Tag Archives: Economics

168. The End of Degrowth

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Or what comes after the realization hits that we’ve been already in degrowth for fifty years now

An American view of the future. Copied from The Honest Sorcerer

With peaking energy supplies humanity faces a massive dilemma. How to adapt to the shift from ever growing supplies of fossil fuels and minerals to an ever shrinking availability of these resources? Is this even possible?

Let’s take the case of America, the poster child of capitalism, for example. In order to see how degrowth might unfold — wholly unwillingly, I have to add — we must first understand the essence of our current economic system. The key thing to note here is that the core tenet of capitalism is not a belief in markets, free trade or private ownership but unimpeded growth. Unrestricted competition between businesses was nothing more than an ideal which was never met. The larger enterprises grew, the bigger their influence over pricing and regulation became. The repeated appearance of monopolies, an ever growing wealth inequality and a growing number of rent-seeking billionaire oligarchs thus were not unintended side effects of an otherwise benevolent system, but a clear goal towards which capitalism as a complex adaptive system evolved over time.

Concentrating wealth in the hand of the few and limiting competition was simply the best way to maximize profits. In fairness this is not an entirely new phenomena: whenever lootable, hoardable, tradable and storable surplus became available — be it grains, gold, sheep etc. — sooner or later some people always ended up owning much more than the average folk. And when the richest conspired to bend the rules for themselves, civilizations inevitably ended up in the rather unstable state of oligarchy. History never repeats itself, but it sure does rhyme — a lot.

What has made capitalism more “successful” than any of its predecessors was an ever increasing supply of raw materials, energy and labor turned into products and services at a profit. In a more or less stable system, such as in the Middle Ages, it would have been much harder for Rockefellers and Carnegies to rise and contest established power structures. That has changed when fossil fuels started to unlock more and more resources and technology in the industrial age. Whenever a new market or resource (be it real or digital) was opened up for competition, and ultimately for exploitation, a few companies quickly ended up dominating that field — making their owners the new richest kids on the block.

What would happen though, when that material growth finally turns into reverse, consumers can no longer afford to spend as much as they used to, and market after market start to shrink, only to eventually disappear? You see, without adequate surplus energy, it would be impossible to keep producing and consuming at present rates, so something will have to give. Is it possible for capitalism to adapt by degrowth or will this shrinkage — enforced by Nature — cause the system to mutate into something entirely different?

Profits over the economy

Just take a look at what growth has already turned into in the past five decades. In contrast to what it meant half a century ago — new, well paying jobs, a general rise in living standards and improving future prospects — growth has basically turned into a wealth pump. Ever rising asset prices and corporate welfare for the rich, collapsing living standards, food inflation and unaffordable housing and energy for everyone else. The post World War II economic boom revolved around making and selling goods at a profit while paying workers well, thereby creating a self-reinforcing feedback loop of consumption — driving manufacturing and still more consumption. This, however, required cheap raw materials, coal, oil, natural gas and electricity, as well as the “freedom” to dump waste on and destroy Nature free of charge. As environmental regulations became stricter, at the same time when resource extraction and conventional oil peaked (and became more expensive as imports kicked in) in the 1970’s, the old model of “economic” growth became impossible to maintain.

There is only so much you can extract, pollute and destroy without ruining your own prospects.

You see, a continued real, material improvement for the everyday person always required a corresponding increase in resource and energy use. A bigger house, a second car, electronic gadgets, flights abroad, eating out etc. could no longer be provided on a shrinking material and energy base. The only way to preserve growth was to move the manufacturing of the most energy intensive and polluting products and services abroad, where labor, resources and energy was still cheap. This practically meant unfettered growth in company profits, at the cost of disappearing industrial jobs and stagnating wages for everyone else.

Profit per unit of real gross value added of nonfinancial corporate business: Corporate profits after tax with IVA and CCAdj (unit profits from current production), retrieved from FRED, Federal Reserve Bank of St. Louis, October 2, 2025.

Education followed a similar pattern: as working class jobs vanished and salaries stopped growing in real terms, the only prospect for improving one’s lot was by going for a diploma. Asking more and more for higher education, and by financing this activity via student loans, created a lot of economic activity but required very little energy and resources to perform. Hence the birth of a myth: the post-industrial, service economy. (There is, of course, no such thing as a service economy.) These trends, on the other hand, has led to the devaluation of degrees, combined with a swell in administrative and frankly BS jobs. The same “happened” to healthcare, where the number of doctors barely grew as opposed to that of controllers and management. And the list goes on: from “owning” copyrights to creating “intellectual property”, providing financial services and inserting a middle man into every transaction imaginable. Sure, a lot of economic activity could be generated this way (measured as GDP growth and rising stock valuations), while very little — if any — real value was added. Money for nothing? Quite likely.

