Life After Growth (Paperback) : How the global economy really works - and why 200 years of growth are over

NEW PAPERBACK EDITION WITH ADDITIONAL INTRODUCTION AND END NOTE FROM THE AUTHOR Why, years after the banking crisis, is the global economy still mired in recession and burdened by enormous debts? Why have the tried-and-tested economic policies of the past failed us this time? In Life After Growth, leading City analyst Tim Morgan sets out a ground-breaking analysis of how the economy really works. Economists are mistaken, he argues, when they limit their interpretation of the economy to matters of money. Ultimately, the economy is an energy system, not a monetary one. From this, it follows that we need to think in terms of two economies, not one - a 'real' economy of work, energy, resources, goods and services, and a parallel, 'financial' economy of money and debt. These two economies have parted company, allowing the financial economy to pile up promises that the real economy cannot meet. Starting with the discovery of agriculture, Tim Morgan traces the rise of the economy in terms of work, energy and resources. The driving factor, he explains, has been cheap and abundant energy. As energy has become increasingly costly to obtain, the potential for prosperity has diminished, to the point where growth in the real economy has ceased. An immediate problem is that our commitments - including debt, investments and welfare promises - cannot be honoured, which means that we can expect the financial system to be wracked by value destruction. At the same time, we need to adapt to a future in which prosperity can no longer be taken for granted. Publishing details Introduction to the Paperback Edition MORBID CURIOSITY CRISIS? WHAT CRISIS? CRASH-AND-CARRY THROUGH THE LOOKING-GLASS Foreword by Terry Smith PART I: THE END OF AN ERA Chapter 1: An Economy That Has Run Out of Road The corner that is never turned In search of the real economy The end of cheap energy and the death of wealth Endnotes Chapter 2: How the Economy Really Works Two economies, not one The real economy – an energy system Fig. 1: Energy return ratios are non-linear Fig. 2: Energy returns are nearing the cliff edge The subservience of money Recklessness – the creation of excess monetary claims Fig. 3: The debt-GDP ratio in the United States since 1945 Fig. 4: American real GDP and debt since 1945 The madness of crowds Fig. 5: Changes in British real debt and GDP Fig. 6: British real debt and GDP The globalisation disaster Dodgy data – an exercise in self-delusion Where do we go from here? Endnote PART II. THE REAL ECONOMY Chapter 3: The Energy Economy What is the real economy? The commonality of energy Endnotes Chapter 4: The Great Breakthroughs The first great breakthrough – agriculture The second great breakthrough – the heat-engine Chapter 5: Growth and Risk Energy, population and exponential risk Fig. 7: Fossil fuel consumption since 1750 Fig. 8: American real GDP since 1750 Fig. 9: An exponential progression – compound interest Fig. 10: A real-world exponential – the global population Fig. 11: Energy consumption and the global population Fig. 12: Exponential risk Towards peak oil? Fig. 13: An illustrative peak oil supply pattern Fig. 14: Oil – feature ... Fig. 15: ... or blip? Right answer – wrong question Endnotes Chapter 6: The Real Threat Energy returns – the killer equation Table 1: EROEIs in energy units and percentages Fig. 16: The energy returns ‘cliff’ Fig. 17: The energy cost of energy Fig. 18: Trends in energy returns by fuel source Where are we now? Fig. 19: The underlying cost of energy since 1965 Fig. 20: Time development along the EROEI curve The road from wealth to poverty Fig. 21: A high EROEI economy Fig. 22: A low EROEI economy Removing the foundations? Fig. 23: Energy and commodity prices, 2012 vs 2000 Knowing the score Endnotes PART III. THE FINANCIAL ECONOMY Chapter 7: The Servant, Not the Master The subservient role of money The creation of money Endnote Chapter 8: The Madness of Crowds When it didn’t pay to go Dutch “An undertaking of great advantage, but nobody to know what it is” An eastern bubble Fig. 24: Japanese economic performance since 1960 The biggest bust Figs. 25 and 26: Borrowing and growth in the United States Something old, something new Endnotes Chapter 9: The madness of globalisation Dangerously simple, simply dangerous Credit market distortion ‘Taking in each others’ washing’ Fig. 27: The composition of American GDP since 1980, inflation-adjusted Fig. 28: Consumption and production in America since 1980, inflation-adjusted Fig. 29: The American trade balance in goods since 1963, inflation-adjusted Deep in the hole Fig. 30: American debt since 1980, inflation-adjusted Table 2: Changes in American debt and GDP, inflation-adjusted Gravity reasserts itself – the debt crash Fig. 31: The expansion of the Federal Reserve balance sheet since 2007 Compounding errors Energy takes away the punch bowl Fig. 32: American oil and import costs Fig. 33: OECD oil and import costs Endnotes Chapter 10: The Madness of Statistics The high price of understated inflation Fig. 34: British inflation in detail, 2002–12 Fig. 35: Annual changes in British wages and inflation, 2002-12 Fig. 36: British wages adjusted for inflation, 2002–12 Fig. 37: Trends in American government bond yields since 1981 Grossly Distorted Prosperity Table 3: American GDP – the impact of imputations What growth, what jobs? Fig. 38: American GDP growth Fig. 39: American unemployment Government finances – smoke and mirrors Table 4: Liabilities in 2010, selected governments The understatement of government commitments Fig. 40: American government debt, quasi-debt and GDP, 2011 Endnotes PART IV. LIFE AFTER GROWTH Chapter 11: Welcome to Life After Growth The end of an era Chapter 12: Value Reduction – the Real Economy Energy – from abundance to scarcity Options for the future Costs – the energy sprawl phenomenon Fig. 41: An illustration of future energy price trends Real incomes under pressure Business – the model nears obsolescence Endnote Chapter 13: Value Destruction – the Financial Economy Unfit for purpose Fig. 42: An illustration of the ‘claims gap’ and value destruction Thinking the unconventional Are we printing inflation? When inflation is not enough Chapter 14: An End or a Beginning? How do we think? Action this day? The dangers of stasis Afterword: “What Does This Mean to Me?” End Note to the Paperback Edition Why, years after the banking crisis, is the global economy still mired in recession and burdened by enormous debts? Why have the tried-and-tested economic policies of the past failed us this time? In Life After Growth, leading City analyst Tim Morgan sets out a ground-breaking analysis of how the economy really works. Economists are mistaken, he argues, when they limit their interpretation of the economy to matters of money. Ultimately, the economy is an energy system, not a monetary one. From this, it follows that we need to think in terms of two economies, not one - a 'real' economy of work, energy, resources, goods and services, and a parallel, 'financial' economy of money and debt. These two economies have parted company, allowing the financial economy to pile up promises that the real economy cannot meet. Starting with the discovery of agriculture, Tim Morgan traces the rise of the economy in terms of work, energy and resources. The driving factor, he explains, has been cheap and abundant energy. As energy has become increasingly costly to obtain, the potential for prosperity has diminished, to the point where growth in the real economy has ceased. An immediate problem is that our commitments - including debt, investments and welfare promises - cannot be honoured, which means that we can expect the financial system to be wracked by value destruction. At the same time, we need to adapt to a future in which prosperity can no longer be taken for granted. #lifeaftergrowth