Richard Heinberg - The End of Growth, Festival of Dangerous Ideas 2012 (Ides at the House)

It's my absolute pleasure to be chairing this session, titled 'The End of Growth'. Before we get started, there's just a little bit of housekeeping we need to go through. Please keep your mobile phones on silent and if you do wish to tweet, which I encourage you to do, please use the hashtag #fodi. I also want to mention, I don't usually sound like Marge Simpson. It's a product of all the pollen in the air. So... (CHUCKLES) ..sorry. Now, there will be time for Q&A at the end of the session. There are two microphones in the room. There will be one over here on the corner here and there will be one just upstairs. So if you do have a question, I encourage you to actually come to the microphones, stand in line and just wait your turn. And also can you please keep your questions succinct and short so that everyone has a chance to be heard. So to today's session, which is obviously very popular. The issue of growth has been much talked about in the media. We hear about growth in China, growth in Australia, the lack of growth in the United States and, of course, in Europe. And when globalisation and capitalism are predicated on continuous and exponential growth, what does it mean for us to see the end of that growth? Well, hopefully our esteemed speaker Richard Heinberg will be able to shed some light on this and challenge our perceptions. Richard is the senior fellow-in-residence at the Post Carbon Institute and the author of 10 books. He's written extensively about growth and I would like you to join me in welcoming Richard to the stage. (APPLAUSE) Thank you for that warm welcome. Well... ..when we speak about economic growth, what are we talking about? Generally, we're talking about growth in GDP - gross domestic product. GDP is essentially the total amount of money we spend in a national economy on an annual basis and it's a good stand-in for consumption. When GDP goes up, consumption goes up and vice versa. Now, most economists would tell you that economic growth has been going on for a very long time, it's always a good thing and we can anticipate much more economic growth in the future. I'm going to challenge each of those assumptions over the course of these next few minutes and I want to start with the one that says economic growth has been going on for a very long time. Actually, as this graph shows, if you look back over the past few centuries you see that even though empires have risen and fallen, GDP per capita barely budged until we get just to the last 200 years. Now, these last 200 years have been really an extraordinary ride in a number of ways because also we see that human population has grown from under 1 billion to over 7 billion today again in just 200 years. That's an extraordinary and completely unprecedented rate of growth. A third trend that we see in just the last couple of hundred years is increase in energy consumption. And I'm going to argue in just a couple of minutes that this last of the three trends is key, that cheap energy has driven economic growth and it's the lack of cheap energy that may cause us to turn the corner. OK, now I want to pay homage here to the authors of this book 'The Limits to Growth'. It was published in 1972. I was 21 years old at the time. I read this book and it changed my life. I realised for the first time that the world was on an unsustainable path. It was, of course, a report of a group of scientists at Massachusetts Institute for Technology who used computers to model the likely interactions between population growth, resource depletion and pollution. Their 'standard run' scenario showed a peak and decline in world industrial output some time in the first half of the 21st century. Now, this report was immediately vilified by many economists who believed that economic growth was necessary and that there were no limits to it. Interestingly enough, the CSIRO did a retrospective analysis of 'The Limits to Growth' report in 2008 and this is what they concluded - that effectively we're right on track. (AUDIENCE TITTERS) So good job. (LAUGHTER) I want to unpack this 'Limits to Growth' scenario a little bit in up-to-date contemporary terms using these three factors - energy, debt and climate. Now, you'll notice debt is something that wasn't addressed in the 1972 report. They didn't look at the financial system and its contribution to global economic activity, but as we've learned over the past four years this is something we can't ignore. So let's start with energy. And I said at the outset that energy is key. Well, why is that? It's because without energy, nothing happens. Many conventional economists will say that energy is 10% of the economy because we spend 10% of GDP on energy, but really that doesn't capture it because if the energy switches off, if the lights go off, if the petrol pumps run dry, then the economy doesn't decline by 10%. The economy goes away. We have depended upon energy since...since we've been human and before. Energy enables us to do everything that we do. And up until the Industrial Revolution, we were using renewable energy sources in various forms, but there were limits to what we could do. With the beginning of the Industrial Revolution, we had developed certain basic technologies - we had developed metallurgy and gears and a simple heat engine - and the ability to extract first coal and then oil and natural gas and as we did so, all hell broke loose. Think of it this way. Maybe you've had the experience of running out of petrol in your car and having to push your car off to the side of the road. That's a bit of hard work, right, even if you're just pushing your car only a couple of metres. But imagine pushing your car for kilometre after kilometre after kilometre. That would really be a lot of work, right? Well, how much? It turns out that a single litre of petrol contains about as much energy as you would expend working hard for maybe three or four weeks. Let's say a month just to use a round number. So a month's work for... How much are you paying for petrol right now? A