U.S. per capita energy use (from all sources including fossil fuels) is falling since 2000. China is set to surpass the EU in 2025 on a per capita basis. In absolute terms, China has already left behind the EU and U.S. (combined!) in 2020 already. Source

The real state of the economy

Despite the lack of real value added, and much to the reasons explained above, U.S. gross domestic product — the total value of goods produced and services provided during a year — just kept rising and rising. Lacking real material growth this expansion was increasingly financed by credit institutions and government debt. That is, by conjuring money into existence. (Yes, banks create around 80% of the money circulating the economy as electronic deposits.) And as of late: the government running massive deficits — i.e.: spending more than what gets collected as revenues.

Deficit spending, besides creating even more inflation, has a direct stimulating effect on the economy as a whole. When you take a look at what the government spends taxpayer money on, you find expenditures such as social security, Medicare, national defense etc. Retired workers spend their benefits on goods and services, Medicare pays doctors, nurses and the administrative staff (who then also use this money to buy stuff), while national defense drives entire industries (besides being a massive racket). In the end most of this government deficit spending ends up circulating the economy as consumption and investment a.k.a. GDP growth. On the other hand, this practice also increases inflation and locks future governments into a debt trap, where ever increasing amounts of money will have to be spent on servicing this debt. Short term benefits, long term costs — sounds familiar?

The effect of U.S. government deficit spending on GDP. The total height of each bar shows the “official GDP” reading for Q3 each year (in trillions of Dollars, seasonally adjusted annual rate) — source. The effect of deficit spending (source) was marked by diagonal stripes. The red line shows real gross domestic product (source) minus deficit spending — both converted to chained 2017 Dollars (seasonally adjusted annual rate). 2025 values are my estimates. Based on these real values, U.S. economic growth was 2% year-over-year in the past quarter of a century.

If we take a look at the actual GDP figures, we can not only discern a growing trend when it comes to overspending, but a tendency to use deficit spending to fill in the gaps after a recession. Governments in the past 25 years, it seems, have done everything in their power to a) hide the true depth of each recession, and to b) show higher than normal GDP growth. But that’s only half of the story. If we take inflation into account by using chained 2017 Dollars, and deduct government overspending, the true size of the U.S. economy in the middle of 2025 would have been around $22.5 trillion — some 27% below the official figure ($30.5 trillion). And that’s by using the seriously under-reported and heavily massaged CPI figures… If real inflation had been just two percentage points higher than the official figure, economic growth over the past eight years would have simply disappeared into the mist.

Take note how we got to this point: starting with the peaking of conventional oil production in 1970’s, then the outsourcing of manufacturing jobs, followed by neoliberalism and credit adventurism leading to a financial meltdown in 2008/2009. Then came zero interest rate policies, wage suppression, tax cuts for large corporations and now a cost of living crisis in the wake of the 2021 energy crisis (which has never ended). Is it any wonder the U.S. economy is where it is: drowning in debt?

Degrowth is already on — Now comes war

Let’s face it: degrowth is already here — since the 1970’s at least. So far it was offset by globalization (mainly by importing cheap goods from China) and a massive expansion of debt — both federal and private. However, no economy can be propped up artificially forever. With the coming peak and decline in U.S. oil and natural gas production later this decade, revenues can expected to fall dramatically, at the same time when the country becomes import dependent again. Should that be the case, a major economic downturn would be inescapable, and it would be only a question of time till the rest of the world realized that the U.S. economy would deflate like a balloon without incessantly increasing its debt levels, or seriously and heavily taxing its major corporations (1). The former would further erode trust in America’s ability to honor its obligations which, together with the realization that with less and less oil it would be impossible to repay these debts, would be devastating. The latter move, however, would make paying prodigious dividends to shareholders practically impossible, and quite possibly trigger a stock market meltdown. A rock and a hard place?

