Adam Smith on Globalization

So I went into the bookstore down in Mountain View at lunchtime in search of serendipity. The book that found me was an annotated version of Adam Smith's "The Wealth of Nations", which of course I have never read in the original. It's a fascinating read for a peak-oiler for several reasons. Firstly, it's just an engaging and well-written book. Secondly, it's still viewed as the founding text of economics, and one can see many of the thought strains that still shape that discipline already. Thirdly, it was published in 1776. The steam engine ("fire engine" to Smith) had been invented, but was very inefficient and not yet used in transportation. The spinning Jenny had been patented six years before. The industrial revolution was largely in the future. Although coal was starting to be used in bulk for heating and smelting iron, still, the fossil fuel era was only just beginning. The economy that Smith describes is largely powered by wind, water, and biomass.

I heartily recommend it to those of you who believe peak oil means a return to a pre-industrial, localized economy. Of particular interest to me was the following quote (below the fold), since I am not amongst those peak-oilers who think global trade is likely to end after peak oil (at least not soon).

(I'll resume the population analysis tomorrow when I have time).

Smith is discussing how trade allows a larger market, and thus more specialization and division of labor, and so greater wealth creation. He writes:

As by means of water-carriage a more extensive market is opened to every sort of industry than what land-carriage alone can afford it, so it is upon the sea-coast, and along the banks of navigable rivers, this industry of every kind naturally beings to subdivide and improve itself, and it is frequently not till a long time after that those improvements extend themselves to the inland parts of the country. A broad-wheeled waggon, attended by two men, and drawn by eight horses, in about six weeks time carries and brings back between London and Edinburgh near four ton weight of goods. In about the same time a ship navigated by six or eight men, and and sailing between the ports of London and Leith, frequently carries and brings back two hundred ton weight of goods. Six or eight men, therefore, by the help of water-carriage, can carry and bring back in the same time the same quantity of goods between London and Edinburgh as fifty broad-wheeled waggons, attended by a hundred men, and drawn by four hundred horses. Upon two hundred tons of goods, therefore, carried by the cheapest land-carriage from London to Edinburgh, there must be charged the maintenance of a hundred men for three weeks, and both the maintenance, and, what is nearly equal to the maintenance, the wear and tear of four hundred horses as well as of fifty great waggons. Whereas, upon the same quantity of goods carried by water, there is to be charged only the maintenance of six or eight men, and the wear and tear of a ship of two hundred tons burthen, together with the value of the superior risk, or the difference of the insurance between land and water-carriage. Were there no other communication between those two places, therefore, but by land-carriage, as no goods could be transported from the one to the other, except such whose price was very considerable in proportion to their weight, they could carry on but a small part of that commerce which at present subsists between them, and consequently could give but a small part of that encouragement which they at present mutually afford to each other's industry. There could be little or no commerce of any kind between the distant parts of the world. What goods could bear the expence of land-carriage between London and Calcutta? Of if there were any so precious as to be able to support this expence, with what safety could they be transported through the territories of so many barbarous nations? Those two cities, however, at present carry on a very considerable commerce with each other, and by mutually affording a market, give a good deal of encouragement to each others' industry.
It is interesting that he missed the real transport winner of his age. Seven years earlier in 1761 James Brindley finished construction of the first canal in Britain of what would become by 1830 a network of 4000 miles of canals. One horse
walking along the tow path under the control of two men or a man and his wife could pull 50 tons of goods at twice the speed of carts on rutted roads with no risk of storm and often to the doors of factories or mines.
It is perhaps a cautionary tale that in times of change even the most perceptive can get it wrong. We should be cautious in guessing what form of transport if any will replace oil based vehicles.

By "biomass" you must include whale oil which is what was used for lighting before petroleum or gas was used for lighting.

Not that I think we would slip back that far either, but there were practices back then which we couldn't revert to today.

Solar panels, batteries and CF lamps are far better than whale oil.  If you couldn't manage that, I suspect that properly ventilated mantle lamps fed by biogas or wood gas would serve reasonably well even if much less conveniently.
And that is key.  That is why after a "catabolic collapse," society may take hundreds of years to recover, or never recover.  All the resources are converted to waste, making it much harder to support a society than it was before.  
Exept at least metals. There a millions of tons of steel, copper, aluminium, etc for any post collapse society to pick up from the ruins.
I have always thought that Savinar, with his "the metals are all gone" line, has ignored the scrap market which could end up being a big deal far past peak.
Thirdly, it was published in 1776. The steam engine ("fire engine" to Smith) had been invented

It was the best of times, it was the worst of times ... it was the Age of Enlightenment

Adam Smith saw a new "machine" emerging, a social machine that would encourage specialization and thus take us to a new age of prosperity.

Smith did not see the dark side of his machine. Specialization brings on tunnel vision.

Tunnel vision leads to blind-sided group think among those people (sheeple) who come to accept certain things as "self evident" truths that need no further investigation or questioning.

One of the  "self evident" truths of our "modern" society is that growth and prosperity will continue (with compounded interest) forever.

Peak Oilers are some of the few who realize that this myopic viewpoint is fraught with danger. It may be the best of times, but it is also the worst of times. Water is evaporating from our half-fool glass.

The 50%-gone point is very short lived.


Step back has nailed it. Exponential growth is a fool's paradise.

