00091 Why this is necessary

The problem of externalized costs.

Anything that goes into making a product or delivering a service, whose cost is not included in the final price, is an externalized cost. This often happens as a result of political maneuvers. Many economic aristocrats — wealthy and powerful corporations, their officers, board members, and major stockholders — blatantly pay politicians to socialize their risks and costs while keeping their profits private.

The problem with externalized costs is that they don’t actually go away. They just aren’t accounted for on our balance and income/expense sheets. That is nice work if you can get it. We should ask: how long could a business stay solvent if its managers simply ignored their costs? Not long. Sooner or later, all costs will be accounted for and paid. That includes all of the energy costs we externalized over this past century and even longer in some cases.

It’s not a small bill. It’s larger than the limits on our credit cards. When presented for payment, the system will report “Payment Declined.” The waiter will stand there, looking uncomfortably at us, as we fish around for another card. The manager comes back with the news, “The bank declined this card also sir, do you have cash?” Well of course we don’t have any cash! If we had cash, we wouldn’t have been handing over credit cards now would we?

The restaurant manager, standing by your table with his hand out expecting to be paid for the grand dinner you just consumed, is a metaphor for these times for our civilization. The planetary management doesn't want the Greenwash Card which reads, “We can do anything we want without paying the price.” The planetary management demands payment for all the costs we thought we had so cleverly avoided.

So it comes to pass that everywhere we go, we pay more and get less and that trend will only intensify going forward. Consider the impact of a century of externalized costs demanding payment in the present with current dollars (or pounds, yen, euros, and renminbi). If that doesn’t make you afraid, you aren’t paying attention.

Chaco Canyon, New Mexico

Let’s hop into the “Way-Back Machine” and visit Chaco Canyon in northwestern New Mexico, about a thousand years ago. For 250 years (roughly 900 to 1150 AD), this area contained a thriving civilization. They founded 15 major centers containing the largest buildings built in North America until the 19th century. Pueblo Bonito is about the size of the Roman Coliseum! They moved goods and people via a network of nearly 200 miles of roads, 30-feet wide, imposed on the landscape and apparently oriented in accordance with the positions of the moon.

In their beginning, there were dense forests in the area, which provided plentiful resources for building projects.

The story doesn’t have a good ending.

As population and social complexity increased, natural resources became more scarce as the inhabitants converted them into buildings, fuel, and artifacts. Archeologists say that the buildings of Chaco Canyon required the timber of more than 200,000 trees! As time passed and resources dwindled, people had to go further and further afield to find the necessary items for their lifestyle. Even so they muddled along until 1130 AD, when a 50-year drought began. By 1140, the Chaco Canyon civilization was in disintegration. They abandoned communities along the periphery of their area and by 1200 AD, the entire region depopulated. Most of the survivors migrated south and east and became the ancestors of the Pueblo Indians of New Mexico.

The trees never came back.

Greater investments in Chaco Canyon complexity led to diminishing returns.

The archeological evidence suggests that as the resources became more constrained, their solution of choice was to make even greater investments in the complexity of their civilization. They founded increasing numbers of small settlements. The burst in building activity perhaps doubled the labor requirements. New villages located in more marginal areas and the functional specialization of buildings increased.

In other words, as they faced grave crises and stress, they responded with “more of the same.”

They made ever-greater investments in social and economic complexity, while their return on their investments steadily declined. One of the characteristics of late Chacoan architecture was large storage rooms. Archeologists think this is the result of increasing problems with food production.

Pushing the Chaco Canyon ecological limits to the breaking point led to a catastrophic depopulation.

Climate change broke the back of Chacoan civilization.

The 50-year drought (1130-1180) appears to be the proverbial straw that broke the poor Chacoan camel’s back. While they survived severe droughts several times during their history, those were in earlier times. Their population was lower, biological diversity in the area was higher, and the “resource bank” was not quite so empty.

They were not without alternatives. They could have mobilized their population to carry water, pot by pot, from the rivers to their fields. They did not do this because they had finally reached the point of no return for their investment in even more complexity. Imagine the amount of organization, effort, and resources required to carry enough water in pots for the needs of thousands of people! The drought expedited existing trends by sharply increasing the decline rate of their returns on their investments in complexity.