little less than $1.50 or right around $1.50? A month's hard labour for $1.50? You can't get labour that cheap anywhere in the world. And, of course, that's why we've mechanised every process of production and transport that we possibly could over the course of the last few decades and that has given us enormous economic growth. When you hear about labour productivity, that doesn't mean people working longer hours and working harder. In most instances, it means people using more fuel-fed machines. Well, oil is the most economically critical of the fossil fuels because virtually all of our transport energy comes from oil. But oil is also a finite resource, as we've discovered in my country, the United States, over the course of the last century. The US is where the oil industry got its start in 1859 and it's hard to imagine today... Of course, today the US is by far the world's foremost oil importing country, but in the early 20th century the US was the world's biggest exporter of oil by far. Now, oil discoveries in the US hit a peak and started to decline all the way back in 1930. 40 years after in 1970, US oil production began to decline. Now, this is the template. This is what we have been seeing and will see in every oil-producing nation and, in fact, many other former oil exporters like Indonesia and Great Britain are now oil-importing nations. Actual world oil discoveries have been declining since about 1964. So it's not just a couple of years' bad luck. This is a long-standing trend. Actual world oil production has been stagnant since 2005. Now, if you add in some other liquid fuels like biofuels and propane, butane and so on, you can see a little up-tick on this graph, but if we're just talking about regular, old, conventional crude oil, the stuff that made the economy go in the 20th century, we seem to be stuck in neutral. Well, why is that? It's because the oil industry itself is changing. Back in the 1930s, '40s and '50s, it was the days of the Beverly Hillbillies - we could find oil in onshore areas in enormous pools in the ground, it was relatively cheap to drill for the stuff and the amount of energy that we got back for every unit of energy that we invested in exploration and production was enormous, something on the rate of 50 to 100 to 1 energy-profit ratio. I think the battery in my clicker is starting to go. Uh-oh. This is not good. OK, here we go. So this is what the oil industry looks like today - drilling in a mile or two of ocean water where a single exploratory well can cost a half a billion dollars and still come up dry. Other new sources of oil include tar sands in Canada or tight reservoirs in North Dakota. Yes, there's more oil there. We're not about to run out of oil, but we've been extracting it using the low-hanging-fruit principle. So we get the cheapest, best and easiest stuff first and leave the more expensive, harder to get, more environmentally risky stuff for later. Well, guess what. It's later. Here's Australia's situation, as I'm sure you all know well. Your country was an oil exporter for a couple of years back in the 1980s, but as Australia consumes more oil these days, it has to import more oil and, of course, the line... the queue of oil-importing nations is lengthening with each passing year and there are some bullies who want to elbow their way to the front of that line. Let's go here. Ah! So there is a very strong link now between the economy and oil prices. The vertical grey bars are recessions in the US since 1970 and as you'll see, there have been several oil price spikes since 1970 and they correlate very well with the beginnings of these recessions. Now, there have been recessions that aren't correlated with oil price increases, but the reverse is not true. There hasn't been a single occasion since 1970 when we've seen a rapid increase in oil prices when we haven't seen a recession. Most famously, obviously, just 2008, we saw the price of oil skyrocket up to almost $150 a barrel and just a couple of months later in September 2008 of course the famous GFC - global financial crisis. Now, this is our situation in a nutshell. The oil industry now needs prices over $100 a barrel in order to justify bringing on a new barrel-of-oil's worth of production from unconventional sources, whether it's ultra-deepwater, tar sands or whatever, but meanwhile we know from recent economic history if the price of oil goes above $100 and stays there for very long it starts to undercut economic growth. So just on the basis of this one factor alone - global oil prices - there is reason to think that we may be hitting some kind of fundamental limit at least over the short term until we can find something to replace oil, but that's going to be hard to do for a while and, in fact, I'd argue that there aren't any good substitutes for oil from an economic standpoint on the horizon. But that's not the only thing that's happening. We're also seeing a global debt crisis. Now, what is that about? Let me explain it to you with a story. The story starts in the early part of the 20th century. The problem then was overproduction. With cheap energy and powered assembly lines, it was possible to make consumer products in larger quantities than people were accustomed to buying them. So how to solve this problem? Well, one strategy that was hit upon was advertising - talking people into wanting more stuff. And there were subsidiary strategies like planned obsolescence - making consumer products that would reliably break down before they really had to so that you would have to replace them or making consumer products so they would change appearance every year and everyone would want to have the latest model. Now, this is an ad for a 1910 Studebaker. A 1910 Studebaker cost about $900. That doesn't sound like much to pay for a new car today, but in 1910, $900 was a lot of money. It was much more money than people were accustomed to paying for, well, what was at that time a luxury item. So even though factories were capable of turning these things out by the thousands and tens of thousands and hundreds of thousands, it was hard for people