This connects with carrying capacity as well as economics re the limit for any local being the least available reasource that is needed. Interestingly I have pulled J. Bronowski's The Ascent of Man for our 'descending?'. History is becoming more   real.
It's all a matter of economies of scale.  Those entities that can most easily avoid the impact of higher energy costs will gain at the expense of others.  This is why I contend that Wal-Mart, with its huge monopsonistic buying power and high volumes can hold down absolute energy costs and also minimize the energy cost per unit.

Local production and sales will succeed exactly to the extent that they can provide the things people need and want on a competitive basis.  In other words, the basic formulation won't change, just the numbers that get plugged into the equation.  The large volume manufacturers and distributors will do everything they can to control costs, making them even more formidable competitors in a time of rising energy costs.

The only way I see us converting to a highlyo localized economy is if transportation costs get vastly more expensive than they are now--as in 50 or 100 times higher--and whole sectors of the economy and even political system collapse into little fiefdoms.  I don't believe for a second that that will happen.

You may be right, but consider what happens to economies of scale as energy prices rise. At first, every physical dimension will be explored to effect new efficiencies: warehousing, transportation, communication.... Then the human dimension will come under pressure: lower wages, extended work hours.   Finally, profits will begin to shrink.  Those at the top, CEO's and those around them, will do everything possible to ensure their own horn of plenty.  Does this remind you of a feudal society?  When I look around the world today, I see the pressures for such a society growing.

Right now, because of vast pools of cheap foreign labor, workers in the developed countries are already experiencing such a pressure.  Higher energy costs will put even more pressure on those in the West while ensuring that cheap labor in the developing nations never gets its two-car garage and white picket fence.  China and the rest of the developing world will fall short of the Promised Land.  

Looking at Walmart employees in the West, is this not already happening?

Don't forget to take into account all the different layers in the transportation enterprise.  It may be that WalMart can gain all sorts of advantages of scale in running a vast trucking fleet.  But the small, local enterprises it will be competing with have their own advantages.

A small shop, walking distance from downtown, can sell things to people who don't want to pay for the gas needed to drive to the edge of town.  People may well pay extra for that.

That same shop might well be close enough to a rail terminal that goods can move from train to warehouse to shop without needing to be trucked at all; if they do need to be trucked, they can be moved just a few blocks in a small truck, rather than several miles in a large truck.

There are lots of similar savings available to the small, local business:  All businesses used to take advantage of them.  It simply turned out that just-in-time delivery was cheaper, in a world of cheap energy.  In a world where energy is expensive (and, especially, where energy isn't absolutely reliable), the older business structure may well turn out to be the cheaper choice.

 Energy shortages and major price fluctuations will drive larger systems , like Walmart, nuts. In the U.S. Depression era the only bank near here that made it went to a careful, personal decision making basis. Plus with shortages it's only what is in walking distance, cycling ,etc. that counts.
I'd venture that even with sharply rising energy prices, long-distance unit shipping costs are but a fraction of what they were in Adam Smith's day. I also wouldn't be surprised if a single medium size container ship could carry an entire year's worth of shipping between say Liverpool and Boston circa 1776.

And I agree with the previous poster in that WalMart and the other big-box stores will continue to enjoy a strong economic advantage over local privately-owned stores. Don't forget, unless you live on the very outer edges of the deep suburbs or in an outright rural area, it is often the case that a MalMart is just as close to your home as many of the smaller stores. And even if it isn't, the one-stop shopping feature in and of itself can be an energy-saver for the consumer. While I certain am no fan of WalMart and the like, I don't see their demise in the foreseeable future.

Having said that, on the subject of economies-of-scale, I don't think we should  assume that efficiency, cost-effectiveness, or whatever other benefit you want to discuss automatically continues to improve indefinitely with increasing size. In many things (e.g., buildings, ships, organizations, etc) there is a certain size beyond which efficiency, cost-effectiveness, and other benefits starts to decline. The reason usually is that the size itself becomes an obstacle and and difficultly and becomes more trouble than it's worth. I stongly suspect that some of our economic and social systems are already at or beyond that point.

As usual, Dr. Joule has it right.

I would add that what limits size is flexibility.  Economies of scale continue until conditions change (as they eventually do), then the larger organizations have more inertia and find the conditions they had optimized for no longer held.

I think General Motors is one example in the news.  If, say, China suddenly returned to its "Great Leap Forward" or Red Guard policies, then Walmart would need to change and rapidly.  With such a huge built structure, it would difficult.

BTW, I picked up a copy of the "Wealth of Nations" recently too - haven't started it yet - have to finish the biography of Mussolini first.

Doesn't anyone think holistically anymore? You can't have a global economy if the entire thing is shut down in a peak oil economic catastrophe. It doesn't mean squat if a gigantic freighter can outhaul the entire 17th century if there is no trade to speak of.

And quite frankly the idea that Mal-Wart will be the paradigm of the post-peak era is pure malarkey. If there ever were a system doomed by peak oil, it would be the big Wart.

Let us count the ways:

   1. Fuel prices. Skyrocketing. Cost of business model---YIKES!!! Sure ocean vessels are efficient, but then what do we do then? Do we move to the docks? NO. They have to drive it to the stores.

   2. Road maintenance. EXPENSIVE! The energy cost of maintaining IMMENSE stretches of roadway is enormous. If fuel is expensive, then jobs are scarce. Natural gas running out, feedstock running out. Factory jobs gone. Knock-on job losses. High unemployment means a shrinking tax base. Poor highway repair, high truck maintenance cost on top of fuel cost all spells no go.

