Much of the academic discussion about post growth assumes a deliberate transition. The language is about “choosing” degrowth, redesigning capitalism, or voting for ecological limits.
But what if the transition is not optional?
In the UK and other mature industrial economies, several forces are already in motion:
Ageing populations
Declining discretionary spending power
Infrastructure decay
Energy constraints
Stagnant productivity
Rising maintenance costs
Fiscal pressure on the state
These are not ideological. They are structural.
The future is not a government programme. It is an evolution already underway.
Government Does Not Lead Structural Contraction
Historically, governments lead during expansion. They stimulate, borrow, build, and promise.
But during contraction:
Tax revenues weaken.
Welfare demands increase.
Borrowing capacity tightens.
Political promises become harder to sustain.
In such conditions, governments do not shape growth. They manage decline.
The economy sets the pace. Government follows.
This is closer to historical experience in long stagnations than to the optimistic tone of degrowth theory.
The Cultural Shock
The real issue is not economic technique. It is mindset.
For seventy years, the UK has assumed:
Next year will be richer than this year.
Property will rise.
Consumption will expand.
Public services will grow.
Pensions will be funded by a larger workforce.
Mobility will increase.
If the underlying economy is shrinking in real terms, those assumptions quietly break.
And that break is not temporary.
What Changes in a Shrinking Era
If contraction is structural and prolonged, then values gradually shift:
Instead of expansion:
Maintenance becomes central.
Repair replaces replacement.
Longevity replaces novelty.
Instead of rising revenues:
Hard prioritisation emerges.
Universal provision becomes targeted.
Informal support systems grow.
Instead of mobility and scale:
Local provision strengthens.
Travel reduces.
Small units become viable again.
This is not a manifesto. It is adaptation.
The Foreseeable Future
The critical point is permanence.
If shrinkage is cyclical, governments can wait for recovery.
If shrinkage is structural, they must adapt permanently.
And so must households.
The political danger lies in pretending expansion will return. The practical wisdom lies in recognising that the system is evolving into a lower throughput economy and planning accordingly.
Trying to contact a bank, energy company, telephone provider or government department can consume much of a morning. The telephone menu offers numerous options, but rarely the one that is needed. Customers listen to music, repeat security information and explain the same problem to several different people. Sometimes the call is disconnected and the whole process must begin again.
Online services are presented as quicker and more efficient. They may be convenient for straightforward transactions, but they become frustrating when something goes wrong. Passwords are forgotten, security codes fail to arrive and automated systems cannot understand an unusual problem. People without smartphones are increasingly excluded.
This is particularly difficult for older and disabled people. Someone with limited mobility may be unable to reach the telephone quickly. A person with poor hearing may struggle with recorded instructions. Others may find small screens, complicated passwords and rapidly changing technology difficult to use.
The customer’s time is treated as though it has no value. A bank may save money by closing branches and reducing staff, but its costs have merely been transferred to its customers. Thousands of people spend millions of hours trying to complete tasks which once required a short conversation across a counter.
Centralisation has separated organisations from the people they serve. Decisions are made in distant offices. Calls are handled by national centres whose staff may know nothing about the customer or the locality. Responsibility is divided between departments, contractors and computer systems. Everyone follows the procedure, but nobody appears able to solve the problem.
Localism could reverse this.
A local bank or service office would not need to reproduce every function of a large organisation. It could provide a real person who could identify the problem, verify the customer and contact the correct department. Several essential services might share the same local office. Banking, energy, water, council services and benefits advice could all be made accessible through a familiar point of contact.
Local staff would gradually get to know the people they served. They would understand that an elderly customer had no smartphone, that another had hearing difficulties, or that someone with limited mobility needed longer to answer the telephone. Such knowledge would reduce repeated explanations and unnecessary security procedures.
Local accountability would also matter. It is much harder to ignore poor service when the organisation is visible within the locality. Customers would know where to go, whom to speak to and how to pursue a complaint. Staff would have names rather than employee numbers.
Not every service can be completely local. Banks will still require national computer systems, specialist departments and regulation. The important change would be to place a human local layer between large systems and the people who depend upon them.
Efficiency should not be measured only by how many branches are closed or how few employees remain. It should include the time, anxiety and inconvenience imposed upon the public. A system which saves an organisation five minutes but wastes an hour of a customer’s time is not efficient. It has simply moved the burden.
Localism would restore something increasingly absent from modern life: the ability to speak to a responsible person who understands the problem and has the authority to help. That would save time, reduce frustration and make essential services more humane.
A recent Daily Telegraph editorial argues that cutting public spending must become the central issue in British politics. National debt is estimated to have passed £3 trillion. The cost of long-term borrowing has risen sharply, while debt interest consumes money that can no longer be spent on defence, healthcare or other public services.
The newspaper welcomes Reform UK’s proposal to reduce annual government spending by £80 billion. It also approves of Conservative plans to restrain welfare spending while increasing defence expenditure. Its conclusion is that the British state is consuming ever more resources while delivering increasingly disappointing results.
The financial warning is justified. The Office for Budget Responsibility has acknowledged that debt-interest spending has reached post-war records as a proportion of both government revenue and national output. It has also become exceptionally volatile. Higher interest rates can therefore upset the public finances very quickly. The original Telegraph editorial can be read here.
However, the political debate still avoids the more fundamental question. What if economic growth cannot simply be “unleashed”?
The assumption that growth will return
The conventional argument is that government should cut spending, reduce taxes, remove regulations and allow the private economy to grow. Economic growth would then raise tax revenues and make the remaining public services affordable.
This assumes that the underlying productive economy is merely being restrained by bad government. Remove the restraints and expansion will resume.
But Britain may be facing something much deeper than poor economic management. The industrial economy depends upon abundant and affordable energy, raw materials, transport, infrastructure and credit. As these become more expensive, a growing proportion of economic activity must be devoted simply to maintaining existing systems.
The economy may continue to appear to grow in money terms while producing less real prosperity. Government borrowing can disguise this for a time. So can rising house prices, financial speculation and expanding public expenditure. None of them creates the affordable energy or physical resources upon which productive activity ultimately depends.
If the economy is shrinking structurally, no government will be able to restore the growth rates upon which its promises are based.
Spending cuts will come anyway
In that case, public spending will eventually be reduced. The choice is not necessarily between spending cuts and continued abundance. It may be between planned adaptation and disorderly contraction.
When government borrows to maintain services that current taxation can no longer support, it transfers part of the cost into the future. Interest then becomes another permanent claim upon future taxpayers. Eventually, lenders demand higher returns because they see that the state’s commitments are growing faster than its ability to pay.
The bond market is therefore not merely expressing a political preference for a smaller state. It is exposing an affordability problem.
Nevertheless, announcing a large figure such as £80 billion does not explain what should disappear. Every item of government spending supports somebody’s income. A departmental economy may mean the closure of a local office, the loss of a bus service, fewer carers, less road maintenance or the disappearance of a small rural school.
Badly designed national cuts can weaken precisely those local structures that will be needed as the economy contracts.
What should be cut?
The first distinction should not be between public and private activity. It should be between the essential and the discretionary.
Britain will continue to need defence, basic healthcare, water, food production, essential transport, telecommunications, law, taxation and the maintenance of vital infrastructure. These functions may have to be delivered more simply, but they cannot safely be abandoned.
There is much greater scope for reducing the machinery constructed around them. Layers of administration, overlapping authorities, consultancy contracts, constant reorganisations, excessive reporting systems and grand projects with doubtful practical value all consume resources.
Government must also reconsider whether it can continue trying to manage every locality through elaborate national systems. Central administration is expensive because it attempts to impose uniform procedures upon places with very different circumstances.
Cutting local capacity while preserving central bureaucracy would be the worst possible outcome. It would leave people with fewer services but no greater ability to provide for themselves.
Spending must move closer to necessity
A shrinking economy requires a smaller national state, but not an absent one. The national government will still be responsible for functions that cannot sensibly be undertaken locally. These include defence, monetary affairs, national taxation, major railways, telecommunications and highly specialised medicine.
Many other activities should move closer to the locality. Food production and processing, basic care, housing maintenance, smaller schools, minor roads, local transport, repair workshops and some forms of energy supply can be organised nearer to the people who depend upon them.
This would not merely transfer existing bureaucracy from one tier to another. Localities would have to recover the freedom to decide what they genuinely need and what they can afford. Solutions would differ from place to place.
One locality might give priority to food production and a small bus network. Another might concentrate upon fisheries, forestry, water management or the repair of existing buildings. A town might convert empty shops into workshops, health rooms and food markets.
Success would no longer be judged solely by the amount of money spent. It would be judged by whether essential needs were met.
Welfare and the loss of employment
Reducing welfare spending is particularly difficult in a shrinking economy. Discretionary employment is likely to disappear before essential employment. Retailing, hospitality, advertising, entertainment, financial services and parts of the digital economy may contract as households have less money left after paying for food, energy and housing.
Simply withdrawing benefits will not create conventional jobs that the wider economy can no longer support.
The answer must include enabling people to undertake useful local work. This could mean food growing, care, maintenance, woodland management, repair, reuse and small-scale manufacturing. Some of this work may produce relatively little taxable money while making an important contribution to local survival.
A government that recognises only formal employment and monetary output will misinterpret this development as economic failure. In reality, it may represent the beginning of a more resilient economy.
A different political debate
The Telegraph is right that Britain cannot continue borrowing and spending as though growth will always rescue the public finances. But the argument cannot end with a competition over which party promises the largest cut.
The real debate concerns what the national state must continue to do, what it must stop doing and what it should allow localities to do for themselves.
Public spending will have to fall because the resources supporting it are becoming less affordable. Yet indiscriminate austerity would accelerate decline without creating anything to replace the services being lost.
The purpose of spending reductions should therefore be to preserve the essential national core while releasing local initiative. Government must become smaller at the centre while localities become more capable, practical and self-reliant.
Britain cannot cut its way back to the former growth economy. It must reduce its financial commitments while helping a different economy to emerge: one founded upon local resources, essential production, sufficiency and the quality of everyday life.
A recent Daily Telegraph article examined Britain’s growing state pension problem by comparing it with Slovakia, which has introduced reforms to make its pension system more affordable. The conclusion is clear. Britain faces rising pension costs, fewer working-age people to support retirees, and difficult political choices over taxation, borrowing and retirement age.
But the article raises a more fundamental question.
Why has the pension system become unsustainable in the first place?
The answer lies in the ending of the growth economy.
