Human Capital

Much faith in both growth and steady state scenarios rests on the observation that human ingenuity, technology, markets and social capital are at least as important in shaping history as raw energy and resources. The stunning power and spread of computers and information technology into all sectors of industrial society is seen as much a product of human capital as it is of natural capital. The rise of the service economy promised continued economic growth without using more energy and materials. But these service economies and the human capital that helped create them were themselves created through the flows of energy and resources. For example, mass education, and especially mass tertiary education, is a very expensive investment in technical capacity and social capital that has been possible because of economic wealth from the extraction of cheap fossil energy and non-renewable resources.

Mass education has been possible because of the extraction of cheap fossil energy.

In pre-industrial societies it was not possible to have so many potential workers outside the productive economies of agriculture and manufacturing, or to build the educational infrastructure necessary for mass education. Human capital, in the form of mass education, the media, democracy and other characteristics of industrial culture has greatly expanded the apparent power of human rather than ecological factors in determining our future. While these new forms of wealth are clearly important, they are in reality “stores” of high quality embodied fossil energy. Like more material forms of wealth, they depreciate over time and must be used and renewed to remain useful.

Much of the technological and economic innovation since the oil shocks of the 1970’s can be attributed to society’s capacity to draw on this human capital and, by further cycles of reinvestment, further build human capital. Several factors suggest the continuous growth in human capital and capacity is an illusion.

Firstly, much of this growth is in forms that are increasingly dysfunctional. For example the increasingly sedentary lifestyle created by the computer and other innovation is requiring escalating expenditure in the health care system and in the health and fitness industry to compensate for lifestyles that are incompatible with human biology.

Secondly, much of the economic growth since the energy crises of the 1970’s has come through economical rationalist policies such as privatisation. Many academics and social commentators have identified how much of the apparent economic growth has come at the cost of decline in many social indicators of well-being. We can think of this growth as being driven as much from mining (rather than maintaining) social capital as it has from mining the earth. For example, the privatisation of many electricity and other utilities has resulted in the loss of detailed knowledge about the maintenance of infrastructure, while maintenance budgets have been cut to the bone.  Gains in productivity and efficiency have been achieved at the cost of resilience and long term capacity.

One of the characteristics of a robust, enduring and mature civilization is the capacity to consider the longer term, aim for desirable but achievable futures, but have fall-back strategies and insurance policies to deal with surprise and uncertainty.  Given the globalised nature of culture, knowledge and wealth, our industrial civilisation should have been able to devote resources to serious redesign strategies at the technological, infrastructural, organisational, cultural and personal levels which are able to respond to the potentials of all four long term scenarios.  Instead we see remarkably short term behaviour and a cavalier disregard of the fate of future generations. While this is often explained as “human nature” of fallible individuals, this explanation should not apply to institutions such as corporations let alone governments. History and systems theory suggest that powerful and long lived human institutions should embody longer term cultural wisdom and capacity. 

We can interpret the short sighted nature of information and decision making in our largest organisational structures as one of the many signs of cultural decay, reflecting the fact that our stocks of human capital may be declining just as our stock of natural capital is. Applying the concept of resource depletion to that of social capital in both affluent and poor countries over the last 40 years is more than metaphorical. This depletion suggests these less material forms of wealth may be subject to the same laws of energy and entropy that govern the natural capital of the earth, air and water.⁹EMergy accounting as developed by Howard T Odum provides a systematic and quantitative synthesis of how these forms of wealth combine, with more basic energy and resources, to drive human systems.

Consequently, we should be skeptical of the notion that innovation in technology and organisation is a continuously expanding human resource that we can rely on to solve ever more complex challenges. This is not to say that given the right conditions humanity cannot rise to the energy transition challenge we face. However the conditions that could harness that human capacity are unlikely to include the continuation of endless economic growth, maintenance of current world power structures and the idolising of consumption. A smooth conversion to a steady state economy running on renewable energy without massive geopolitical and economic crises is unlikely. In fact an increasing number of commentators recognise that we are already in the crisis that has been unfolding since the turn of the millennium.

The next section considers the likelihood of collapse.