   3. Roads clogged with out-of-work economists fleeing for their worthless lives all loudly proclaiming, "Let the invisible hand take care of it, Amen."

Methinks the art of wishful thinking is not dead.

Plenty of people think holistically, but not everyone agrees with the catastrophist model you're espousing. I admit when I started in on Peak Oil a few months back, I was in your camp, but now my view has changed significantly. Stuart's recent depletion rate analysis suggests things won't get nearly as bad as you predict, and besides that the post you're replying to didn't say that Wal-Mart would be a model for all things post peak, just that its scale might allow it to have an advantage over smaller operators, which I think is a pretty sound idea. Maybe it won't last forever in its current form, but it may be able to hold on longer than its competitors.
Thank god you have a sense of humor:)
Here is an interesting quote on the development of rail transport to a meeting in 1800 by a collaborator of Watt.  This was before rail was widespread, but it sure sounds like an early proponent of sprawl, before sprawl was considered bad.

" If, we can diminish only one single farthing in the cost of transportation and personal intercommunication, and you at once widen the circle of intercourse, you form, as it were, a new creationÑnot only of stone and earth, of trees and plants, but of men also; and, what is of far greater consequence, you promote industry, happiness, and joy. The cost of all human consumption would be reduced, the facilities of agriculture promoted, time and distance would be almost annihilated; the country would be brought nearer to the town; the number of horses to carry on traffic would be diminished; mines and manufactories would appear in neighborhoods hitherto considered almost isolated by distance; villages, towns, and even cities, would spring up all through the country; and spots now as the grave would be enlivened with the busy hum of human voices, the sound of the hammer, and the clatter of machinery; the whole country would be, as it were, revolutionized with life and activity, and a general prosperity would be the result of this mighty auxiliary to trade and commerce throughout the land."

Much discussion today on efficiency of transportation.  Some thoughts relating to above quote and evolution of transportation over the last 150 years.

This very principle led to the establishment of Granges in the late 1800's in the U.S, which led to other changes.  Rail became the fastest cheapest way to move goods to and from agricultural areas.  

Rail was so good (because of speed) they drove all the horse and water freight companies out of business.  Then they had a monopoly and they charged "what the market would bear" for delivery rates.  Granges worked as COOP's to counter this, not entirely successfully, so that rail owners couldn't dominate individuals in the negotiating process for freight rates.  

At about this time the automobile came along and was a viable threat to rail shipping, because of speed.  Rail had become the enemy and was broken up and displaced by trucks, cars and planes, never to recover as a viable efficient long distance transport in the U.S., except for commodity volume raw materials.

Inland water has never recovered except on the Mississippi, and it main tributaries, as a way to move goods.  Again, inland water is used to move bulk commodities.

In all of these transitions speed has been the driver, not just energy efficiency of freight.  Trains were both an increase in speed and efficiency over horses. But trains were only an increase in speed over water, not efficiency.  Today it is hard to argue that it is  more efficient to ship a package by jet, instead of rail, across the U.S. from an energy standpoint.  But it makes perfect sense from a time standpoint.

Before cheap fossil fuel (mostly petroleum) became abundant, speed was always balanced with energy cost to ship.  After cheap oil the only part of the equation that is relevent is speed.  The difference in energy cost is so small as to be negligable when balanced against satisfying a paying customer.

What happens when energy gets really scarce again?  How will the decision trees gets parsed?  These are the questions that can't be answered today because energy as of 12/21/05 is still really cheap worldwide.  If you are really forced to choose between manufacture and transportation, which gets the energy?  When you can't use a very limted energy for three things simulaneously which takes precidence?  

These were questions that business and individuals used to be able to answer.  Maybe, if you can't afford the shipping you don't buy or sell to far off places?  Maybe you keep as much finished goods as possible in the local environment? Maybe more people will make their own finished goods from less refined stocks?  Who can say at this time.  Interesting days are ahead.

The auto industry was based in Detroit because of Great Lakes shipping. Henry Ford even built his own harbor to bring in iron ore from Minnesota and coal from Pennsylvania. Model Ts were driven out of the River Rouge plant straight on to freighters headed all over the world.
It's been many decades since I read Adam Smith and, to be honest, I wasn't really paying attention back then. So my memory has faded. But didn't he state somewhere that capitalism would have a 200 year life span? Someone on another forum recently insisted that he did but couldn't supply a citation.
I'll let you know if I get to anything like that.
All political writers since the time of Charles II. had been prophesying 'that in a few years we would be reduced to an absolute state of poverty,' but 'we find ourselves far richer than before'.

This passage was found at paragraph I.19 in the editor's introduction at

Click on Table of Contents at above site to see a hyperlinked Table of Contents.  

Adam Smith was not the first to express the ideas as found in The Wealth of Nations, for example: see both works of Sir William Petty's A Treatise on Tax (1662) and Political Arithmetic (1691); and see, Sir Dudley North's Discourses upon Trade (1691). Also, see Turgot's Réflexions sur la formation et la distribution des richesses (1766) which, it is thought, anticipated Adam Smith.

above from:

For a total Smith experience, just Google it

The economy that Smith describes is largely powered by wind, water, and biomass... I heartily recommend it to those of you who believe peak oil means a return to a pre-industrial, localized economy.

