Land and Resource Scarcity

Capitalism, Struggle and Well-being in a World without Fossil Fuels

Andreas Exner, Peter Fleissner, Lukas Kranzl, Werner Zittel

• Publisher: Routledge
• Year: 2013
• Print ISBN: 9781138900950
• eBook ISBN: 9781136223174
• Topic: Biological Sciences
• Subtopic: Development Economics
• Index: Biological Sciences

This book brings together geological, biological, radical economic, technological, historical and social perspectives on peak oil and other scarce resources. The contributors to this volume argue that these scarcities will put an end to the capitalist system as we know it and alternatives must be created. The book combines natural science with emancipatory thinking, focusing on bottom up alternatives and social struggles to change the world by taking action. The volume introduces original contributions to the debates on peak oil, land grabbing and social alternatives, thus creating a synthesis to gain an overview of the multiple crises of our times.

The book sets out to analyse how crises of energy, climate, metals, minerals and the soil relate to the global land grab which has accelerated greatly since 2008, as well as to examine the crisis of profit production and political legitimacy. Based on a theoretical understanding of the multiple crises and the effects of peak oil and other scarcities on capital accumulation, the contributors explore the social innovations that provide an alternative.

Using the most up to date research on resource crises, this integrative and critical analysis brings together the issues with a radical perspective on possibilites for future change as well as a strong social economic and ethical dimesion. The book should be of interest to researchers and students of environmental policy, politics, sustainable development and natural resource management.

1 Exiting the multiple crises through ‘green’ growth?¹

Elmar Altvater and Margot Geiger

The disembeddedness of the market economy from society and nature has resulted in the market becoming independent of society on the one side, and has created an inherent constraint on the other. This is described in Karl Polanyi’s classic ‘The Great Transformation,’ about the capitalist market economy since the second half of the eighteenth century, after the industrial revolution (Polanyi 2001 [1944]). At present, this inherent but external constraint is more precisely defined as a constraint to permanent growth. But what is economic growth? Economic growth is measured as the increase in gross domestic product (GDP), although there is considerable scepticism about the meaningfulness of this indicator. This has triggered in recent years a debate about growth, zero growth, post-growth and degrowth, sustainability, prosperity and happiness. The economy grows when the volume of labour increases and when more natural resources (including territorial space) are used for an increase of GDP and for spatial expansion. Consequently, growth is more of the same, an extensive parameter.

Growth also occurs when the productivity of labour increases. This is generally only possible when ‘living’ labour is replaced by ‘dead’ capital, and mostly supplemented by it. This applies to machinery and buildings, and is especially the case for spatial infrastructure that is ‘built environment’ or a ‘spatial fix’. It is especially important when the energy of human labour and the energy from animal or plant biomass, as well as energy from wind and water to propel mills, is replaced by fossil energy.² The energy density of fossil fuels is very high and they can be used anywhere because they are easily transportable. Fossil fuels can also be used at any time, day or night, winter or summer. Radiation energy from the sun does not have these properties: no wonder that a new age, the industrial age, began with the use of fossil fuels. Growth now becomes an intensive parameter; increasing productivity occurs through a substitution process. The use of fossil energy instead of biotic energy enables an acceleration of all economic processes, a compression of time.

Economic growth has proceeded in a cyclical manner since the beginning of the industrial age. Only in the ‘golden years’ of economic development from about 1950 to the mid-1970s did steady, crisis-free growth appear to be the rule, at least in the industrialised countries. However, this was an erroneous assumption. Growth does not exclude crises. The systemic crisis from 1929 onwards was no singular event: it is repeated in the twenty-first century. It is a historic rupture that affects all dimensions of the capitalist system. This destructive financial crisis affects the entire economy, is expanded into a currency crisis, unsettles the global hegemonic order and then alters the global political situation. Since it is at the same time a crisis in energy supply, a climate crisis and a food crisis affecting billions of people, this multiple crisis questions the moral values on which social coexistence and cohesion is based: thus, it is a systemic crisis.