No wonder that slashing social benefits, Medicare, Medicaid are all on the top of the government’s list — we can take severe cuts to those as a given. But then what’s there to do the year after? Sure, cutting social spending will result in lower consumption (and lower GDP growth), but resource depletion won’t stop just because we no longer give adequate medical and financial support to retired citizens… The now accelerating long decline of high-tech industrial civilization will demand more and more cuts each and every year. Unless… Unless there is a way to “convince” other nations to give up their consumption and resources first.

The European economy is already in self-destruction mode for four years now, resulting in a massive (10%) drop in their overall energy consumption compared to 2014. And not only that, they also became more dependent on U.S. energy deliveries than ever. Should any of their nations decide not to put up with American pressures then, LNG shipments could easily drop to zero overnight. Or the last remaining pipeline underneath the Black Sea could suffer a severe blow. Europe, the second largest importer of energy in the world is now on a strict slimming diet, enforced and controlled by their biggest friend and ally. Next one on the list: China, the globe’s largest importer of oil and gas.

Constraining the world largest energy consumer’s access to hydrocarbons is a more tricky question, though, as they are not as dependent on one source as the EU was (or rather: still is). There are, however, some major suppliers — ruled by governments deemed hostile by the West — whose deliveries to China could be curtailed: Venezuela and Iran. Toppling these two regimes could thus deliver triple benefits: first, U.S. oil corporations could finally return in full to exploit their resources. Second, they could divert oil deliveries to America, instead of the far east, and third it could help reserve the Dollar’s status as the world’s number one currency. As Curro Jimenez observes:

Iran has the third-largest oil reserves and the second-largest gas reserves. If the U.S. were to control Iran and Venezuela’s oil reserves, it would control the first and third-largest oil reserves in the world, while the second and fourth – Saudi Arabia and Canada – are already under its influence. Having control and influence over the four largest oil reserves would allow the U.S. not only to influence prices and distribution, but to dictate in which currency they are paid.

Note, how bailing out Argentina, the last U.S. friendly South American state with a booming shale oil industry in its Vaca Muerta region, fits neatly into this picture. There is, however, a fly in the ointment: we no longer live in the 1990’s when the U.S. was the sole military superpower. Today, we have other players with formidable air defense complexes, hyper-sonic missiles and manufacturing capacities far greater than that of the entire West, combined. Russia, for example, is already busy training and equipping Iran to resist the next wave of U.S.-Israeli bombardment. The recent Tomahawk scare and turning Taiwan and the Philippines into a porcupine are thus part of a diversionary tactic aimed at pinning down air defense and missile resources far away from U.S. targeted countries. As for the success of this strategy… Well, I’m highly skeptical, to say the least.

Conclusion

U.S. per capita energy production and use is already falling for two decades now, despite the shale “revolution” adding record amount of barrels to the mix. Without an ever growing number of well paying jobs, and with a continued cost of living crisis, on the other hand, this cannot be expected to change. So even if American military adventurism were successful, it would most likely end up enriching a few oil corporations, while the rest of the population would still be unable to buy more gas or products made with oil. On a falling per capita energy availability — translating into higher electricity and gas prices — it will be impossible to keep consumption even on its current level. With a continued decline in conventional oil production, and now with peaking shale oil extraction, diesel fuel supply can be expected to fall in the years and decades ahead, making the crisis especially severe in the food, mining, construction and transportation businesses.

Under these circumstances it’s not terribly hard to understand why tariffs were a failed attempt to rein in competitors and to incentivize the re-industrialization of America; as none of these goals were achievable from the get go. Tariffs have thus ended up becoming just another tax on the average citizen, with the only practical purpose of raising government revenues to pay interest on debt, while further eroding people’s ability to buy more products and services. Now add in austerity measures, cuts to social benefits — as well as to many other government programs — and a continued decline in consumer spending is pretty much locked in. With slowing consumer demand, however, even more manufacturing companies will be forced to close doors, and even less oil wells will be drilled — effectively cementing peak oil in place. U.S. oil companies in anticipation of weaker demand and ever increasing drilling costs, are already accelerating layoffs and cutting investments, and not only in the shale business but everywhere.

