Singapore Peak Oil

A succinct criticism of modern economics by Clive Ponting in A New Green History of the World, pp. 132-135. I heartily recommend this book which I borrowed from the Singapore National Library. It is a stimulating, concise overview of civilizations' impact on the environment.

There is a fundamental flaw in classical economics and all the modern systems derived from it -- Marxist, welfare, Keynesian and modern ultra-liberal economics. They all deal only with the secondary problem of the distribution of scarce resources between competing ends and how the optimal allocation of resources can be achieved. The resources of the earth are treated as capital - a set of assets to be turned into a source of profit. Trees, wildlife, minerals, water and soil are simply commodities to be sold or developed. More important, their price is simply the cost of extracting them and turning them into marketable commodities. Yet this view ignores the basic fact that the resources of the earth are not just scarce, they are finite. Economics is unable to incorporate this fact into its analysis and so the economic systems based upon it encourage both the producer and the consumer to use up resources at whatever rate current market conditions dictate. Economics assumes, in defiance of all logic, that resources, in terms of land, materials and energy, are inexhaustible and that growth in the overall level of the economy can continue for ever. It also assumes that as one material or source of energy becomes scarce its price will rise and this will encourage the development of substitutes. In the short term this is certainly possible but the process cannot be continued indefinitely into the future. There is no way in economics that current prices can take account of the problems that will have to be faced in the future. (Since there is in theory an almost infinite future ahead of human societies current prices would have to be infinite in order to conserve them for that future.) Instead, economics argues that since the most rational action for individuals and hence societies is to pursue immediate self-interest then there is no need to take account of posterity.

Another problem for economics is that markets and therefore prices do not reflect true costs. Some commodities such as air never enter a market mechanism and are therefore treated as free goods available to all. However, as early industrial societies found out, if commodities such as air and water are treated as free then levels of pollution will rise rapidly because firms do not have to pay a price for the smoke and gases they put into the air or for the waste products and effluent that they tip into rivers. The rest of society does, however, bear the cost of such activities - water not fit for drinking, air not fit to breathe or even simple problems such as people's washing becoming dirty through air pollution. These 'externalities' can only be controlled through government regulation.

Many of these problems are also reflected in the failure of GDP to measure the real state of society and the economy. GDP does not measure some sorts of activity and economic contributions, for example housework if it is done without wages being involved, subsistence agriculture and voluntary community work. The 'black economy' (which is very large in some countries) is by definition not measured. There are also problems with what GDP does measure. It includes many items that are not benefits to society as a whole. For example, the shorter the life of cars and the more frequently they break down, the greater will be the amount of activity in an economy and the level of GDP will rise. This ignores the fact that individuals (unless employed in a car factory of a garage) would be better off if they had more reliable, longer-lasting cars. GDP also takes no account of some of the effects of using cars - higher levels of pollution and greater traffic congestion and delays. Other social problems such as poor housing and health care are also not included. On the other hand some social problems actually lead to a rise in GDP. In the United States as levels of crime continue to rise one of the major growth industries has been in crime prevention and security. This is not worth $65 billion a year and makes its contribution to GDP but its doubtful whether this measures and overall benefit to society. Similarly over-eating, obesity and an obsession with weight have created a diet industry worth $32 billion a year and the stresses of modern life have resulted in sales of Prozac worth $1.2 billion a year, both of which increase GDP. The growing doubts about the failure of GDP to reflect social costs and problems have led in the last couple of decades to attempts to create better measures of the real increase in the standard of living, taking account of factors such as pollution, traffic congestion, crime, health care and access to education. One of these measures is the Genuine Progress Indicator or GPI and it reflects a very different picture from the GDP. In the second half of the twentieth century the GDP per head in the United States rose from $12,000 to $35,000, suggesting a near tripling in the standard of living. However, the GPI would suggest that the standard of living taking account of wider social problems increased by only 8 per cent.