For most of the last century governments assumed that each generation would enjoy higher productivity, higher incomes and a larger workforce. Economic growth would generate enough tax revenue to support an expanding retired population. The system depended upon continuous expansion.
That expansion is now faltering. Energy is becoming more expensive to obtain, natural resources are under increasing pressure, debt has grown to extraordinary levels, and birth rates have fallen across much of Europe. Governments are trying to maintain promises that were made under conditions that no longer exist.
The result is predictable. Pension ages rise. Benefits come under pressure. Taxes increase. Governments borrow more. None of these measures addresses the underlying cause. They merely delay the adjustment.
Localism starts from a completely different understanding.
Instead of asking how central government can continue financing an ever more expensive welfare state, localism asks how people can recover the ability to provide more of life’s essentials within their own locality.
This is where the emerging wood economy becomes important.
As fossil fuels become more costly and less available, wood once again becomes a valuable local resource. Managed woodlands can provide building materials, fuel, furniture, tools, charcoal, compost, craft products and many other necessities. They also create meaningful work that cannot easily be moved elsewhere.
Older people have a particularly important place in such an economy. Many possess practical knowledge, traditional skills and life experience that can be passed on to younger generations. Their contribution is measured not only by paid employment but by teaching, mentoring, repairing, organising and strengthening the social fabric of the locality.
At the same time, local communities naturally provide much of the practical support that older people need – friendship, transport, meals, small repairs, shopping and companionship. These are things that no amount of central government spending can organise as effectively as neighbours who know one another.
The pension itself remains important. People who have contributed throughout their lives deserve financial security. But money alone cannot provide resilience. A pension paid
At the same time, local communities naturally provide much of the practical support that older people need – friendship, transport, meals, small repairs, shopping and companionship. These are things that no amount of central government spending can organise as effectively as neighbours who know one another.
The pension itself remains important. People who have contributed throughout their lives deserve financial security. But money alone cannot provide resilience. A pension paid into an isolated community with few local skills and little local production buys progressively less security as national systems come under strain.
A locality that produces more of its own essentials, values the contribution of every generation and shares responsibility for one another is far more resilient.
The pension debate is therefore about much more than retirement ages or Treasury budgets. It is about the future shape of society.
The growth economy assumed that security would come from expanding national wealth.
The local economy recognises that lasting security comes from productive localities, healthy woodlands, practical skills and strong human relationships.
The pension crisis is not simply a financial problem. It is another sign that Britain is moving from one economic age into another. Localism is not an escape from that transition. It is one of the few practical ways of living successfully within it.
Before reading this article I expected it to be another of Tim Morgan’s thoughtful essays. Instead, I found a substantial work that is closer to a short book than a blog post. At approximately 18,000 words, it took me about five hours to read carefully and absorb its arguments. It is not something to skim. It deserves to be studied.
Tim Morgan brings together the ideas he has developed over many years into a single, comprehensive explanation of how the economy really works. His central argument is deceptively simple. The economy is not created by money. It is created by energy being used to transform raw materials into the goods and services on which civilisation depends. Money is simply a claim on that real economy.
From this foundation he develops several important conclusions.
The first is that economic growth has not ended because of poor government policy or temporary crises. It has ended because the surplus energy available to society is declining. As more energy has to be used simply to obtain energy, less remains available for everything else. Rising living costs and slowing prosperity are therefore structural, not temporary.
Second, Morgan argues that conventional economics mistakes money for wealth. GDP measures financial transactions rather than material prosperity. Expanding credit and creating more money cannot create the physical resources needed for genuine economic growth. The financial economy has become increasingly detached from the physical economy on which it ultimately depends.
Third, he explains why technology, including artificial intelligence, cannot escape physical limits. Every technological system requires energy, minerals, water and manufacturing capacity. Technology can improve efficiency, but it cannot abolish the laws of physics. Claims that innovation alone will restore endless growth ignore these material realities.
Perhaps the most valuable aspect of the article is that it provides a coherent framework rather than a collection of isolated observations. Readers who have sensed that housing, pensions, public finance, energy, inflation, food prices and environmental pressures are somehow connected will find an explanation of how these issues arise from the same underlying causes.
From a localist perspective, the implications are profound. If prosperity increasingly depends upon secure access to real resources rather than expanding financial claims, then resilient local economies become far more important than global financial growth. Communities that shorten supply chains, conserve energy, rebuild local production and strengthen local relationships are likely to prove far more resilient than those dependent upon ever-expanding international systems.
Whether one agrees with every conclusion or not, this article represents one of the clearest and most comprehensive explanations of surplus energy economics currently available. It rewards careful reading, but it demands concentration. I found it one of the most significant pieces Tim Morgan has written. It is long, detailed and challenging, but it provides a framework for understanding many of the problems that otherwise appear unrelated.
These disconnects from the real world and productive work have created a mindset in which doing something with money is all we need to do to get rich and preserve our wealth..
∙An old friend summarized the mindset of much of the developed world wryly and succinctly: “We don’t need the world, we only need money.“ In other words, we don’t actually need real-world sources of life’s essentials that are within our control or a functional biosphere because since we can buy everything we could possibly want or need with money. So, money is all we need.
We don’t care where the stuff we want/need comes from because it will always come from somewhere and be available in whatever quantity and quality we desire, as somebody somewhere will keep our stores and fuel tanks fully stocked and our electrical grid powered 24/7.
This disconnect between the complex mechanics of real-world manufacturing, processing and transport–a world of physical materials reconfigured by productive work–is understandable in a consumer economy of transactions of money where all the work, all the materials and all the consequences are invisible to the consumer plugging in an appliance, fueling their car and buying an item off the shelf.
An economy that favors assets and financial speculation as the means to acquiring wealth is also disconnected from the role of productive work in this invisible world of production and supply chains.
These disconnects from the real world and productive work have created a make-believe mindset in which doing something with money is all we need to do to get rich and preserve our wealth. I call this make-believe world civilizational psychosis, a mindset detached from reality for it mischaracterizes the relationships of the material world, productive work and currency / money.
This make-believe world in which money is all that matters is not a sustainable society or economy.
In this make-believe world, shape-shifting money is the solution to all problems. Common sense and history both support the conclusion that a financial system that must borrow from the future and pay interest on that rising debt to fund the present is not sustainable and will be replaced with some other arrangement one way or another.
All the solutions being bandied about are money-based: stablecoins, gold-backed currencies, etc. The idea behind all of these proposals is that changing money will fix whatever’s broken in a system that has lost touch with its material foundations and productive work.
This mindset explains the conventional conviction that all one has to do to live extremely well is navigate the coming collapse of the current money system (i.e. fiat currencies and credit) and emerge from the other side of the wormhole with wealth intact in some other form.
This mindset makes three implicit assumptions:
1. The real world will continue functioning perfectly despite the collapse of the current money system, ensuring fuel tanks are full, the electricity is on 24/7 and all the retail shelves are full of all the good things. 2. The majority who did not successfully navigate the collapse of the current money system and are now impoverished will passively accept their serfdom to the New Nobility who successfully emerged with wealth intact–or greatly increased (see #3). 3. Since the new form of money will be scarce–and this is the source of its value as a replacement currency–those who own it will accrue virtually all the “value” embedded in “money:” all those who held the old currency that’s now worthless will have zero “money:” those who own the new form of money will own all the scarcity value of the new currency.
If history is any guide, the distribution of those who manage to convert all their “old” wealth into “new” wealth is highly asymmetric, as the vast majority lack the means to manage the conversion on a scale where the resulting wealth is consequential. In other words, the rich tend to manage the conversion and everyone else doesn’t. So the rich get richer and everyone else is wiped out.
This has a corollary: since those who manage the conversion will emerge on the other side of the wormhole with wealth, “money” is no longer bound to work/labor: the wealthy have no need to generate value via work, they merely provide demand via spending their wealth.
None of these assumptions strike me as realistic, practical or desirable.
Let’s examine what happens to supply chains when fiat currencies (the current form of money) crash in purchasing power (i.e. hyper-inflation or loss of trust in the currency) and the replacement currency is a gold-backed currency.
Those favoring gold-or-commodity backed currencies tend to forget that scale is a primary characteristic of “money” used in global transactions. If the gold-backed currency (or cryptocurrency) in circulation can only fund 10% of the current global volume of currency transactions–around $9 to $10 trillion dollars a day–and 90% of the new currency is locked in domestic accounts and unavailable for global transactions–then this new currency can only grease 1% of the current demand for global currency trading.
The global supply chain system crashes because there is not enough currency outside the issuing entity to grease the immense daily trade in currency for trade, debt, speculation, hedging, etc.
The whole point of a currency backed by a limited commodity is that it can’t expand 10-fold overnight because that would reduce the purchasing power of the currency by the same factor.
In other words, a replacement currency must provide the same scale of not only currency in circulation but the same scale of liquidity available for global settlements of trade, debt, speculation and hedging–currently trillions of dollars per day. Anything less and the entire global trade / credit network freezes up.
Consider what happens to enterprises in supply chains who continued accepting now-worthless “old” currency. They’re now bankrupt, so whatever chains they were links in are now broken. Those enterprises that prudently held off accepting any orders until the situation settled down have nothing in the pipeline, so whatever chains they were part of are also broken.
Those who decide to only accept some scarce monetary substitute are sitting on their hands, as they’ve been outbid by more desperate dealers / traders.
In summary, if the current “money” dissolves, global supply chains immediately dissolve, too, and expecting a relatively limited volume of replacement currency with a tiny float to ramp up 10-fold while retaining its scarcity value is delusional, as the entire point of scarcity value as the basis of a currency is destroyed if the issuance jumps up 10-fold to handle global trade needs while the quantity of the underlying commodity remains unchanged.
The real world breaks down immediately, and nobody will restock the shelves that are now bare, or refill the fuel tanks that are now empty, or restart the grid.
As for #2, the impoverished and those hanging onto “middle class status” by a thread had hope in the old system because the shelves were still full. Now that the old money has dissolved and the shelves are empty, they’re not just impoverished, they have lost hope and are now angry. They are unlikely to view those who emerge from the wormhole wealthy favorably. They will likely view this as the penultimate form of unfairness and inequality and take action they reckon is appropriate, rebalancing the inequality by expropriation.
Telling them that they will now be able to turn their labor into real wealth down the road as serfs in a neofeudal arrangement is unlikely to persuade them that the New Nobility deserves its wealth and dominance.