This, however, is only the beginning. As more and more producers are pulled out, like blocks from a jenga tower, so will the risk of entire supply chains failing grow. Not just in the oil industry, but everywhere else. How this will affect finance and the monetary system is anyone’s guess at this point, but I suspect we are in for a pretty rough ride — potentially involving issuing massive amounts of stimulus checks, investors having to bail-in (2), and CBDC-s being introduced in a rush. Such a major, or even partial, meltdown of the economy, and the draconian measures needed to prevent a complete collapse, however, raises the risk of civil unrest to it’s highest level in recent history… That’s the risk every government around the globe takes, when not explaining that we are rapidly approaching the end of growth, after having surpassed an almost infinite number of planetary and resource boundaries. So, in case you were wondering why there is a war psychosis all over the world, or why the President called certain states and cities ‘training grounds’ or why did he sign orders to criminalize dissent — look no further for an answer. I’m afraid what we have seen up until now is just a dress rehearsal for what comes next: the biggest turning point in human history. Buckle up.

158. The Moral Decay of Debt

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Debt has moral implications, and in denying this, we’re choosing a rendezvous with Nemesis

Charles Hugh Smith – Sep 17

Let’s start with a household analogy. A married couple have four fine children, and since expenses are higher than income, they borrow money in their children’s’ names to fund their lifestyle and investments. Once the offspring reach 18 years of age, the debt their parents borrowed is theirs to service.

The offspring didn’t get a say in how much money was borrowed or how it was spent, but the debt is now theirs to service (i.e. pay the interest) for their entire lifetimes, as the debt is simply too large to pay off with conventional wages.

The economy changed, and since wages don’t go as far and costs keep rising, the four offspring borrow in their own children’s’ names to afford the basics of a middle-class life.

The parents are now comfortably retired, drawing on their investments bought with borrowed money. The two generations behind them are now debt-serfs who funded their own lifestyles by borrowing even more money. Since the kind of house their parents bought for 3-times-income is now 6-times-income, the debt required to own a house and fund what is considered the minimum middle-class entitlements is multiples of their parents’ borrowing.

Is anyone willing to call this offloading of ever-expanding debt onto future generations wrong, as in morally wrong, or have we lost the vocabulary and ability to declare the offloading of debt as morally disgraceful, a line that should never have been crossed?

Debt that cannot be extinguished and that is offloaded onto future generations is a manifestation of moral decay, a decay of the moral foundations of the economy and society that is terminal.

So here we are, cheering on a big reduction in the Fed Funds Rate to encourage an expansion of debt, as more debt means more spending and that means more taxes and corporate profits. The manipulation of interest rates and the financial machinery to encourage more debt is viewed as bloodless, absolutely devoid of moral judgment: when it comes to “growth” of asset prices, spending, taxes and profits, there is no wrong, as “growth” is the only good anyone cares about.

This is the perfection of moral decay. Offloading debt onto future generations–money borrowed to prop up a self-serving status quo that focused on expediencies, not future consequences–and then telling the debt-enslaved generations, “we’ll inflate away the debt, and your wages will buy less and less, but no worries, we’ll just borrow more to pay the interest due”–how is this not morally repulsive?

Here is Federal debt as a percentage of Gross Domestic Product (GDP). This is a better measure of consequences, for it illustrates the Federal government’s ability to counter a deep recession by borrowing and spending trillions of dollars is now limited by extreme debt levels.

Those who track the history of government debt generally draw the red-line at 100% of GDP, so 120% is already deep in the danger zone. History is rather decisive: any attempt to add trillions in additional debt at these levels has zero chance of working as intended, i.e. a pain-free way to boost “growth.”

Note the debt-to-GDP ratio actually declined during both the stagflationary 1970s and the 1990s Internet boom. In both eras, the economy was still largely organic, i.e. unmanipulated enough that natural forces (supply, demand, risk aversion, writedowns of bad debt, etc.) could work through excesses of speculation and debt and restore not just balance sheets but legitimacy.

The Federal Reserve no longer trusted the system’s self-correcting capacity and leaped into full-blown manipulation of financial and mortgage markets in 2008-09. The debt-to-FDP ratio soared from 60% to 100% in the post-Global Financial Crisis (GFC) “save” of the Federal Reserve, which inflated the money supply and pushed ZIRP (zero interest rate policy) and QE (quantitative easing) to boost borrowing.

As a result, private-sector borrowing also skyrocketed. Now that households and enterprises have borrowed up to their capacity to service debt, their ability to “borrow their way to prosperity” is also constrained.

Here is total debt, public and private (TCMDO). In Q2 1975, total debt was $2.5 trillion. If this had tracked inflation, it would have reached $15 trillion by Q2 2025. ($1 in Q2 1975 is $6 in Q2 2025.) (BLS Inflation Calculator)

Let’s say that debt can double the rate of inflation if it’s being invested productively. That would put today’s total debt at $30 trillion.