In the following, we will focus on the growth dilemma between the constraint towards surplus production and the limits set by nature. We start with a brief description of this constraint, and how it contributes to an overloading of society and nature and has propelled the financial system and the ‘real’ economy into crisis. Following on from this, the dimensions of the multiple crises and the regulation of the use of time and space will be discussed, in order to understand the challenges and assess the consequences that will occur when fossil fuels run out and need to be replaced by renewable solar energy. How must time and space be regulated when biomass is not only harvested for food but to shift productivity and secure mobility? Hence, what conflicts will result from rivalry in land use?

Excessive financial claims in the systemic crisis

The financial and economic crisis, together with the crises in climate, food supply and politics, has taken on a magnitude in the second decade of the twenty-first century that surpasses the great world economic crisis of 80 years ago. The causal connection between the crises is difficult to discern and to clarify (see Altvater 2010). Basically, financial crises occur when financial claims by creditors in the form of documented securities cannot be serviced from income flows or the assets of the debtors. Either the financial claims are too high or the real surplus of the creditors (macroeconomically, i.e. the real economic growth rates) is insufficient, or both occur together. Thus, the crisis is never just a financial crisis, even when it starts off as such, because the value of securities, which is based on shrinking returns, suddenly drops.

Instead, the crisis is a crisis of real capital accumulation and has two sides. One is the value side and the other is the use-value side. The latter is doubly characterised, on the one hand by the natural limits of availability of those energy sources, matter and living beings, whose use-value can be transformed in order to satisfy human needs. Up to a few decades ago, their limits seemed so far away in the future that it was assumed that they could be ignored. In the meantime, they have moved threateningly close to the evolutionary ‘tipping points’ (see Rockström et al. 2009). On the other hand, there are also social limits concerning human needs and the manner of managing private and public goods. The growth rates of surpluses in the real economy (i.e. profits on invested capital and growth rates of gross domestic product (GDP)) tend to decrease.

The decrease in GDP growth rates throughout the world is indisputable, even though this decrease is not occurring evenly or simultaneously. The profit rate falls when the distributive relation between profits and salaries and wages does not change, and capital intensity increases. This explains why economic policy efforts to overcome the crisis shift the income distribution, to the detriment of labour and in favour of capital, and at the same time reduce the capital coefficient (the capital expenditure per unit of the social product). The reaction to the deceleration in growth reverses it: the income on capital rises and is invested, increasing growth and consumption of resources. If capital is used for speculation, indirect effects are likely to increase surplus production and resource consumption to service financial claims. This is a kind of ‘rebound effect’ caused by crisis. Due to the crisis, the consumption of energy and matter has been reduced, but the economic policy measures undertaken to overcome the crisis result in growing consumption of energy and matter, comparable to the ‘rebound effect’ described by William S. Jevons in 1865 (Jevons 1865; Santarius 2012): The use of resources increases when their market prices sink because of productivity increases or – the case mentioned here – when economic policy stimulates capitalist growth.

The returns of the financial world increase in any case, in contrast to the real economy surpluses and their growth rates – until there is a financial crash. First, the financial market returns will compete upwards. Financial places are attractive when they offer comparatively high returns. Second, the financial markets are so decoupled from the real world that social or natural limits to increasing returns disappear from the horizon of financial actors. This is an effect of the disembeddedness mentioned above: financial innovations particularly serve to financialise everything by securitisation so that virtually everything can be traded on liberalised markets worldwide. The legal and institutional prerequisites were created in the time since the ‘neoliberal counter-revolution’ (Milton Friedman 1970) in the 1970s.

The high returns result from trading in securities and create the illusion that value is created by the ‘origination’ of these securities. Their value is not realised by work and thus by transforming nature, but is derived from the returns that are obtained by trading assets on the financial markets. If the returns decrease, then the value of the securities decreases, and the credit relation collapses when these serve as security for other loans. The great financial crisis breaks out if this happens en masse instead of in individual cases. Capital is fictitious, and in a crash its value turns out to be an illusion. The real capital circulation is also disrupted. The seemingly endless sequence of buying and selling goods just stops: value and surplus value cannot be realised as profit on the market. Growth decreases and develops into a recession when it is negative. The financial and economic crises, together with the political crisis, are different aspects of a capitalist systemic crisis, which appears as a sequence of crises in time and space.

