Charles Hugh Smith: The
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 and assets.
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.
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 industrialization.
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 returns?
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 calculated.
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 disease.
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 other industries.
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
picked.
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."
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 supply chain.
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.
Consider END OF GROWTH - six headwinds: demography, education, inequality, globalization, energy/environment, and the overhang of consumer and government debt.(via Zero Hedge)
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 and implode.
The Collapse of Complex Business Models
Source
banzai7
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