to buy them. So how to solve that problem? Well, the solution was consumer credit - making it easier for people to go in to debt to buy things they couldn't otherwise afford. Consume now, pay later. It was a way of stimulating economic growth and, of course, it was very successful. Another thing we did was to change the monetary system. In the early 20th century, there was a link between precious metals - gold and silver - and money, but there were limits to the amount of gold and silver that could be brought to the market at any given time so over the course of the 20th century those links were severed so that today effectively money is debt and debt is money. If you go to the bank and take out a loan for $10,000, the banker doesn't scurry off to the vault and look for $10,000 that somebody deposited there. No, as soon as the loan is approved, $10,000 appears as a deposit in your account. That money was created out of nothing. And when you pay back that $10,000 loan, the money disappears. It's magic. It's...it's a very good system for an economy that's growing rapidly because it means we can just create as much money as we actually need. Now, I want to describe for you the contents of a paper by economist Robert Gordon that is kind of incendiary. It's making the rounds right now. Bear with me. I'll describe it as quickly and simply as I can. He's suggesting that there have been three periods of economic growth during the industrial era. Now, the first segment was characterised by coal, steam power and railroads. It took place during the 19th century, the early years of the 20th century. The second industrial period was characterised by oil and the machines that use oil like automobiles and airplanes and also by electrification and the machines that we invented to take advantage of electrification - obviously electric lights, but also refrigerators and air conditioners and so on. Then there was a third period of industrial growth that started in the 1980s and that was characterised by computers, eventually by cell phones and the internet. Now, Gordon argues on the basis of very clear data that it was the second of these industrial periods that brought by far the lion's share of economic growth and that by the 1980s, the introduction of oil-powered machinery and electrification and electrical appliances, this phase was reaching a point of diminishing returns in the industrialised countries. People had already bought their first automobile, their first air conditioner and vacuum cleaner and so on and from then on it was just a matter of replacing ones that already existed. There was a very high level of consumption and economic activity, but it wasn't wanting to grow very much. Now, the third period that begins to take off in the 1980s with computers and all the rest, yes, it brings another bit of economic growth, but not nearly as much as took place earlier. Now, the significance of this is that many of us, I think, are relying upon technological innovation to maintain the same level of economic growth that we saw in the mid-20th century. If Gordon is right, then that may have been a one-off event, in fact. Oil after all is an amazingly powerful energy resource that has unique characteristics. It's energy-dense, it's portable, it's unlike anything that we know that might be a substitute. And also you think of the power of the technologies that it unleashed - automobiles, air travel and so on. Where's the encore? It doesn't seem to be in the wings. Another thing started in the 1980s and that was globalisation and it also had an impact because suddenly as a result of container shipping and satellite communications it became possible for companies to outsource production. So workers in the already industrialised countries like the United States were now competing with workers on the other side of the planet. This had the effect of capping real wages for factory workers in already industrialised countries. So in the United States, the average hourly wage in inflation-adjusted terms for factory workers is no higher than it was in 1973. So by this time consumerism is 70% of the economy and if people don't actually have more money in their pockets how are we going to keep the economy growing? Well, the answer hit upon was more debt - make it even easier for people to take on even more debt so credit cards, subprime mortgages, home equity lines of credit, car loans, student loans, and all the rest. If you're taking out that $10,000 loan that we talked about earlier, that's an obligation for you to repay, but from the standpoint of the banker who's making the loan, that same loan is an asset. So as the economy is suffused with more and more debt, that means that there are more and more assets for the financial industry. And, of course, securitisation and derivatives also come into the picture around this time so the financial industry is actually growing at something like three times the rate of the rest of the economy. This is... The lower blue line is US GDP and the red line is the amount of debt in the US economy. And here we're not talking about government debt. We're primarily talking about household debt, corporate debt and so on. So the financial industry is taking on more political clout within the economy as it's growing faster than manufacturing, faster than agriculture and all the rest. It becomes a different kind of economy, in fact. Here's another picture of the same thing. And as you'll note, government debt actually was growing slower than household debt throughout this period right up until 2008. And what happens in 2008? With the housing crash, suddenly trillions of dollars of value disappear from the economy and the central bank - the Federal Reserve - and the government step in as the lenders and borrowers and spenders of last resort in order to keep the economy from imploding upon itself. You have a similar situation here in Australia with levels of private debt compared to GDP. Now, you didn't have the same experience with the collapse of the property bubble, but...perhaps just wait a while. (LAUGHTER) These were the words of my