It is also useful to remember that Smith was a member of the elite of his day — some of his early work sponsored by a lord, traveling abroad as the tutor for a duke, and eventually appointed to lucrative positions by members of the nobility — which affected how he saw the world. Delong provides an interesting estimate of the economic output of the world in 1750: population 720M, per-capita output $178 (in 1990 dollars). Compare that to the world in 2000: population 6.3B, per-capita output $6,540 (in 1990 dollars). In 1750, the difference between "developed" and "undeveloped" countries was narrow. The difference in per-capita output of Britain and India, for example, was smaller (in percentage terms) than the range covered by today's "developed" countries. A return to anything approximating Smith's 1750 Britain over a period shorter than centuries probably represents a crash of monumental proportions.

That said, I'm still on Stuart's side here (or at least I think I am). Peak Oil won't stop trade — but it will probably scale it back, particularly for bulk goods. There will be more places where it is cheaper to grow wheat than to buy from the US, or to use lower-quality local coal than to buy from Australia. We have the enormous advantage over Smith's Britain that we have largely mastered electricity, so that industry need not be tied so directly to locations with falling water. And we have alternatives besides falling water and such for generating electricity. Still, even in Smith's time, economic growth was tied to the ability to apply more energy to the problems (think about the evolution towards clipper ships for wind-powered transport). Separating energy and economic growth is the challenge we will face going forward.

With the expected rise in the real cost of oil, ocean transport will not go away.  It will be moved increasingly by nuclear-powered ships.

A big container ship can today be built by the Russians (if they had their commercial act together) using four reactors from their subs that could half the trans-Pacific transit time and have lower fuel costs.  Each sub reactor is about 30 MW shaft power - four of these would develop 120 MW which should drive an 80,000 tonne ship at 25 knots+.  

I'm neither a naval architect nor have direct experience in the nuclear navy so someone with more expertise could certainly improve on these ballpark estimates.

The commercial edge would be faster transit times, allowing more turnarounds and more paying tonnage per annum (hence more revenue) plus lower energy costs against the increased capital costs and manning costs for a nuclear ship.

I've been expecting some sort of announcement for some time - maybe there is some aspect I'm missing.

The trans-Atlantic market could also be served although the commercial edge is not as great in there.

Ship based plants are too small to be economical - fuel savings are not nearly enough to offset very high capital costs. And, many ports would ban entry. Nuclear is ideal for submarines because it avoids the need for oxygen to burn a hudrocarbon and also avoids the need to discharge co2, therefore allowing the ship to cruise underwater for long periods. During WWII the oil burning subs had to surface often, quickly drawing attacks; US survivers keenly remembered this liability in post-war construction. Aircraft carriers are more marginal, but nuclear fills the military need to be fuel independent for months at a time while remaining at station - essentially unlimited power even allows desalination. These military advantages provide no economic benefit for commercial nuclear ships.

Nuclear is coming none too soon to help replace coal and ng for electrical consumption, thus freeing coal for liquid fuels (and thereby staying on-topic) and ng for home heating. TVA communities with existing nukes have already voted in favor of new construction; my guess is that contracts will be let within three years in spite of the waste problem. ANd, the DOE could solve the latter overnight by promising Nevada to only store the small amount of short-lived non-actinide fuel at Yucca Mountain, taking possession of the hot actinides, which constitute maybe 99% of the waste, for burning in future breeders if and when conventional nuclear fuel becomes scarce.

I am waiting for the proposed mobile nuclear powerplant barges to be built. Put a submarine reactor on a barge, tow it to your customer, run it for 10 years or so, tow it back to the factory for renovation and refueling.

They have been proposed as combined heat and power plants for siberian coastal towns. They should be good for power limited thirld world cities with a big middle class. And if the cutomers skip on their bills it can be towed away.

I guess one problem is the capital cost and maybe that the fuel has a higher enrichment level then regular nuclear powerplant fuel. Russian reactors also have a bad reputation even if their nuclear icebreakers have run well as far as I know.

I guess public opinion about nuclear ships will change a few years after people start to fight over who gets the next set of nuclear powerplants as a new neighbour.

My guess is that nuclear powered ships will be common when the fossil fuel prices are much higher. I see them in combination with electrified rail as a kind of "proof of concept" that large scaly long distance trade is sustainable for a very long time.

Just eyeballing it, I would think that 120 MW (160,000 shaft HP) would easily be able to drive an 80,000-ton ship 25 knots or more. As you know, the form of the hull plays a big part, and cargo ships generally are not as svelt as ocean liners or warships, but you appear to be well within the ballpark.

As the power required to propel a ship increases very roughly as the cube of the speed, dropping the design speed to say 20 knots would require only about 82,000 HP, just a tad over half of what it takes to go 25 knots.  There is, of course, some optimum design speed that factors in such variable as capital cost, fuel cost, labor cost, and number trips projected over the service life of the ship. This is way super tankers lumber along as something like 15 knots or less.

However, as far as going to nuclear-powered cargo ships, I'm a bit skeptical that will come about any time soon, largely due to the cost. It's not just the cost of the reactor, but the very design of a nuclear-powered ship requires many more features than a conventional power plant (shielding, redundancies, etc).  Furthermore, the technical expertise to safely operate a reactor at sea is a whole other level above that of conventional power.

