Humanity is facing three major crises: the economic meltdown, energy security and climate change. These three mutually reinforce each other building up to a perfect storm, according to the American economist Jeremy Rifkin. There is no way of telling how severe the impact will be on civilization once that storm hits the planet full scale. Therefore we must act, Rifkin urges. By jumpstarting the third industrial revolution. Now.
Jeremy Rifkin is president of the Foundation On Economic Trends and serves as a political adviser on the impact of scientific and technological changes on the economy. In an interview he gave to the Dutch television news program EenVandaag (embedded below) he explains the gravity of the problems we face and the rapid radical change we need.
The financial crisis is not the cause of the economic meltdown, Rifkin argues. The bursting of the housing bubble and the toppling banks are merely an effect of a much deeper and more structural flaw in the current economic system. For decades the global economy has been fueled by ever-increasing debt. This is made possible by fractional-reserve banking. This means that a bank only needs to hold a fraction of a deposit in reserve. Say, you deposit $100 in a bank and the bank is bound by law to keep 10% of that in reserve. This means that $90 can be lend to another bank. That second bank will need to keep only $9 in reserve and can use the remaining $81 to grant yet another loan. By now the initial $100 is backing loans up to $271 without there being any actual real world commodity to back it up. This way banks create money. This is perfectly legal but critics doubt it is sustainable.
The problem is that if money flows so easily the check on giving credit becomes too lenient. Credit is given to households for consumption or to governments to support welfare states. But these investments do not guarantee a sustained cash flow that will repay both the loan and the interest on it. Again, money is spend where none is made. Debt-based monetary systems operate best when they can grow exponentially forever. Alas, in our finite world no system can meet that condition therefore the collapse of debt-based monetary system is written into its very configuration.
The second crisis, energy scarcity, propels this immanent demise of the debt-based monetary system forward. Cheap energy was the motor that kept the growth of the economy going. But when scarcity caused the oil price to sky-rocket in 2008 the collapse of the economy was quick to follow. This is what Rifkin calls peak-globalization. The limits of the global, fossil fuel-based, debt-based economy have been reached.
And as the era of the fossil fuel-based economy is coming to an end, its inheritance -climate change- is about to kick in. Rifkin points out that the predictions about when the effects of climate change will be observable in the environment are constantly being adjusted. And every time for the worse. In the third UN Climate Change Report of 2001 the glaciers on the mountain ranges were predicted to start melting in 2200. In the fourth UN report of 2007 it was established the glaciers were already melting. Climate change is happening in real time. And the consequences will be devastating. Clean water resources will no longer be available, food production can not be sustained. The resulting chaos will be the biggest threat civilization has ever faced.
But Rifkin is not only a prophet of ill-omens. He also proposes solutions: what we need is an economical revolution. Looking back in history we can learn that economical revolutions take place when an energy revolution converges with a communication revolution.
4000 BC the Sumerians started the agricultural revolution. Their technological innovation was irrigation. Instead depending on rainwater that nature provided, the Sumerians built a large network of irrigation canals to direct water to their fields.The hunter-gatherers before them had lived in small groups but the new technology required of the Sumerians to work together with a growing number of people to maintain the irrigation canals. This innovation dramatically increased the amount of crops the land yielded. They had managed to capture the energy the sun and earth provide to multiply their food supply.
But to run such a large scale collaboration, oral communication was not enough. The Sumerians were the first to invent writing, extending the durability of communication over both place and time. The combination of technological innovation, an energy revolution and a communication revolution brought about the beginning of a new era. The Sumerians built the first civilization in the history of mankind.
Equally, around 1850 an energy revolution took place when oil was introduced to generate power. This was accompanied by the large-scale implementation of the telegraph which made long-distance communication near-instantaneous. A revolution in communication without which the growing complexity of the industrialized civilization could not have been managed.
The communication revolution taking place today is –of course- the introduction of the personal computer and the internet. The energy revolution we should aim at is the shift to renewable energy. The economic revolution will take place when these two converge.
The revolutionary aspect of contemporary communication is that it is distributed. A distributed system consists of a network of autonomous nodes that communicate with each other to execute one or more processes together. In contrast, until 15 years ago mass communication was always centralized and top-down. A single broadcaster sent out information to a host of receivers. Think television, newspapers, government communiqués but also record companies and encyclopedia’s. The message was prepared by a small elite intended to inform the masses. Now youtube, the blogosphere, open source and file sharing have undermined that hegemony.
Energy production needs to undergo the same transition from centralized and elitist to distributed. Oil, coal and uranium are elite energies. They require large military investments to secure them, geopolitical power play to manage them and enormous capital investments to provide an infrastructure to process and trandport them. They are only found in certain places and above all they are finite.
Distributed energy comes from renewable energy sources like the sun and the wind. It can be generated anywhere on the planet. Because it is infinite it does not require military backup to secure it. And as prices of renewable energy technology are dropping more and more people will be able to afford their own little power plants.
The true convergence of distributed communication and distributed energy lies in the smart grid. The smart grid relies on the same technology as the internet. But instead of connecting millions of computers, the smart grid connects millions of distributed power plants. A network of autonomous power plants that intelligently communicate with each other to provide energy security for the entire grid.
Watch the interview with Jeremy Rifkin. It’s 27 minutes but well worth your time.
Photo by Bradh
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Humanity is facing three major crises: the economic meltdown, energy security and climate change. These three mutually reinforce each other building up to a perfect storm, according to the American economist Jeremy Rifkin. There is no way of telling how severe the impact will be on civilization once that storm hits the planet full scale. Therefore we must act, Rifkin urges. By jumpstarting the third industrial revolution. Now. Jeremy Rifkin is president of the Foundation On Economic Trends and...