They opted for collapse to a simpler way of life and migration to other areas. The archeological evidence suggests the collapse was violent and chaotic.

OK, that was Chaco Canyon. In our modernity we soothe our fears by whispering to ourselves — “They were geographically constrained. They did not have the knowledge advances, technology, and energy resources we have today.”

Rome, Eternal City and Empire!

The Roman System was conquer, loot, spend. Sound familiar?

The Roman Empire made its profits by conquering surrounding peoples, looting their riches, and investing those riches in increased social complexity at home.

As time passed, however, they looted all the rich countries profitable for conquering that they had the power to conquer. Greece, Egypt, Carthage, all were drained. The Parthians didn’t want to be Roman and provided an eastern limit for the empire as well as a several hundred-year long series of “hot” and “cold” wars that consumed resources and returned little other than the status quo. To the west was the Atlantic Ocean, north were various barbarians who lacked the ready wealth in gold and silver that the Romans coveted in their targets for military expansion. The southern coast of the Mediterranean was already in hand, and beyond that was an apparently endless desert devoid of lootable riches. What’s the point in going to war without rich cities full of gold and silver that could be carried away? Indeed, who could afford to go to war without the prospect of cities to loot?

Even so, the decline in the return on their investments in complexity was not sharp enough to produce collapse early in the process. In the 2nd Century AD, the Roman Empire reached its largest geographic extent and generally held together. But as time passed, the stresses and crises multiplied. Today we would refer to these events as “Black Swans.” Barbarian invasions, plague, weather disasters — all began to take a toll on the economy and the people.

When war, weather, or government corruption destroyed real wealth in the form of buildings, productive land, and trained personnel, it was not easy to replace whatever had been lost or destroyed.

Aside from the loot of military conquests, the primary foundation of their economic system was agriculture. Without loot from conquests, there wasn’t much surplus to support armies, aristocrats, bureaucrats, and all the other accouterments of empire.

Political criminality and economic irrationality made the Roman situation worse.

Like the Chacoans, the Romans ongoing response was “more investment in more complexity.” They externalized present costs onto future taxpayers by debasing their currency and borrowing money. This is a fine strategy as long as in the future, there are no more crises and people can afford to pay the costs of past work. Oops. That didn’t work out well. So the government raised taxes and regulated the lives of Romans and conquered peoples in minute details. The aristocracy blamed scapegoats and persecuted them. Thus, the barbarian invasion crises of the late fourth and early fifth centuries were terminal for the Roman state in the west.

For most Roman people, the advantages of being Roman were no longer self-evident. In the countryside, the peasants and slaves viewed the barbarian invaders as “liberators.”

The Collapse of Complex Societies

Joseph Tainter’s book, “The Collapse of Complex Societies,” is one of the best treatments of this subject and I recommend it to everyone. His conclusion is that civilizations collapse when their increasing investments in complexity bring greatly reduced returns. In each case that he studies in the book (Roman, Mayan, Chaco Canyon), he finds that a surge of investment in new complexity preceded each collapse.

About Rome, he writes —

“Rome’s collapse was due to the excessive costs imposed on an agricultural population to maintain a far-flung empire in a hostile environment.”

About Chaco Canyon, he says —

“The regional population of the San Juan Basin chose not to continue participating in the Chaco Canyon network, nor to rise to the challenge of the final drought, because the costs of doing so had grown too high in comparison to the advantages conferred. Collapse and migration were economically preferable.”

Neither the Romans nor the Chacoans had anything quite like permaculture — an intentional, conscious design system based on the sustainability ethics of care for people, care for the planet, and care for the future by limits-aware and surplus-share — to help them address and resolve the contradictions of their times that led to the demise of their societies. They collapsed onto the ash heap of history.

Permaculture can be fairly compared to the martial arts, in that it uses the overwhelming strength of the challenge as both an offense and defense leading to a positive resolution over the situation. This is why permaculturists often say “the problem is the solution.”