Then, we have the issue of security. Would it be too far-fetched to wonder whether a nuclear-powered cargo ship would need extra security to prevent it from being attacked by either pirates bent on obtaining nuclear material for sale on the black market, or by terrorists intent on causing a major release of nuclear material?

I quite literally did a "back-of-the-envelope" calculation some time ago and then lost the envelope.  Glad to hear someone backs up my memory.

Still, I don't think it is "if" as "when."

The major safety issue with nuclear electric power plants is ensuring that the core is ALWAYS covered with water - the equipment to provide that assurance is a large chunk of the capital cost of a nuke.

When a reactor is at sea, this is less of a problem!

It is true that current submarine cores are made of highly enriched uranium and are in no ways proliferation-resistant.  One could use <20% enriched U-235 (the usual cutoff) at some performance and volumetric cost but a very large container ship would have advantages over a submarine in having more room for the layout.

As to vulnerablity, it is pretty difficult to lose a 80,000 ton ship.  Reaction time to a boarding or hijacking would need to be considered in the design - on our subs, the reactor compartment is welded into the hull - you have to break the ship apart to get to the cores.  Actual volatile and gaseous radioisotope inventory is small since 120 MW shaft equals maybe 450 MW thermal.  The new big nuke plants are now rated at 4500 MW thermal so the whole ship would only have a tenth of the bad stuff at equilibrium.

Overall, it seems a couple of orders of magnitude LESS risky than LNG tankers.

We'll see how it develops - just know that alternatives to oil-fueled shipping are out there.

More efficient ships that utilize wind power to augment diesel engines would be far more practical.  Check out this link on "Sky Sails."

If anything, I expect PO to drive us to more water modes of freight transit.  Trucking will not go away because there will always be some industries that value speed and locational flexibility (i.e., not needing to be near the sea port or rail yard) far more than the cost savings that may be realized by lower fuel costs.  But the firms that can organize in a way to shift more of their shipping to rail and water modes will be at a distinct advantage.  

I also wonder if water transport will come back into vogue, and not just for intercontinental transport. Maybe cities on rivers will once again have a big trade advantage.
Big diesels work okay on slurried coal.  Coal is heavier and bulkier than oil and thus costs more cargo capacity, but if it's available for intercontinental trade it's going to be available as transport fuel.  The maintenance overhead will be offset by reduced fuel cost.
If I recall correctly, Rudolf Diesel did some of his orginal engine work using finely powdered coal dust. Yes, it can be done, but it does pose some obvious problems, not the least of which is mechanical erosion due to the abrasive nature of powders.

Still, this brings up an interesting issue, and that is: much of our problem with energy stems from trying to get energy into a liquid form so that it can be used for transportation. The presumption is that liquid fuels are necessary for transportation. Well, perhaps they are not.

I don't think that this question has been sufficiently explored.

A ship running on direct-carbon fuel cells could use processed coal or charcoal as fuel.

Most any biomass will serve to make charcoal.  Making the charcoal from fast-growing algae would be interesting.

Rudolf Diesel used gasified coal (syngas) which was a commonly used for street lighting and cooking in many European cities. Some of his early engines were sold with an accompanying gasifier.
By the way, I recently stumbled across "evolutionary economics" which offers a critique of Smith.
The below article roots out the "Intelligent Designer" of our modern, Adam Smithian society:
Nice point Stuart, History is with you.

Remember the great empires of antiquity, Greeks, Persians, Romans, and so on; they all based in large scale commerce.

Around here we had to divide the World in the 15th century, so commerce could expand without war.

I think what I'm drawing from Smith is this.  In a post-peak world, energy gets expensive (though coal-to-liquids might put off the day of reckoning).  However, ocean/river transport is much more energy efficient than land transport.  Therefore, cities (which are by and large close to rivers/oceans), will maintain commerce and wealth better than the country.  Thus, the nice folks in Yellow Springs may have it exactly backwards (at least for the early decades of a post-peak world).
Hey Stuart, Real GDP was announced at 4.1% this morning.  I have been a proponent of sustainable grwoth thru 2006/2007.  With respect to our disagreement on potential USA growth wrt Miles Data on Oct 25th when u said:

"We'll see who's right :-) Maybe driving and economic activity have become uncoupled recently, but I doubt it. (I'm not saying zero growth btw - I have no way to be that precise. I just think the growth rate is bound to drop pretty significantly for a while.)"

Are u ready to say "uncle"?!!

I'm willing to say I don't understand what's happening right now :-).  However, my prediction was about next year, not this (since I was basically working off an annual time series in which the GDP response often lags the miles data).  The situation might be clarified by more miles data, but unfortunately the FHWA has fallen behind.  Though they do now have September up, so maybe I'll do a post about that sometime soon.
The growth number depends 100% on the price of oil. If Oil goes up, growth will not increase. Not now. We need to become much more efficient for that to be possible. So for now, Stuart has the advantage in this argument.
Agreed. I read a discussion by somebody who moved to the country, did well planting a vairety of fruits and vegetables, but moved back after deciding the heavily armed people who live there would be likely to take what he had built if lawlessness comes to rural areas. He now plants a couple of fruit trees in the city, is part of a group of similar individuals. Whether law enforcement will protect him in a city if and when hungar comes is another question.
Regarding transportation, I think the crunch will come to commuters, forcing them to adopt fuel efficient vehicles plus carpooling, long before much happens to the transportation of goods. Maybe some reduction at the margins, such as air transport. It does seem that airport expansion is somewhat less needed than whatever society decides would best help in the transition, whether traditional renewable or nuclear.