As for the connection between the material world, productive work and money, there is no sustainable economy or society possible until these bonds are restored. The road to wealth must run through being productive in the material world rather than speculation. This has been lost in the current speculative mania and the associated civilizational psychosis that we “don’t need the world, only need money” and the best way to acquire that money is speculating in assets and money. (I discuss the connections of money and work in my book Money and Work Unchained.)
In summary: the idea that modifying or replacing currency / money will solve problems of corrupted values, perverse incentives, destabilizing asymmetries of wealth and power and the civilizational psychosis of “growth of consumption and profits at any cost” is illusory. We would be wise to ponder changing far more about how we live than our monetary system, which is a manifestation of corrupted values, perverse incentives, destabilizing asymmetries and civilizational psychosis rather than their source.
Reorganizing the monetary system to serve a sustainable social order is certainly part of the overall set of solutions, but that alone is not enough to fix what’s broken at deeper levels than what we use as money.
The AI boom shares all the risk profiles of previous speculative manias but lacks society-wide benefits while generating fast-metastasizing negative consequences and costs.
The idea that the current bubble in AI data centers is an echo of the railroad-construction bubble of the 1870s is appealing–but only half-right. The completion of the first transcontinental railroad in late 1869 sparked a speculative mania of raising capital to build railroads, which were seen as “can’t lose” investments in a technology that lowered transport costs from $1 to ten cents.
But not all routes had the potential to become profitable, and the resulting collapse of the railroad bubble devastated the developed-world economies, triggering a deep economic downturn from 1873 to 1879 that was called “The Great Depression” at the time (or “The Long Depression”).
The term for speculative frenzies channeling vast sums into investments with difficult-to-assess risk profiles is mal-investment, and mal-investment on a large scale triggers financial panics and economic depressions in a well-understood feedback loop.
Money invested in digging a mine that doesn’t yield any gold can’t be recovered. That capital is gone. There is an opportunity cost to every investment: that capital could have been invested in something else that was more productive than the speculative bet on something with unclear risks and payback.
As the scale of losses become apparent, credit tightens and the pool of capital available shrinks. Short-term loans that can’t be rolled over into longer duration loans trigger bankruptcies which quickly lead to bank runs (financial panics) and layoffs as businesses close. This decline in wages, revenues and the velocity of money is self-reinforcing, and the recovery process–being both financial and psychological–takes years.
The parallels with the AI speculative investment mania are obvious. Just as any railroad was viewed as guaranteed to be immensely profitable because railroads generated enormous efficiencies that reduced costs, all AI is guaranteed to be immensely profitable because AI generates enormous efficiencies that reduced costs. But in the real world, use cases for specific railroads and AI applications are stretched along a spectrum which isn’t visible in the early stages of a speculative boom.
Individual use cases don’t automatically guarantee an entire class of use cases will be successful. That one railroad–or application of AI–profitably reduced costs does not necessarily extend to all railroads or AI applications.
Nobody wants to wait around for the long process of sorting which use cases are actually beneficial and which are mal-investments, as the big money is made by making big bets in the early days. Human greed is a remarkable force, especially when combined with self-serving hype and the euphoria of the herd running.
In the current confluence of greed, hype and euphoria, the possibility that the inevitable aftermath of vast mal-investment is a Great Depression doesn’t exactly resonate. AI isn’t a railroad, it’s the most amazing force in the Universe, etc. This is Wetware 1.0 in action: the psychology of speculative frenzies doesn’t change, and so here we are–again.
Those are the parallels of the railroad mania of the 1870s and the current AI mania. But that’s only half the story. Railroads did dramatically lower costs, turning unprofitable ventures into profitable ventures not by reducing production costs but by reducing transport costs, which prior to railroads might equal production costs.
The differences between railroads and LLM / generative AI are significant. While many railroads went bankrupt when the bubble burst, those that actually served expanding markets were eventually put to use as the tracks were still useful many years after being laid. A new locomotive type might enter service decades later, but the tracks remained useful and valuable for decades–with proper maintenance. The rails were not obsoleted every few years, nor did the the entire rail lines have to be replaced every few years.
AI is not permanent. It is constantly being obsoleted. A new class of lower-power consumption chips could obsolete the current class of AI chips, requiring a mass replacement of the entire processing foundation of AI. Innovations in software could reduce the processing demands, turning existing data centers into expenses rather than profit generators. AI software that users download onto their own computers negates the need for “renting” data centers (i.e. buying processing power with tokens) by generating models from the user’s own data. These are just a few potential forces undermining the utility, lifespan and profitability of the current build-out of data centers.
While the cost structure of railroads were relatively straightforward, the costs of AI are complex and difficult to assess as initial costs are not total ownership costs, as maintenance expenses are still unfolding and future costs of resources and energy are trending higher.
Create enough hallucinated legal arguments, flawed engineering calculations and backdoor-ridden code, and the slop vats fill faster than our capacity to tell good work from bad, writes Tim Harford. How can we tell good AI from bad? (Financial Times)
Cedar Owl recently published a comprehensive overview of the Total Costs of Ownership of AI / Robotics and concluded they may exceed the costs of human employees.Will the cost of an AI Robot be higher than the salary of a Human Employee?AI Robot vs. Human Worker Total Cost of Ownership (cedarowl.substack.com) “AI didn’t remove cost–it changed where the cost lives.”
As for profitable use cases, it’s too soon to tell. Individual cases don’t necessarily scale to the entire sector or economy. The hype is AI is scalable and applicable everywhere, but this isn’t what real-world experience is finding.
Unlike railroads, whose cost-reduction benefits were immediate and measurable, the sum total of AI benefits is not just unclear but potentially negative. The negative effects of AI slop and malicious applications are already visible but the full consequences of their expansion cannot yet be determined.
Recent polls reveal a profound skepticism in the younger generations whose lives will be most impacted by AI.Gen Z Is Using A.I., but Doesn’t Feel Great About It. Only 15 percent said they saw A.I. as a net benefit.
The structural limits of AI are equally visible but the full consequences of these multi-factor limitations cannot yet be determined. A recent article in Scientific American summarized one key limitation: the illusion that AI is “thinking,” “understanding” and “reasoning”: AI and human intelligence are drastically different–here’s how: “They are extraordinarily powerful tools when used as what they are: engines of linguistic automation, not engines of understanding. They excel at drafting, summarizing, recombining and exploring ideas. But when we ask them to judge, we unintentionally redefine judgment–shifting it from a relation between a mind and the world to one between a prompt and a probability distribution.”
There are many other structural limitations whose nature limits “quick fixes.”“To grow skills, people need to go through hardship. They need to develop the muscle to think through problems,” he said. “How would someone question if AI is accurate if they don’t have critical thinking?”
“This is the contradiction that has many AI boosters talking out of both sides of their mouths: The use of coding agents is actively diminishing the very skills needed to effectively manage the coding agents.” (via Manoj S.)
Two: when the tokens run out, the AI stops. Just stops. No continuity. No workaround. Just a spinning wheel where your workforce used to be.”
AI coding frontloads one form of productivity by backloading the entire system with higher maintenance costs down the line. These costs are not visible in the initial phase, and by the time they’re piling up, it’s too late to reverse these structural costs.
The sums invested in AI data centers–and committed to planned data centers–are on a large enough scale that even the most robust economy is vulnerable to disruption when the revenues needed to justify these extraordinary sums fail to materialize and the total operational costs and costs of ownership become measurable.
But in a sense, the entire AI narrative is a bit like selling huge amounts of picks and shovels as everyone rushes to the mines, and then betting there will be gold when they all start digging. Much of the stock market is made up of investor speculation that pick and shovel companies are about to hit the motherlode. But we don’t actually know how much gold there is, or even if there is any gold at all. So far, every powerful and rich person has insisted that there’s so much gold we can’t imagine it all, and anyone who thinks otherwise is a Luddite Marxist loser.”
Perhaps most importantly, once we subtract the hype, there is no evidence-based answer to the question: will our society / the public benefit from AI? Or are all the proposed benefits of reducing costs and generating innovations concentrated in the hands of AI’s owners and corporate users?
Cui bono–to whose benefit? What’s being touted as beneficial to all–equivalent to railroads–is at this point only beneficial to owners and monopolistic-cartel corporations, the very asymmetry that is fast undermining the foundations of our social and economic systems.
Put another way: is AI actually solving the core problems undermining our society and economy–systemic asymmetries of costs, wealth, power, agency and opportunity–or is AI adding new problems–brain rot, dependence on black box systems owned by a handful of tech corporations, AI slop, deepfakes, and a tsunami of malicious AI?
For all these structural reasons, AI data centers are not the railroads of today. The AI boom shares all the risk profiles of previous speculative manias but lacks society-wide benefits while generating fast-metastasizing negative consequences and costs.
The recent concern that Britain’s housing wealth may be in danger of collapsing raises a much deeper question. What happens if the economy itself continues to shrink?
In a shrinking economy, the fundamental assumption behind ever-rising house prices begins to weaken. Housing values ultimately depend upon what future buyers can afford to pay. If incomes stagnate, secure employment becomes scarcer, borrowing becomes more difficult and younger generations possess less disposable income, the pool of buyers capable of sustaining high prices gradually contracts.
This does not necessarily mean a sudden crash. More likely is a long period of stagnation in which house prices fail to keep pace with inflation. In nominal terms prices may appear stable, but in real terms housing wealth steadily declines year after year. Britain may already be moving in this direction.
A shrinking economy would also change the role of housing itself. During the growth era, property functioned as an investment asset. People expected capital gains. Buy-to-let investors expected rising values. Governments quietly welcomed rising house prices because they created a feeling of prosperity.
However, if economic growth disappears, housing increasingly reverts to its original purpose – shelter.
That change could have profound consequences.
The first consequence would be psychological. Much of Britain’s middle-class security is tied to property values. Pension planning, inheritance expectations and retirement assumptions all depend upon housing wealth remaining high. If prices stagnate or fall, many households may discover that what appeared to be wealth was largely a paper valuation dependent upon continuous market optimism.
The second consequence would be political. Governments have repeatedly intervened to support house prices through low interest rates, mortgage schemes and planning restrictions. Yet in a shrinking economy governments themselves become poorer and more indebted. Their ability to support asset prices weakens. Eventually economic reality may become stronger than political intervention.
The third consequence concerns localism.
If housing ceases to be viewed primarily as an investment, local communities may begin to think differently about land and property. The emphasis shifts from maximising exchange value to maximising usefulness. Empty buildings become potential workshops, local enterprises, food production facilities or housing for younger families. Land ceases to be merely a financial asset and becomes part of the productive life of the locality.
