Now and then, I have to remind myself where I have got to in my thinking.

For two centuries, the UK economy grew because we had cheap energy with a large surplus.  We put a little energy into getting a lot back.  That surplus powered everything beyond basic survival, including, for a while, the consumer-based economy, much of which is discretionary.

Discretionary businesses and markets depend on people having spare money created by surplus energy in the broader economy.  When surplus energy is high and energy costs are low, households can afford extras such as leisure, travel, and luxury goods. 

Essential businesses rely on steady demand for food, heat, and basic services, and their markets shrink or grow only slightly as energy conditions change. 

As surplus energy falls and energy costs rise, households cut back on discretionary spending first, which causes those markets to contract while essential markets remain the backbone of daily life.

Now the surplus is decreasing, and we have become focused on affording the essentials.  Less is left over for comfort, variety, and growth.

What this means for prosperity

Prosperity depends on what is left after the basics are paid for.

When energy costs increase, households have less money for eating out, leisure activities, holiday travel, new clothes, and gadgets.  Firms have less to invest in staff and new kit.  The State collects less tax from slowing activity, while costs for health care, care, and infrastructure continue to rise.  

The result is a slow squeeze on the domestic and wider economies.  

Discretionary markets are now shrinking.  Second-hand replaces brand new.  Some replacements cannot be afforded.  It feels like a reduction in choice, pace, and reach.

What if the present UK system remains unchanged?

Assume the government tries to run the current model with blinkers on, as if nothing basic has changed.

Debt will try to bridge the gap of the declining surplus.  Households will juggle higher bills and lower real incomes.  Local shops will thin out.  Out-of-town retailing will struggle with energy and transport costs.  Public services will, in effect, be rationed through increased waiting times.  Councils will delay maintenance.  National supply chains will trim their range and carry less stock.

Daily life is already stepping back toward past habits.  People travel less and nearer to home.  More meals are cooked from basic ingredients (something now being rediscovered).  Gardens and allotments will become part of domestic economies, not just hobbies.  Homes will fill with repaired items.  Sharing will become normal, from tools to car lifts.

Much of the formal framework will be retained, as an informal layer emerges beneath it.  

The system quietly reverts to an older pattern, albeit boosted by modern technology.

Will this be an evolution or a revolution in the economic system?

Both are possible.  

Evolution occurs when institutions acknowledge the energy constraint and redesign their use of money, services, and daily behaviour to accommodate a world that is no longer expanding.  

Revolution occurs when the formal system fails to adapt despite rising pressure.  The outcome includes a decline in honesty and trust.  Although it may not be acknowledged, unconscious lying is a response to the ensuing muddle.  Because people become unable to cope.  From top to bottom in society, this may already be happening.

How change actually happens

Change is an evolutionary process.  The government may want us to think it rules the roost, but in reality, the natural evolution of the economy determines what happens.

As the return on energy declines, discretionary sectors become memories of good times, and the rising costs of essentials creep into everything. 

For example, heating all the rooms in our homes, an essential we grew up with, is becoming unaffordable and discretionary.  Those of us who lived through the 1940s and 50s, when the economy was much smaller than it is now, will remember how we clustered round the only open fire and were kept warm, filling the coal scuttle.

Tax receipts will decline, and the state will have to trim benefits.  Local authorities will defer projects.  Households will move decision by decision toward thrift.  Informal exchange will grow, from neighbourly help to small cash jobs.  

In response to the shrinking economy, pay rates charged by electricians, plumbers, and builders for household work will decrease.  Their purchase and maintenance of electrical tools will become unaffordable, and they will have to revert to using hand tools.  DIY and self-built housing will increase, with some opting for off-grid living in response to rising utility prices.

The number of small businesses may increase because the margins of large-scale operations are too thin.  

A parallel economy will form, close to home.  Black markets in rationed food will develop.

If policy stays fixed, stress builds.  Debt becomes harder to service.  Banks and lenders pull back.  Shocks, such as a winter price spike or a supply interruption, will expose the lack of slack.  Trust in promises, both public and private, will weaken.  People and firms seek reliability over growth.  They value a steady supply over a low sticker price.  They accept less variety if it is nearer and more certain.  

The formal rules either bend to reality or break.  Goods and services become less trustworthy.  Home deliveries fail and are stolen.

What a managed evolution could look like

If the Government and councils recognise that the era of economic growth and surpluses is over, there will be an opportunity to shift to an entirely new way of thinking. 

The first step will be for the government to recognise that a radical shift in thinking is needed.  There can be no further economic growth.  This will take time to be generally accepted and become the norm.

