furniture, casks and other vessels not to be numbered, and of carts, wagons and coaches, besides the extreme waste of wood in making iron, burning of bricks and tiles, that at this present, through the great consuming of wood as aforesaid, and the neglect of planting of woods, there is so great scarcity of wood throughout the whole kingdom that not only the City of London, all haven towns and in very many parts within the land, the inhabitants in general are constrained to make their fires of sea-coal or pit coal, even in the chambers of honourable personages and through necessity which is the mother of all arts, they have in late years devised the making of iron the making of all sorts of glass and the burning of bricks with sea-coal and pit-coal.1
That was it. The thin end of the wedge. The slippery slope. For the first time, humanity was starting to depend on a nonrenewable, and hence unsustainable, energy source for its comfort and livelihood. It was understandable that it did. Which of us would have worried about the long-term consequences of burning black stones collected from beaches in Northumberland, or which had been dug out of shallow holes in the ground?
I then pointed out that as the demand for coal increased, the easiest, shallowest mines were soon exhausted, and deeper and deeper pits had to be dug. This posed enormous problems since a shaft floods if it is sunk below the water table and a pump has to be installed to keep things reasonably dry. The early pumps consisted of rags or buckets on continuous chains which were turned by horses or, if a stream was handy, a water wheel. However, the deeper a shaft went, the longer the chain had to be and the more friction the horse or the wheel had to overcome. As this placed a real limit on how deep a mine could go, mine-owners were keen to find other ways of powering their pumps. Around the time Edmund Howes was writing, coal-fired steam power began to be used for the first time for pumping water out of mines. In a somewhat incestuous way, coal energy was being used for mining coal.
The Transformation of Manufacturing Methods
The first steam engines just moved a piston back and forth, which was all that was required to work a cylinder-type pump. It was only during the following century that the piston was attached to a crank to turn a revolving shaft, an innovation in response to a demand for rotary power from cotton mills unable to find additional sites for their waterwheels. This was the type of engine, of course, that powered the industrial revolution and, in my view, led with an alarming inevitability to the problems we have today. It was steam power, in fact, which made the widespread use of machines possible and then, for competitive reasons, absolutely necessary.
The essence of industrialization is that it produces lower-cost goods by using capital equipment and external energy to replace the skilled, and thus relatively expensive, labor used in handcrafts. Since less labor is used per unit of output, unemployment develops unless sales expand. The mechanization of sock and lace production in the English midlands led to such widespread job losses that riots broke out in 1811 and 1812. Troops were sent to the area to stop the Luddites, as the bands of destitute working men were called, from breaking into the new factories and destroying the machines. Indeed, had the Napoleonic War not ended in 1815 allowing the factories to increase their sales in Europe and elsewhere, the disturbances might have become serious enough to kill off the industrial revolution. Without wider markets, firms using powered machinery would have either consumed themselves in a competitive frenzy, or seen their technologies banned as a result of popular unrest.
Eventually, however, British exports put most continental craft producers out of business and left the remainder with no alternative but to adopt more fossil energy-intensive methods too. A sales pyramid developed. The early participants in a sales pyramid get rich because they receive commission on the goods they sell to people whom they have persuaded to become dealers too; dealers who, in turn, can earn a commission from others they induce to join the pyramid as dealers later on, who themselves recruit and stock further dealers. And so it goes on, setting up a situation in which everyone in the pyramid can only fulfil their income aspirations if the pyramid does the impossible and expands indefinitely, eventually involving infinitely more people than there are in the world.
The fossil fuel-based production system became dominant by expanding on exactly the same lines. Just as British factories had needed to take over the markets previously served by craft-scale manufacturers in Europe to survive, industrial Europe had to oust artisanal producers elsewhere in the world, and the British sold them the machinery to do so.
Tariff barriers were maintained to allow the new continental industries to build themselves up until they could not only compete with their British rivals but had acquired export markets in which to sell themselves. It was the need for exclusive external markets to solve the problem of mass unemployment at home that led the European powers to scramble to assemble competing empires and eventually to confront each other in the First World War.
As each successive group of countries was forced to adopt mechanized production methods themselves in the hope of escaping poverty, so those who had mechanized earlier sold them the equipment. The pyramid this created grew and grew until it reached the point some years ago when there were no more markets supplied by craft producers to take over. This left firms in the pyramid with no–one to displace but each other, and since then, international competition has become so intense that only certain specialized types of manufacturing such as armaments, aerospace and pharmaceuticals thrive in high-wage countries, arguably because of the subsidies they receive through government contracts or patent protection.
How the Economy Came to Rely on Economic Growth to Avoid Collapse
The use of fossil energy not only displaced sustainable manufacturing methods, it also made the economy dependent on economic growth. In a stable, stationary economy, there is no net investment and no net saving. Everything produced in the course of a year either gets consumed or goes to replace things that have worn out. The return on capital is so low — somewhere between 2 and 3% — that it’s only just worth using part of the sales income to maintain the buildings and equipment rather than the business owners spending it on themselves. In other words, the average rate of profit is just enough to balance the society’s desire for income now against its desire for income in the future.
Suppose a new technology — steam power, perhaps — is introduced to this stable economy which enables much higher profits to be made in a particular business sector. The firms in the sector will race to adopt it because those that get it first will be able to cut prices a little and drive the laggards out of business. The would-be leaders won’t be content to wait until they have saved up enough of the money they would normally have spent on maintaining the old equipment until they can afford the new type. No, they will want to borrow the money they need to get ahead. But where is the money they wish to borrow to come from, since their society has no net savings and no spare resources? The answer is that the money and resources can only come from those that would have been spent on maintaining capital equipment in other sectors. The output from the other sectors will therefore shrink, shortages will develop and prices will rise, putting up the return on the remaining capital until it reaches the rate that the sector with the new technology is able to offer.
The arrival of a new technology in one sector therefore increases the rate of return on capital in all sectors. Profits in excess of those needed to maintain production appear for the first time and workers get a reduced share of the amount the society produces. Moreover, the profits belong to the business owners. This creates a capitalist class with potential investment power. I say potential because what happens next depends on whether other innovations follow the first. If they don’t, once the investment needs of the new technology are met, prices will fall and profits drop to the level set by people’s time preference, the 2 or 3%. If, on the other hand, there is a stream of innovations, profits could grow to become a substantial part of national income.
This creates the problem noted by Major C. H. Douglas, the founder of the Social Credit movement, who realized that the wages paid to workers could not buy everything that they had produced and that if there was to be full employment, the profits firms produced had to be spent back into