dear former president George W. Bush. On September 24, 2008, he said, "If we don't loosen up some money, this sucker could go down." Now, by the words "this sucker", I believe he meant to say the entire US financial system and, by extension, that of the rest of the world as well. Some money was indeed loosened up. The Federal Reserve was recently audited as a result of an act of Congress for the first time in its history since 1913 and it emerges that the Federal Reserve pumped $16 trillion into the global economy after 2008 in order to keep it afloat. $16 trillion is a lot of money. It happens to be more than the entire annual US GDP. And yet even with all of that, and the US is deficit spending to this day at a rate of $100 billion a month. Now, of course there's a great hue and cry, a great concern about that in Washington because, you know, you can't keep borrowing money forever, but if the government stops deficit spending then where's the economic engine going to come from? The economy just isn't picking back up on its own. (LAUGHTER) We hear about bail-outs and Greek bail-outs, for example. Now, are the people of Greece being bailed out? Are the people of the US being bailed out? No, what's actually happening is that... ..in order for the banks to receive the payments on their existing loans... They effectively made a bet with subprime mortgages and home equity lines of credit in the US based on inflated house prices and in Europe with loans from banks in Germany and France to countries like Greece. The bet was that there would be plenty of economic growth in the future and therefore it would be easy for these people or countries to pay back these loans. When that turns out not to be the case, when economic growth isn't happening and the payments can't be made, well, these loans turn out to be toxic assets for the banks, but rather than seeing the banks fail because they made bad bets and their assets turn out to be toxic more money is created out of nothing by central banks and by governments to make the payments, but those loans are on the backs of the people. So the Greeks now are working six-day weeks and 13-hour days with the hope that their economy will start to grow somehow and they'll be able to pay back ever and ever larger debt. It's not going to happen. We have hit limits to debt. You know yourself if you take on so much debt that you can't make the payments and the bank doesn't want to loan you any more money then you've hit the wall. That's what we're doing. That's what is going on in the very simplest terms right now across the world. But that's not all that's happening. Of course, climate is changing and I'm not going to argue that climate change is currently right at this moment choking off world economic growth, but I will argue that over the course of this decade climate change is going to come in from the wings and deliver the coup de grace on world economic growth. We all know the story. Global carbon emissions are increasing. Global temperatures are going up. Believe me, they are going up. Yes. And by how much? Well, we know with the amount of carbon dioxide in the atmosphere right now that we will certainly see at least two degrees or warming and just with the current degree of warming, amount of warming, we're already seeing extreme weather events like the drought that's hitting my country right now and causing billions of dollars worth of damage to crops throughout the American Midwest. We're also seeing just with the current amount of warming the collapse of the Arctic ice. The North Pole is becoming ice-free over the course of just a few years. Almost certainly by 2020, we will see an ice-free Arctic during summer months and this is setting off a self-reinforcing feedback because as dark ocean water is opened up in summer months that absorbs much more heat from the sun, which melts ice even sooner, which opens up more water to create more heat to melt the ice even sooner and so on. So we're almost certainly looking at even more warming than... ..than two degrees. We don't know exactly how much. But another worrisome thing is that as the Arctic is warming it's letting loose methane that's been trapped in ice either in permafrost on land on under the oceanbeds and over the short term, over a decade time span, methane is 10... Excuse me. 100 times as powerful a greenhouse gas as CO2. So this is yet another self-reinforcing feedback that could bring us to...who knows? 10 degrees, perhaps more. If we get to 10 degrees, if we get to 20 degrees, it's game over for civilisation as we know it. But long before we get to that stage, I believe we will see weather events extreme enough to effectively reverse economic growth as we've seen it over the past few decades. So we see these three things converging - oil prices, limits to debt and climate change. All together, this is our situation. We're on a speeding train. It's going at a pretty fast clip, but it's never going quite fast enough for our taste. We want it to go faster with every passing year because we want more jobs, governments want more tax returns so they can provide more services to the citizens, investors want higher rates of return. So we want that train to speed up all the time. And, of course, it's exhilarating until we get to the end of the road. And here we are. You know, nothing goes on... Nothing grows forever on a finite planet. Think of it this way. Imagine a tiny hamster. A baby hamster grows very rapidly for the first portion of its life. It actually doubles its body weight every week for the first several weeks. Now, suppose we had a magic hamster that could somehow continue doubling its body weight every week for one whole year - 52 doublings. How big a hamster would we have? Would it be 50 kilos or 500 kilos? Well, the New Economics Foundation in London has done the math for us and it turns out that it would be a 9 billion ton hamster. Now, how can that be? How can just 52 doublings get us to such an extraordinary value? Well, that's what exponential growth is all about. It can be expressed in terms of doubling times. That's what we're trying