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178 comments on DrumBeat: December 7, 2008
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178 comments on DrumBeat: December 7, 2008
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Re: Crude’s collapse oiled the Bank’s wheels (linked uptop)
Like a lot of other Peak Oilers, I am not surprised that we are seeing price volatility, but I am surprised at the scale of current price decline, but every Peak Oiler I know argues about flow rates first, and then discusses rising oil prices and price volatility. Notice that the Cornucopians are treating numerical flow rate data like the data are radioactive? Instead, they are framing the argument purely in terms of price.
After two years of slight declines, through August of this year (average to date) world crude production (C+C, the stuff that accounts for about 98% of the input into refineries and the stuff that we use for the index price) is up by about one half one percent over the 2005 annual rate. Basically, we will have seen four years of flat crude oil production, with 2006 and 2007 showing declining net oil exports(EIA). Total liquids is up a little more than crude, but Simmons attributes a good deal of the NGL bump to the dying gasps of many large oil fields as the gas caps are blown down.
imo, the markets are way too focused on demand, of late. nearly every drop in crude oil is blamed on(or credited to) reduced demand, current and going forward. seldom do i see anyone in the msm discuss supply and i suppose that is a reflection of the assumption that supply follows demand i.e. ever increasing.
My guess is that the production drop due to reduced demand will be from October forward, but in any case if we take the 2008 EIA data (subject to revision, frequently downward) at face value, the 2005, 2006, 2007 and 2008 annualized production volumes are as follows (C+C, using 365 days for 2008):
2005: 26.9 Gb
2006: 26.8
2007: 26.6
2008: 27.0*
*Based on preliminary data through August
If we round off to the nearest billion barrels, it's four years at 27 Gb per year. Alternatively, the cumulative shortfall between what we would have produced at the 2005 rate and what we actually produced would be 300 mb, using 27 Gb for 2008.
Of course, different crude oils trade at different prices, but if we use Brent as an index price for comparison purposes, the total dollars paid for crude would like like this (assuming $100 for 2008):
2005: $1.48 Trillion ($55 per barrel)
2006: 1.74 ($65)
2007: 1.92 ($72)
2008; 2.7 ($100)
This pattern of flat to declining production versus rising oil prices is exactly what we saw in the initial Texas and North Sea declines, two regions developed by private companies, using the best available technology, with virtually no restrictions on drilling:
http://www.theoildrum.com/files/TexasAndNorthSea.png
If we use 27 Gb for 2008, we would have increased annual production by 100 mb (per year) relative to 2005, so we paid (for comparison purposes) $1.2 trillion more for an incremental increase of 100 mb, or about $12,000 per barrel of incremental production.
However, the reason for using cumulative production is because that directly relates to the area under the production rate versus time curve, which is the argument that Hubbert made back in 1956. The bottom line is that the crude data show a cumulative shortfall relative to 2005, even with the contribution from unconventional production.
I find it fascinating too the focus on pricing we see. Analytically, everything revolves around supply and availability. Monetary worth is purely a side effect and not very important in the greater scheme of things. Economists show their stupidity by always referring to "fundamentals" when in reality they have yet to come up with any kind of model for oil depletion. It could be the case that no one field of study uniquely covers constrained resource exploitation. Economics definitely doesn't cover this.
This is the sort of empirical analysis that puts the lie to all the current chatter in the media that the days of high oil prices are over. The plateau cannot be explained by demand being flat as clearly reflected in the exponentially increasing price. Therefore the plateau was maintained by the development of marginal and unconventional oil fields, which of course was expensive and solidly in the realm of diminishing returns. I expect the plateau to turn into a decline now that the price does not justify expensive field development (exhibit A: the Canadian tar sands). The plateau is a transient feature regardless of oil price but the current financial meltdown will shorten its life.
Good points, Westexas.
I wonder what's happening to spare capacity. When the public works are in full swing from Peoria to Paris to Peking (or is that Boston to Berlin to Bejing?)how long will it be until the oil industry is back to the high cost barrel?
Apart from the availability of financing, it seems to me that the industry will not be well served by too much spare capacity, as this would keep the price of oil down, at a time when higher prices are required to overcome the cost of the marginal barrel.
The markets and the extended "perception space" as manufactured by the MSM are in total denial about supply. We will have shortages if oil prices stay low. Unlike the 1980s there is not enough spare capacity and the much discussed demand destruction in most of the world is not destruction at all, but a transient driven by price. Even if Americans reduce their oil use due to the recession it does not mean that the rest of the world will reduce by as much or more. There is always a need for oil.