This would represent a major cultural shift. For decades Britain has measured success through rising property values. Yet from the perspective of a shrinking economy, permanently rising house prices are actually a sign of increasing unaffordability and growing dependence upon debt.
The irony is that falling or stagnant house prices may be painful for those who expected continual gains, but beneficial for future generations seeking somewhere to live. Many younger people already regard high housing costs as one of the greatest barriers to family formation, financial security and independence.
If the shrinking economy continues, Britain may eventually be forced to choose between preserving housing as a speculative investment or restoring it as an affordable necessity.
The housing market was built during an age of growth, expanding credit and rising consumption. If that age is ending, then housing wealth may no longer behave as it did before.
In that case, the future may not be a dramatic collapse, but something perhaps more significant – the slow transformation of housing from a financial asset back into a home.
For newcomers to this blog, I must explain that I follow Dr Tim Morgan’s SEEDS analysis.
Dr Morgan is the former head of research at Tullett Prebon, a major British financial brokerage.
Morgan uses the acronym SEEDS to mean the “Surplus Energy Economics Data System”. It is the economic model he developed to analyse the economy as an energy system rather than as a purely financial one.
The central idea behind SEEDS is:
The economy is not really driven by money. It is driven by surplus energy.
Money is only a claim on what the real economy can produce.
Morgan argues that orthodox economics gets this backwards because it assumes growth can continue indefinitely if central banks and governments manage money correctly. SEEDS says this is impossible if the surplus energy available to society is shrinking.
The model revolves around several key concepts.
The economy is energy
SEEDS starts from the idea that every good and service requires energy to exist:
food,
transport,
buildings,
hospitals,
computers,
the internet,
financial services,
everything.
Without energy, there is no economy.
Surplus energy matters, not total energy
This is probably the most important part of the theory.
Morgan says that what matters is not how much gross energy exists, but how much is left after obtaining the energy itself.
For example:
oil wells,
pipelines,
refineries,
wind turbines,
batteries,
electricity grids,
All require energy to build and operate.
So society must “use energy to get energy”.
The remaining amount is called surplus energy.
ECoE – Energy Cost of Energy
Morgan measures this using a metric called ECoE.
ECoE is the percentage of energy consumed to obtain usable energy.
He argues that:
In earlier industrial times, ECoE was very low,
cheap coal and oil created enormous surplus energy,
This enabled industrial growth, welfare states, consumerism, and financial expansion.
But now:
resources are harder to extract,
systems are more complex,
renewables require extensive infrastructure,
therefore ECoE rises.
As ECoE rises, surplus energy shrinks.
Prosperity is shrinking even if GDP rises
SEEDS distinguishes between:
financial growth, and
real prosperity.
Morgan argues governments disguise declining prosperity through:
debt,
money creation,
asset inflation,
low interest rates,
expanding credit.
So GDP may still rise while real living standards stagnate or decline.
Essentials squeeze discretionary spending
One of Morgan’s major conclusions is that as surplus energy declines:
essentials become more expensive,
households spend more on food, energy, housing and taxation,
discretionary sectors shrink.
SEEDS therefore predicts long-term pressure on:
tourism,
hospitality,
leisure,
luxury retail,
non-essential transport,
much office employment,
and many financial activities.
Meanwhile, essentials become dominant again.
Finance becomes detached from reality
Morgan argues modern finance increasingly represents claims on future prosperity that may never exist.
So:
debts expand,
pensions become difficult,
asset prices become unrealistic,
governments borrow to preserve living standards,
but the underlying energy base is weakening.
Eventually, he believes, the financial system must “de-financialise” and reconnect with physical reality.
A growing number of UK businesses are either collapsing, closing branches, or entering administration. When the pattern is examined carefully, most are connected with discretionary spending rather than essentials.
Recent examples include the restaurant chain Spaghetti House, which closed all of its branches and made over 100 staff redundant.
Retailers are also under pressure. Shoe Zone has closed stores after losses increased sharply. The former WH Smith high street chain, now renamed TG Jones, is facing possible insolvency and major store closures.
Hospitality is one of the worst affected sectors. Government and industry data show thousands of pubs, restaurants, hotels and food-service businesses becoming insolvent.
The pattern is revealing.
Most of the sectors under greatest strain are not directly connected with survival needs. They are businesses that depend upon surplus income – eating out, leisure shopping, fashion purchases, travel, hospitality, entertainment and tourism.
Consumer spending figures support this. UK households are cutting back mainly on non-essential expenditure, particularly travel and leisure.
This is highly significant in relation to the shrinking economy.
As energy costs rise through the whole economy, and as governments, businesses and households all struggle with debt and inflation, people naturally retreat towards essentials. Food, heating, housing and basic transport take priority. Discretionary spending declines first because it depends upon surplus prosperity.
The industrial-consumerist era created vast layers of discretionary activity. Much of modern employment has depended upon people having enough surplus income to spend on optional goods and services. Once that surplus begins to disappear, these sectors become unstable.
The insolvency figures increasingly reflect this reality. Retail, hospitality and leisure businesses are consistently among the most vulnerable sectors.
From the viewpoint of localism, this may represent the early stages of a long transition away from a consumption-driven economy toward a more essentials-based economy.
In a localist future, economic activity becomes increasingly focused upon necessities close to home – food growing, maintenance, care, repair work, local materials, practical crafts, shared facilities and small-scale production. These are activities rooted in survival and locality rather than discretionary consumption.
The present wave of closures may therefore not simply be a temporary recessionary cycle. It may instead be showing which parts of the industrial economy are least sustainable when surplus energy and surplus spending begin to decline.
That does not mean all hospitality, retail or leisure disappears. Some will survive locally at smaller scale, especially where closely tied to community life. But the era of mass discretionary consumerism appears increasingly fragile.
The economy may gradually divide into two parts:
essential activities that remain viable because people must have them
discretionary activities that contract because people can no longer afford large amounts of optional consumption
This distinction may become one of the defining economic realities of the coming decades.
The United Kingdom increasingly appears to be trapped in confusion. Governments announce new policies almost weekly, yet few problems seem to be improving. Welfare spending rises relentlessly, public debt expands, housing shortages worsen, immigration continues at historically high levels, and public services struggle under increasing pressure.
At the same time, governments appear unable to decide what direction the country should take. One minister speaks of growth, another of austerity, another of borrowing, and another of industrial strategy. Yet underneath all these debates lies a deeper reality that few politicians are willing to discuss openly.
The reality is that the industrial-consumerist economy is slowly shrinking.
The modern economy was built during a period of abundant, cheap energy and continual expansion. Governments, businesses and individuals all assumed that future growth would always pay for present borrowing and the expansion of systems of welfare, administration and consumption.
But the surplus energy that supported this expansion is gradually declining. As a result, many forms of discretionary economic activity become harder to sustain. Large parts of the economy increasingly depend on debt, subsidies, and financial manipulation rather than on genuine productive growth.
Governments cannot openly admit this because the entire political structure depends upon belief in future expansion. So instead they continue borrowing, taxing and expanding welfare systems in an attempt to preserve the old order.
This creates a vicious circle.
Higher welfare costs require more taxation and borrowing. More borrowing increases the national debt. Weakening economic productivity, in turn, encourages governments to support high levels of immigration to maintain the labour force, tax base and consumer spending.
Also, mass immigration increasingly strains housing, healthcare, schools, infrastructure, and social cohesion.
Much of modern immigration is linked directly or indirectly to the national welfare state and the wider consumer economy.
Britain offers not only employment opportunities, but also access to housing support, healthcare, education, welfare payments and numerous forms of state assistance. Even when immigrants work hard and contribute positively, the overall system remains a powerful attraction because it offers security from a large, centralised state.
This situation belongs to the era of growth economics.
As the economy shrinks, the central state’s ability to maintain such vast national support systems steadily weakens. Governments may continue trying to preserve them by borrowing, but eventually, the financial burden becomes too great.
At this point, society itself begins evolving from the grassroots upward.
This is an aspect of the beginning of localism.
Localism is not primarily a political ideology. It is the natural social and economic adjustment that occurs when large centralised systems become too expensive and too inefficient to maintain. Functions slowly move away from distant bureaucracies and back toward families, localities and practical local cooperation.
In such a society, many forms of support increasingly arise from local participation rather than automatic national entitlement.
People contribute directly to local life through food production, repairs, care, maintenance, small businesses, practical skills, and mutual support networks. Economic activity becomes more local, informal, and rooted in local relationships.
Under these conditions, immigration changes naturally.
Large-scale immigration becomes less attractive as the national welfare structure that once served as a magnet gradually weakens. Support systems increasingly depend upon local relationships, local contribution and long-term participation within the locality itself.
Benefits provided through local cooperation are not easily transferable to newly arrived outsiders who have no established place within the local social structure.
This is not necessarily hostility toward immigrants. It is simply the natural behaviour of local economies.
Families and localities tend to support those who are already part of the community and who contribute directly to its well-being. In a localist society, support is based less on abstract national entitlement and more on trust, familiarity, reciprocity, and shared participation.
As a result, excessive immigration declines naturally without requiring constant political conflict.
The same process may gradually affect welfare dependency more generally.
Under the present system, millions of people depend upon distant state structures for survival because productive local economic roles have disappeared. But as local economies redevelop from the grass-roots, people increasingly regain practical functions within their own localities.
Food growing, care of older people, repair work, local transport, maintenance, childcare, cooking, preserving food, and many other essential activities are slowly regaining economic importance.
Children with difficulties may also benefit from this transition. Modern consumer society often requires both parents to work full-time simply to maintain household finances. Yet many children struggle emotionally and behaviourally within this arrangement.
As the shrinking economy reduces formal employment opportunities, particularly within discretionary sectors, society may gradually reorganise around different priorities. More parents, especially mothers, may once again spend more time at home because the economic structure itself has changed.
The value of parenting, care and local involvement rises again.
This evolution may eventually reduce many social problems more effectively than government programmes.
Government debt may also begin stabilising naturally. As society becomes structurally simpler and more localised, the enormous administrative costs of maintaining highly centralised systems may slowly decline. Local solutions are often less expensive because they depend more upon direct relationships and practical cooperation than upon layers of bureaucracy.
None of this implies an easy transition.
There may be periods of instability, financial crises, political fragmentation and falling living standards in some sectors. Governments will continue trying to restore economic growth because the present political system has few alternatives.
But beneath the surface, a different society is already emerging.