to do with economic growth. It seems so innocuous - 2% or 3% or 5% per year. But think about what China's doing - growing its economy in recent years at 10% per year. What's the doubling time? Well, the math is very easy, actually. It turns out to be seven years. So after seven years, China's economy is twice as big. After 14 years, it's four times as big. After 21 years from the moment we started, China's economy is eight times as large. So how many times can we double China's economy before it runs into fundamental limits? No-one knows the answer to that question, but one might start to wonder is even one more doubling possible? Well, how does all of this relate to Australia? It's not for me as an American to come to your country and tell you what you should do with your country, but I think as an interested and sympathetic outside observer it appears to me that you all face a kind of crossroads. It would appear that you're banking your future on extracting and exporting resources to a growing Chinese economy, but does that really make sense as a long-term strategy? After all, China is facing some problems. China's economy is actually slowing down right now and it's entirely possible that this decade, China will face real problems with maintaining its economic growth. So Australia is part of a larger system. China makes its money largely by exporting manufactured goods to the United States, Europe, other importing nations. So as those countries stagnate then China exports less, which means China needs less iron ore, less coal, copper - all of the things that Australia is exporting to China. So if China's demand goes down, that means that commodity prices soften and that then in turn will have an impact on Australia's economy. This is already occurring. This is not hypothetical. When Martin Ferguson said that the resources boom is over... Of course, talk about a dangerous idea. (LAUGHTER) He was immediately forced to retract and fudge and so on, but, you know, I think he was telling us all something we need to know. Meanwhile, Australia's population is still growing very rapidly. The Australian Bureau of Statistics is telling us that the nation's population could double or triple by the end of the century. Is this something to be concerned about? Well, maybe so. I mean, after all, if the economy is slowing down and maybe stagnating and maybe even contracting over the course of this century and meanwhile population is continuing to grow, that means that per capita consumption, per capita GDP would plummet. Is that any kind of future for your children and grandchildren? Maybe it's time to start thinking about population. Maybe it's also time to start thinking about building resilience into your economy. Now, what are we talking about with resilience? In many cases, resilience is the opposite of economic efficiency. Economic efficiency sounds like a good thing. After all, energy efficiency is almost always a good thing. Well, economic efficiency's a bit different. When I explain this to American audiences I use the following analogy. If you can grow corn cheaper in Iowa than anywhere else then you should grow all of your corn in Iowa and nothing in Iowa except corn. It makes good economic sense. That's economic efficiency. But it makes for a less resilient food system because if the Iowa corn crop fails, as it's doing right now, then nobody has corn and Iowa has nothing. If you want a more resilient food system then you need more dispersed inventories. You need a more localised food system rather than a globalised and centralised food system. It may not be as economically efficient, but in hard times, it'll be much easier for everyone to get by. Well, we are facing hard times. Let's be real about this. The 21st century is not going to look like the 20th century all over again. It's not the Jetsons, it's not the Beverly Hillbillies. It's going to be a time of belt-tightening. It's going to be a time of retrenchment. Now, that doesn't mean it's the end of the world. We've had hard economic times before and we've gotten through them. But it will go much better for us if we prepare, if we understand what's happening and why and make the necessary adjustments. Getting off growth will go much easier for us, for example, if we get off of GDP. GDP most economists will acknowledge is a perverse indicator. All it's telling us is that we're spending more money, but we may be spending money on things that make us miserable. Why not adopt indicators like a genuine progress indicator or gross national happiness, as the people of Bhutan have done, that actually gives us useful information about the quality of our household lives and community lives, the quality of our environment and so on? How about developing alternative currency so that if one major currency like the US dollar or the Australian dollar has a few hiccups along the way we have some alternatives to that, perhaps a currency that's not based on interest-bearing debt? Maybe we need to rethink how corporations are organised. You know, right now most corporations are organised so that their first priority is returns for shareholders. So corporations have to grow or die and if a corporation stops growing then it's likely to be taken over by another and liquidated and so on. How about family-owned or worker-owned businesses that can continue to provide work for their labour force, can continue to provide good products for their customers without necessarily having to grow year after year? And as we do these things we should be thinking about what we're going to prioritise. You know, do baby bonuses make sense under these circumstances? I don't think so. You know, we do need alternative energy sources, solar and wind, but they will provide a different kind of energy from what we've been used to. They are intermittent sources. The sun isn't always shining, the wind isn't always blowing. They're not going to support the same kind of consumer growing economy that we've seen during the last few decades. So as we transition to renewable energy sources, which we certainly must do as fast as we can, we have to