The global economy is still expected to grow next year is it not? Why would that cause a decrease in oil consumption? And especially now that oil prices are at multi-year lows? As long as the global economy is growing we will still see stable or increasing global oil consumption next year.
The depression we are headed for will be global. Everyone will be reducing demand involuntarily due to a collapse of purchasing power. Remember that demand is not what you want, it what you are ready, willing and able to pay for. As the credit bubble implodes, taking the vast majority of the effective money supply with it, demand will fall dramatically, but so will supply as falling oil prices make more and more projects non-viable. We will also see a significant impact on supply from lack of maintenance, fighting over control of infrastructure, sabotage by those with nothing left to lose and piracy in an era of neo-mercantilism. The result will ultimately be far higher oil prices that will price ordinary people out of the market almost completely.
You might be interested in today's Debt Rattle - Energy, Finance and Hegemonic Power. Thanks to deflation, demand will collapse first, followed shortly thereafter by supply.
I have started reading the TAE daily and I commend you for your efforts to educate and decipher a complex situation. I have to highly disagree with the following comment you have made.
The anglo saxon countries have most definitely NOT placed all their trust in the markets. As of March 31, 2008, U.S. Forces were stationed at more than 820 installations in at least 39 countries, many of them are in or close to countries with vast energy supplies, for more http://www.financialsense.com/series3/part2.html , the invasion of Iraq with possibly the largest/2nd largest reserves in the world along with the direct influence that the Americans have on Saudi Arabia mean that the Anglo Saxon nations aren't relying on markets alone.
You also go on to say,
So you say China's strategy is successful and that there will be a transfer of power to the East, yet just on your blog on the 2nd of December Illargi wrote
So power is going to transfer to China while it is facing civil war and its economy is more vulnerable to a global slowdown than America's? HOW?
The US relies less on markets than other Anglo-Saxon countries, but still leaves its domestic population to the mercy of the market even as it engages in foreign occupations in order to ensure its military will be well supplied.
My view of China is that it is facing its equivalent of the 1930s - a set back on the road to the Chinese century as the Great Depression was a set back on the road to the American century. That will likely mean violent upheaval, especially in a nation with a large surplus of young men, but China remains the empire in the ascendancy (see Entropy and Empire in the TOD archives).
What the US and Europe are facing in this global credit crunch is far more terminal IMO.
In order for China to remain on the ascendancy,
1) It requires access to Cheap, abundant energy - the age of cheap energy is passing by.
2) It would mean a rising standard of living for its population, meaning greater consumption, better health care, better infrastructure etc. If everyone in China were to live the lifestyle of the average American/ European that would require 2 earths I believe?
3) China relies heavily on exports. It must stoke domestic demand, which would be very troublesome to do with a restive population and potential civil war, this would mean their economy could quite possibly collapse.
4) China has an aging population due to it's one child policy. An aging population can not be the key to ascendancy as Japan found out in the late 80's.
It is all to easy to dismiss Europe and America but the history of the World is filled with periods of long depressions and panics and from the ashes the phoenix arises. It is true that we may never reach the heights that we reached in the past few decades but there will still be a rise at some point.
Also one thing that might not be well known is that China is far more corrupt than the West (this according to my Chinese friends and from reading online). Things such as freedom of speech, freedom of beliefs etc are very important in the growth and development of any nation. Also one mustn't forget that China lies next to India and Pakistan and these two could get easily embroiled in a Nuclear conflict. Asia is not as strong as one thinks. It is still highly dependent on the west for technology, key ideas, innovation, culture, literature, (infact where did the idea of blogging come from? ;-) it's become a cultural phenomenon, and it originated in the West)
American culture is the dominant cultural force in the world. People still want to live the American life, listen to american music and rock bands, watch american movies. Although for sports most of the world turns to britain and spain (soccer). I don't see any cultural shift that marks the rise of ascendancy i.e. people turning to China for ideas in innovation, entertainment, technology etc. Western culture is fluid and dynamic IMO, China is still very rigid in terms of its rote and memorize education system.
Infact I would not be surprised if you asked a group of 1000 random people, which country they would prefer to live in, in the next 50 years, and you told them all about peak oil, its implications etc. Most would choose Europe and America IMO.