Many peak oilers assume we will just make do with less as we slide down Hubbert's curve, die-off or other inconvenience be damned. This would not get any politiciain elected, so the US and others will do what they can to maintain what their citizens have become accustomed to, and not all attempts will involve war. What else will be tried?

It would be interesting to see which of the following could really compensate for declining oil output over time, say using ASPO's latest, together with a little discussion of cost and practical limits:
Acres of sugarcane
Acres of solar plus ctl.
Number of windmills, assuming latest technology, plus ctl.
Number of 1000MW nukes, either conventional light water or breeders, plus ctl.

Further off topic, today's US crude storage report shows oil up 2mb, surprising analysts expecting 1mb decline. Further evidence that OPEC is right in claiming the problem is lack of refineries, and increasing the chance they will cut output end Jan, helpfully delaying peak a little.

Food will be the country's wealth, and without it the city breaks down.  Agricultural areas  will have to do some land transport, even to get to water. Very right about water as  energy efficient transport. Lewis & Clark drug those boats UP the Missouri River to discover the U. S. west.
McCain said: " Peak Oil won't stop trade -- but it will probably scale it back, particularly for bulk goods."

Aren't we missing something here by fixating on transport costs alone? Peak Oil won't just make it uneconomical to drive your SUV three blocks to the 7-11 and back for a bag of Hostess Twinkies. It will also raise the prices of all those Made in China "I Support Our Troops" stickers and plastic storage tubs. Most of the junk we import today from China is either 100% plastic or has a very high plastic component to it.

If plastic becomes prohibitively expensive due to rising oil & NG prices, won't that kill off the incentive for a substantial portion of global trade?

Think of it this way, if we revert back to making things out of wood and metal, why not do it locally or at least somewhere within our own borders? Products made the old way are probably too heavy to ship half way around the world.

Exactly.  Global trade may still exist, but globalization will not.  So what if it's still cheaper to ship stuff from China to the U.S. than it was in the days of the Silk Road?  They didn't transport plastic "Support our troops" magnets on the Silk Road.  They transported silks and spices - rare luxuries for the wealthy few who could afford to buy them.

And it's not just the cost of plastic.  It's that everyone will have less money to spend.  We will be buying a lot less stuff.  And our suppliers will be likely be concentrating on producing food for their own people, not luxuries for Americans who can no longer afford them anyway.

Well, what do you mean by "globalization"?  To me it means global integration of the economy, and an excellent indicator of the amount of it is the amount of global trade.  What is the distinction you are making?
"Well, what do you mean by "globalization"?"

To me it's the current state of affairs where we have almost every tangible good we use and consume (including our food) produced for us in another country.

I think Adam Smith was writing about a world where only a limited number of luxury goods were farmed out for production elsewhere. I don't think that he could envisage a world where a country thought that it could survive solely off an "information economy", as we do today.

If PO causes a depression, where only people with critical skills can eke out a loving, what do you think will happen to information economy people? Think of Enron energy traders, or Wall Street bond traders, or cgi special effects creators in Hollywood. Who will need or be able to afford their services? They's be starving while the rednecks with a still who can make moonshine will be the new mini-tycoons.

In a nutshell, I believe that we'll pull back a lot of production in-house in a post_Peak world. Especially the food production will will become more labor intensive again.

I also believe that with the Iraq invasion we have entered into a new century of resource wars. Jeff Vail believes that these wars will replace free trade with Mercantilism 2.0. China will be Enemy Numero Uno.

I do think peak oil is the end of globalization.  It may not be right away.  And it won't be the end of global trade.  But it will be the end of globalization.  

That could be a problem for us.  Globalization is the way the U.S. grabs the resources of poorer countries.  All the benefits of colonialism, but without the hassles.  

Globalization is also the way poor countries with a reasonable legal system and general education bootstrap themselves to industrialized countries with enourmously better living conditions. And more fossil fuel use...

A fair number of them has even become democracys. The loosers seems to be people outcompeted for work in already industrialized countries and countries that has stopped halfway in their growth due to their nomenklatura finding the halfway profits more secure then letting society and people loose from their grip.

I bow in respect to South Korea and Taiwan, your aging diktatorship bastards did the right thing.

On the other hand, this is only another worldview. It might be a minority one around here. ;)

"Globalization is also the way poor countries with a reasonable legal system and general education bootstrap themselves to industrialized countries with enourmously better living conditions."

I'm not convinced of that. The few that bootstrapped themselves up since WW2 appear to have done so by initially ignoring the tenets of free trade. In reality, they threw up barriers to imports while simultaneously flooding cheap goods into other markets. It's only after becoming industrialized that they began opening up their own markets--ever so slowly.

I think much of the free trade claptrap everyone spouts is just that--claptrap.

Exactly.   China is doing well, and their markets are anything but free.  

Globalization has not helped the poor nearly as much as hoped:

Globalization fails to cut poverty

Free Trade Is Not Enough

An above post mentioned global per capita production was $6540 but this report says nearly half of all workers earn less than 10% of that amount.
I'm not convinced of that. The few that bootstrapped themselves up since WW2 appear to have done so by initially ignoring the tenets of free trade. In reality, they threw up barriers to imports while simultaneously flooding cheap goods into other markets.