expect to have less energy and especially less energy for transportation. We will be less mobile in the future. Nobody is planning on electric airliners to ferry hundreds of people from continent to continent. It's not going to happen. And if we use biofuels for Boeing 747s, that fuel is going to be much more expensive than the kerosene that we're using right now. We will be less mobile so let's plan on it. We can make this transition. We should be building or retrofitting our buildings so that they don't require external energy sources like the passive house movement in Germany is doing. And, finally, we've created a food system that depends upon fossil fuel inputs for pesticides, fertilisers, herbicides and so on. That's a food system that's almost designed to fail under circumstances that are entirely foreseeable. So we need to re-localise our food systems and extract fossil fuels from every stage of it. Finally, we need to rethink economics itself. Economics as a discipline grew up during this anomalous period, a brief eye-blink of time in human history, when we had rapid fossil-fuelled economic growth. And so economists internalised some ideas about the world that I think are pretty unrealistic, like the idea that the entire natural world is a subset of the economy - it's just a pile of resources that we extract, turn into consumer goods, which then become waste, which goes away, wherever 'away' is. But the reality, of course, is exactly the opposite - the entire human economy is a subset of the ecosystem, always has been and always will be. So why don't we design our human economy to function like a healthy ecosystem? We have to understand that growth and population and consumption is fundamentally unsustainable and when I say 'unsustainable', I don't mean insufficiently eco-groovy. I mean it can't go on. Now, obviously it can go on for a few decades because it has, but not much longer. So we should plan for how big an economy nature can support over the long term and how big a population. Renewable resources have to be harvested at less than the rate of natural replenishment - how obvious and yet we're flouting this principle with regard to forests and fisheries. And non-renewable resources have to be recycled wherever possible and the rate at which we extract them from the earth's crust always has to decline if we're going to aim for a condition that's sustainable. Very simple principles. Now, can we follow those principles and still build one of these? I don't know. But if these are the most important invention in all of human history, as we seem to all have agreed that we can't live without them, well, shouldn't we be thinking about how we can make them not from depleting, scarce, non-renewable resources using slave labour and lots of fossil-fuelled transport in between, shouldn't we be thinking about how we can make them from recycled and renewable materials using well-paid local labour? Can we do it? I don't know, but we should try. You know, if you're starving, a little more food can be a very good thing, but we in the industrialised world have gotten to the point where it's like you're full, but you're having another hamburger. It's not good for you and it doesn't feel good and, in fact, economic growth is no longer feeling that good to us. There are all kinds of psychological studies showing we in the western world... Even in the industrialised parts of China people are miserable because of the pace of life. So can we back off on the accelerator and actually be happier, healthier and better off? There's a lot that we have traded away for the sake of rapid economic growth. That means that if we aim to stabilise our economies in a sensible way, downsizing the financial system in relation to manufacturing and agriculture, reorganising our priorities. We can be happier. We can live more fulfilled, integrated lives. Well, that's what we should concentrate on, that's what we should aim for and if we do, the future may look actually brighter. Thank you very much. (APPLAUSE) (WHISTLING AND APPLAUSE) I'll just put my mobile phone down here. (CHUCKLES) Oh, thank you, Richard. That was very interesting and highly illuminating and a lot of dangerous ideas in there. We have time now for Q&A so if you do have a question please make your way to the microphones which are being set up, one just over there and then one up the top. But I'm going to kick off. Richard, do you think - in your view - the United States will find its way out of this current economic situation that it finds itself in? Um, I'd like to answer with a resounding yes, but I can't. (BOTH LAUGH) I think the US and actually most of the world is going to be driven to adaptation by crisis and the current political discussion in the US about the economy and about energy, about our future, is pretty abysmally wrongheaded. But, you know, it's hard to find a politician anywhere who's willing to stand up and say, "Hey, look, we've had enough economic growth. "Let's rethink our direction." But when crisis comes, we're almost forced to think dangerous ideas. That happened in 2008. We saw magazines like 'The Economist' and 'Time Magazine' suddenly questioning capitalism. I mean, who would have 'thunk', right? So as crises recur, I think it's really important that we contextualise them, take advantage of them. A crisis is a terrible thing to waste. (LAUGHTER) Well, and also what you said before, which I actually thought was quite a dangerous idea, was the notion that to downsize the economy and looking at shrinking manufacturing... Manufacturing here, obviously, has been very much at the forefront of the national debate. It's a dangerous idea. I think it would take a lot of political courage to actually step up and say something like that. Well, see, what we need to do first of all is downsize the financial industry and we can do that by... Good luck with that. (CHUCKLES) We could do that nationally or globally with a tax on all financial transactions and then use that money to help households make the transition and also to build up our renewable energy infrastructure and help society