But total debt isn’t close to $30 trillion; it’s $104 trillion and climbing, suggesting 70+ trillion is “excess debt.” As for all this borrowed money being invested productively–given “waste is growth” planned obsolescence and rampant asset appreciation / speculation, it seems obvious that most of this borrowed money was consumed by ephemeral products and services or squandered chasing asset bubbles.

Debt has implicit moral implications, and in denying this, we’re choosing a rendezvous with Nemesis–a rendezvous with Destiny that will be arranged by Nemesis, not the Federal Reserve or the Treasury.

Yes, debt can be productive, but it can also be exploitive, and therein lies the moral implications. Debt can never be amoral or bloodless; its moral nature cannot be extinguished. We appear to be destined to discover this truth the hard way.

140. Post-Growth Social Realignment

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In today’s post by Tim Morgan he concludes that in our situation, intensifying competition for dwindling resources is likely to drive a disorderly rather than a structured and organised transition to a post-growth social realignment.

Not sure what a post-growth social realignment entails, I sought the advice of ChatGPT:

A post-growth social realignment refers to the broad and often fundamental changes in society that occur when an economy moves away from the goal of continuous economic growth and begins to prioritise well-being, sustainability, and resilience instead. This shift affects not only economic policy but also cultural values, social structures, and political power dynamics.

Key elements of a post-growth social realignment:

  1. New values and priorities
    • Societies begin to value quality of life over quantity of goods.
    • Success is measured less by GDP and more by things like health, community strength, environmental integrity, and time affluence (free time).
  2. Restructuring of work and livelihoods
    • Paid work may become less central; informal work, care work, and community activities grow in importance.
    • More people might work part-time or in subsistence, local, or cooperative economies.
  3. Decentralisation and localisation
    • Power and resources may shift from national or corporate centres to local communities.
    • Local food, energy, and social networks become more important as globalised systems contract or prove unreliable.
  4. Change in consumption patterns
    • Reduced emphasis on material consumption and status goods.
    • Simpler lifestyles, reuse, repair, and local exchange are favoured.
  5. Social and political shifts
    • Governments and institutions may be forced to adapt by supporting more equitable resource distribution, local decision-making, and ecological limits.
    • New alliances form around common interests in health, fairness, environment, and security.
  6. Redefinition of prosperity and progress
    • Prosperity is seen as the ability to live well within ecological limits.
    • Progress is measured by regeneration, not expansion.

In short, a post-growth social realignment describes how societies reorganise themselves socially, politically, and economically when the underlying assumption of infinite growth is abandoned. It is both a consequence of ecological and economic necessity and a conscious reimagining of what a good life and fair society look like.

139. Stagflation in a Shrinking Economy: What It Means – and What We Can Do About It

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We’re entering unfamiliar territory.

Across the UK, people are noticing that life is getting harder in ways that don’t make sense if you’re still thinking in terms of normal economics. Prices are rising, but the economy isn’t booming. Wages are flat or falling behind. Public services are creaking. And while government figures talk about recovery, it doesn’t feel like recovery for most of us.

What we’re living through is stagflation – a mix of stagnation and inflation – but with a new twist: it’s happening in an economy that’s no longer growing at all. In fact, in many places, the economy is quietly shrinking.

What is stagflation?

Stagflation used to be rare. Economists once believed that if inflation rose, it meant the economy was overheating. However, we are now witnessing a simultaneous rise in prices and decline in living standards.

In plain terms, that means:

  • Your bills go up, but your pay doesn’t.
  • Jobs become harder to find or more insecure.
  • The weekly shop gets more expensive even as the packets get smaller.
  • Councils cut services while tax rises eat into your pension or take-home pay.

The causes are complex, but the direction is clear. The old model of growth, based on cheap fossil fuels, mass consumption, and global trade, is no longer effective. The government’s response so far has primarily involved printing money, raising interest rates, and hoping for the best.

What does this mean for ordinary people?

It means life is going to feel tougher, especially for those on lower or fixed incomes. And it also means that many of the systems we’ve relied on – housing, healthcare, transport, and food – will become less dependable over time.

You may already feel it: buses disappearing from rural routes. GP appointments are becoming harder to book. Rent is rising faster than wages. Local shops are closing. Savings are being eroded.