The future may place greater value upon stability rather than expansion, quality rather than quantity, locality rather than centralisation, and participation rather than dependency.
Many of today’s apparently unsolvable problems will be resolved not through larger government systems, but through the gradual natural evolution of localism.
The industrial and consumerist era was built upon one overriding condition – abundant surplus energy.
Coal, oil and gas provided such vast quantities of concentrated energy that societies could undertake a wide range of activities far beyond simple survival.
Once food, shelter, transport and basic industry had been secured, enormous additional sectors could emerge. Tourism, advertising, financial services, mass commuting, global retailing, endless entertainment, international supply chains, consumer electronics, consultancy industries, luxury goods and countless other discretionary activities all became possible because the energy surplus was so large.
This surplus energy shaped not only the economy but also the psychology of modern civilisation.
Industrial society increasingly came to believe that human progress consisted of quantitative expansion.
More production meant success.
More consumption meant prosperity.
More movement meant development.
More choice meant freedom.
More wealth meant happiness.
And because industrial civilisation was fundamentally expansionary, it increasingly measured itself in numerical terms. Growth required measurement. Expanding systems could only be coordinated through statistics, accounts, targets and calculations.
Thus, modern society became a gigantic measuring machine.
Governments measure GDP growth.
Businesses measured productivity.
Banks measured financial returns.
Transport planners measured traffic flows.
Retailers measured sales volumes.
Schools measured test scores.
Hospitals measured targets.
Individuals measured income, house values, pensions and possessions.
The modern world increasingly trusts numbers more than lived experience.
At the centre of this system stood Gross Domestic Product, or GDP. GDP measures the total monetary value of goods and services produced within a country during a given period. If more money flows through the economy, GDP rises. If less money flows, GDP falls.
But GDP does not really measure well-being.
It measures activity.
Indeed, many activities which increase GDP may actually reduce human happiness and social stability.
If families stop caring for elderly relatives and instead pay for commercial care, providers.
If people stop repairing possessions and constantly replace them, GDP rises.
If communities become fragmented and individuals purchase more services separately, GDP rises.
If stress, anxiety and overwork generate larger pharmaceutical industries, counselling industries and entertainment industries, GDP rises.
The industrial system, therefore, rewarded quantity over quality.
The assumption was that if measurable activity increased continuously, society itself must be improving.
But this increasingly produced a strange contradiction.
Material quantity expanded enormously while unhappiness, anxiety, loneliness and social fragmentation often expanded alongside it.
People possessed more goods yet frequently felt less secure.
Consumer choice expanded while communities weakened.
Economic growth increased while trust declined.
The industrial era became extraordinarily successful at producing quantity but much less successful at producing contentment.
This occurred because industrial consumerism encouraged perpetual dissatisfaction. Economies dependent on continuous consumption require people to never feel they have enough. Advertising, fashion, status competition and planned obsolescence all depended upon maintaining permanent dissatisfaction.
A happy, contented and materially sufficient population is economically problematic for a growth-based system because contented people consume less.
Thus, industrial civilisation subtly encouraged endless striving rather than sufficiency.
But this entire system depended upon abundant surplus energy.
The critical issue is not simply the price of energy, but the rising cost of obtaining it.
In the early industrial period, huge quantities of surplus energy could be extracted relatively easily. A small amount of energy invested in oil extraction yielded enormous returns. The surplus remaining after extraction powered the rest of civilisation.
But over time, the easiest resources are depleted first. Oil fields become harder to exploit. Minerals require more processing. Infrastructure becomes more complex. More energy must be invested simply to maintain the energy system itself.
As a result, the net surplus energy available to society gradually declines.
Industrial civilisation can mask this process for some time through debt, financial expansion and technological efficiencies. But eventually the effects spread throughout the economy.
And they appear first in discretionary activities.
This is crucial because a large proportion of modern economic activity is discretionary rather than essential. A vast number of jobs and industries exist only because abundant surplus energy once allowed them to emerge.
As surplus energy declines, societies naturally begin reducing these discretionary activities.
People eat out less.
They travel less.
They postpone purchases.
They repair rather than replace.
They reduce luxury spending.
Businesses contract.
Hospitality weakens.
Retail declines.
Large office sectors shrink.
Long-distance commuting becomes less attractive.
Some estimates suggest that perhaps nearly half of modern economic activity may ultimately prove to be discretionary – dependent not upon necessity, but upon temporary conditions of high surplus energy.
As these sectors weaken, formal employment also weakens.
This is not merely a temporary recession. It is part of an evolutionary adjustment.
Industrial society required millions of specialised formal jobs because large-scale systems required central coordination. But as discretionary sectors decline, increasing numbers of people have to move towards informal, practical and localised forms of activity.
Some grow food.
Some repair equipment.
Some provide local services.
Some care informally for others.
Some combine several small activities together.
The formal industrial labour market slowly fragments.
Governments often interpret this as economic failure because they continue to view society through industrial metrics such as GDP, tax receipts, and employment statistics.
But underneath the measurements, another process may be occurring.
People begin adapting individually to a world with less surplus energy.
And this adaptation naturally encourages localism.
The important point is that localism is not primarily an ideology imposed politically from above. It is an evolutionary response to changing material conditions.
As large systems become more expensive, fragile and impersonal, individuals increasingly turn towards what feels immediate, practical and dependable.
They rediscover locality.
They value nearby food production.
They reduce dependency upon long supply chains.
They rely more upon personal relationships.
They seek practical security rather than abstract financial growth.
And most importantly, the emphasis slowly shifts from quantity towards quality.
This is the profound civilisational change taking place underneath the economic statistics.
Industrial civilisation assumed that more quantity created more happiness.
Localism will discover that quality creates happiness.
A locality with fewer possessions but stronger trust may feel happier than an affluent but fragmented suburb.
A slower life with secure relationships may produce greater well-being than a high-income life dominated by stress and commuting.
Repairing and maintaining valued possessions may create greater satisfaction than endless replacement.
Knowing neighbours may matter more than access to vast anonymous systems.
Fresh local food may provide more contentment than unlimited supermarket choice.
Security, familiarity and usefulness begin replacing accumulation as measures of success.
Importantly, many of these improvements barely register in industrial statistics.
A neighbour helping another neighbour creates little GDP.
Home-grown vegetables barely appear economically.
Shared tools reduce measurable consumption.
Repairing old equipment lowers retail sales.
Informal care reduces service-sector activity.
From the viewpoint of industrial economics, these may appear negative because the measurable quantity of transactions declines.
Yet qualitatively, life may improve.
This is why the transition towards localism is so difficult for industrial institutions to recognise. Governments and economists continue to observe declines in measurable indicators while often failing to recognise the emergence of qualitative resilience beneath the surface.
Indeed, localism may initially appear economically poorer but ultimately become socially richer.
GDP may decline while trust increases.
Retail spending may fall while practical competence grows.
Formal employment may weaken while informal usefulness expands.
Consumer choice may narrow while life satisfaction improves.
The industrial era measured society because it believed reality could be understood numerically.
The emerging localist era may increasingly understand reality through lived experience.
People may gradually judge society less by how much it possesses and more by how well it lives.
And the driving force behind this transition is not primarily political theory, but the decline of surplus energy available to support the enormous quantitative complexity of industrial consumer civilisation. As quantity becomes harder to sustain, society naturally discovers quality
Britain is living through a period of profound muddle. Institutions continue to behave as though economic expansion, rising consumption and increasing public expenditure will soon return, yet everyday experience increasingly suggests otherwise. The country is caught between an old expectation of endless growth and a new reality of limits, stagnation and decline.
At the centre of the confusion lies a deeper issue that is still rarely acknowledged openly. Modern financial capitalism itself depends upon continuing economic growth. Debt, pensions, investment markets, property values, government borrowing and business expansion all assume that tomorrow’s economy will be larger than today’s. When growth slows permanently, the entire financial structure begins to lose stability.
For decades Britain has attempted to maintain the appearance of prosperity through borrowing, asset inflation and financial expansion, even while much of the productive economy weakened. Rising house prices created the illusion of wealth. Expanding credit maintained consumer spending. Governments relied increasingly on debt. Pension systems depended upon rising investment values. Yet all these mechanisms ultimately require continuing growth underneath them.
If growth no longer returns, financial capitalism as it has existed since the late twentieth century gradually ceases to function properly.
This can already be seen across the country.
The housing system is in confusion. Governments promise hundreds of thousands of new homes while construction costs rise, planning systems become more complex, infrastructure becomes harder to fund, and younger people find ownership increasingly unattainable. Developers depend upon debt, high land values and continuing consumer confidence. Mortgage systems themselves rely upon assumptions of stable long-term growth and rising incomes. Yet many towns already contain empty shops, underused offices and ageing housing stock requiring major repair. The assumption that continuous expansion will solve the housing crisis no longer fits reality.
Transport is equally confused. Roads remain congested, rail systems require enormous subsidy, local bus services decline outside major cities, and large infrastructure projects become steadily more expensive. Yet many journeys are becoming unaffordable for households facing rising costs. The old assumption that mobility would endlessly increase is weakening. Remote working, online shopping and demographic ageing are quietly reducing the demand for daily long-distance travel.
The NHS sits in perhaps the greatest muddle of all. It was designed during an era when economic growth could steadily finance rising demand. Today it faces an ageing population, chronic illness, staffing shortages and increasing treatment costs. Governments still speak as though greater efficiency alone will solve the problem, yet the deeper issue is structural. Modern medicine has become enormously complex and expensive, while the tax base required to support it struggles to grow. The system attempts to maintain industrial-era expectations in a post-growth environment.
Education is similarly uncertain. Universities expanded on the assumption that ever-growing numbers of graduates would enter an expanding professional economy. Instead, many young people leave with debt and uncertain employment prospects. Schools continue preparing pupils for a labour market that increasingly no longer exists in its previous form. The expectation that every generation will become steadily more prosperous than the last is quietly weakening.
Local government is under severe strain. Councils struggle to maintain roads, libraries, parks, social care and waste collection while central funding weakens. Yet the formal structures of administration remain based on assumptions of continuing expansion. Authorities are increasingly trapped between rising demand and shrinking resources.
Business itself is deeply uncertain. Many firms survive on debt, low wages and fragile consumer spending. Retailers face declining footfall. Restaurants and pubs close despite full high streets on weekends. Farmers face rising fuel, fertiliser and machinery costs while supermarkets drive prices downward. Smaller firms struggle with regulation designed for a larger and more prosperous economy.