This approach has a much longer history of successes than that. Holland, Great Britain, and the United States all rose to commercial prominance in their day using some form of mercantilism. Arguably, Great Britain supplanted Holland because their protected internal market was larger. Economies of scale matter, and the larger internal market allowed the British manufacturers to move further out on that scale. The US could play that same game in its turn. The Asian countries have added some wrinkles to their version of the game: lower unit labor costs, and the Japanese have been very good at incremental improvements to drive marginal cost down. But these were additions to the starting point of "protect your internal markets".

Peak oilers worry about the future, but most are fairly liberal and see globalization as pretty evil, and its hoped for demise a silver lining. Few reflect that if it costs a penny to ship a bra from China to the port of LA, and if the savings from fabricating the bra in China vs. the US is a dollar, fuel will have to rise higher than is likely to happen before global trade dries up.

Globalization brings rising standards to most but reduced ones for a few (generally, those that previously had the means to grab a higher standard of living than their skills would otherwise justify by holding hostage the means of production). Those reaping rising standards certainly includes most of those in the US, benefitting from walmarts etc, as well as virtually all those in Asia, a really big number. It could all be better except that groups with influence out of proportion to their numbers, particularly romanticized farmers, not least those in France, the US and Japan, have so far been able to prevent further globalization going forward.

THose who benefit most from globalization, whether making textiles in China/Vietnam or buying them in walmart, are the poorest, far outnumbering those unionists moving to non-union jobs. Anyone who doubts this should walk through a walmart, taking careful note of other shoppers. Resistance to walmart expansion in California has been organized by unionists, who successfully prevented the building of a couple stores in the Los Angeles region. However, one of the poorest cities, not served by the unionized grocery stores, recently approved one, seeing the combined benefit of both needed products and jobs.

The US has helped kickstart economies in Germany (intersting that there are no objections today to this), Japan, and more recently Asia and many central american countries, plus Chile and Israel, among others, by having a relatively open economy. The result of this is, in addition to sharply growing economies, are large amounts of dollars in the hands of foreigners, which worries many in the US. It is best to consider that these dollars can only be used to purchase a) other paper, such as the golf courses bought by Japan in the late eighties, and b) US goods and services. This will happen sooner than many think because Japan, Germany and China, among others, have relatively few young people to replace their aging work force. (The latter's one-child policy has usefully delayed peak oil and reduced global warming, but will fairly soon lead to the highest proportion of old to young the world has ever seen.)

Some complain that the US gives relatively little to charity considering the size of its economy. In my view, providing jobs is more useful in raising living standards than handing out money, and both Europe and Japan could do much more to help others (and themselves) by opening their economies, particularly agriculture.

An excellent analysis, jkissing!  The "teach a man to fish.." paradigm at work on global and historical scales.

However, the US dollar is a global currency so is often used for purposes other than purchases in and from the US.  For example, oil is priced in dollars for all comers and much global trade accepts dollars.  We benefit fgreatly rom the dollar being the preeminant currency so foreign currency holdings are just part of the deal.

I would also add that domestic food production does have a national security aspect that we in the US seldom consider.  WWI and WWII saw direct attempts to starve the populations of Britain and Germany (Japan too during WWII) as an instrument of war.  I can understand some interest in maintaining a secure domestic food production base.  I will admit that more globalization would be a good thing, however.

In my turn, I agree food can be considered important to security. So, Japan, which does not export food, perhaps can be forgiven for protecting its farmers and food source, even as there is not sufficient land for homes, sharply driving up land prices. France and other European countries, however, export much of their heavily subsidized food production because they produce far more than they can consume, thus crushing many third world agricultural economies. And, the money paid to European farmers drives up their fiscal deficits, raising interest rates, reducing growth, and further reducing demand for imports.
The dollar for international trade probably helps us sell our paper, helping to fund our fiscal and trade deficits. However, pricing oil in dollars does not do much - if Iran does not want to hold dollars, they can be instantly sold for Euros, Yen or any other convertible currency.
I am thinking globalization requires: stable goverments(& politicians/corporations), consistantly available & price stable energy, and international agreements/ goodwill. I agree we will not have any of these to a large degree. The problems  are not engineering ,but sociopolitical. As you say we, the U. S. will have the biggest loss in standard of living, similarly this was true in the great depression.
I do think peak oil is the end of globalization. It may not be right away. And it won't be the end of global trade. But it will be the end of globalization.

Depends on what's being "globalized". Significantly higher energy prices may increase shipping costs to the point that it becomes uneconomic to transport low-value high-bulk (either weight or volume) goods. Information, on the other hand, takes very little energy to move around. Globalization of data-based services -- financial manipulations, legal research, radiology reading in the medical field -- may continue to be shift to wherever the labor costs are lowest.

Ah, Adam Smith, the beginning of the dismal science (a bit of interesting history there). And now, today's quote.

"If [the petroleum] is not there to begin with, all the human ingenuity that can be mustered into the service of exploration cannot put it there... The literature of the past decade suggests that the best place to look for oil would be in the economics departments of American universities and research institutes, ... not in sedimentary rocks."
-- Richard Nehring, 1981
There is an interesting artile in CounterPunch

Montana Weeps, Canada Reaps
Natural Gas, a Montana Tragedy

As you well know, natural gas prices are skyrocketing which is not bad news for everybody.

