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3 Jul 2008

The Art of Wishful Thinking or Why The World Cup Finals Won’t Get Us Out of This

Yesterday morning, while chivvying my kids along to eat their breakfast and clean their teeth (not simultaneously), I had one ear on a piece on Radio 4′s Today programme about the economy and recession, prompted by Marks and Spencer’s dismal drop in share price, and its CEO talking of “stormy times ahead” for the UK economy. One of the guests was Sir Martin Sorrell (right), a businessman, who attempted to offer an upbeat picture of the future for the UK economy that left me scratching my head.What we are experiencing at the moment, he argued, is not technically a recession, but an economic slowdown. His prognosis for the UK’s economy was that 2008 would be OK, thanks to the 2008 Olympics in Beijing, 2009 would be hard, but that we would recover in 2010 due to the World Cup Football and the Winter Olympics in Vancouver. Economies, he smoothly reassured the millions of other toast munching listeners across the UK, are cyclical, they are always moving from one state to another, this is a natural phenomena, underpinned, presumably, by the occurance of major international sporting events.

This same ‘temporary downtown’ case was again being dished up later in the day by Sir Alan Sugar, who told the BBC that it might be three or four years, rather than two, before consumer markets returned to normal. I was listening to this just days after reading Euan Mearns’ excellent piece on The Oil Drum Europe called A State of Emergency. Clearly Mr. Sorrell and Mr Sugar (sound like Victorian confectioners) hadn’t, or they wouldn’t be insulting our intelligence with such trite reassurances. In his piece, Mearns writes;

“It is time for Alistair Darling and Mervyn King to explain to the British people why they see current problems with energy prices and associated inflation as a transient blip when the UK seems to be in a terminal dive towards insolvency”.

The first graph in his article offers an insight into the basis for that terminal dive, the crippling vulnerability of our energy addiction.

This graph, from Mearns’ article, shows where we find ourselves in terms of how our energy surplus has plunged into a deficit, how we snatched defeat from the jaws of victory

In a nutshell what happened, as shown in the graph above, was that the UK found oil in the North Sea, and either sold it extremely cheaply to other countries or used it to create Thatcher’s ‘economic miracle’ and gave most of the revenues away as tax breaks. Having sold most of ours off cheap, we how find ourselves with North Sea production plumetting, increasingly dependent on imports, just at a time when, as Chris Skrebowski puts it, we are “in the foothills of peak oil”.

Mearns predicts, from data from BERR themselves, that the cost of importing oil and gas to the UK will balloon “to about $200 billion (£100 billion) per annum by 2013″. Zoinks. Of course it is not feasible that we will be able to find that kind of money without bankrupting everything else. The right wing press are currently moaning about the cost of installing renewables and how more renewables will mean higher energy bills all round. Whatever the source, it rather looks like high energy prices are here to stay.

This second graph, again from Mearns’ piece, shows how this will affect the UK balance of trade. Looking at this it is impossible to see where Sugar and Sorrell (actually they sound more like a 1970s folk outfit) imagine the way out of this is. What will power the great new economic powerhouse that will pull us out of recession? I’m not an economist, but it looks to me like this recession is kicking in very fast, and as the BBC report this morning, more and more signs are emerging of this.

It will take a lot more than the World Cup Football Finals or the Winter Olympics to get us out of this one. Some straight talking wouldn’t go amiss for starters. It is not every day that I find myself agreeing with Chief Economists of international Energy Agencies, but rather than placing our faith for the future on sporting events, we might be better to concentrate on “leaving oil before it leaves us”.

We need to stop focusing on big infrastructure projects that are designed to work only in the context of economic growth and cheap energy, and focus instead, as Transition Initiatives across the world are now doing, on resilience, rebuilding local food networks, vastly reducing the need for car use, creating energy systems that are decentralised and community owned, looking afresh at imaginative ways to reuse waste locally rather than as part of far-flung recycling processes, prioritising urban land for intensive market gardens rather than office development and the development of passive house buildings using mostly local materials.

As George Monbiot wrote yesterday;

“In his speech last week, Gordon Brown said he wanted “to facilitate a reduction in short term global oil prices” while seeking “to reduce progressively our dependence on oil”. He knows that the first objective makes the second one harder to achieve. The government’s policy is to build more of everything – more coal plants, more nuclear power, more oil rigs, more renewables, more roads, more airports – and hope no one spots the contradictions”.

