Forecasts of Pittsburgh’s future cite education and medicine, complemented by entrepreneurial “green energy” and high-tech ventures, as engines of 21st century growth.
However, the country is entering its third year of economic contraction and fiscal crisis. In a recent column pundit David Brooks assures a return to prosperity is inevitable. Recall that three years ago he and many of his colleagues claimed that the economy was “humming along” and the financial sector was “innovative” with a “contained” problem in subprime mortgages.
We now know that most experts were in denial or oblivious as the crisis emerged, and today polls show growing numbers of Americans sense that this is more than a recession. For example, the federal government has given or pledged $24 trillion to “Too Big to Fail” financial institutions –the $700 billion TARP bailout of October 2008 is a tiny percentage of this amount. Last year Washington altered its accounting rules so that financial institutions could postpone recognizing “toxic assets” on their books. In February the federal government took in $107 billion and expended $328 billion, making trillion dollar deficits likely for years to come. Our nation -businesses, levels of government, private parties- has a total debt owed of $54 trillion, and there is $65-100 trillion in unfunded federal liabilities to such areas as Social Security and Medicare. The states and many municipalities are fiscally distressed. We are waging wars with borrowed money. From 1999-2009 there was zero net job growth. Unmistakably this has implications for Pittsburgh’s future. But what are they?
First, we need to name the problem. Rather than a recession, our dilemma is a sustainability crisis rooted in reaching the physical limits to economic growth, an outcome predicted by several MIT scientists nearly forty years ago. This means we do not have the natural resources -first and foremost oil- to maintain growth. For most Americans this would be the most unpalatable and illogical admission of their lives.
Let me explain this divergent contention and then end with comments on how Pittsburgh’s future might look if we come to terms with sustainability in the context of the limits to growth.
Two years ago I sat down with the Post-Gazette’s Clarke Thomas to discuss the socioeconomic implications of peak oil, which occurs when the amount of oil pumped from the earth reaches its geological limit, sometime thereafter to go into decline. Clarke ended the article he wrote about our discussion with this passage, “Pittsburgh’s leadership … had better be thinking about peak oil to avoid being caught off guard as it was 30 years ago with the collapse of the steel industry.”
Pittsburgh’s leaders have ignored his warning, but it would have been astounding if they had heeded it. Peak oil is typically dismissed or misunderstood as solved by shale gas, tar sands, biofuels, nuclear, solar, algae, coal, and so on. The simple truth is that these alternatives face one or all of three hurdles: scalability, environmental sustainability, and net sufficient energy return.
More important, peak oil’s significance goes beyond finding substitutes for oil. Petroleum underlies modern socioeconomic and financial systems, but standard economics views oil as just another commodity; if it becomes scarce the market will spur discovery or stimulate the invention of alternatives. However, crude oil production reached a plateau in 2005, where it has remained, and replacements have not been developed on a scale anywhere near what is required to sustain growth.
Consider its rise in price. In 1998 oil was $11 a barrel; by July 2008 it had reached $147 a barrel. Does anyone think it will return to $11 -and what would be the economic implications if it did? Six weeks after hitting $147 a dramatic economic contraction ensued and was accompanied by the further exposure of incredible amounts of unserviceable “toxic” debt that had been festering in the financial system as the price of oil climbed in 2007 and 2008. When oil –now over $80- reaches $100 we may experience a repeat of the summer and fall of 2008. This will be another signal of unsustainability that should place in starker relief the connection between oil, finance and the economy.
Modern debt-based finance assumes that the economy of the future will be physically bigger -and therefore wealthier- than the economy of the present. Wealth creation requires energy, which is defined as the ability to do work (a Who song goes, “Conquering lethargy, I’ve got energy!”). Peak oil halts the growing supply of cheap high-density energy needed to literally create wealth to pay off debt with interest while leaving a profit for the borrower. Put directly, declining net petroleum flow into society equals reduced or no ability to pay off debt.
What then is the future of Pittsburgh? First up is the recognition that we do not have the energy flows to operate, maintain and grow the socioeconomic systems we depend upon. Once we grasp this, the task is to redesign those systems at lower –sustainable- levels of natural resource consumption, primarily energy. Next, we need to separate economic development from economic expansion. In this context Pittsburgh’s renewable energy efforts are essential, but they must be acknowledged as totally inadequate to preserving business as usual.
This suggests that higher education can adapt in the context of overall economic contraction and conservation of resources by embracing real sustainability, as a goal of physical plant operation and as an organizing principle for a variety of disciplines. There will be far less demand for finance majors and in all probability far fewer students enrolled in four year colleges.
American medicine is unsustainable by virtue of rising costs, high energy and resource consumption, dependence upon technological complexity, and as a producer of waste. It is also highly resistant to change as evidenced by its momentum to continue growing even as the economy has contracted. While some think this is an indication of robustness it illustrates a lack of resilience. The nation will be forced to downsize medicine, treat health care as a public good, and educate the citizenry about public health. The opportunity for Pittsburgh’s medical industry is to design a sustainable medical care system; attempting to carry on as usual invites collapse.
Finally, our region has three overlooked natural resources: 1) its rivers, for commerce in an energy constrained world; 2) water, to support agriculture and a city; and 3) farmland to grow food to help feed the nation.
Sound crazy? So did the idea of doctors washing their hands before surgery in the 19thcentury. Having no understanding of the microbe –germs- they saw no connection between hand washing and infections.