But natural gas prices are not good news for the Montana public that was recently robbed of their access to regulated and affordable natural gas.

And right now, in the grip of a prolonged cold spell, when 10 above zero sounds balmy, many in the Big Sky are dreading
the arrival of utility bills in the mail.

If you'd like to read along with Stuart you can find the book online here:

Could help with quoting and discussing topics, too.

Thanks, Agric.  My husband and I were just about to purchase a copy online today. We want to read it together (as we have been doing with all PO related books) and really appreciate the link!
Some more links up above

It's always a good idea to use a search engine (ie Google) to hunt down info on any topic that strikes your fancy

There was an interesting story in the NYT Science (Dec 20 Page F3) page where they talked about how the fishing industry is spending more and more on fuel as they have to travel further and further to find fish.

It varies depending upon the species they are trying to catch, but they mentioned that to catch tuna, they use about 2000 liters of fuel to catch 1 ton of fish.  When the ships arrive back with their cargo holds full of tuna, they are riding higher in the water than when they left.

Smaller species like herring only take 50 liters of fuel to catch a ton of fish.

Still the way things are going, humans will completely depopulate the oceans at some point soon, and we will reach a point where it won't pay to send a fishing vessel out into the open ocean.

I think that between rising fuel costs and depleted fish stocks, the blue-water fisherman is soon going to become a thing of the past (in some areas he already is).

More and more of our food fish is coming from domestic and foreign fish farms, and this trend will continue until 'free range' fish will essentially become a rare delicacy.

Maybe this is the way it should be, as eating blue-water fish caught by commercial fisherman is almost like eating an equivalent weight of petroleum.

A while ago I had some correspondence with an older fellow from Norway who had a fish farm operation in a remote area along the Norwegian coast that he started in the 1970s.  As there was no electrical power available, he designed and installed his own wave power system to provide power for the various power requirements of a fish farm.  I thought this was most resourceful and a step in the righ direction.

Well, I was waiting for an open thread, but this seems fairly close to topic!  Here is an issue which I have been thinking about, and which has been touched on in previous posts:  The US economy has changed fairly drastically since the 1970s. We've made a major shift from manufacturing to service industries, and increased our debt significantly.  What is the relationship, if any, to the peak and decline of oil production in the lower 48?  I know it's a complicated system with many inputs and causes, but can it be attributed to the US peak?  What would be the mechanism?  

One thing I have wondered about is the cost of the US military.  Some of this can be attributed to the cost of procuring foreign oil.  Did the total cost of obtaining oil once the US peaked go high enough to make manufacturing non-viable?  

since the 1970s. We've made a major shift from manufacturing to service industries, ...  What is the relationship, if any, to the peak and decline of oil production in the lower 48?

I don't think the shifting of manufacturing activities to "lower cost" geographical regions has anything to do with domestic Peak Oil.

By offshoring, business people have simply found a way to do away with "excessive costs" associated with giving workers a livable wage with health benfits and a safe working environment.

Oil is a global commodity. We have to fight for it "over there" because there ain't much to fight over "over here".

Before the mid 1960s the US had a positive trade balance. Since that time the increase in oil imports has resulted a negative trade balance and a drop in purchasing power of a majority of American families. We may never return to the prosperity of those days but a renewable energy strategy is the only thing that can eliminate the trade deficit.
i don't think there was ever a time in the past when the average US citizen had a higher standard of living, and the increase is mostly because of globalization. Free trade creates mostly winners, particularly among the poor, but some losers, particularly among those unionized workers exposed to increased competition. The competition is not necessarily truly foreign - gm, ford and the older airlines are in trouble because of local competition, eg honda, toyota and nissan factories producing cars here (which substantially exceed the imports) and the upstart airlines.  The benefits to US consumers are not just lower prices but better quality - ford and gm are losing market share not just because they now have the wrong products, but also because the competition is making better products.
Yesterday, Wal-Mart got socked with a huge lawsuit bill for screwing their own American workers, which says nothing about how they create worldwide misery for slave camp laborers in China.

CSPAN was running an expose on Wal-Mart today.

It always amazes me how those who are seduced by the addictive siren call of the Adam Smith religion do not realize we are all spiralling down towards doom, not up towards a world of inifinite "growth".

These are not "the best of times".

>>"It always amazes me how those who are seduced by the addictive siren call of the Adam Smith religion do not realize we are all spiralling down towards doom, not up towards a world of inifinite "growth".<<

That's why it's called "the race to the bottom".

Look at real wages for Americans since about 1970 adjusted for inflation. Americans are actually earning less now than they were back then.

Look at concentration of capital. More and more of the country's wealth is being concentrated in the hands of fewer and fewer. (Buffett and Gates are to be commended for telling Bush not to repeal the inheritance tax. But did he listen?!)

Capitalism is our "scared cow". It's not just India that has them. I think we really need to reexamine capitalism. Not get rid of it, but maybe ask, "Who's it working for and how many?"

I think the whole game has become badly skewed in favor of big business to the detriment of everyone else.

Am I a commie? Nope, far from it. I'm actually a businessman. But my role models are men like Yvon Chouinard of Patagonia and not Kenny Boy Lay of Enron. Problem is that we have too many parasitical amoral Kennys and not enough productive and honorable Yvons.

Great typo I made above.

That was supposed to be "sacred" cow.