Back to the US of A.

The modern investment in complexity achieved stunning results during the 20th century in the United States and other developed countries in the world.

We worked hard and smart.

We exterminated the indigenous population and stole their lands. Always seeking our advantage, we broke treaty after treaty in our pursuit for land and wealth. This gave us an enormous inheritance of capital wealth to spend.

We advanced our wealth and power by capturing and selling human beings as slaves.

We developed large sophisticated financial systems to facilitate our efforts.

Governments finagled the energy markets to ensure cheap, below-market prices for fossil fuels.

Powerful aristocracies of finance distorted the government process in order to control market entry, reward friends of political power, and punish enemies. Instead of defending the public welfare and the common good, with a government of, by, and for the people, we have a government of the corporations, by the politicians, and for the aristocracy. This process drives the centralization of wealth, as the wealth of the majority is transferred to the rentier ruling minority. The extreme centralization of wealth in the modern world is evidence of the corruption of the system.

We ignored the costs of our development for the natural ecologies of the planet. We willingly ruined and destroyed ecologies in our quest for industrialization. We frivolously spent our natural capital on frilly curiosities and wasteful gluttony.

We ruthlessly suppressed anyone elsewhere who got in the way of our incessant quest for cheap resources to fuel our industrial machine. This included assassinations, overthrow of governments, and the use of weapons of mass destruction against civilians. We manage a continual state of war for the purpose of enriching the powerful and distracting the masses.

We enact social policies whose result is to destroy family bonds of kinship and support, suppress individual initiative, and isolate people from natural and traditional sources of community.

Like the Romans and the inhabitants of Chaco Canyon, we heap complexity on top of complexity as we attempt to stave off the looming disaster that we see ahead of us.

Even so, it is evident that our increasing investments in complexity yield diminishing returns and in some areas, the returns are negative. History does repeat itself, especially when people fail to learn the lessons of the past. Rome, Chaco Canyon, US of A, and Europe — all demonstrate a straight line path to collapse and the ash heap of history.

Energy crises bring on economic crises. When we devote an increasing share of wealth to purchasing energy, without corresponding increases in productivity, we have less money for other needs. Someone doesn’t get paid.

A critical problem with energy is EROEI — Energy Returned On Energy Invested. In the early days of petroleum, we got 100 barrels of oil for every barrel of oil equivalent of energy invested in exploration and extraction.

As time passed, we found and began to pump all of the easy oil. In the beginning, oil actually flowed to the surface on its own. Early wells were shallow and tapped formations with so much pressure the oil blew through the drilling equipment creating “gushers.”

Now we willingly pay tens of millions of dollars to drill wells in the deep ocean and millions of dollars to drill for oil on dry land.

Of every 100 barrels of oil that we pull out of the ground —

• 10% of the energy is used to extract the oil.
• 27% is used to refine the oil into usable products.
• 42.5% is used to construct and maintain the transportation infrastructure necessary to move the oil around, and to actually move the oil around to where it needs to go.

So only 20.5% of the original energy value of the 100 barrels of oil is available for use at the end consumer stage.

But wait. . . there's more! And it's still not good news.

Most of that 20.5% of our 100 barrels of oil energy ends up as fuel, and the internal combustion engine wastes most of the energy it burns as heat. That’s why your car has a radiator and a cooling system that you fill with antifreeze. According to Wikipedia, the average efficiency of internal combustion engines is 18-20%.

This means that only FOUR PERCENT of the original energy of the 100 barrels of fuel actually is used to move a vehicle. Or, for every 100 barrels of oil we pump, we get to use four for our personal use.

That’s not quite true though. What does the weight of a vehicle consist of? Mostly steel, rubber, plastic, etc. and the weight of the fuel itself. Less than TEN PERCENT of the weight moved by a typical vehicle is an actual human body.

So ultimately, the way we presently do things. NINETY-NINE POINT SIX PERCENT of the original energy endowment of that 100 barrels of oil is either consumed in its production of fuel, frittered away as heat, or used to move steel, plastic, etc. down the road. ONLY FOUR TENTHS OF ONE PERCENT moves people around.