I would write off todays ponzi scheme global economy, but I would never say that the US and Europe are in terminal decline, simply because over the last few centuries they have led the way and IMO will continue to do so, because they adapt faster and information flows more freely and the culture is not rigid.
I am not arguing that China will claim any kind of dominance now. Their economy is about to collapse under the weight of over capacity and there will be serious civil strife at the very least. In the longer term I see them assuming and consolidating hegemonic power, but that could take decades. We will have a chaotic interregnem first, probably culminating in a large scale war. I can see China emerging from that as the dominant power, as the US did after WWII, although the Chinese century could be a pale shadow of the American century due to energy limitations.
The US and Europe are economically hollowed out. There is the appearance of great wealth, but much of that is an illusion based on credit that will destroyed in the great deleveraging that is now underway. Of course they are currently pleasant places to live, but their future is not so bright. Europe appears headed for a future of balkanization and the US for fascist theocracy, following in the footsteps of Spain after the collapse of its empire.
To take your points in order:
1) It is clear that oil is at or near it's peak, and that gas probably is from conventional resources at least, although methane hydrates may alter this picture, albeit at unknown cost to the environment.
2)Figures such that it would take 2 earths for the Chinese to live at American or European standard's need a helping of several pinches of salt.
For a start, even when all allowances are made for outsourcing of energy intensive production, it is clear that a high standard of living costs very different amounts of energy in Europe and America, and even more so in Japan.
Secondly if energy is more expensive then they would be looking for ways to minimise it's use whilst still living better - for instance today it was announced that China is to institute progressive taxation of motor fuel, and a major new investment in rail of several billion pounds was announced.
For other resources, it is also clear that the strain on the environment from a Swedish style system of regulating inputs and outputs for things like forestry, and later sewage would lead to far less impact than many alternatives.
The nuclear industry in China is also moving far faster than in the West, and is rapidly accumulating critical mass, such that plant will be more and more able to be produced rapidly, and the expertise gathered should enable the introduction of new, more efficient designs.
Coal gassification may also become important.
So IOW the oil peak does not necessarily imply that sufficient energy resources will not be available, although the cost may be higher than recent fossil fuel prices.
3)A rapid fall in exports will certainly put great strain on the Chinese economy, but it is a rather better place to come from than the West not producing much.
With great difficulty, but still attainable, is to transfer that production to producing more goods for their own consumption and improving their infrastructure, for instance in energy.
4)The situation of China and Japan is very different.
You argue that the large population of China will impose too much strain on the environment.
Well, in that case the reduction in birth rate has a very positive side to it, and not the purely negative implications you draw from it.
In some ways it will make things a bit tougher, but overall must be a good thing.
In addition to the above considerations, the world is moving to a more Government directed economy, as the fissures appear in the old order.
China has much more recent experience in controlling it's economy in this way.
Maybe it will collapse, but it seems in a stronger position than most in my view.
Hello Davemart
IMO the west still produces a lot, it is Germany that is the world's largest exporter and not China. Also China is hugely dependent on Australian minerals and resources. And I think that America exports more now than it did at the so called height of manufacturing?
Western countries are World leaders in computing - Microsoft (Ok, ok, Apple fans but they are the "leader" so far by volume), IBM, Oracle.
For what it's worth, American car manufacturers are still the biggest in the world by volume.
Of the worlds top 20 biggest pharmaceutical companies, 19 are Western Based, one is Japanese.
The West still leads the way in terms of engineering and transport think of firms such as Rolls Royce, Boeing and Airbus.
The West still leads in terms of education exports. Think Harvard, Yale, Oxford, Cambridge etc.
Western countries still lead when it comes to Nuclear, France comes particularly to mind.
The West still leads in terms of literature in terms of the sheer number of books produced and the creative freedom that it allows, the number of ideas that flow through TOD are incredible.
Just from an outsiders view point, back home in Kenya, we still rely to this date on the railroad system that the British left us a century back. In India if i'm not mistaken, there has been very limited modernization and they still rely on the railway system that the British left behind.
IMO every country faces a potential collapse but I do believe that the survival power of the West is underestimated. It's manufacturing capacity is vastly underestimated. There are so many financial sites out there that were predicting the demise of the dollar and now its the Euro, there are many blogs out there looking for the collapse of America and all of a sudden it's Australia or NZ which face massive currency risks. IMO even though Iceland went bankrupt, they will not see and feel the true poverty that people in Zimbabwe face for example due to support from the IMF and Europe.