For families, it often means saying no to things that used to be normal – holidays, heating, hobbies. For younger generations, the promise that hard work will bring stability is eroding.

But there is another story here. One that doesn’t just leave us as victims of a failing system.

Because when the formal economy retreats, the informal economy begins to matter more.

How we respond: seven local actions that matter

Stagflation is serious. But it doesn’t mean helplessness. In fact, it’s a wake-up call – a chance to rethink how we live and support each other. Here are seven ways that communities and households can respond:

1. Grow more of what we eat
With food prices rising and extended supply chains at risk, local food matters more than ever. Home gardens, community plots, and small farms can make a difference – and reconnect people with land and seasons.

2. Rebuild informal networks
Mutual aid isn’t just for crises. Time banks, skill swaps, neighbour help – these are the lifelines of a post-growth world. They don’t show up in GDP, but they keep communities alive.

3. Waste less, share more
From mending clothes to swapping tools, a culture of resourcefulness is re-emerging. Frugality, once looked down on, may become a new kind of wealth.

4. Local energy resilience
Energy bills will keep rising. Local solar panels, shared heating schemes, and community energy cooperatives can give people more control and buffer against shocks.

5. Trade skills, not just money
When cash is tight, practical skills become currency. Fixing bikes, making clothes, cooking, growing – these are the trades of a more grounded, resilient economy.

6. Reclaim local decision-making
Councils and parishes need the power to act locally, not just carry out orders from above. When central systems falter, it’s the neighbourhood that holds things together.

7. Talk honestly about the future
This isn’t just a blip. It’s a turning point. And we need to be honest about that – with our families, our communities, and ourselves. A smaller economy can still be a good society – but only if we build it deliberately.

In summary

Stagflation in a shrinking economy may sound like something only economists worry about. But for ordinary people, it’s already shaping the way we live. The challenge is real – but so is the opportunity.

We cannot return to the old model of endless growth. But we can go forward into a different kind of economy – one that values people over profits, place over global reach, and resilience over illusion.

And that begins not with waiting for someone else to act – but with small, determined steps close to home.

131. Has Growth Ended? – A Review

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Read the full article here: https://surplusenergyeconomics.wordpress.com/2025/05/29/304-has-growth-ended/

Dr. Tim Morgan’s article asks a big question: Has economic growth come to an end? He thinks it might have—and not just because of politics, bad decisions, or short-term problems, but because of something much deeper: the limits of energy and nature itself.

What’s the article about?

Morgan believes the global economy may have hit a turning point in 2023. Up until now, we’ve kept pushing for more growth—more money, more production, more consumption. But he argues that the real economy (what we physically do and make) is no longer keeping up with the financial economy (what we imagine through loans, debts, and stock markets).

He says the gap between what we think we have and what we actually do have is getting wider, and that spells trouble.

What’s causing the slowdown?

The main issue, according to Morgan, is energy. Everything we do—building houses, growing food, running hospitals—relies on energy, especially oil, gas, and coal. However, it now requires increasingly more energy just to extract that energy from the ground. This is referred to as the Energy Cost of Energy (ECoE).

The higher the ECoE, the less energy is left over for the rest of the economy to grow. Morgan says we’ve reached the point where the energy “surplus” is shrinking. That’s why prosperity—the ability of ordinary people to live comfortably—is already falling in many countries.

What does the future look like?

If Morgan’s right, we’ll see:

  • A steady decline in real wealth over the next 25 years.
  • Fewer things people can afford beyond basic needs (what he calls a collapse in “discretionary” spending).
  • Financial systems are under strain because they’re based on the idea that growth will continue forever.
Is there anything we can do?

Morgan doesn’t give a lot of solutions in this piece, but he does hint that we’ll need to:

  • Be more realistic about what the future holds.
  • Stop pretending we can grow forever.
  • Find ways to live well with less.
Final word

Dr. Morgan’s message is profound: the era of endless economic growth is over. We now need new ways to think about prosperity—ones based on what really matters, not just money and markets. This article is a great starting point for that conversation.

130. Economic Contraction, Coming Right Up

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Gail Tverberg, the author of the blog Our Finite World, is a researcher and actuary with a background in mathematics. She focuses on the interconnection between energy limitations and economic systems, particularly how finite energy resources impact economic growth and stability. Tverberg has been writing on these topics since 2006, bringing a unique perspective that combines actuarial analysis with energy economics.