We no longer have the time to listen to the la-la land musings of commentators like Sugar and Sorrell, nor to the “well, we’ll just do a bit of everything in the hope that something might work” approach of the government. It is time to focus folks. This is, as David Strahan calls it, “the last oil shock”. It may well be the last time an economy ever scaled the heights we have. Although the transition away from economic growth won’t be easy, it will be made much more difficult if we don’t begin with an honest assessment of where we start from. Much as I love the World Cup, I’m not pinning all my hopes onto it.

Comments are now closed on this site, please visit Rob Hopkins' blog at Transition Network to read new posts and take part in discussions.

12 Comments

Tom A
3 Jul 9:25am

I think the pertinent bit in Euan Mern’s article is in the conclusion:

“Society becomes more polarised into those who can still afford to drive an SUV, live in comfort and warmth and fill their bellies with prime Aberdeen Angus steak set against a new under class who struggle to feed and heat their families.”

Until the majority of people are really suffering governments will do very little. And that’s a lot of suffering and wasted resources. Don’t hold your breath waiting for them to ‘get it’ whilst there are still plenty of people getting rich.

On the other hand, London has the Olypmics in 2012 so everything should come good again then…

Greenpa
3 Jul 1:09pm

Rob-”We need to stop focusing on big infrastructure projects that are designed to work only in the context of economic growth and cheap energy, and focus instead, as Transition Initiatives across the world are now doing, on resilience…”

Absolutely true. But the people embedded in the old world are just not ever going to listen, or change. The most powerful thing you can do is exactly what you are doing- getting communities launched on new paths. Those examples are going to be the only arguments that work.

Quite a few of the financial pundits making soothing noises know perfectly well that they are lying in their teeth. But the longer they can convince regular folk to keep their retirement pennies in “the Market” – the more money they can make. It’s brutally self centered behavior.

Some of them, of course, are just truly delusional. Either way- these are people you do not want to be listening to.

It’s gotten very desperate already. Yesterday in the US, the GOOD news was that Starbucks; the coffee money machine; has decided to close 600 shops, and fire all the employees associated with them.

Seriously; this was touted as good news. They were “dealing with reality!” – and plummeting profits. Good management!

Our pundits were predicting a nice bounce up for the market, in response to this “good news”. The Dow dropped 160 points.

Run, do not walk, to the exits.

Justin
3 Jul 9:35pm

I’d just like to add something about the
“well, we’ll just do a bit of everything in the hope that something might work” government strategy. This seems to be clearly in the anti-boat rocking mentality, because governments respond to voting pressure, and the majority don’t want their boats rocked. Majority governments do not seem to be in the business of deciding how best to look after the country, just on avoiding enough bad news to stay in power.
Unfortunately for us picking holes in the free market optimistic vision sounds very much like causing a recession, so free economists and businessmen have to sell optimism very loudly to encourage yet more consumption.

The irony is that building community resilience and re-gearing our entire infrastructure to use natural renewable resources stimulates plenty of activity, innovation and happiness!

Mick Mack
3 Jul 9:43pm

I think it misleading to believe that transition initiatives are able to deliver the kind of change necessary to deal with the crises looming. The collective political strength of the majority of people in England expressed through local Councils of Action with the intent to expropriate and nationalise to manage the resources that will be resisted by a ruthless and bloody-minded minority will be closer to the reality. Although I believe that Permaculture has a lot to offer in terms of more intelligent management of resources, until you have ‘ownership’ of those resources it’s an idea, i.e consistent with a philosphical outlook that hasn’t fully grasped the significance of the historical period in which we find ourselves; transitional yes, to a fundamentally different economic system that completely changes the relations to the means of production based on need, not the monopoly of surplus value. For all the contribution of ‘localisation’ it doesn’t deal with the fundamentals facing people in relation to an economic system which will not allow them the luxury of such a change. Marx foresaw this problem 150 years ago and it has still not been resolved. Leon Trotsky pointed the way in his ‘Transitional Programme’ written in 1938, a copy of which I sent to Rob over 2 years ago. Like it or not, history repeatedly shows us that it will, unfortunately, be a violent confrontation for control of those resources before we have the chance to alter our relationship with Nature for the future survival of humanity. Collective political organisation to face the Capitalist onslaught will be the mass response. Are we with them or given to repeating what would be nice?