I have never been to America but American ideas and culture have greatly shaped my world view. Maybe there is a lot of anger in America, beneath the surface, at where the country is headed, how people have become mindless shopping zombies, the rise in the cost of living and how the middle class is getting raped. I see it in many blogs and forums. Don't really know what to make of it. Still developing thoughts on that.
Yep, the West still produces a lot, and France anded Germany are in relatively favourable positions, IMO.
However, my intention is to focus on China in this discussion. I don't think it will become a world-wide hegemonic power such as America is for the forseeable future, but many here regard that as undesirable anyway.
On a more localised basis, the problem with selling Chinese goods is not that people don't want them, it is that they are loosing their ability to pay for them.
So there would be good reason to think that trade with Australia will remain vigorous, as China wants the resources, so you may end up with a Far-Eastern economy, rather than the present world economy.
As America's arm gets shorter, Chinese influence will likely increase in the region, so it seems doubtful that environmental concerns will lead to Australia restricting exports of coal and uranium - with China hungry for them, that would hardly be politically advisable.
France is still the number one power in nuclear energy, as it's build experience is more recent than the US and it's nuclear infrastructure including personnel is in a more ready state to build reactors as it has recently been involved in builds.
Japan also has recent experience.
Just the same, EDF puts present European capacity at 1 reactor per year, and hope to build it up to 3 over a few years, as against 5 a year at the height of their build in France alone.
Incidentally, that is not far off of American capacity, where Alan from Big Easy informs us that a study puts the number they could build in a decade at 8.
In China, they have been building a number of reactors, using several technologies and pretty much on time and to budget.
This capacity will rapidly expand. They are building production lines capable of 1-2 reactors a year, and plan ten lines by 2020.
They are also moving to pebble bed reactors which are mass-producible, so that would go on top of their projected capacity of 10-20 reactors a year by 2020.
These things are cumulative, so it should mean by around 2030 they should be able to build around the same number of reactors as they currently build coal plants.
This increasing expertise will also mean that they will develop the design expertise to build more advanced reactors such as Molten salt reactors and metal cooled reactors.
In my view both cheap fossil fuels and political opposition from the coal industry, together with an obstructive and incoherent regulatory regime were the chief obstacles to early prototype reactors on these lines in the West.
The economics of nuclear power are also treated rather unfavourably by Western accounting systems for similar reasons to the unfavourable accounting treatment of renewables.
Costs are amortised relatively quickly, which is unfavourable for resources with heavy capital costs up-front.
A reactor lasts around 60 years, or 80 years projected for the latest designs, so after the capital costs are amortised the costs are very low indeed.
That is why France has some of the cheapest power in Europe, although the build in the 70's was probably 'uneconomic' against then fossil fuel costs in the late 70's and early 80's.
Similar considerations would apply to Chinese reactors. It will cost a lot to build up the fleet, but once built up then costs should be low, so it should not be the end of 'cheap energy'.
Similar considerations apply to decommissioning and waste storage costs.
Although many 'greens' may not like these ways of dealing with the waste, I see no reason to think that China will not use cheap methods.
If a reactor is decommissioned you remove the fuel, and then leave the structure for a long time, and it costs little if you do not go in early and have to deal with high levels of radioactivity.
For waste, the cheap way of dealing with it is to put it in cooling tanks for a few years, and after that put it in casks.
The cost is minimal.
This is far from saying that nuclear technology is the only string on China' bow.
One of the arguments made to contend against the increasing energy efficiency of the West and Japan is that a lot of the energy consumption is displaced by producing the goods in the Third World, a great deal of this from China.
Well, that cuts both ways, and if the West can't afford so many of the products then China will have large surpluses in it's energy resources for use for other purposes.
Energy use is also low per capita.
In many ways China is already at the point that many ecology minded folk want the West to move to, with low energy consumption, no extensive suburbs, most people being in touch with growing their own food, heavy reliance on public transport, the world's highest production of electric bikes, massive use of residential solar thermal hot water heating etc.
They also have a very large wind-power build and are the biggest builder of batteries and solar panels.
Finances are also a lot stronger in China than in most places in the West.
None of which is to argue that it will be easy for China, or that successful transition is inevitable, but the prospects do seem relatively favourable.
Hi Davemart and Stoneleigh,
This is the view I am gathering, on the one hand China is seen as the new power, the rise and rise and rise of the Middle Kingdom. On the other I see a China being constrained by a resource crunch, pollution and increasing internal unrest.