In her May 27, 2025, article titled “Economic Contraction, Coming Right Up,” Tverberg argues that the global economy is poised for a significant downturn over the next decade due to fundamental physical and resource-based constraints.

Main Conclusions

1. The Economy as a Physics-Based System Facing Diminishing Returns

Tverberg posits that the global economy operates as a “dissipative structure,” a concept from physics describing systems that require continuous energy input to maintain order. She asserts that as easily accessible resources are depleted, the energy and effort required to extract remaining resources increase, leading to diminishing returns. This phenomenon affects not only fossil fuels but also minerals such as copper and lithium, as well as arable land and freshwater.

2. Debt and Financial Systems Are Unsustainable Without Growth

The article highlights that modern economies rely heavily on debt, which presupposes future growth to repay. However, with physical limits to growth becoming more apparent, the ability to service debt diminishes, potentially leading to defaults and financial crises. Tverberg notes that high debt levels can temporarily mask resource constraints but ultimately exacerbate economic instability.

3. Societal Complexity Will Decline

Drawing on Joseph Tainter’s work on the collapse of complex societies, Tverberg suggests that as energy and resources become increasingly scarce, societies will be compelled to simplify. This could manifest as reduced government services, infrastructure decay, and a general decline in living standards.

4. Emergence of New Economic Structures

While acknowledging the challenges ahead, Tverberg believes that new, simpler economic systems will emerge as adaptations to the changing resource landscape. These systems will likely be less energy-intensive and more localised, reflecting the constraints imposed by diminished resource availability.

Tverberg’s analysis offers an enlightened perspective on the future of the global economy, emphasising the physical and resource-based limits to growth. Her integration of concepts from physics and systems theory provides a unique lens through which to view economic challenges.

However, some may argue that her outlook underestimates the potential for technological innovation and policy interventions to mitigate resource constraints. Advancements in renewable energy, efficiency improvements, and shifts in consumption patterns could play significant roles in addressing the issues she raises.

Nonetheless, Tverberg’s emphasis on the interconnectedness of energy, resources, and economic systems serves as a valuable reminder of the foundational elements underpinning modern economies. Her work encourages a holistic examination of economic sustainability, urging consideration of physical realities alongside financial metrics.Our Finite World

For a more detailed exploration of her arguments, you can read the full article here: Economic Contraction, Coming Right Up.

128, When Growth Stops: What Happens Next Isn’t Political, It’s Inevitable

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  • A look at how the world may change when governments cling to an old economic story, while reality quietly moves on.
  • This is not a vision from the left or the right. It’s not about what anyone wants to happen. It’s about what will unfold around us – quietly, unevenly, and outside the headlines.

We have lived for decades in an economy built on growth. Growth paid the wages, funded the services, justified the debts, and kept governments in motion. It shaped policy, purpose in politics, and confidence in households.

But that era is ending.

Not with a crash, but with a slow, stubborn refusal to continue. Energy is no longer cheap. Supply chains are more fragile than we realised. Populations are ageing. Climate pressures are rising. Global trade is becoming patchy and unreliable. And all the while, prices rise while incomes don’t.

The government, meanwhile, continues as if none of this is happening. It draws up new growth plans and talks of turning corners and unleashing potential. But the old levers no longer work. Nothing takes off. People quietly stop listening.

And beyond the headlines, big institutions start to vanish.

Supermarkets struggle with rising costs and falling demand. Most bank branches have already closed, and digital systems are becoming unreliable. Public services shrink. Connectivity becomes patchy. Confidence drains away.

This is not the failure of a government. It is the end of a model. The growth economy depended on scale, complexity, and rising consumption. When those are no longer possible, the systems built around them begin to fade – not because anyone decides to shut them down – but because they no longer work.

At the same time, global markets begin to fragment. Trade becomes slower, riskier, and more expensive. Countries turn inward, not for political reasons, but because there’s no longer much choice.

And yet, life does not end.

In place of the national economy, a different kind of economy emerges. People grow food, fix things, share tools, and find ways to get by. Empty land is cultivated. Empty buildings are used. Trust becomes local. Skills return. It’s not smooth. It’s not easy. But it is possible.

This isn’t a movement. It’s not a programme. People do it when the world changes and the system doesn’t. They will build something smaller, slower, and more practical in its place.

The danger is not collapse. The real threat is pretending it isn’t happening. The government risks losing all relevance by clinging to a story of growth that no longer fits the world. It talks while the future quietly organises itself elsewhere.