Finn Jackson
4 Jul 10:48am

Thank you Rob, once again.

Finn

Shaun Chamberlin
4 Jul 11:44am

What gets me is the current politic-ing going on around who gets to host the World Cups in 2018 and 2022.

I’ve long thought this is a little strange considering how different the world is likely to look by then, but now that I understand that World Cups are the salvation of the economy all becomes clear ;)

Greenpa
4 Jul 1:13pm

Mick Mack- we’re in substantial agreement. The transition movement is not going to “save” everything. Quite a lot of current culture is not going to survive- or at least, I don’t see how. Where my brain is at the moment, I’m taking that more and more for granted- not good for communication, I know. I think a good well united Transition Town could survive what’s coming, though; and come out the other side able to provide a good template to build on.

Eric
6 Jul 3:14am

Hi Mick Mack.

I feel that socialists (ideological marxists) and most permaculture and eco activists, are caught in a 1920 or 1980 view of the world.

That is, the people will rise up rationally and change things, according to your viewpoint of the end result of change.

The constant use of the word ‘capitalism’ and its terribleness means that while you sit and talk about current events through this looking glass, you arent listening to what is happening on the ground.

People are changing only due to finances. Not belief. It could be argued that people are willing to sacrifice their lifestyle for an abstract thing (in their eyes) like global warming . . . but I doubt it.

People are taking public transport grumpily, and will go back to old ways at a stroke. Thats why most people want petrol prices to go down. So that they can get on with how things are.

Even tho I was an eco activist, I am still centred in the current cultural and societal ways. So, I need to constantly take myself out of this world, like not becoming too attached to my mobile phone for example, to stay detached. So that whatever happens, I am ready.

20 year old Marxists may be able to live without their mobile less than 20 year old airheads, but in the end, we are all in the same boat.

I dont see leadership in your statements. I see you speaking of Trotsky more than how the Market works. So, although I would agree with some things you say, its not you I pay attention to when I want to keep up to date with what is happening at the moment, amongst ordinary people and the people who run the world. Only there will I get a better sense of where the winds are blowing.

Yours in on an old recording. Marx was pre-Internet. He had nice points, but I can email him.

Eric
6 Jul 3:21am

I meant ‘you cant email Marx’ . . . . erm

Bill Hopkins
6 Jul 6:18pm

Dear Rob, I wonder how the proposed eco-towns fit in with your thinking? Surely, we need to build towns that consume zero carbon, and refurb existing homes to low energy standards. Individual actions (I put a solar panel on my roof) will not make the big impact that is required. Does proposal for Pennbury (Leicester, U.K.) fit in with your ideas?
http://www.harboroughonline.co.uk/forum/topic.asp?TOPIC_ID=1389

Mike Grenville
7 Jul 11:39am

Hosting an Olypmic event isn’t always a financial boost. The 1976 Olympics put Quebec in debt for three decades, with it only being paid off in 2006 with much of the debt serviced through a special tax on tobacco.

This view by politicians that everything is under control is starting to be a cause for serious concern.

Gordon Brown told a parliamentary committee that rising demand for oil in Asia meant that the current pressure on prices could remain in place over the long term. “If demand exceeds supply and is likely to exceed supply for years to come, people will expect the price to rise,” the prime minister said. At the same time the chancellor denied the British economy was heading for recession. “The economy will continue to grow,” he said, adding that it was also the view of a majority of forecasters in the City. The banking executives told Darling and Paulson that they believed the worst of the year-long credit crisis was now over.

US treasury secretary, Henry Paulson said:
“The predominant factor by far is supply and demand; the fact that global production and capacity haven’t increased appreciably over the last 10 years, while demand has continued to grow and inventories are at low levels.”

Chancellor insists economy will grow, despite oil price nearing $150
http://www.guardian.co.uk/politics/2008/jul/04/economy.economicgr
owth

Jason Cole
14 Jul 10:02pm

I’ve been saying this for months:

2008 will be remembered as “The Year of Wishful Thinking”.