One of the really confusing things I find is that there are predictions being made that lie in direct contradiction to each other.
Fair enough that China is currently investing heavily in Nuclear, Renewables, Wind Farms, batteries and solar panels. This assumed trend depends upon the fact that the country doesn't get embroiled in a civil war, a great depression or into resource wars with so far stronger military powers e.g. the USA or Russia. If any of these three were to happen, all bets are off on China's possible favourable transition as the countries resources would be diverted or put on hold indefinitely.
Energy use is indeed low per capita but NOT at the center, where power and wealth are concentrated. If the center breaks down eg Beijing and Shanghai, the rest of the country could easily follow suit as the center is as vulnerable to energy needs as New York or London or Tokyo.
Also according to Time Magazine, there are I believe 70,000 "Mass Protests" in China every year. That's nearly 200 protests a day that the authorities have to suppress. With the recent slowdown to 5% growth (I don't believe the stats, I assume they are in recession) we are already seeing massive protests and discontentment in China. What happens if a great depression occurs? The fall of the Communist Party is entirely feasible. What would this mean for their energy use, economy, growth and alternative energy?
I disagree that China's finances are stronger than the West, the stock market has fallen much further, almost 65% last time I checked. Also their banking system is far more opaque than even America's. And the Chinese are printing money now, maybe at an even faster rate than the West. Their currency did depreciate slightly last week.
Also my knowledge of Nuclear power is very limited, but from what I know, it requires massive amounts of fresh water. China has severe water problems. This could seriously constrain their ability to develop nuclear power in the future. One drought, global warming kicking into high gear and the whole scenario can change.
Chinese cities are hardly as dependent on heavy energy use as Western cities, and more especially not than American cities.
The introduction of the car has simply been too recent, and densities are far higher.
Public transport and bicycles were almost the only means until recently, and still move the vast majority of people.
I am not sure I would describe Russia as being massively more powerful than China, and if there is a gap it is closing rapidly.
It seems doubtful that the US will be able to maintain it's present armed forces, as they can't be paid for - it is Chinese and Japanese funds which allow their maintenance!
The potential is certainly there for breakdown, but perhaps to a degree the Chinese are immunised from such tendencies, as they have recent horrific experience of a divided society fighting amongst itself.
It would seem to me that the likeliest result of a failure of the Westernising, export led model would be the ascendency of the left, as moderniser's ideas would be discredited.
Control would likely be very severe, and no dissent tolerated.
This might have severe negative consequences for the economy in itself, but might reduce the tendency to disintegration and should allow the transfer of resources to infrastructure.
One of the biggest reasons that the Chinese are reluctant to spend is that they have to have money for medical emergencies, and state provision of this would both raise internal Chinese demand directly and give individual Chinese people more freedom to spend.
Although it is true that not everything in the Chinese financial garden is rosy, just the same the Central budget is in surplus, China has been producing surplus goods and exchanging them for dubious assets in the West.
IOW China has the problem of diverting production to internal demand, which is surely a far easier problem than the Western one of living beyond their means.
As for nuclear power and water use, the reason most of them use a lot of water is simply that that is the cheapest way of doing things where it is available.
Incidentally, it only 'uses' the vast majority of the water in the sense of raising it's temperature somewhat, and there is good potential to make use of this warmer water to keep greenhouse temperatures up a bit, and so on.
Most of the biggest users of energy are near the coast, so sea water can be used.
If not, at a slight premium dry cooling can be used:
http://www.nrel.gov/docs/fy06osti/40025.pdf
http://www.powermag.com/water/1361.html
Droughts where water is usually abundant have caused issues with water use, rather than any inability to design around lower water use.
To the extent that nuclear replaces coal, the water for cooling is being used anyway.
Similar considerations apply to solar thermal, where some of the less populated areas have good potential.
Many thanks for your considerable input Davemart, certainly plenty to think about. Still a newbie in terms of the more technical stuff on energy. So I will have to dig deeper into this.
In terms of car use, Just Beijing by itself has about 3.5 million vehicles for a population of 16 million. In addition, about 1,200 new vehicles take to the roads everyday. This according to last years statistics according to http://news.xinhuanet.com/english/2008-11/19/content_10382874.htm
According to the WEO 2008 Cities contribute to 67% of world’s primary energy demand or equal to 7,903 Mtoe.