Families feel the muddle directly. Household budgets are stretched by housing, energy, food and transport costs. Younger adults postpone having children or remain living with parents longer than previous generations. Elderly people increasingly support younger relatives financially. Many households quietly reduce discretionary spending, holidays, entertainment and travel while trying to maintain appearances of normality.
Politically, the muddle appears in the constant promise that growth will soon return if only the correct policies are adopted. One government promises technological transformation. Another promises planning reform. Another promises green growth. Yet underlying productivity remains weak, infrastructure ages, debt expands and public trust declines.
Much of the confusion arises because society still interprets present difficulties as temporary interruptions rather than signs of long-term transition.
Two events could finally break this confusion.
The first possibility is a major financial crash. A severe collapse in markets, pensions, banking confidence or government borrowing could abruptly force recognition that the old economic model no longer functions. Such a shock would be painful, but it would also expose the reality that financial capitalism cannot survive without growth. Modern finance is built upon future expectations. When confidence in future expansion disappears, debt structures weaken, investment values fall and the financial system itself becomes unstable.
The second possibility is slower but potentially more constructive – a broad realisation that continuous growth is no longer achievable within Britain’s economic, demographic and environmental conditions.
This second path would represent a psychological turning point. Instead of endlessly attempting to restore the industrial growth model of the late twentieth century, society would begin planning for stability, resilience and adaptation.
Government would gradually shift from pursuing growth at all costs towards managing contraction intelligently. Success would no longer be measured purely through GDP expansion, but through stability, affordability, security and social cohesion.
Businesses would adapt to slower consumption and more localised markets. Instead of endless scaling, firms would focus upon durability, repair, maintenance, reuse and local relationships. Smaller enterprises could become more important than giant national chains.
The public sector would increasingly concentrate on essential services rather than continual expansion of administration. Local practical problem-solving could become more valuable than large central programmes.
The NHS might eventually evolve towards a mixed system combining high technology emergency care with much stronger local informal support systems for ageing populations, rehabilitation and chronic illness management. Community involvement, family support and preventative living could become increasingly important as industrial-scale medicine reaches financial limits.
Families would also begin seeing the future differently. Security might come less from high consumption and more from relationships, locality, practical skills, shared housing, gardening, informal work and reduced dependence upon debt. Multi-generational households could become more common again. Villages, small towns and urban neighbourhoods might slowly recover forms of local interdependence that industrial growth previously weakened.
It is at this point that localism begins to emerge, not as a political slogan, but as the natural outcome of economic contraction. As large-scale financial capitalism weakens, societies increasingly depend upon local resilience. Food production becomes more local. Services become more community-based. Informal work expands. Small-scale enterprise becomes more important. Long supply chains become less reliable and less affordable. Local repair, local care, local trading and local decision-making steadily grow in importance.
In this future, people increasingly depend upon those physically around them rather than distant national or international systems. The enormous industrial structures created during the growth era gradually lose their dominance. In their place comes a more decentralised society based upon practical interdependence within towns, villages and neighbourhoods.
Such changes are already beginning quietly beneath the surface. Repair cafés, food growing, home working, informal care networks, second-hand economies, local trading and practical cooperation are all signs of adaptation emerging before official recognition.
The central issue is not whether Britain can return to perpetual rapid growth. The more important question is whether society can recognise the transition early enough to adapt calmly rather than through panic and collapse.
At present, Britain remains trapped between two eras. The institutions of the old growth economy still dominate public thinking, but the realities of contraction are steadily becoming more visible. Financial capitalism continues operating largely because governments, markets and populations still expect growth eventually to resume. If that expectation finally disappears, the system itself will have to evolve into something fundamentally different.
Eventually, either crisis or recognition will force a clearer understanding of the future. When that happens, the country may finally begin reorganising itself around a more realistic vision of how people can live securely and meaningfully within an economy that no longer expands endlessly. In the long run, that future is likely to become increasingly local, decentralised and based upon the rebuilding of practical human relationships close to home.
Tim Watkins has raised a stark but important point. If energy and food supplies contract far enough, money can indeed lose its meaning. This is not because coins and notes disappear, but because the system that gives them value stops working.
Below is a clear account of what would actually happen if money became worthless in the United Kingdom. This is not a sudden collapse into chaos. It is a recognisable sequence that has occurred many times in history.
First, what makes money valuable in the first place?
Money only works because three conditions exist
energy flows through the economy
food is available in sufficient quantity
supply systems function reliably
Money is therefore not wealth itself. It is a claim on wealth.
If the underlying physical system weakens enough, those claims cannot be honoured.
At that point money begins to lose credibility.
Stage one – shortages appear before money fails
Money does not become worthless overnight.
Instead people begin to notice
empty shelves
delivery delays
rising prices
rationing behaviour
queues
At this stage money still works, but it buys less.
This is already familiar to many households after recent inflation in food and energy costs.
Stage two – prices stop reflecting reality
As shortages deepen
prices rise sharply
shops limit purchases
suppliers refuse contracts
deliveries become uncertain
Eventually sellers stop trusting price signals.
They begin to ask a different question
“Can I replace what I sell?”
If the answer is no, they stop selling.
Money still exists, but trade starts to stall.
Stage three – priority replaces markets
When supplies become tight enough, allocation shifts from markets to control systems.
Historically this has meant
ration books
government direction of production
priority access for essential workers
restrictions on travel
limits on fuel use
Britain already did this during the Second World War.
Money continued to exist then, but it stopped determining who got what.
The ration system did.
Stage four – trust in money weakens
Money depends on trust in three things
supply chains
government stability
future production
If food and energy shortages become persistent, people begin to doubt that money represents future access to goods.
They then shift behaviour
They start to store
food
tools
fuel
useful materials
instead of saving cash.
This is the moment money begins losing its role as a store of value.
Stage five – barter and local exchange grow
When national systems weaken, people do not stop trading.
They change how they trade.
Exchange shifts toward
local producers
known suppliers
trusted neighbours
repair skills
practical services
Money still circulates, but alongside it appear
informal exchange
favours
mutual aid
direct swaps
This is not collapse. It is adaptation.
Stage six – essentials replace discretionary goods
The biggest change is not financial. It is structural.
Employment shifts toward
food production
repair
transport maintenance
fuel preparation
local services
and away from
luxury consumption
long supply chains
complex imports
high energy industries
At this point money becomes less central simply because fewer goods are available to buy.
Stage seven – money becomes secondary rather than useless
Even in severe contractions, money rarely disappears completely.
Instead its role changes.
It stops being the organiser of the economy.
It becomes one tool among several.
Alongside it appear
ration systems
allocation systems
local exchange networks
household production
shared resources
This is what happened in Britain in the 1940s, in Eastern Europe after the Soviet collapse, and in many other places under stress.
What “money becoming worthless” really means
It does not mean people suddenly throw coins into the street.
It means
money stops guaranteeing access to essentials.
When food and energy cannot be expanded by spending more money, the economy stops behaving like a marketplace.
It begins behaving like a survival system.
The unexpected positive side
There is another outcome that is often overlooked.
When money weakens, locality strengthens.
People begin to rely more on
nearby land
nearby producers
nearby skills
nearby relationships
the Black Economy
Economic life becomes more physical, more practical, and more local.
In other words, the centre of gravity shifts from finance to community. I know it as localism.
That is the real transformation hidden inside the warning that money might one day become worthless.
This piece is intended as a thought exercise. It invites readers to consider what the short-term future might look like if a sudden financial collapse occurred in the United Kingdom as a result of widening war and disruption to the global economy. The purpose is not to predict events precisely, but to encourage practical thinking about how society might adapt if the financial systems that support modern life stopped working.
A major war is already under way in the Middle East. If it spreads further it could disrupt oil supplies and shipping routes that supply much of the world’s energy. Oil remains the foundation of the modern global economy. If supplies are interrupted, transport costs rise, trade contracts and financial markets can panic. Because the United Kingdom imports most of its energy and depends heavily on global finance, a severe disruption in oil supply could quickly trigger a financial crisis affecting banks, trade and government borrowing.
Modern Britain runs on continuous financial flows. Wages move through banks. Businesses depend on electronic payments. Government spending relies on borrowing and tax receipts that circulate through the financial system. If that system stops, the machinery of the modern state begins to stall.
This would not necessarily involve physical destruction. Roads, hospitals, railways and buildings would still exist. What disappears is the financial mechanism that keeps everything operating.
We saw a small example of this during the banking crisis in Greece in 2015 when banks closed and cash withdrawals were restricted. In a larger crisis the disruption could spread through the entire economy within days.
The First Two Weeks
Imagine the sequence.
Day 1
Banks close while emergency measures are considered. Cash machines stop working. Debit cards fail in shops. Electronic payments cannot be processed.
People expect the interruption to last a day or two. But supermarkets immediately face problems because their supply chains depend on electronic transactions and rapid restocking.
Queues form outside banks but the doors remain closed.
Day 2
Petrol stations begin refusing card payments. Many close because they cannot obtain fuel deliveries. Traffic on the roads begins to fall as drivers try to conserve fuel.
Businesses send staff home because they cannot guarantee wages or pay suppliers. Many workers suddenly discover that their wages cannot be transferred into their bank accounts. Pension payments and benefits are also interrupted while the banking system remains closed.
The government announces that essential services will continue operating but asks the public to remain calm.
Day 3
Hospitals and emergency services continue working, but many administrative systems slow down because they depend on national financial networks.
Railway operators begin reducing services. Without financial support they cannot guarantee staffing, fuel supplies or maintenance.
Public confidence in the large national systems begins to weaken.
Day 4 and Day 5
People start relying on personal networks. Neighbours share food and information. Small shops that still accept cash become gathering places.
Local councillors and community leaders organise meetings to discuss practical issues such as food distribution and transport for vulnerable residents.
Local authorities focus their efforts on keeping the NHS, policing and emergency services running.
Most other public services close.
Day 6 and Day 7
Communities begin adapting quickly.
Local farmers and growers start selling directly into nearby towns and villages. Informal food markets appear. Mechanics and small workshops become valuable because repairing equipment becomes more important than replacing it.
Council wards begin acting as practical local units. Residents organise simple groups to manage community buildings and coordinate assistance for neighbours.
Day 8 to Day 10
The government restructures its priorities.
Top-tier local authorities are asked to concentrate on essential services: health care, emergency coordination, policing and basic infrastructure.
Discretionary services are suspended.
Many public buildings are offered to local community groups willing to operate them.
Local trusts begin to form. Residents organise themselves to run facilities such as libraries, halls, workshops and small transport schemes.
