Our American way of life is unsustainable

Our American way of life is unsustainable – evidence

By Chris Clugston, originally published by Energy Bulletin

August 18, 2008

Our American way of life—300+ million people enjoying historically unprecedented living standards—is NOT sustainable because the ecological resources and economic resources upon which it depends will not be available going forward. As supplies associated with the ecological resources and economic resources that currently enable our way of life become increasingly scarce, we will experience escalating lifestyle disruptions, followed by societal collapse. 

The following ecological and economic resources are critical to the perpetuation of our American way of life. None of these resources is sustainable; supply disruptions associated with all of them are possible at any time; and supply disruptions associated with any of them could trigger societal collapse. 

Nonrenewable Natural Resources 

Nonrenewable natural resources include both energy resources such as fossil fuels and nuclear material, and non-energy resources such as metals and industrial minerals. These natural resources are defined as “nonrenewable” because their supplies are “not renewed in an annual cycle of organic growth”[1]; that is, their supplies are “fixed” from the human perspective. 

Total Nonrenewable Natural Resources

US Natural Resource Mix: Percentage of Renewable and Recycled US Natural Resource Utilization

In 1900, 41%[2] of the natural resources used in America (raw materials flowing into the US economy) were renewable. By 2007, only 13% of the natural resources used in the US were either renewable (5%)[3] or recycled (8%)[4]. Thus, 87% of the natural resources currently used in America are “nonrenewable”; supplies of these resources will peak, decline, and ultimately exhaust. 

We have been able to continuously increase our level of economic activity, especially since the inception of our industrial revolution, by using nonrenewable natural resources to enable the various processes and activities associated with our production and consumption of goods and services. Currently, 87% of our economic activity is unsustainable; that is, enabled by nonrenewable natural resources. 

Note that shortages or supply disruptions associated with all nonrenewable natural resources need not occur in order to cause severe lifestyle disruptions or societal collapse. As Liebig’s Law of the Minimum observes, “growth is controlled not by the total of resources available, but by the scarcest resource (limiting factor)” [5]. Hence, a protracted shortage or supply disruption associated with one critical nonrenewable natural resource is sufficient to trigger societal collapse. 

Nonrenewable Energy Resources

US Energy Mix: Percentage of Total US Energy Obtained from Renewable Sources

In 1800, prior to the US industrial revolution, 100%6 of US energy was derived from renewable sources—primarily biomass. By 1900, the percentage of US energy derived from renewable sources had declined to 23.7%[6]; by 2007 this percentage had further declined to 6.8%[7]. Thus, over 93% of America’s total primary energy is currently derived from resources—oil, natural gas, coal, and nuclear—the supplies of which will peak, decline, and ultimately exhaust 

We have been able to continuously increase our level of wellbeing—our population level and material living standards—especially since the inception of our industrial revolution, by using nonrenewable energy sources to enable the activities essential to our day-to-day existence: food production, cooking, heating, lighting, transportation, service provisioning, and industrial activity. 

Using nonrenewable energy resources is like drawing down a one-time inheritance in order to “supplement” our current incomes and (temporarily) improve our lifestyles. Today, 93% of our American way of life is unsustainable; that is, enabled by our finite and dwindling “inheritance” of nonrenewable energy resources. 

Pseudo Purchasing Power

Pseudo purchasing power is a generic characterization for economic resources that enable us to improve our level of wellbeing at any point in time at the expense of our future wellbeing. Specifically, pseudo purchasing power enables us to increase our “current” consumption level through economic asset liquidation, intergenerational debt, and deferred investments critical to our future wellbeing. 

Pseudo Purchasing Power Derived from Economic Asset Liquidation

We increase our “current” consumption level by depleting our previously accumulated wealth reserves such as our home equity, our physical and financial assets, and our currency—i.e., by living off the past… 

Home Equity Liquidation

Home Equity as a Percentage of Total US Residential Real Estate Value

In 1950, the equity interest in American homes was 81.5%8 of total US real estate value—the average American homeowner owned over 80% of his or her home. By 1980, this percentage had declined to 68.5%[8]. By 2007, US home equity had further declined to 47.5%[8]—the average American now owns less than 50% of his or her home. By drawing down the equity in our homes, we have seriously undermined the value of what has traditionally been the number one American investment. 

We have been able to increase our “current” consumption level of goods and services by using our homes as ATM machines, and by securing high risk mortgages requiring little or no money down. The ultimate limit to this unsustainable behavior is the amount of equity remaining in our homes; a more systemic or structural limit has been evidenced during our recent “credit crisis”. 

Domestic Asset Sales to Foreign Entities

Percentage of Total US Assets Owned by Foreign Entities

As recently as 1980, the ownership of US assets by foreign entities stood at only 3.1%9 of the total US asset base; by 2000, this percentage had increased to 9.9%[9]. In only seven years since then, the percentage of foreign owned US assets has soared to 17.6%[9] of our total asset base. Obviously we can only sell 100% of our assets; but foreign entities will obtain a controlling interest in the US long before we have sold out to that level.