Also according to the WEO here, http://www.gcp-urcm.org/Main/TheWorldEnergyOutlook2008
So are Chinese cities really that independent of heavy and intensive energy use? The data seems to suggest that the cities are really energy sucking centers.
One of the key points that I would like to make is that the new, rich urban middle class and elite live a lifestyle equal to or surpassing their Western counterparts. In the last 20 years they have seen far greater improvement in their country and lifestyles than have their Western counterparts.
So they might be in for more of a shock than the West? There rise in the past few decades has been meteoric.
Most of rural China might be on bicycles and foot but ultimately it is the Center that holds the key to the stability of the country. And Beijing, Shanghai and Hong Kong are highly dependent on cheap, abundant fossil fuel energy as well.
You also state the following,
Seems somewhat contradictory as if they do impose strict and harsh controls than wouldn't that make the Chinese even more reluctant to spend? So on the one hand they require people to spend more to stimulate domestic demand on the other hand they don't yet have the funds necessary to create a national health care system so they are entirely dependent on exports?
Plenty of people use cars in Chinese cities, just as they do in British cities.
That does not mean that it would be impossible to get around without them.
The high density of most cities in the UK make public transport very practical, even if less convenient than a car, and the still higher densities in Chinese cities make that even more so.
I would be more concerned with diesel for use in trucking, but the rail system is being rapidly expanded.
Strict and harsh controls do not necessarily imply that people would be reluctant to spend - Chile under Pinochet springs to mind.
Wages in China have hardly risen for years, so a modification of present circumstances and reduced inequality might have positive as well as negative effects.
A lot of the money needs to go to infrastructure in any case, and so expenditure can be centrally controlled rather than a matter of personal choice.
I'd be curious to know what it is that whoever downrated my posts feels is abusive or against site rules, as that is the purpose of the rating system, rather than as a general expression of disagreement.
BTW, It appears that China is also the number one in geothermal energy, although it is presently a very small proportion of total energy:
http://en.wikipedia.org/wiki/Geothermal_power_in_China
China is towards the forefront of most renewable energy resources and advanced energy technologies.
From the above link on entropy and empire, it is written,
Looking at the above, the political centre in the article is referred to as the US "Empire" and it is seen as using it's influence to suck resources towards the center.
Now, in the above article, replace the center with Beijing/ Shanghai and the third world periphery as the poorer provinces of China. You get the same situation and possible collapse, but within one country. China depends on cheap rural labor to power its growth. Massive amounts of resources go from its external provinces to the center, think of the Tibet situation? What about the way in which the government forced millions of their land during the construction of the three gorges dam. These people "didn't count" and are seen as in the way of the center.
The country's wealth is mainly concentrated in certain provinces such as Guangdong, Jiangsu, Shandong, Hong Kong, Beijing and Shanghai. These can be seen as centres sucking in the other provinces wealth.
China also faces massive environmental challenges, according to the World Bank
Again one can see that the poor periphery is where the resources are mined and is used as a dumping ground for waste. Entropy and Empire are very much in play in the Middle Kingdom.
Also the descendants of the Roman empire are very much alive and kicking today. Infact they have gone on to conquer the world and create a Global empire one could say.
I agree completely that China also has a centre as a periphery, as do all countries. Wealth conveyors in favour of the centre exist at all scales simultaneously. The centre of the centre of the centre (etc) is inhabited by the wealthiest, while the periphery of the periphery (etc) is the abode of the most wretched and destitute.
I have written quite a lot about this recently, see for instance: From the Top of the Great Pyramid.
I also agree that China has massive environmental challenges to face. I expect it to face them at least partially through migration and colonization, as empires have always done, and as we did when we were in the ascendancy. This time we (or more likely our children and grandchildren) would be on the receiving end, which we/they would find acutely uncomfortable.
China is a poor country. People have the impression that it might be rich, simply because it is so big. But this is false. Nobody has a car in China. More people have a car in Syria or Morocco than in China. People are very poor. The poorest people in the US would be part of the top 1% elite in China. Since the chinese population has climbed from being dirt poor to only being very poor, it results in the second biggest economy in the world. Still, the chinese population can only dream of being as rich as the average Mexican, not to mention the average eastern european.
"The poorest people in the US would be part of the top 1% elite in China."
wondering how it is that these poorer than the poorest us residents manage to save so much and us citizens manage to borrow so much.
"Nobody has a car in China."
maybe that is a partial explaination.
A lot of financial types are seeing the current crisis as a shift in global power from the US to China.