That’s apparently the best that the world can do at this stage of its development. It’s embarrassing, though, to run the numbers like this, and discover how incredibly energy inefficient our transportation system is.

Big Oil — Big Finance — Big Food?

One of the first effects of a rise in the price of oil is an increase in the manufacturing of biofuels (mostly alcohol) made from food grains. This drives increases in the price of food. While the developed countries can manage such price increases, corn price increases cause suffering and death in the poor nations of the world. This is an example of both political criminality and economic irrationality at work. During the serious drought year of 2012, the United States burned 40% of its corn crop as fuel.

The problem is not an absolute lack of food. The problem is that poor people don’t have the money necessary to buy food. Even though people die of hunger-related causes every day, it has been a long time since an absolute lack of food caused a famine. During the Irish Famine in the 19th century, the absentee landlords of Ireland consistently exported grain every year while millions of the Irish people died of starvation or fled for refuge elsewhere. There was plenty of food to feed everyone in Ireland. Since the poor had no money for bread, they died as collateral damage of the economic irrationality and political criminality of that era.

Nobel prize winner in economics Professor Amartya Sen has proven the hypothesis that in the modern era, famines are the result of politics and unjust economics, not an absolute lack of food.

This can’t happen here, can it?

A food crisis in the United States or other developed countries is unlikely to be caused by an absolute lack of food. One of the issues in food processing and distribution is that a half-dozen transnational corporations control most of the food system of the U.S. There are similar problems of food system consolidation elsewhere. Indeed, these United States corporations play a dominant role worldwide. While a grocery store appears diverse in its production selections, a handful of corporations own most of the brands. This is exactly the area of the economy that is at particular risk of systemic financial failure.

The bigger they are, the harder they fall.

The just in time inventory system has little flexibility when it comes to shortages. Food leaving the system to its end users must be balanced by raw materials coming in at the beginning of the process. If those deliveries stop for any length of time, at any place in the process, the system begins the grind-to-halt process.

If the big transnational aggregators go, we will have a situation where on one hand you will have farmers with food, and on the other hand, 300 million hungry customers, and no structural markets in between to move, process, and distribute the food.

Folks will immediately begin to find work-arounds, although new market structures won’t magically materialize overnight. Large inventories of primary products can be frozen in place while bankruptcy proceedings drag on. Processors may not be able to get raw materials and the processing pipelines that feed the warehouses that supply the stores may at best operate at a much reduced level of supply or even come to a complete stop in some areas.

It could take months for this to sort itself out, and the more remote people are from farms, the longer it will take. All of this adds up to potential food shortages, possibly right in the middle of winter.

On an emergency basis, the government may supply cities with whole foods like grain and soybeans. That food won’t arrive at cities nicely processed and packaged. We’ll be looking at bushels of raw grain and soybeans. Many areas won’t have local or household infrastructure to process these products.

At the supermarket level, anyone who has lived through an extended ice storm that disrupts shipping has seen how quickly grocery store shelves empty if not resupplied every day.

This is not a prediction of inevitability. It is an observation on the weakness and brittle nature of our supply systems.

A Nutrition Crisis?

We are not at an absolute food shortage at this time. We do seem to be in the midst of a nutritional health crisis.

Obesity, diabetes, heart disease, cancer — the list of medical problems that nutrition can either cause or aggravate is long and getting longer all the time.

High fructose corn syrup is in “just about everything” in the processed and prepared food aisles of supermarkets. In 1996, the per capita consumption of sweeteners in the United States was 103 pounds! Production per capita was at 128 pounds!

Pesticide use increased 50-fold since 1950, with 2.5 million tons produced and used each year, 75% of this in the developed world. Pesticide use has been linked to reduced nitrogen fixation, pollinator decline, and reduction in soil fertility. They contribute to long-term health problems in farm workers and consumers. One study found that diet is the primary way that children and infants in the US are exposed to pesticides. 3 Another study found that switching children to an organic diet dramatically reduced the children’s exposure to pesticides.4

Wikipedia details the negative aspects of herbicides at http://en.wikipedia.org/wiki/Herbicides.

