The American Spectator

The Big Flatline: Oil and the No-Growth Economy
By Jeff Rubin
(Palgrave Macmillan, 272 pages pages, $27)

In February 2010, this august journal published some musings of mine titled “The Great Recession of 2011–2012,” with a subhead, “And that’s only the beginning of a new Dark Age.”

The article attracted a bit of attention. The ubiquitous tocsin Sean Hannity mentioned it on both his radio and cable shows. A man named Mitt Romney shook my hand in the lobby of the National Press Club and said he had read it too. And three years later, I have to say there are large parts of it I would not change.

But I did err. I both overstated some parts of my conclusions, and understated the even more critical forces that make the years ahead so problematic, uncertain, and ominous.

I was correct in arguing that the real proximate cause of our ongoing economic malaise was rooted in the “new certainty…that the era of cheap resources is over. The plentiful and extremely profitable supplies of everything—petroleum, metals, minerals, water, yes, and even air—have been exhausted.”

While the economy did plunge into a decline in growth in the last October-December period, I cannot congratulate myself about my prescience. The 3.2 percent contraction probably had more to do with the Three Stooges pie fight among the White House (Mo), the Senate Democrats (Larry), and the House Republicans (Curly) over the fiscal cliff threat overhanging us all. Still, while the economic patient manages a few shuddering breaths of life and then lapses back, we are still way too far from the Great Recovery that our current president promised us.

I observed the last presidential election campaign with increasing alarm. Mr. Obama’s open shift away from historical coalitions of the middle class in favor of old machine-politics bribe-’em-and-herd-’em “hot button” issue groups scared me and does still. Yet when my lonely eyes turned to Mr. Romney, I found a hologram of an alternative; a man repeating old nostrums that had become increasingly disconnected during the last three decades of a changing world.

I wondered what was really going on. It was plain that the Keynesianism that had morphed into ludicrous Krugmanite spend-and-be-damned stimulus was wrong. But was it also true that Reaganomics—or Milton Friedman’s prescriptions—were equally unresponsive to reality?

I believe I found a key that unlocks the conundrum. I recently picked up a book written by the Canadian energy economist Jeff Rubin, titled The Big Flatline: Oil and the No-Growth Economy. I knew about Rubin. For 20 years he had been chief economist for the powerful CIBC World Markets investment bank and a respected prognosticator for the Toronto-Wall Street-London nexus.

But Rubin kicked over the traces in 2009 once the financial crisis was upon us in earnest. He left CIBC and published Why Your World Is About to Get a Whole Lot Smaller. Now he has refined his worrisome conclusion with more recent data that make his early forecasts even more troubling.

Rubin challenges the pervasive myth that a return to growth is an inevitable consequence of one side or other winning the current policy wrangling. His argument boils down to the assertion that when careerist economists, the politicians they serve, and the journalists who (out of idle ignorance) feed off them, argue about which nostrum—free markets versus more government intrusion—will return us to the halcyon days of euphoric prosperity, they are both wrong.

We are not entering, as I suggested, a “New Dark Age,” which would, after all, be dramatic enough to spark some radical economic-social experimenting either in free markets or a new New Deal. Instead Rubin sees us mired in a world where most national economies essentially flatline, along with a bump of recovery here and there. But overall the global environment will be of lassitude, constraints, increasing inequalities of outcome, and dangerous increases in popular unrest on an international scale.

In short, a Gray Age of multiple shades of diminished expectations, shifting relative advantages, and dangerously unexpected crises where war comes to be a palliative response by the world’s leadership elite.

OIL, AS IT WAS THREE YEARS AGO, remains the linchpin factor in the industrial world’s economic future. And, as Rubin emphasizes, it is not the supply of burnable petroleum-based fuels that matters so much as the cost of its transfer into usable energy—in a word, the price:

Just how unique is oil? Oil can be stored. It doesn’t spoil. It can be easily moved through pipelines, trucks or tankers. It’s found all over the world. It’s used to make pop bottles and to power fighter jets. Most critically, it packs an unparalleled amount of energy into a tiny package. Given the same volume, oil contains more energy than natural gas and roughly twice as much as coal.