In the meantime, the UK will slip into an Anomie system.  It may already be there.

In anomic systems, there is a growing absence of social rules, norms, and expectations that once guided people’s behaviour.

• Society’s norms become unclear or weakened.
• People feel disconnected, uncertain, or without guidance.
• Traditional structures no longer provide stability.

In short, anomie is the feeling or condition of normlessness.  Everything will seem to be muddled.

The outcome of this rethink must be recognition that the hierarchical systems of governance that enabled the industrial/consumer economy to develop are over.

The focus must shift from maximising throughput and economic growth, led from the top down, to enabling people in local communities to secure their essentials.  Hierarchies enable growth; once growth ceases, they have to be de-layered and dismantled.

Planning and licensing will need to facilitate small-scale production, repair, and food production.  Procurement must favour nearer suppliers to cut energy costs.  Community buses, driven by volunteers, will replace conventional services.  A transition which is already underway in country areas.

A kind of management is needed which enables this to happen.  Not top-down, but enabling bottom-up grassroots activities to be born and develop.  Not guided, which would be counterproductive because this is new territory not visited before.  People won’t be bothered to think for themselves if local councils act as if they know best and limit funding to services they deem necessary.

As the economy shrinks, the localist economy is likely to be increasingly self-generating.

In time, there will be no need for top-down intervention in local community doings.  Local health services will develop, and general hospitals will provide services sought locally.  The localist economy will be established.  At first, we can’t imagine what it will look like, except that it will be driven from the grassroots.

What a rupture could look like

If denial of the end of growth persists, cuts will deepen, backlogs grow, and services erode.  

A sharp energy shock triggers business closures and job losses in the thinning discretionary sector.  Households default.  The tax base shrinks.  The central government centralises more decision-making to hold the line, slowing local problem-solving.  Black markets and petty thefts grow.  

A settlement then arrives fast, not by design, but through breakdown.  Price controls, rationing, emergency procurement, and strict priorities appear.  After the shock, rules are hastily written to match the new reality.  In effect, it would be creeping centralisation, leading to totalitarianism.

Not unlike what happened after the last big shock, when the Second World War broke out and then ended, leaving the government to deal with the dreadful state of the indebted economy.

Life in the United Kingdom during and after the war was shaped by disruption, hardship, and a strong sense of collective effort.  Daily routines were transformed by rationing and power outages.  Food was limited, so people learned to stretch every ingredient, grow vegetables, and share what they had.  Cars became rare on the roads because petrol was tightly rationed, and most private motoring came to a halt.  People walked or cycled.  Essential vehicles were reserved for the military, ambulances, farming, and other vital work.  

A return to the past would only be partial.

We will not rewind to the 1940s and 50s.  We will keep today’s knowledge and experiences, basic digital tools, and some modern infrastructure.  But for those of us who experienced the post-war era, the pattern feels familiar.  Shorter supply lines.  Less travel.  National systems still exist, but local practice carries a greater share of the load.

Choosing the path

The energy fact will not change.  The choice will be how we will change our systems with it.  

Evolution is calmer than revolution.  It will require clear communication about limits, early support for essential services, and legal space for small-scale activities.  It will reward households that adapt and communities that organise.  

Revolution is the risk if we delay, deny, or defend old models.  Delay will result in the change arriving suddenly and on harder terms.

Politically

Revolution will involve a regular party-political choice, reacting to events.  Parliamentary procedures may not be necessary.

A decision to enable fully fledged localism to evolve will require extensive parliamentary processes.  Once enacted, each locality will decide how to govern itself. 

A willing local authority may be able to implement some aspects of localism that do not require new legislation.

What to watch

There will be shrinking ranges on supermarket shelves.  Longer waiting times.  Rising repair trades.  Growth of allotments and local food.  More second-hand.  New mutual aid groups.  Small makers and services that thrive by being near.  These are signals of the shift.  They are also the seeds of the next economy. 

Conclusion

Falling surplus energy leads to falling prosperity.  

If we keep the current systems unchanged, life will narrow and move closer to home, much like it was 75 years ago.  The issue is whether it will be a top-down revolution or grassroots localism.

With top-down systems maintained, there would be increasing government and local government regulation of daily life.  Social inequality might increase due to rising social unrest.

Moving closer to home can be a managed evolution to localism.  It may be self-managed at each locality.

The difference lies in whether economic shrinkage is acknowledged and accepted, and the UK positively redesigns around it, with localism playing a significant part.  Or we can pretend that shrinkage isn’t happening and have to put up with the unexpected consequences of attempts to fabricate “growth”.