Ecological Consequences of Production Agriculture

In the United States, we lose topsoil at a rate 10 times faster than it can be replenished by natural means. A good estimate of the economic impact of topsoil loss is $37 billion/year in productivity losses (by Professor David Pimental, Cornell University), http://www.news.cornell.edu/stories/march06/soil.erosion.threat.ssl.html

Concentrated Animal Feeding Operations (CAFOs) cause major environmental problems. They emit large quantities of greenhouse gases, divert high quality feed grains from human consumption to animal, require large areas of arable land to produce feed grains, pollute ground water supplies and deplete water supplies at high rates. CAFOs are breeding grounds for infectious disease. They may be driving the development of antibiotic resistant bacteria due to daily feeding of antibiotics in rations, and land degradation.

For more information on the ecological consequences of conventional agriculture, see the power point presentation, at http://tinyurl.com/29qkc9. Note in particular the maps showing pounds of pesticides applied in watersheds and excess topsoil erosion. Oklahoma has high rates on both maps.

Get big or get out: the impact of modern food systems on rural communities.

In 1938, there were 6.5 million family farms in the United States. Today, there are less than two million.

For decades, the government mantra has been simple — “Get big or get out,” a phrase coined by Secretary of Agriculture Earl Butz, who served under the Eisenhower and Nixon administrations. He famously urged American farmers to go fence-row to fence-row with the big commodity crops like corn and wheat. He eventually resigned after the media caught him telling crude racial jokes about African Americans.6 Later, a court judged him guilty of tax evasion. He served some time in jail and paid a large fine.

“Get big or get out” was a great phrase, as such things go, although like all propaganda, it was a creation of an irrational unquestioned assumption. The consequences of the policy, for rural America, were never publicly considered.

Bigger farms inevitably mean fewer farmers.

If there are fewer farmers, there will be fewer people living in rural areas.

And so it comes to pass that there are fewer people buying clothes at local stores, going to school at local schools, serving as volunteers in community organizations, and attending local churches. Thus, rural communities wither and die.

According to the government’s propaganda, this is all as it should be. It is no one’s “fault,” it is just the impact of giant megatrends over which no one has any control.

Those of us interested in reality know that it is not an accident that our rural communities are dying. It is the direct result of deliberate government policies that have the effect of depopulating rural areas and encouraging the movement of population to urban centers.

Small Leaks Can Sink a Large Ship.

Generally, in most communities (cities and towns in rural areas, neighborhoods and regions in urban areas), the economic pattern is simple:

Items necessary for human life (food, energy, manufactured goods), are trucked in from other areas, with the local area being a link in a global just-in-time distribution chain.

Most of the money paid for those items goes out of the area quickly.

Outside interests finance much of the economic activity, interest paid on the loans leaves the area, and persons seeking financing must meet national standards. Lenders may not be interested in non-traditional financing needs.

Some money comes back into the area in the form of government transfer payments, government spending programs, and the sale of goods and services produced/located in the county to places elsewhere.

Therefore, the net result over time is that a “death of a thousand financial cuts” slowly kills rural communities. More money goes out than comes back in and this financial accounting doesn’t even begin to report ecosystem issues such as the continuing loss of fertility, depletion/pollution of water/aquifers, and erosion of topsoil. Our conventional accounting systems do not report such losses.

A local economy can be compared to a ship with lots of leaks. As Benjamin Franklin said, “A small leak can sink a large ship.”

The Human Cost

Over the last few decades, there have been several waves of bankruptcies among American farmers. Between 1986 and 2002, Oklahoma alone counted 500 farm-related suicides, as people reacted with despair to the ongoing financial crisis in American agriculture.