as a whole move into a survivable future. Alright, let's take some questions from the floor. I can see someone upstairs. -Please. -MAN: Thanks. In your discussion, I don't recall you addressing the globalisation of the movement of capital and knowledge to places like China and India and other developing countries as a cause of some of the changes that you were describing. You also didn't address whether developing countries have still got a right to anticipate and demand growth within their countries. Can you address that? Thanks. Sure. Yeah, you know... (SIGHS) I'm not suggesting that the end of growth is an option. What I'm saying is it's happening and it will happen regardless of what we do. Now, the less industrialised countries I think can adapt best by completely leapfrogging the whole fossil fuel industrial paradigm of automobiles and highways and so on and go straight to a more localised renewable-energy-based economy. China I think is making an enormous mistake by becoming the world's largest automobile market and building highways at a frenzied pace. Not only is it unsustainable, I think it's going to lead the country off the cliff. So do less industrialised countries have the right to grow further? Well... ..certainly they have the right to make life better for their people. How they do that I think is going to be a matter of using some intelligence and strategy and not just trying to emulate the US and Australia and what these countries have done over the course of the 20th century because that's a path to failure. -Down here on the floor. -MAN 2: Yeah, thank you. A wonderful presentation with a lot of data, but I think just a few speakers around the world can tackle the fact that, at least for some of us, this system - capitalism or the free enterprise system - doesn't work at all because it's focused on money and it's a money-based economy basically. Some of the speakers just speak about solutions like we have to do things that make us happy... PERSON: A question, please! So why don't you generally speak about something like the economy as we know it now - the free enterprise system - doesn't work at all. We should get out of this idea and then find something else, like, for example, a resource-based economy? If you know, what's your thoughts about the 'Zeitgeist' movie? Yeah. Well, you know, I generally try to avoid the word 'capitalism' simply because as soon as you use it people think they know what you're talking about, but at least in my country, in the United States, it results in an enormous amount of... ..of confusion, actually, because people think that if you're against capitalism somehow then you must be for state socialism or communism. I don't think that any of the economic systems of the 20th century will actually serve us in the 21st century. We're going to have to reinvent the economy. Now, whether that means abolishing private ownership of all means of production... I kind of doubt if that's really going to be the way we go. It certainly wasn't the path to health and happiness for millions of people in the socialist world during the 20th century. The 'Zeitgeist' movie I think has some very good ideas, but there are a number of organisations that have come up with I think very good critiques of our current economic system and alternative plans and that's only one of many that I would point to. I'm just in Year 10 studying commerce so if the question's a bit off-topic, sorry if it doesn't make sense. But is our addiction to cost-effective economic growth a path to deconstruction of what it was designed to create? I'm sorry. I don't... Could you restate that? So is our addiction to cost-effective growth a path to deconstruction of what it was designed to create? Right, OK. Well, yeah, in a sense I guess so. The whole idea of economic growth was to make us richer and happier and it has made some people certainly a lot richer and if you look at GDP per capita, as we saw in the very first slide, we do live in the wealthiest societies that have ever existed in all of human history. I mean, an ordinary Australian or North American lives like a king or queen in energy terms and in terms of personal consumption compared to people in previous centuries and millennia, but are we happier as a result? That is another question. And I think once basic human needs are satisfied, once we have enough energy to keep ourselves warm when it's cold outside and cook our food, once those basics are covered and we have enough to eat and shelter and so on then there's not that much correlation between further consumption and satisfaction in life. So economic growth I think right now actually is undermining the very things that it was designed to foster. Richard, I'd like to ask you a question. Obviously, Australia is focusing very much on finite resources, digging things out of the ground and exporting them to China, as you mentioned in your speech, and, obviously, they do run out. Where in your view then should the focus be for the government and other sort of people in those positions? Well, Australia's going to have to plan its economy for the longer term, right? So that means developing an internal economy that can function with a resilience over decades and we should be planning for a society that can persist for centuries. You know, right now Australia's a boom town economy. We know about boom towns in the United States. You know, there are ghost towns all over the American west where there was a silver mine back in the 19th century and a saloon and the saloon was prospering as long as the silver mine and then the silver mine started to peter out and the whole town just dries up and blows away. Well, what's the long-term plan for long-term sustainable agriculture? For example, Australia has very poor thin soils so that means a long-term plan would be to build topsoil rather than mining topsoil, which is what industrial agriculture typically does. So Australia should be thinking about really the basics - of topsoil, water, food production - and making its cities, its buildings to last and not to require external energy inputs. Australia