Several stages can be discerned in the course of the financial crises since the 1970s. The debt crisis encompassed the ‘third world’ in the early 1980s. The overture was provided by Mexico’s insolvency in August 1982, followed by the drum roll in Brazil in November of the same year. This crisis was more than an economic and financial crisis: it was a global historical turning point. First, it was generated by the recycling of petrodollars and was directly linked to the fossil energy crisis and its regulation. Second, it changed the global power positions of the oilproducing countries of the Middle East, of the Latin American countries and also, to a lesser extent, of the African and Asian countries. Hence, the crisis had a geo-economic and geo-political dimension. Third, the financial innovations that were developed were precisely those without which the spectacular dynamics of the global financial markets and the current financial crisis would not have been possible. Fourth, neoliberal ideology was promoted in this phase of upheaval. Milton Friedman (1970) calls it a ‘counter-revolution’, directed against the Keynesian policy concepts of the previous decades. This was essentially a declaration of war against state intervention in the free market. Now the antiinterventionist position rules in the universities, in the media, in the corridors of politics and in conference centres: free trade provides prosperity and any intervention in free trade operations diminishes prosperity.³

The monetarist doctrine of price stability was used to discipline wage earners and their unions. Increasing unemployment made it easier to bring militant workers under control. The increase in real interest rates since 1979 did indeed reduce inflation in Western industrial countries, but it reduced investment at the same time. The profit rates again increased after their sharp drop in the 1970s (see Brenner 2006), but were insufficient to compete with rising returns on financial assets (Deutscher Bundestag 2002, especially pp. 69ff.). The position of creditors, i.e. the large internationally operating banks and funds, was strengthened by the high rates of interest, and the foundation was laid for a financial wealth-based regime of capital growth. The debt burden also rose with increasing interest rates. This exceeded the debtors’ ability to pay and caused the aforementioned debt crisis.

The oil-exporting countries had to find investment opportunities for their petrodollars after the oil price shock of1973 (see the extensive presentation by Clark 2005). But, where? The industrial countries were not attractive, since these were in an economic crisis from the mid-1970s. In this situation, the US banking system offered to recycle the petrodollars from the ‘oil and sand states’ at the Persian Gulf to the emerging markets of the developing countries, and simultaneously to rectify capital shortage as well as energy shortage. The US government and international organisations such as the International Monetary Fund (IMF) and the World Bank supported the ‘recycling’ of petrodollars through the expanding international financial markets.

Thus, oil income was still invoiced in US dollars and mostly invested in the US banking system. The banks used the dollar accounts for extensive credit supply to developing countries. Under the protective shield of the US military, this business chain supplied the oil producers with currency income, weapons and military and political security. The ‘oil and sand states’, as they were disparagingly called, changed with time into ‘dollar, oil and tank states’. The US could maintain its oil supplies after its ‘peak oil’, the peak of oil production in the USA, which can be dated to the beginning of the 1970s (see Deffeyes 2005), and at the same time establish the US dollar as the oil currency. The third-world countries received access to credit, which they used to cover their energy needs, but also to finance the luxury consumption of the ruling elite, the armament of the military dictators of those decades and – as in Brazil – to finance ‘pharaonic large-scale projects’. In other words, they had to incur debt, but predominantly with the US banking system, in US dollars and not with the oil exporters. That became disastrous for them when the USA raised the interest rate on dollar debts to combat inflation, to finance the double deficit in the balance of payments and the national budget. At the same time, the USA tried to offer the US dollar as a ‘value anchor’, as a secure reserve and asset currency to the financial markets. The US dollar, weak in the 1970s, emerged stronger out of the 1980s debt crisis in which all indebted states were embroiled. The energy crisis, the dollar crisis and the crisis of political hegemony were overcome at one blow, and the US-dominated world order was reinforced following several years of dollar devaluation and the country’s ignominious defeat in Vietnam in 1975.

As recently as in the course of the current financial crisis, the ‘American Century’, as it was called after this extraordinary performance, faced a downturn. The present financial crisis started in 2007/2008 as the ‘subprime crisis’ of bad mortgages in the USA. The earnings of mortgage holders were not sufficient to service the interest dues, which increased from about 2006 onwards, following a very low interest rate regime after September 11, 2001. The mortgages were bundled into complex financial instruments, with the approval of the rating agencies, and sold all around the world. Suddenly, billions, even trillions of assets were bad and ‘toxic’, also nearly all over the world. They depressed bank balances as valueless assets that had to be depreciated. Often the banks overextended their capital requirement. The ‘subprime crisis’ of the ‘NINJAs’ (no income, no job or assets) in the US suburbs – the problem of mortgage holders without income, job or assets – turned into a global bank crisis.

