I find the central thesis about The Great Stagnation compelling. The thesis posits that the rate of technological progress, particularly in transformative areas that significantly enhance productivity and living standards, has slowed since the 1970s. I think there are some particularly sound empirical arguments that support this theory in view of the trends since the 1970s: slow wage growth, declining economic performance and decreased productivity, flat job growth, persistent unemployment, and so on. Some pin the broad stagnation exactly on the decline of real wages and incomes since the oil crisis in 1973, the year when oil prices quadrupled.

It is like being trapped in a thermodynamic stagnation state in which a fluid is brought to rest isentropically. The stagnation state describes the total energy in the system, no longer contributing to motion or work. Except, economically, we are now talking about the stagnation state of economic dynamism, innovation, and productivity growth. The economy continues to grow, but the rate of growth is slow and the transformative impact almost diminished. It is metaphorical, limited, and not exact, but I like this picture because capital, technology, and resources, all appear roughly analogous to energy in a thermodynamic system. The great stagnation is the reference state.

At the same time, I think the thesis that inflation is a primary trigger of this history, and of the present shift from neoliberalism to something else, is similarly compelling. When we combine these two viewpoints as a way to frame the economic history of the past five decades, I think Peter Thiel is onto something when he said: “We wanted flying cars, instead we got 140 characters.” Bigger picture, his point is that, whilst consumer goods have progressed in some capacity, mainly driven by the progress in computers, many science and engineering fields have similarly become stagnate. Nvidia hypes its annual release of a new graphics card, and people fawn over it; but it is like, “Alice in the Red Queen’s race, we (and our computers) have been forced to run faster and faster to stay in the same place”.

The culture industry instead serves us distraction from stagnation.

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Between the theses about inflation and the great stagnation, there is something missing from this picture that signals to me deeper underlying pressures that caused the shift from Keynesianism to the interventions of neoliberalism. The latter defines the period of economic history from the mid-1980s to roughly 2007. Going back to the sketchy thermodynamic analogy, I think the deeper point has to do with energy.

I mean, in the 1970s there was quite literally an oil crisis. But I mean to make a bigger picture point. Energy is the most important resource for civilisational abundance and growth. This is a simple fact from the most basic, elementary view of the physics of society. From the modern epoch of civilisation driven by fossil fuels all the way back to pre-agricultural foraging societies – throughout history energy has literally shaped society, perhaps more than economic policy since energy is a key parameter to any economic theory. The entirety of economic and cultural progress is built from such foundations. At its most primitive, very few driving forces have been as constant – it is as simple as turning energy into heat, and then into basic sources of light and motion.

I agree with Smil’s contention that energy is the only universal currency. One of the key demarcations between human beings and other animals is the ability to systematically – through intellect and then by engineering and technology – harness various types of energy. The internal combustion engine not only revolutionised industrialisation; it arguably revolutionised all practical matters of daily life. The epochal transition to fossil fuels transformed everything: agriculture, industry, transportation, communication, and subsequently economics, politics, urbanisation, and the environment. A new energy era should similarly transform everything.

How to get there is a big question, and there are many ideas. The first thing is we have to power ourselves there. And yet, there are some who would suggest regression and deindustrialisation – what I tend to package as anti-modern – is instead the answer. For decades the Germans, along with other parts of the EU, built their economies on advanced machinery, meanwhile total gas consumption has fallen by 37% (not entirely due to the war in Ukraine, by the way) without being supplemented. This is an ideological decision. In 2011, the German government decided to accelerate a nuclear phaseout, committing to close all nuclear plants by 2022. The country closed its last plant in 2023. Some energy has been supplemented by wind and other green sources; but not nearly enough. This is why, as a direct result of completely illogical energy policies, the country is undergoing deindustrialisation of energy-intensive industries due to rising costs and the inability to satisfy demand. As EU gas supply diminishes, so too will costs rise. I don’t see how this will amount to anything other than deeper stagnation.

The same can be said for other parts of Europe, too. In the UK and the US, the situation is slightly different but still ultimately not good. In the UK, general incompetence by successive governments over recent decades, absent of sensible energy policies along with the will and the intelligence to organise a responsible fiscal plan, are responsible for the cancellation of several nuclear power stations which would otherwise be operational, if not more. There would not have been any talk about any sort of energy crisis in 2023 and 2024. Clean energy production is good, energy efficiency is good – nuclear energy is essential.

These are the issues covered focusedly by the people at Less Wrong. In many ways, the arguments are rather facile in the sense that they should be obvious.

I think there is a bit more nuance to the criticism of the flatlining of energy usage as depicted in this graph, both quantitatively and in terms of the general qualitative analysis. But the broad point stands: we should be consuming more energy, not less. This seems so completely obvious. Degrowth and deindustrialisation are part of an anti-modern ideological fantasy, and the solutions to 21st century problems are not going to come from continued technological stagnation, or worse. We need technological revolution, and any such revolution will be powered by sensible and reasonable energy policies. If this had started in the 1990s, we would already likely be so much further ahead.

**Cover image by Dall-E.