We are not heading into a political crisis – we are heading into a material one. But if we let go of the old assumptions, we may find that something new – and deeply local – can take root in the space that follows.

It won’t look like the past. But it might work.

124. How the Evolution to the New Economy Works

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Across the developed world, economies are beginning to change in ways that mainstream analysis struggles to explain.  Growth is stalling.  Consumption is slowing.  Traditional jobs are disappearing.  Something more profound than a business cycle is at play: the old economy is winding down, and a new one is emerging.

This is not a smooth or painless transition.  It is being driven not by planning or reform, but by necessity.  As formal employment shrinks and financial structures falter, people adapt informally, locally, and creatively.  They are shifting from consumer-oriented jobs to roles that support life more directly, even if these roles fall outside official recognition or legal frameworks.

This is how the evolution to the new economy works.

From Growth to Redundancy

For decades, the industrial economy flourished through the growth of discretionary markets—sectors built around non-essential spending: fashion, tourism, entertainment, advertising, hospitality, and a vast range of services that depend on surplus income.  These markets expanded thanks to rising wages, easy credit, and relentless consumer demand.

But in today’s world, discretionary spending is under pressure.  Household budgets are tightening due to inflation, debt, housing costs, and energy bills.  Consumers are less able—and less willing—to spend on non-essentials.  As a result, businesses in these sectors are cutting back.  Jobs are being lost.

When someone in a discretionary job becomes redundant, they begin an arduous journey.  The first step is unemployment.  The second is searching for something more secure, grounded, and often more local.

The Shift to Essential Work

With fewer well-paid roles available, many redundant workers turn to essential occupations.  These jobs keep daily life functioning: food production, caregiving, building repairs, cleaning, small-scale deliveries, informal childcare, and personal services.  They are often physically demanding, less secure, and poorly paid—but they are necessary.

In towns and villages across the country, we are seeing the quiet growth of this economy of necessity.  It is not driven by profit or prestige.  It is driven by need.

Much of this work exists outside of contracts, tax records, and conventional regulation in the informal economy.  Some of it operates in the black economy, where earnings go unrecorded.  A smaller proportion may cross into illegality: untaxed trading, unlicensed sales, or in some cases, survival-driven criminal activity.

This is not moral decline.  It is economic evolution and adaptation.

The Decline of the Financial Economy

The financial economy wobbles as the real economy shrinks and labour is reallocated.  This is the sector that deals in money, credit, and speculation.  Its valuations depend on assumptions of future growth and consumption.  When these assumptions fail, the system destabilises.

Redundancy weakens income.  Falling incomes reduce spending.  Lower spending hits corporate earnings.  In turn, markets lose confidence.  Asset prices fall.  Government revenues decline.  Debt becomes harder to service.  A vicious circle emerges.

Government attempts to revive growth—through stimulus packages, interest rate cuts, or quantitative easing—may delay the reckoning, but they cannot prevent it.  When growth is no longer viable, the financial economy loses its anchor in the real world.

The Rise of Localism

As national systems falter, people fall back on what is close and familiar.  Localism—a pattern of life rooted in place, relationship, and mutual support—begins to grow.

In the emerging economy, food is grown near where it is eaten.  Services are exchanged informally, sometimes through barter or favour.  Tools are borrowed, goods are repaired, and homes become productive rather than just consumptive.  The goal is not to maximise profit but to meet needs with minimal dependence on distant systems.

Localism is not nostalgic.  It is pragmatic.  It offers resilience where globalised supply chains and centralised governance falter.  It is often slower, smaller, and less efficient in industrial terms, but more adaptive and humane.

The early stages are difficult.  The transition brings lower incomes, fewer comforts, and greater reliance on personal relationships.  But over time, this economy can offer something more profound: a sense of purpose, belonging, and security that modern consumerism could never provide.

A Quiet Evolution

This shift is happening now, not through policy, but through quiet necessity.  It is not a revolution.  It is not a collapse.  It is an evolution.

It begins when someone loses their job.  It deepens when they take up essential work that pays less but matters more.  It continues as they trade, grow, mend, care, and support others in ways that fall outside official channels.  And it stabilises as local life patterns take root and begin to flourish.

The old economy may continue to dominate headlines.  But underneath, a new economy is emerging—smaller, more local, and more human.

The sooner we recognise this transformation, the better we can prepare for it—and help one another through it.