Since the affected banks were classified as ‘relevant to the system’ (mostly according to the simple formula ‘too big to fail’), governments immediately stepped in to provide bailout packages and to release a lot of money for guarantees and the purchase of bad assets, and performed this virtually overnight, bypassing all democratic procedures as well as those required by the constitution. This applied to the financial sector as well as to the real economy. Companies faced with bankruptcy were bailed out, whole industrial sectors were subsidised. The car industry, for instance, received scrapping bonuses (‘cash for clunkers’). These efforts did not prevent the financial crisis from developing into an economic crisis. And during this economic crisis, the real income of the masses dropped even further. The profit rates recovered to some extent, production was lucrative again and on average growth moved slightly upwards. But differences from country to country were now greater than ever (see the rich literature on the development of profit rates, e.g. Duménil and Lévy 2002; Harman 2010; Kliman 2009; also Altvater 2010). Some countries, with surpluses in their balance of payments, a strong currency and high financial claims, survived without too much trouble, but other countries experi-enced a serious public debt crisis. The Mediterranean states of the Eurozone were affected particularly badly. The public debt crisis was then converted into a euro currency crisis, which has the potential to shatter the euro currency zone that was set up in 1992.

Scarcity and shortage

The systemic constraint to overproduction, which is emphasised during a crisis, has characterised the industrial-capitalist system since its formation in England in the second half of the eighteenth century. Surplus production was enormously increased when the more diffuse solar radiation energy was replaced by the more compact fossil fuel energy. The productivity of labour also increased. Work processes were accelerated in time and their spatial range expanded. This is a ‘historical lost property’; the potential of fossil fuels to raise the productivity of labour is immediately utilised in the capitalist economy. The surpluses needed by the system are expanded, while the extensive growth of labour volume is now supplemented with the intensive growth from substituting biotic energy by fossil fuels and hence with the increased productivity of labour.

The surplus is related to the capital invested as profit rate or shareholder value. Capital is borrowed beyond the limits of equity and interest has to be paid. The use of capital is thus disciplined. The instrumental rationality of the capital owners promotes this: they swing the ‘pioneering banner of modernity’ by gaining the largest possible profit from the smallest possible amount of invested capital, i.e. striving for and attaining the greatest possible growth. The addiction to growth is satisfied with the economic adrenaline supplied by finance markets that have meanwhile gone global.

But there is another side to the story: the limited ecosystems of the planet are over-used by increasing productivity and subsequent accelerated growth – in the worst case until the planetary nature collapses, to the ‘ruin of mankind’, as Karl Polanyi already warned more than half a century ago (Polanyi 1944). For growth is only possible when mineral and agricultural resources: i.e. finite and renewable resources, the fossil fuels (coal, oil and gas), are exploited from nature and transformed into those products that maintain growth and the accumulation of capital, and therefore also the production of everyday goods and services. Significantly, people need some of these goods and services to meet their needs – but this is still a side effect. The main point is the economic surplus, the profit on invested capital, which is calculated in monetary units.

The waste and other harmful emissions of production, circulation and consumption that are deposited in various spheres of the Earth are in no way insignificant. These range from atomic waste, for which there is no safe final dumping place anywhere on Earth, as is regularly admonished pol...

Table of contents

• Cover
• Half Title
• Routledge Studies in Environmental Policy
• Full Title
• Copyright
• Contents
• Notes on the authors
• Acknowledgements
• Introduction
• 1 Exiting the multiple crises through 'green' growth?
• 2 The end of the black epoch: fossil fuel peaks
• 3 The stuff of the green revolution: nitrogen, potassium and phosphate
• 4 Mining between comeback and dead end
• 5 Land and the centrality of biomass
• 6 The new land grab at the frontiers of the fossil energy regime
• 7 Possible futures among dictatorship, chaos, and living well
• 8 De-growth solidarity: the great socio-ecological transformation of the twenty-first century
• 9 A strategy of double power: the state and global regulation
• References
• Index