The National Catholic Reporter article, “Farmers: get big or get out,” quotes Mary Hendrickson, of the Department of Rural Sociology at the University of Missouri in Columbia, about the devastation of rural communities caused by the loss of farmers:

"The devastation in America's rural communities is caused by the loss of infrastructure that makes society work. The small farms go down, and they pull everything else along with them. What disturbs me most are the compromises rural folks have to make in order to stay on the land. People are desperate to stay because of family connections and love of the land, and they find themselves in a powerless relationship with the big guys. As a result, they have to do unpleasant things. When food decisions are made somewhere else, dollars also go out of the community. You lose human capital, too. When you work for someone else, you don't learn those leadership skills, the ability to evaluate many factors and uncertainties and then make good decisions that have been the hallmark of farming since day one in this country.”

“Public figures are actually telling farmers there is no necessity for small-scale agriculture in the U.S. anymore. 'Tough luck,' they say, 'you just have to move, go somewhere else.' But people don't want to move. Not only do the farmers have to leave their land, but the butcher, hardware store proprietor, implement mechanic in town, they all have to go, too. Then all that's left is the Wal-Mart."

Katherine Copeland was an advisor to the 4-H Club I was a member of while growing up in Tillman County, Oklahoma. She was truly the “salt of the earth.” If you had a potluck dinner, you wanted her to come because she always brought a tasty covered dish. If you sold tickets or band candy, she was sure to buy. Her family had farmed their land outside of Chattanooga, Oklahoma since 1910. They followed the government’s advice. They got big, they borrowed heavily, the price for farm commodities declined, and they were at risk of foreclosure. In despair, she took her own life. She climbed on top of a barrel of burning trash and died of smoke inhalation. The New York Times, reporting the story on July 11, 1986, put it this way:

The suicide of Katherine Copeland, whose family had plowed the fields of southwestern Oklahoma since 1910, came the day after they harvested their wheat crop. She hated the idea of losing the farm, said her eldest son, Robert. "She felt that she had failed her parents and failed her children," he said.

According to conventional economic theory, these bankruptcies and the declining number of farmers are actually “good.” Bankruptcies “eliminate” inefficient producers, and distribute their assets to “more efficient” producers. They see a net gain for the economy.

This accounting is a problem. Our primitive systems have no way to account for the death of Katherine Copeland, or the 499 other people classified as “farm-related suicides” in Oklahoma since 1986. How do we put a price on the loss of this kind and loving woman’s life?

Frederick, my hometown, during the 1960s had four department stores downtown — Norwoods, Penny’s, Perkins Timberlake, and Anthony’s, plus a “Dime Store” — TG&Y. There were three locally-owned pharmacies with soda fountains. There were two dress shops. All of these stores had owners, managers, employees. Now they are closed. Those jobs are gone. There is a junior big box store on the outskirts of town, and a couple of dollar stores.

How do we account for this loss of economic vitality on the “Get big or get out” ledger?

Agribusiness Corporations Laughing All the Way to the Bank

Meanwhile, back at the transnational agribusiness corporations, profits are up. Cargill — 160,000 employees in 67 countries — up 62%9 ; Tyson — up 50%10; Archer Daniels Midland — up 24%.

This is not an accident. This is what we pay for when we go to the supermarket and buy the products of the agribusiness system. These are the consequences of the “Get big or get out” philosophy.

Cities have a vested interest in a healthy farming economy.

People in cities have a vested interest in the social and economic health of rural areas. We are dependent upon supply chains from those communities for our daily bread. Cities were once fed by the farmers of their immediate foodsheds, the areas of up to a hundred miles or so around each metropolitan area. There were many economic and social ties between cities and their rural areas. Most of those relationships have been abandoned by people in both rural and urban areas. One of the tasks going forward is to reweave the urban-renewal connections that have potential to shorten the supply chains that keep our cities alive and healthy.

Finding a better fate than Chaco Canyon or Rome.

If we want to avoid the fate of Chaco Canyon and Rome, we need to rethink the whole “let’s do more of the same and hope we get something different this time” plans enthusiastically embraced by the political, economic, and social aristocracies of the United States and other developed counties.

We do this one person, one family, one household, one community, at a time.

iPermie will help you get yourself and others out of this increasingly toxic situation, and into a much better — more sustainable, more frugal, more socially just — place.