Only a small minority of economists have tried to deal with these deeper questions and raised doubts about the ability of conventional economics to deal with environmental questions. E. F. Schumacher in his book Small is Beautiful, published in the early 1970s, argued for an approach to economics 'as if people mattered'. He never created a coherent economic theory but argued that efforts should be concentrated on questions about the appropriate size and scale for activities and technology and identifying the real needs of people rather than assuming they would be met by ever increasing levels of production and consumption. He characterized this approach as "Buddhist Economics" and although his writings became international bestsellers his ideas have had little impact on policy makers or mainstream economics. Another trenchant analysis of the shortcomings of traditional economics was made by Hazel Henderson in her book Creating Alternative Futures published in 1978. Like Schumacher she criticized the fragmentation of economic thought, its failure to take into account humanity's dependence on the natural world and its even greater failure to recognize the values and unspoken assumptions that lie deeply embedded within it. The result, according to Henderson, is that:

Economics has enthroned some of our most unattractive predispositions: material acquisitiveness, competition, gluttony, pride, selfishness, shortsightedness, and just plain greed.

I posted the following comments on a blog post by a Member of Parliament, Dr. Lam Pin Min, concerning soaring rice prices:

I think the Singapore government is doing the right thing in allowing the SGD to rise, but it is not a good long term solution. Singapore and the rest of the world are not addressing the root causes of the food problem: overpopulation, limits to growth and declining availability of fossil fuels. Just as you cannot cure a cancer patient by treating the symptoms, so you cannot solve the current food crisis by addressing only the symptoms - which in this case is price inflation. A stronger SGD may help in the short term, but it does not address the root causes.

First, we need to understand the "perfect storm" that we are about to face. In a presentation by Paul Chefurka: We are facing a perfect storm of 1) Ecological Collapse, driven by the depletion of natural resources and Climate Change; 2) Energy shortages, driven by Peak Oil and Peak Natural Gas; 3) Economic destabilization driven by American debt loads and a complex and unsustainable global financial system.

I shudder every time I hear our ministers encourage more childbirths and their overemphasis on economic growth. Don't they understand our limits to growth? Have they not read the works and warnings by scientists who have been telling us since the 1970s that humanity's unrestrained growth will result in ecological collapse? Don't they get it?

The Green Revolution of the 1970s was successful due not only to molecular genetics, but also to increased use of pesticides, diesel or gas powered irrigation pumps, and synthetic nitrogen fertilizes - all of which are highly dependent on oil and natural gas. We are unfortunately witnessing a "peak" or decline in the availability of such fossil fuels to which there are no suitable substitutes. How shall modern farmers, who are highly dependent on these resources, grow enough to feed the world in coming years?

Instead of emphasizing economic growth, or should I say Uneconomic growth since such growth only inflates our GDP numbers but not necessarily our well being, our government needs to rethink their priorities and look at how we can become more resilient and sustainable even at the expense of growth. They need to aim for the following:

1) Zero or better still, negative population growth

2) Increase local food production to the point of or near self-sufficiency

3) Increase local energy production to the point of or near self-sufficiency

4) A Steady State Economy


These goals may sound too radical, but I believe it's the only way to ensure our survival and sustainability in the long run. Cuba successfully overcame their oil crisis in the 1990s when they lost 90% of their oil imports after the collapse of the Soviet Union - whom they were so dependent on for oil. It will serve us well to study what they did for this could very well happen to us. In time to come, do not be surprise if such an oil crisis happens to us in a very short period of time because of nationalism and hoarding by oil exporting countries.

Is there anyone in parliament who is perceptive enough to understand these issues? Is there anyone in parliament who is bold enough to bring up these issues and to challenge our flawed assumptions in economics and growth?

I don't wish to sound presumptuous or arrogant, but the following links should be required reading for all our ministers and MPs. I have gone through the links and I am very concerned about our future. These links have altered my fundamental worldview. Frankly, I'm feeling very pessimistic about our survival chances unless we address the above concerns immediately. We don’t have much time left.


Peak Oil Primer

Converging Crisis (PDF)

Youtube lecture on exponential growth and overpopulation

Fossil Fuels and Agriculture

Threats of Peak Oil to the Global Food Supply

The Economist Has No Clothes

Mainstream Economics and the Environmental Crisis

FAQ on Steady State Economy

Peak Oil and Economic Growth

World Scientists' Warning To Humanity (1992)

How Cuba Survived Peak Oil

Cuba's Special Period

Uneconomic Growth

Biophysical Economics

Approaching the world’s environmental problems through the Entropy Law

World Financial Crisis Explained