We have been able to increase our “current” consumption level of goods and services by selling our physical assets and financial assets to foreign individuals, corporations, and governments—this is like selling the furniture in our homes in order to (temporarily) improve our lifestyles. The obvious limit to this unsustainable behavior is the size of our remaining asset base; the more imminent threat: “they who own us, control us”. 

Currency Inflation

Relative Value of the US Dollar (1900 = 100%)

Using 1900 as a baseline, each US dollar provided $1 worth of purchasing power in 190010. By 1950, the relative value or purchasing power associated with each US dollar had declined to 33.3 cents[10]—one third of its value in 1900. By 2007, the relative value of a US dollar had further declined to 4.6 cents[10], less than 5% of its value in 1900. Continuous and significant erosion of our currency’s value seriously undermines the viability and credibility associated America as an economic power. 

Perhaps the most insidious method by which we increase our “current” consumption level is the continuous inflation of our currency. By continuously increasing the supply of US dollars at rates greater than the rates at which we are able to create real wealth in the form of goods and services, we are able to “spend more than we earn” without incurring any formal debt obligation. The unsustainable side effect of this form of fiscal imprudence is the continuous devaluation of the US dollar, once the most stable and in-demand reserve currency in the world. 

Pseudo Purchasing Power Derived from Intergenerational Debt

We increase our “current” consumption level by borrowing continuously, and at ever-increasing levels—i.e., by living off the future… 

Accumulated Debt

Total US Debt as a Percentage US National Income

In 1950, following WWII, total US individual, corporate, and government debt stood at 158%[11] of our national income—it would have taken roughly 1.5 years worth of total US income to pay off our total outstanding debt. By 1980, our total debt had increased to 194%[11] of our national income. By 2007, our total debt had soared to 366%[11] of our national income—it would now take nearly 4 years worth of our total national income to pay off our accumulated debt. 

We have been able to increase our “current” consumption level of goods and services through ever-increasing borrowing at all levels. While such a trend is obviously unsustainable, the critical issue is “how much debt is too much”? As a point of reference, total US debt immediately prior to the “1929 crash” stood at 260% of our Gross Domestic Product (GDP)[12]; our total debt in 2007 was 324% of GDP12. 

New Debt

Incremental Annual US Debt as a Percentage US National Income

In 1950, new US debt incurred at the individual, corporate, and government levels totaled 6.2%[13] of our national income; by 1980, new debt had increased to 18%[13] of our total national income. In 2007, new debt totaled 33.2%[13] of our national income—we borrowed almost 1/3 as much as we earned in 2007. Such historically unprecedented new borrowing, in conjunction with our already staggering outstanding debt balance, calls into question the willingness and capacity of our creditors to continue to fund our profligate behavior going forward. 

Because we must pay ever-increasing interest payments on ever-increasing outstanding debt balances, and because real incomes for most Americans have not risen in decades, we have resorted to borrowing more each year in order to perpetuate our American way of life—behavior that is obviously unsustainable. 

Unrepayable Debt

Total US Debt as a Percentage US Net Worth

In 1950, total US debt at the individual, corporate, and government levels stood at 31.7%[14] of our total net worth (the difference between the assets and liabilities of all individuals, businesses, and governments in the US). By 1980, this figure had increased slightly to 35.7%[14]. In 2007, total US debt as a percentage of total US net worth had skyrocketed to 61.2%[14]. Our “unwieldy” debt has become “unrepayable” debt. 

US debt has become “intergenerational”; it is inconceivable that we could ever pay it off—we no longer even try to pay it down. We are content to pass along our increasingly large debt balances to future generations. Unfortunately, when our creditors not only refuse to loan us additional funds but also demand repayment of our outstanding balances, we, or our children, will be physically unable to repay them. We are technically insolvent—bankrupt.[15] 

Pseudo Purchasing Power Derived from Deferred Investments Critical to Our Future

We increase our “current” consumption level by failing to fund or by underfunding investments that are critical to our future wellbeing and to that of our progeny, such as in “social entitlement” programs, pension funds, and physical infrastructure—i.e., by shortchanging the future… 

Underfunded Social Entitlement Programs 

Unfunded Social Security, Medicare, and Medicaid Obligations as a Percentage US Net Worth

In 1900, America had no social entitlement programs—Social Security was a product of the New Deal, and Medicare and Medicaid were initiated during the era of the Great Society. Since their inception, the financial obligations associated with these three programs have increased to almost incomprehensible levels. By 2007, the present value of the unfunded portion of the “big 3” programs—the difference between projected outlays and projected receipts—exceeded the total net worth of all US individuals, businesses, and governments combined.[16] 

We have been able to increase our “current” consumption level by failing to allocate sufficient portions of our current incomes to fully fund our Social Security, Medicare, and Medicaid programs. We simply “defer” this investment until some unspecified time in the future—ostensibly until after we have “collected our share” and are dead. 

The result of our unwillingness to fully fund our “social entitlement” programs is a financial obligation that currently exceeds $77 trillion[16]—and is growing at $2.5 trillion per year[16]—an obligation so immense that it also exceeds our total national net worth, which is “only” approximately $73 trillion[17]. This situation is obviously not sustainable. 

