The approach fosters environmental integrity, social cohesion, good governance and equitable economic opportunity. This enhances community well-being by slowing the unnecessary outflow of money from the local economy (just what Trump seems, inadvertently, to be calling for).

Predictions are risky, and parsing who will win or lose under the complexity we face would defeat even the best Vegas bookies. For example, it’s improbable that big business will stand hitched for the sorts of value destruction likely under Trump’s proposals, so many of them will never happen. Still, it is amusing to wonder if Mr. Trump, and the rebellion he is fueling, might not be just be what it will take to unleash the transition to regenerative development.


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About Hunter (bio and blog list)

End Notes

[i] “The Perils of Prediction, June 2nd,” The Economist, 15 June 2007, http://www.economist.com/blogs/theinbox/2007/07/the_perils_of_prediction_june

[ii] Kenneth Boulding, Adbusters, 14 Feb 2011, https://www.adbusters.org/article/kenneth-boulding/

[iii] Meadows, Donella, et al, The Limits to Growth, The Club of Rome, 1972, https://www.clubofrome.org/report/the-limits-to-growth/

[iv] Graham Turner, http://sustainable.unimelb.edu.au/sites/default/files/docs/MSSI-ResearchPaper-4_Turner_2014.pdf

[v] Papenfuss, Mary, “Society Could Collapse In A Decade, Predicts Math Historian,” Huffington Post, 6 Jan 2017, http://www.huffingtonpost.com/entry/peter-turchin-cliodynamics-society-collapse_us_586f1e22e4b02b5f85882988

[vi] Turchin, Peter, “Social Instability Lies Ahead, Researcher Says,” UConn Today, 27 Dec 2016, http://today.uconn.edu/2016/12/using-social-science-to-predict-the-future/

[vii] Meadows, Donella, Beyond the Limits, Chelsea Green, http://www.amazon.com/Beyond-Limits-Confronting-Envisioning-Sustainable/dp/0930031628

[viii] http://www.smithsonianmag.com/science-nature/Looking-Back-on-the-Limits-of-Growth.html

[ix] Durden, Tyler, “US Industrial Production Slumps To Longest Non-Recessionary Contraction Is History,” Zero Hedge, 16 Aug 2016, http://www.zerohedge.com/news/2016-08-16/us-industrial-production-slumps-longest-non-recessionary-contraction-history

[x] Diamond, Jeremy, “Trump wants 20% tax on imports from Mexico to pay for wall,” CNN, 26 Jan 2017, http://www.cnn.com/2017/01/26/politics/donald-trump-mexico-import-tax-border-wall/index.html

[xi] Towards a Circular Economy, Ellen MacArthur Foundation, 2015, http://www.ellenmacarthurfoundation.org/about/circular-economy/towards-the-circular-economy

[xii] Jeremy Grantham, on Charlie Rose Show, 11 May 2013, http://www.hulu.com/watch/466390

[xiii] Grantham, Jeremy, “Jeremy Grantham: In the Face of Finite Resources, It’s Time to Think About ‘Peak Everything’,” Money Morning, 19 May 2011, http://moneymorning.com/2011/05/19/in-the-face-of-finite-resources-its-time-to-think-about-peak-everything/

[xiv] Rystad Energy, “2016 Offshore Discovered Liquids Resources Were 90% Lower Than In 2010,” 19 Jan 2017, https://www.rystadenergy.com/NewsEvents/PressReleases/2016-offshore-discovered-liquids-resources-lower-than-in-2010

[xv] Renewable Energy World, “Renewable Energy Job Growth Unique in Global Energy Sector,” 27 May 2016,  http://www.renewableenergyworld.com/articles/2016/05/renewable-energy-job-growth-unique-in-global-energy-sector.html

[xvi] Transition Towns US, http://www.transitionus.org/

[xvii] “If BP is right, the oil price may never again hit $100,” The Week, Jan 26, 2017

http://www.theweek.co.uk/oil-price/60838/oil-price-hit-by-conflicting-data-on-stockpiles

[xviii] Hallsmith, Gwen, et al, LASER, 2005, http://natcapsolutions.org/resource-library/tools/laser-local-action-for-sustainable-economic-renewal/#.WIej27YrLMU

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