Day 11 to Day 14
The pattern of a new system begins to appear.
The railways operate only a small number of essential routes. Major highway programmes stop. Government departments reduce their activity to basic coordination.
In towns and cities many traffic signals and area traffic control systems stop operating because they depend on central management and electrical maintenance.
But this turns out not to be a major problem. Traffic levels have fallen sharply because fuel is scarce and fewer people are commuting long distances. Drivers adapt quickly to simpler road conditions, much as they did in earlier decades before complex traffic management systems existed.
At the same time, local systems grow stronger.
Food markets appear in town squares. Community kitchens operate from halls and churches. Local repair services expand. Small trading networks develop between nearby communities.
The country does not descend into chaos. Instead it begins reorganising itself.
Why Britain Could Adapt
Britain will be well placed to adapt to this kind of transition.
The country already has strong local structures. Council wards exist in every town and city. Counties and metropolitan authorities possess administrative experience. Thousands of voluntary organisations, churches, charities and community groups already operate across the country.
These structures provide a foundation on which local systems could grow quickly.
In such circumstances the national government would concentrate on a few essential responsibilities: defense, national coordination and support for the NHS and emergency services.
Top-tier local authorities would organise those essential services within their areas.
Meanwhile everyday life would increasingly be organised locally. Council wards and neighbourhoods would manage many of the services that were previously operated by large national systems.
This would not be a planned reform programme.
It would be the natural response of society when large financial systems stop functioning.
In effect the country would be moving from a highly centralised industrial system towards a simpler and more local structure of economic life. The shrinking economy would not simply reduce activity. It would change the way society organises itself, with local communities taking on many of the practical roles that once belonged to the large national systems.
Thinking about this possibility in advance may help people understand that even if the financial system were to fail suddenly, society would not simply stop. Communities would begin adapting quickly, and local organisation could become the practical foundation for everyday life in the short-term future.
Energy, Shrinkage and the Case for Deliberate Evolution
1. Energy Surplus: The Foundation of Growth
Modern economic growth did not begin with finance. It began with energy surplus.
Economic output ultimately depends on usable energy. The more net energy available beyond what is required to obtain that energy, the more complex an economy can become.
This relationship is captured in the concept of Energy Return on Energy Invested (EROEI):
EROEI = energy obtained/energy expended to obtain it
When early coal and oil fields delivered extraordinarily high returns, society gained an immense surplus. That surplus powered industrialisation, railways, global shipping, urbanisation, fertiliser production, aviation, public health systems and welfare states.
Another way to express this is:
As long as net energy per person continued to expand, economic complexity could expand with it.
Credit expansion amplified this physical surplus. Asset prices reflected confidence in its continuation. Public spending widened in the expectation that tomorrow would be larger than today.
Growth was not ideological. It was energetic.
2. When Surplus Tightens
Over time, the highest-return energy sources were depleted. Extraction shifted toward more complex and capital-intensive sources. EROEI declined.
Even if total energy production remains high, the net surplus available to society may plateau or weaken.
Economic adjustment is both cultural and financial.
Growth culture equates expansion with success.
Managed localism redefines success as:
Stability.
Competence.
Reduced fragility.
Secure provisioning.
Meaningful participation.
Housing ceases to be a retirement plan. Retirement becomes a gradual transition rather than a prolonged withdrawal. Security shifts from portfolio value to tangible resilience.
Cultural transition also prepares the ground for fiscal transition. As expectations narrow from expansion to sufficiency, public spending can narrow without panic.
10. Funding the National and Local Layers
A managed localist system must be financially clear.
National and local functions are funded separately.
National funding:
Households & Businesses → National Taxes → National Core Systems
Local funding:
Local Households & Enterprise → Local Revenue → Local Services
Local revenue supports local provisioning.
During transition, monetary policy stabilises rather than stimulates expansion.
The difficult question is taxation in a shrinking economy.
The answer lies in redefining necessity.
Under surplus expansion, many activities became treated as permanent essentials. In a stabilising economy, some must become discretionary. Then, gradually, some must be abandoned.
This is not a collapse. It is pruning.
Political resistance will be real. Institutional momentum favours continuation. But if surplus growth is weaker, denial increases the likelihood of eventual disruption.
Managed localism argues for deliberate narrowing rather than forced retreat.
11. The International Context
Hyper-globalism depends on expanding surplus, falling transport costs and rising leverage.
If surplus growth moderates and leverage declines:
Trade continues but moderates.
Supply chains shorten.
Capital flows reduce.
Financial centres contract relative to productive sectors.
Localism is not isolationism.
It is the end of growth-dependent global expansion.
Conclusion
Maturity Without Collapse
For two centuries, expansion felt normal.
Energy surplus rose. Financial claims multiplied. Expectations hardened around perpetual growth.
That era was real. It was built on surplus.
If surplus growth weakens, financial expectations must realign with physical reality.
The question is not whether adjustment occurs.
It is how.
Crash compresses adjustment into trauma. Managed localism spreads it through time.
One path centralises through fear. The other decentralises through adaptation.
Neither restores perpetual expansion.
The difference lies in dignity.
Managed localism does not promise abundance in the language of GDP. It promises sufficiency aligned with limits. It accepts that some ambitions must become discretionary and then abandoned. It replaces scale with resilience.
In youth, societies grow. In maturity, they stabilise.
If shrinkage is structural, adaptation is rational.
Managed localism offers maturity without collapse.
At the centre of the British system sits an assumption.
Growth will return.
It may be delayed. It may be slow. But it will come.
Budgets are written on that basis. Forecasts depend upon it. Elections are fought upon it. The language of policy assumes it.
Recovery. Investment. Renewal.
The national story is forward movement.
Yet at the household level, a different story may be unfolding.
I have recently come across a self-employed man and his self-employed wife. Both are skilled. Both are reliable. Both have lost work. Not because they are poor workers, but because they are considered too expensive.
They install bathrooms in existing homes. They decorate houses. Owner-occupied properties.
This is not emergency repair work. It is not a leaking roof or a failed boiler. It is an improvement. Modernisation. Enhancement.
Such work depends on confidence.
When households feel secure, they upgrade. They refresh. They improve. They borrow if necessary. They justify the expense by reference to rising house values and rising income.
When households feel uncertain, they postpone.
The bathroom can last another year. The paint can wait. The tiles are dated but serviceable. We will manage.
This is not drama. It is a caution.
And caution spreads quietly.
In a growing economy, quality commands a price. Clients choose the reliable worker. They pay for competence and speed. Time is valuable.
In a tightening economy, price becomes the first question. The cheapest quote wins. Or the job does not proceed at all. Or the householder does it themselves.
The worker has not changed. The context has.
This matters because discretionary domestic improvement sits in a sensitive zone. It is funded from surplus income, savings, or housing confidence. It is not essential, yet it is not trivial. It tells us how safe households feel.
If good tradespeople are losing such work because they are too expensive, something has shifted at the level of expectation.
At the top of the system, growth is still assumed.
The Treasury projects rising output. The central bank speaks of returning to the trend. Political leaders promise expansion. The language remains optimistic.
But at the kitchen table, decisions are being made differently.
Mortgage payments are higher. Energy bills are remembered even if they have eased. Food costs have risen. Employment feels less secure. Pensions look uncertain. House prices are not clearly rising.
In such a climate, the rational response is not expansion. It is preservation.
Cash is held back. Projects are delayed. Improvements are deferred.
This is how contraction begins. Not through collapse. Not through an announcement. But through hesitation.
If one household behaves this way, it is an anecdote.
If many do, it becomes a pattern.
And if the pattern persists, the structure of the economy begins to alter.
Discretionary markets thin out first. Trades linked to improvement rather than necessity feel it early. Good workers become “too expensive”. Clients seek cheaper alternatives or abandon the project.
As this repeats, several consequences follow.
Small firms compete more aggressively. Prices are cut. Margins shrink. Income becomes unstable. Workers reduce their own spending in response. That feeds back into the wider economy.
Meanwhile, the national narrative continues to speak of recovery.
A gap emerges between the language of growth and the behaviour of caution.
At first, this gap is tolerable. Governments can borrow. They can stimulate. They can promise.
But if the underlying behaviour of households has shifted from optimism to preservation, stimulus does not fully restore the former pattern.
Expectation has changed.
And expectation is central.
A growing economy rests on shared belief in improvement. People spend because they expect tomorrow to be better. They borrow because they expect income to rise. They upgrade because they assume value will increase.
If that shared belief weakens, the economy reorganises from the bottom.
People do not stop living. They adjust.
They repair rather than replace. They paint their own walls. They share childcare. They grow vegetables. They reduce travel. They extend the life of what they own.
These are rational responses.
They are also the building blocks of a different economic structure.
From above, the system still looks growth-oriented. From below, it is becoming sufficiency oriented.
The centre expects expansion. The locality practises restraint.
If this pattern spreads across many trades and many areas, it is not merely a cyclical slowdown. It is the early stage of structural drift.
Growth at the centre. Caution at the kitchen table.
If the kitchen table wins, the structure eventually changes.
The question is not whether growth is still promised.
The question is whether households still believe it.
If businesses and self-employed individuals are being told their services are too expensive, they must rethink their business plan.
In times of economic upheaval, the convergence of hyperinflation, deflation, and structural economic shrinkage can profoundly reshape societies. These phenomena, while distinct, often intertwine, leading to complex challenges and necessitating adaptive responses. One such response is the resurgence of localism—a focus on local production, consumption, and community resilience. This piece explores how these economic conditions interact and their collective impact on the shift towards localism.
Hyperinflation Amid Structural Economic Shrinkage
Hyperinflation occurs when prices rise uncontrollably, often exceeding 50% per month. This typically results from excessive money printing without corresponding economic growth, leading to a loss of confidence in the currency. The effects are exacerbated when combined with a shrinking economy, where production and employment decline.
Impacts:
Currency Devaluation: Rapid loss of purchasing power renders money nearly worthless.
Barter Systems: Communities may revert to barter or adopt alternative currencies to facilitate trade.
Supply Chain Disruptions: Essential goods become scarce as production halts and imports become unaffordable.
Implications for Localism:
Community Self-Reliance: Necessity drives communities to produce food and goods locally.
Strengthened Social Bonds: Shared hardships foster cooperation and mutual aid.
Local Currencies: Development of community-based currencies to facilitate trade and stabilise local economies.