The Evidence is Indisputable

Our ecological and economic resource utilization behavior has become increasingly dysfunctional over the past 200 years. Ecologically, our American way of life is almost entirely dependent upon resources, the supplies of which will be wholly inadequate to support our population level and living standards in the future. Economically, a majority of our “current” consumption is enabled by fiscal imprudence: liquidating our economic asset reserves, incurring intergenerational debt, and deferring investments critical to our future wellbeing. 

As a result, we are currently more vulnerable to resource supply shortages and disruptions than we have ever been in our country’s history—a situation exacerbated by ever-increasing global demand for resources essential the maintenance of our lifestyle paradigm. Through our incessant efforts to perpetuate our American way of life at all costs, we have become obscenely overextended—living far beyond our means both ecologically and economically—a trend that continues unabated, but that is physically unsustainable. 

We cannot possibly mitigate the catastrophic consequences associated with our unsustainable lifestyle paradigm in the absence of fundamental, nationwide behavioral change—our voluntary transition to a sustainable lifestyle paradigm—which will entail rapid and drastic reductions to some combination of our population level and material living standards. To date, we have shown no willingness to acknowledge this reality. 

Our American way of life is unsustainable and must come to an end. Should we attempt to perpetuate it, societal collapse is inevitable—within the not-too-distant future. 

References

1. “Overshoot”; William Catton, Jr.; pg. 32; 1982. 
2. http://pubs.usgs.gov/of/2002/of02-335/of02-335.pdf “Economic Drivers of Mineral Supply“; USGS 2002; Wagner, Sullivan, and Sznopek, pgs. 20-21. 
3. http://pubs.usgs.gov/of/2002/of02-335/of02-335.pdf “Economic Drivers of Mineral Supply“; USGS 2002; Wagner, Sullivan, and Sznopek, pg. 23. 
4. http://pubs.usgs.gov/of/2002/of02-333/of02-333.pdf “Sociocultural and Institutional Drivers and Constraints to Mineral Supply”; USGS 2002; Brown, pg. 41 (recycled metals); and
   http://pubs.usgs.gov/fs/fs-0181-99/fs-0181-99so.pdf “Recycled Aggregates–Profitable Resource Conservation”, USGS 2000, pg. 1 (recycled industrial minerals). 
5. http://en.wikipedia.org/wiki/Liebig’s_law_of_the_minimum Wikipedia, Liebig’s Law of the Minimum. 
6. http://www.eia.doe.gov/emeu/aer/txt/stb1701.xls Table E.1: Estimated Primary Energy Consumption in the United States, Selected Years, 1635-1945; EIA. 
7. http://www.eia.doe.gov/emeu/aer/pdf/pages/sec1_9.pdf Table 1.3 Primary Energy Consumption by Source, Selected Years, 1949-2007; EIA “Annual Energy Review 2007”. 
8. http://www.federalreserve.gov/releases/z1/Current/data.htm “Flow of Funds Accounts of the United States” (Table B.100); US Federal Reserve. 
9. http://www.bea.gov/international/xls/intinv07_t2.xls “Table 2: International Investment Position of the United States at Yearend 1976-2007”; BEA; and http://www.federalreserve.gov/releases/z1/Current/data.htm “Flow of Funds Accounts of the United States” (Tables B.100, B.102, B.103, and B.106c); US Federal Reserve. 
10. http://www.measuringworth.com/uscompare/ “Six Ways to Compute the Relative Value of a US Dollar Amount, 1774 to Present”; Measuring Worth; 2008. 
11. http://www.federalreserve.gov/releases/z1/Current/data.htm “Flow of Funds Accounts of the United States” (Tables L.1 and F.7); US Federal Reserve. 
12. http://www.gold-eagle.com/editorials_04/matlack072304.html “Gold: Back to the Future?”; Downs and Matlack; 2004; and http://www.federalreserve.gov/releases/z1/Current/data.htm “Flow of Funds Accounts of the United States” (Tables L.1 and F.6); US Federal Reserve. 
13. http://www.federalreserve.gov/releases/z1/Current/data.htm “Flow of Funds Accounts of the United States” (Tables F.1 and F.7); US Federal Reserve. 
14. http://www.federalreserve.gov/releases/z1/Current/data.htm “Flow of Funds Accounts of the United States” (Tables L.1, B.100, B.102, B.103, and B.106c); US Federal Reserve. 
15. http://www.minyanville.com/assets/File/Kotlikoff_USBankruptcy_paper[1].pdf “Is America Bankrupt?”; Lawrence Kotlikoff; Federal Reserve Bank of St. Louis Review, July/August 2006. 
16. http://www.philadelphiafed.org/econ/conf/forum2005/Smetters-assessing_the_Federal_Government.pdf “Fiscal and Generational Imbalances: An Update”; Gokhale and Smetters; pg. 26; 2005. 
17. http://www.federalreserve.gov/releases/z1/Current/data.htm “Flow of Funds Accounts of the United States” (Tables B.100, B.102, B.103, and B.106c); US Federal Reserve.

https://www.resilience.org/stories/2008-08-18/our-american-way-life-unsustainable-evidence/