I just can't see that. As you say, it's all about resources. While China is certainly trying to secure resources all over the world, I'm not sure they'll be successful.
IMO, the current situation is unprecedented in recent history. I don't see how any country can create and maintain a global empire in the face of declining resources. Barring expansion into space (which peak oil will likely prevent), I don't see China (or any other nation) becoming the new center of global power (financial or otherwise).
I don't think we'll see another global empire such as the age of oil has given us. As I said, I think the Chinese century will be a pale shadow of the American century due to energy limitations, but I still think China will be the centre of the largest power structure in the world at the time (several decades down the line).
I don't think we'll see another global empire such as the pre-Age of Oil has given us, either. The easily-exploited resources that fueled empires past will be gone.
Now that is possible. That is what they were for a very long time.
I do not think that Empires are fuelked only (or even mainly) by resources. If That was the case, England would never have been able to overcome China, which has always held more of everything (people, coal, ore, etc) than the UK. Or worse, how could Portugal have conquered/established itself across half the world with sucha a tiny population and empire??
The big difference then (and still now) is IMHO technology and the strengtth of institutions that allow you to be more efficient and agile in using the endowments you have.
Yes, technology matters. Jared Diamond has written a lot about this, particularly in Guns, Germs, and Steel.
Tainter has written about it, too, and he points out that technology is dependent on resources.
I don't mean that the easily-extracted resources have to be in the center of the empire. They can be on the other side of the world, as long as the empire controls them. That's kind of the point of an empire.
So one can conclude that within our lifetimes America will still be the central power influencing the world? Since it will decade several decades for China to rise.
Also one point i'd like to question, empires could also end because the center is damaged? I recall that after World War II, The British Empire began breaking apart simply because the British couldn't afford the burden of empire. India, the jewel of the British Empire was let go mainly I believe due to the fact that it became too costly too manage. Not because the land was any less richer but because Britain had to rebuild itself.
Also apart from Finance, the role of culture and freedom plays a HUGE role in how a country can influence the world. Till this day, the thinking of Victorian Britain affects India in terms of it's conservatism and cultural attitudes. The power of western culture and it's influence can not be underestimated, many cultures look for acceptance and validation from the West.
As an example, in Kenya, people hardly watch and support local football but they will madly follow Arsenal and Manchester United (British Soccer teams), look at many spiritual sites that promote hinduism and it's spiritual teachings, they refer to what Nicholas Tesla thought of their religion, or what Einstein said of their teachings etc. They too look to the west to support and validate themselves.
When it comes to the power of beauty, regardless of any country you go to, for most people, the gold standard of beauty is a Caucasian blonde girl with blue eyes. Maybe this came about as a result of the sheer amount of advertising that is being done, but what it does is create a powerful narrative that should not be underestimated in how it influences culture and thinking - in terms of making America and Europe seem "superior". Frankly Japan/ China have very limited influence on the world in terms of culture, when people buy japanese cars, they want to listen to american rock bands play in their cars. When they buy chinese tv's they want to watch American culture and movies, the bold and the beautiful, maybe a bit of monty python (British humor is awesome I have to admit). I don't see many people watching Japanese drama or movies across the world.
What this allows is for America and Europe to have more influence than they would otherwise. Which also means they are more likely to keep it.
I am still developing more insight into this so maybe I will post more later.
I think we are moving towards a dangerously unstable interregnem, or period between regimes, with three poles - the US, Russia and China. The likelihood of another cold war, complete with nasty proxy wars in the periphery (especially the resource rich parts of it) is quite high IMO. Further down the line I think we will see a larger war as the competing interests of a global population far above carrying capacity become more acute. Resource wars will actively degrade carrying capacity further, with tragic consequences. If we see a Chinese century, as I think we will, then I expect it to rise from the ashes of such a conflict.
The cultural dominance you are describing has indeed lasted for a long time - since the Enlightenment in fact - but in recent years it has devolved into a kind of worship of instant personal gratification along the path of least resistance. I think much of the world will turn against symbols of western culture as we fall deeper into depression and the blame game begins in earnest. Since the scale of financial collapse is likely to be unprecedented, so will the magnitude of the anger of the dispossessed around the world, and that anger is likely to focus on the symbols of previous excess (see Markets and the Lemming Factor).
Also it is quite possible that more poles arise in the world. I mean Germany, France, Britain, Japan will play central roles. They might not have a large military right now, but they certainly have the industrial capacity and political tools to quickly create military structures and complexes. I mean Germany was pretty much muffled after WW1 but with the rise of Hitler, they quickly went about building their military. Japan could easily do the same.