Deflation Coupled with Economic Contraction
Deflation is characterised by a general price decline, often due to reduced consumer demand or an oversupply of goods. When paired with a contracting economy, this can lead to a deflationary spiral, with businesses closing and unemployment rising.
Impacts:
Increased Debt Burden: The real value of debt rises, making repayment more challenging.
Delayed Consumption: Consumers postpone purchases, anticipate further price drops, and suppress demand.
Business Failures: Reduced revenues lead to closures and job losses.
Implications for Localism:
Revival of Local Enterprises: As larger businesses fail, opportunities arise for local entrepreneurs to fill gaps.
Community Support Networks: Mutual aid becomes essential in addressing economic hardships.
Emphasis on Sustainability: Communities focus on sustainable practices and local resource utilisation.
Structural Economic Shrinkage: A New Normal
In my view this is already happening. After many years of growth the economy is now shrinking. Unlike a recession, which is a temporary phenomenon, economic shrinkage becomes an established norm. This is a structural contraction which necessitates a reevaluation of growth-centric economic thinking.
Impacts:
Reduced Workforce: Demographic shifts lead to a smaller labour pool, affecting productivity.
Urban Decline: Cities may experience population loss and decreased economic activity.
Fiscal Constraints: Governments face budgetary pressures, limiting public services.
Implications for Localism:
Localised Economic Planning: Communities develop tailored strategies prioritising local strengths and needs.
Resilience Building: Investing in local capacities enhances adaptability to economic changes.
Embracing Localism Amid Economic Uncertainty
The interplay of hyperinflation or deflation and structural economic shrinkage disrupts traditional economic systems, challenging communities to adapt.
Localism emerges as a pragmatic response, fostering resilience through community engagement, self-reliance, and sustainable practices. By strengthening local networks and economies, communities can better navigate economic challenges and build a foundation for long-term stability.
Recent commentary has suggested that Britain is approaching a new economic boom, despite weak political leadership and lingering structural problems. This claim sits uneasily alongside independent economic forecasts, which point instead to modest growth of around 1–1.5 percent. The contrast between these two narratives is revealing, not only about the state of the economy, but about the deeper changes now under way.
This level of growth does not represent a return to the expansionary model that shaped the late twentieth century. It is better understood as economic stabilisation after a prolonged period of strain. National output may edge forward, but discretionary markets remain thin, investment cautious, and productivity gains marginal. Living standards rise slowly, if at all, and many households remain defensive in their spending behaviour.
Within a shrinking-economy framework, this outcome is entirely coherent. Economic contraction does not necessarily mean collapse. It often takes the form of a system that continues to function, but no longer expands in a way that materially improves everyday life. The formal economy remains intact, but its ability to deliver security, affordability, and predictability weakens.
When this happens, the informal economy grows quietly in the gaps. Households adapt by repairing rather than replacing, shortening supply chains, relying more on local provision, and finding ways to meet needs outside formal markets. This is not a rejection of the national economy. It is a pragmatic response to its limits.
There is a strong historical parallel with the 1930s. Then, as now, households adjusted before policy caught up. Discretionary spending fell early. Repair, reuse, and substitution became normal. Work shifted toward food, maintenance, care, and locally traded services. Local economic activity expanded not because of ideology, but because households needed resilience.
The important difference today is that Britain is materially richer but far more system-dependent. Skills have been externalised, supply chains lengthened, and regulation has extended deep into everyday life. Adjustment is therefore slower and more uneven. Yet when it does occur, it is likely to be structural rather than temporary. Once people rediscover local solutions as a matter of necessity, they tend to retain them.
Against this background, talk of an imminent economic boom is misleading. What is being described is not renewed expansion, but a pause in deterioration. Stability after strain can feel like recovery, but it does not restore the conditions that supported sustained growth in the past.
Paradoxically, it is precisely this modest, constrained stability that creates space for localism. When national systems no longer deliver enough certainty to justify full dependence on them, households and localities begin to organise differently. Economic life evolves sideways rather than upwards.
Localism, in this sense, is not a policy programme or a political aspiration. It is the natural outcome of an economy that can no longer grow as it once did, but is still capable of adapting.
The First Cracks: Pubs and Hospitality as Early Indicators
The decline of discretionary markets in the United Kingdom is no longer theoretical. It is already visible, and nowhere more clearly than in pubs, cafés, restaurants, and the wider hospitality sector.
Pubs are not closing because people have suddenly stopped liking pubs. They are closing because pubs exist almost entirely within the discretionary economy. Drinking in a pub is not essential to survival. It is something people do when they have surplus income, surplus energy, and surplus confidence about the future.
As those surpluses disappear, pubs are among the first businesses to fail.
Rising energy costs, higher food prices, staff shortages, business rates, rent, and declining disposable income have converged into a structural problem, not a cyclical one. Even well-run pubs are finding that there is no viable price point that allows them to stay open while remaining affordable to their customers.
This is not a temporary downturn. It is the early stage of a wider contraction.
Hospitality was one of the most significant sources of employment growth during the late stages of the growth economy. It absorbed labour released from manufacturing, logistics, and clerical work. It provided flexible jobs, part-time roles, and entry-level employment. But it depended entirely on discretionary spending.
As explained in Beyond Growth, discretionary work only exists when there is surplus energy and surplus income in the system. When those surpluses decline, discretionary work disappears first.
The closure of pubs is therefore not an isolated cultural loss. It is an economic signal.
Tourism: A Fragile Foundation Now Giving Way
Many parts of the UK have become dangerously dependent on tourism. Coastal towns, national park fringes, historic cities, market towns, and rural beauty spots have reshaped their economies around visitors rather than residents.
Tourism is one of the most discretionary sectors.
People only travel when they have spare money, spare time, and cheap transport. Remove any one of those, and tourism contracts sharply. Remove all three, and it collapses.
This is now happening.
Fuel costs make travel expensive. Accommodation costs have risen beyond what many households can justify. Food prices make eating out prohibitive. At the same time, household insecurity makes people cautious. Holidays become shorter, closer to home, or disappear altogether.
Tourism-dependent areas are therefore facing a double squeeze. Visitor numbers decline, while the cost base of serving those visitors rises.
The consequences are already visible:
Seasonal businesses failing to reopen
Reduced opening hours
Fewer staff taken on each year
Entire streets of gift shops, cafés, and attractions becoming unviable
These areas often have very little alternative employment. Tourism replaced farming, fishing, small-scale manufacturing, and local services. When tourism declines, there is nothing beneath it.
This creates a false narrative of “regional decline”, when in reality it is the collapse of a discretionary overlay that was never structurally sound in the first place.
Discretionary Employment Was Always Precarious
Discretionary employment expanded rapidly during the final decades of growth. Retail, leisure, entertainment, hospitality, events, travel, and personal services all flourished.
But these jobs were not anchored to essential needs. They were anchored to consumption.
As Beyond Growth explains, when surplus energy declines, economies do not shrink evenly. They shed layers. The outermost layers – the least essential – disappear first.
This is why discretionary employment is collapsing before essential services do.
Retail jobs disappear as people buy less. Hospitality jobs disappear as people eat and drink at home. Tourism jobs disappear as travel becomes unaffordable. Creative and cultural work shrinks as sponsorship and ticket sales dry up.
This is not unemployment caused by laziness, automation alone, or poor policy. It is structural redundancy in a shrinking economy.
No amount of “retraining” can recreate jobs that no longer have an economic basis.
The Illusion of Recovery
There is still a widespread belief that these trends represent a temporary dip and that growth will return. Short-lived rebounds, government subsidies, and debt-funded interventions reinforce that belief.
But these measures do not restore surplus energy. They merely redistribute shrinking resources.
As argued in Beyond Growth, what appears to be economic activity is increasingly funded by borrowing rather than by production. This creates the illusion of stability while the underlying system continues to contract.
Pubs reopen briefly, then close again. Tourist seasons look “busy”, but businesses still fail. Employment figures fluctuate, but job quality deteriorates.
The economy is no longer renewing itself. It is thinning.
What Happens Next: The Broad Unravelling of Discretionary Work
The decline of pubs and tourism is only the beginning.
Other discretionary sectors will follow:
Non-essential retail
Entertainment venues
Events and exhibitions
Large parts of the creative industries
Long-distance commuting and business travel
Corporate hospitality and conferencing
These activities were built on assumptions of cheap energy, rising incomes, and expanding markets. Those assumptions no longer hold.
As discretionary markets shrink, employment patterns will change fundamentally. People will not move seamlessly into new paid jobs. Many will exit the formal economy altogether.
This is not mass unemployment in the conventional sense. It is a reconfiguration of work.
The Shift Toward Essential and Informal Activity
As discretionary employment disappears, people will not simply remain idle. They will redirect their effort toward essential activity, much of it outside the formal economy.
This includes:
Growing food
Processing and preserving food
Repairing and maintaining goods
Caring for family members and neighbours
Sharing housing and resources
Running small, local enterprises
Much of this work will not appear in GDP figures. It will not be taxed in the same way. It will not resemble conventional employment.
But it will sustain life.
This is the localist response described throughout Beyond Growth. It is not ideological. It is adaptive
Tourism Areas Will Have to Relearn How to Live
Tourism-dependent areas will face the hardest adjustment.
They will have to transition from serving visitors to supporting residents. This means:
Reclaiming land for food production
Repurposing empty holiday accommodation for permanent living
Turning cafés and pubs into food-processing, community kitchens, or local shops
Reducing dependence on seasonal income
Some places will manage this transition. Others will continue to decline.
There is no guarantee of rescue from outside. The national economy is shrinking too.
This Is Imminent, Not Distant
The decline of discretionary markets is not a future scenario. It is already unfolding.
Pubs are closing now. Tourism businesses are failing now. Hospitality employment is shrinking now.
What lies ahead is not sudden collapse, but steady erosion.
The danger lies in misunderstanding what is happening. If we continue to treat this as a temporary downturn, we will keep applying the wrong remedies.
If we recognise it as a structural transition, we can begin to adapt.
Conclusion: Reading the Signs Clearly
The closure of pubs and the weakening of tourism are not cultural accidents or policy failures. They are early signals of a deeper economic evolution.
They tell us that surplus is disappearing. That discretionary life is contracting. The economy is shedding what it can no longer support.
As Beyond Growth makes clear, the future will not be rebuilt around consumption, leisure, and growth. It will be rebuilt around food, care, repair, and locality.
Those who understand this early will adapt more easily. Those who cling to the old model will experience only confusion and loss.
The discretionary economy is fading. What replaces it will not look like recovery. It will look like something simpler, quieter, and closer to home.