has the potential - lots of potential - for renewable energy. So developing that rather than continuing to mine the fossil energy sources that are the energies of the 20th century. Should Australia allow foreign ownership of its agricultural and arable land? Hmm. (LAUGHTER) Well, one... ..one has to think that that's a very bad idea. I see a few people wanting to clap, but no-one is. Please. Please make your way to the microphone. MAN: Two questions. Leaving aside the climate considerations, a lot of serious commentators are talking about very recent finds with natural gas and fracking technology and some sort of oil finds that you alluded to and there's talk of America becoming energy independent within a decade. Does that change at least one of the points of consideration that you raised? Second question is in light of your comments and the CSIRO report you mentioned, the "sceptics" of your sort of viewpoint seem to use the Club of Rome and 'The Limits of Growth' and there's a person's name that comes to mind, Paul someone, as almost a weapon against this viewpoint, as if that's been totally discredited and yet that would stand in complete contradiction to what you're putting out. I'm going to have to answer this very quickly because we're running out of time. First of all, the fracking gas and unconventional oil in the US is being wildly oversold. We already have a study on our website - postcarbon.org, a free PDF download you can look at, a 75-page study by one of North America's principal geologists - showing that is that the... Natural gas prices have been driven down by a fury of drilling that happened in 2006, 2007, 2008. Now, these new gas wells - and it's true of the unconventional oil wells as well - they deplete very rapidly. So you drill a new oil well in January, by December the rate of production from that well has already fallen by 40% so you have to drill again and again and again. So if you're drilling thousands and thousands of wells then you can keep production flat or maybe even rising, but they're drilling the sweet spots first. So what we've seen so far is the best it's ever going to get and as time goes on, even over the course of the next two, three, four, five years we will see the end of the sweet spots, the decline in the existing fields and are forecast on the basis of very good data is that US oil production, rather than the US becoming self-sufficient in oil will actually begin declining again within the next two to three years. Now, yeah, Paul Ehrlich and 'The Limits to Growth'... You know, this is all a public relations strategy on the part of the growth-based economists. Paul Ehrlich, for example, had a famous bet with the economist Julian Simon. Simon bet that commodity prices would fall, Ehrlich bet that they would rise and Julian Simon won the bet. "So the economy can grow forever," we conclude from that. Well, it was just a matter of timing. If they'd made the same bet 5 or 10 years later Paul Ehrlich would have won. Commodity prices have generally increased since 2000 partly because energy prices have gone up, partly because we're drilling, digging deeper for lower quality ores all the time and the way we do that is with more and more energy and if energy gets more expensive, it undermines the whole process. So, yeah, I mean... ..basically the 'Limits to Growth' people and Paul Ehrlich were right. The data is in their favour. That's all we have time for. I'm really sorry. WOMAN: We haven't had a woman ask a question yet. (LAUGHTER) Oh, alright, you've twisted my arm. One more question. (APPLAUSE) OK, it's all about make-up, obviously. Very quickly, it's a brave policymaker or government who controls growth. The only example I can see that's been successful is the one-child policy in China, which is so culturally kind of against what we could possibly cope with. I'm just sort of putting that out there. Is that what governments... Is that the kind of brave step governments and policymakers need to start taking? Well, with regard to population, many countries have made effective efforts to reduce the rate of population growth and in most cases that involves actually doing things to raise the social status of women, especially in poor countries. So, yeah, if we're talking about GDP, it's true there are very few countries that have deliberately put the brakes on growth, but with regard to population it's a different story and, in fact, the countries that have taken steps to reduce the rate of population growth have seen their economies improve as a result. If you have a poor country with large average family size, a high rate of population growth, then a typical family spends all its income on food and shelter. It has nothing left over at the end of the day for education for the children, for formation of a small family business or anything like that and so they're mired in poverty generation after generation. It's only when the rate of population growth begins to slacken off that there's the possibility then of improving people's lives. (MAN SPEAKS INDISTINCTLY) I'm sorry. MAN: The ageing of the population... The ageing of the population is... It's a problem that I believe has been overstated. Now, once you have rapid population growth there are going to be implications all the way down the line, but it's not something you can continue doing forever so we've got to make plans for how we're going to get off of that curve. Please join me in thanking Richard Heinberg. (APPLAUSE) -Thank you. -Thank you. Thank you. Thank you. And just before you go, I just wanted to let you know if you do have questions, Richard will be signing his book in the Western Foyer. And also, Richard, was there anything else... Yeah, I wanted to offer a brief commercial. Many of you saw a little flyer on your seats or next to your seats. There's an Australian composer named Kris Spike. I happen to be a rather enthusiastic amateur violinist myself and I played some of his compositions. There will be a performance of his compositions here at the Opera House in a few weeks and I would recommend that you go. Thank you, Richard. Thank you.