I don't quite understand what you mean by "but in recent years it has devolved into a kind of worship of instant personal gratification along the path of least resistance." Is there any evidence that it was any different before? It might have been worse before as well?
Also although I have not read much about Mandelbroit, I have read the books of Nicholas Nassim Taleb and one of the difficult things about making predictions is that the world is simply too complex and there is so much going on that one mind simply can not deduce the state of the world in it's entirety.
The above is an assumption and who knows, it could turn out to be entirely opposite? One of the paradoxical things about coming from a developing country that was once a British Colony is that although we want our freedom from the West there is still a huge sentimental attachment to Britain and the West.
We follow the British system of parliament, the British legal system and one of our two national languages is English. This after the West (Britain) kept us occupied for decades, treated Africans as separate and almost inhuman, segregated society etc.
Similar startling examples can be found in India, I mean the British occupation of India lasted an entire century or more, they subjugated the people, basically stole wealth from India and transferred it to the West. YET, India still has English as a national language, follows the British judicial and parliamentary system. Many Indians moved to Britain and America following the end of the empire even though the reckless manner in which India was partitioned resulted in millions of deaths. There is still a huge sentimental attachment to Britain, to the english language and all the symbols of the West. The West is easily forgiven.
So even after all that, the symbols of the West are still prized by people's all over the world. In fact the commonwealth games are held every four years to celebrate the fact that We were once all subjects (slaves?) of the British Empire. Ironic but true. I wouldn't be surprised if the love for all things American and symbols of the West didn't become stronger after this financial debacle.
Whatever may be the case for France, Germany and Japan, Britain will be very lucky indeed if it's populace can continue eating and not freeze, let alone being a regional power centre.
It's own production of oil and gas is rapidly falling, and there are no timely and realistic plans in place to replace it, or to pay for imports assuming that they are available.
Racial and religious divides appear to indicate that in the event of severe shortages Civil war is a considerable danger, as that is the usual response of societies under very severe stress where the populace is that diverse - it is a form of rationing.
Very interesting. If you don't mind I'll take a roll with it from Macro to Micro. Something I've been thinking about for a long time and relates to my own and my family's fortune in these coming days. I call it my hypothermia theory.
When the human body is exposed to extreme cold, a reaction sets in. Body resources are pulled in from outlying areas. Nothing we even have conscious control of. The body actually gives up extremities to save the central core. Fingers and toes go first. All effort is put into the central core. Arms and legs after that.
I think you folks are right on the macro scale, china has the best chance, the reason I think that is that china is not very far along from total government control,it would be quite easy to fall back to that. Not very far from tanks in the square, when is the last time tanks rolled in New York?. Those areas easier to control will be the focus, resources they have will be used to keep the central core going, it's reach will not be as far but it will struggle to survive.
When the central core is threatened it acts. That crosses all boundries. The core pulls in and musters it's strengths and gives up the extremities.
I see our government doing the same thing, control what it is possible to control, cut your loses and focus and what you can do. Martial law. Cordons around the cities. It's going to be all about control.Homeland security's first premise in a red alert is you are not allowed to go anywhere. You have to stay in your house or be arrested. We can see that shaking out now in the bailout thing, who gets bailed who doesn't. Control the food supply to major cities and you control the people. My boys, growing up, had the upstairs as their own, when they got to me, I walked down cellar and tripped the breaker to their rooms. It always got very quiet. Control the power and you control the people.
Kind of beats all hell out of go back to the city threads.
I headed for a major extremity.. and I will be ignored, to busy to deal with the likes of me.
Good.
Peace
Don in Maine
Hi Don,
I made some new arguments against China having the best chance above and the so called fall of the West. Would like to hear more of your input.
It is true that those who control the power control the people but that can only be done for so long. The love and respect your sons had for you also surely played a part, in the same way surely fear and anguish can only work for so long. Real power and respect come from understanding, respect, tolerance and love IMO.
Best wishes.
The two seemingly contradictory concepts - free market or state control - come together in what Bobbit and John Robb refer to as the "market state".
Unfortunately, the most important of those "citizens" are not flesh-and-blood, but the likes of Halliburton, Boeing, you-get-the-idea. The market state - which is largely owned by those same good citizens - uses state force to promote the "market"
cfm in Gray, ME