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Energy and Inflation
Many countries are currently experiencing rising inflation rates. Some of this has been blamed on the Russian invasion of the Ukraine on February 24, 2022. This war between two of the world’s major food exporters will certainly make matters worse. Yet the truth is that many countries, from the USA via Russia to Germany and other European nations, had already experienced rising prices throughout 2021 and early 2022. The war between Russia and the Ukraine simply made a bad situation even worse.
What are the causes of rising inflation? In some sense, the Western world has still not fully recovered from the financial crisis in 2008. Central banks have been printing money for years without truly fixing most of the underlying problems of the economy. Many European countries have higher levels of debt now than they did a couple of decades ago. The USA suffers from enormous levels of public debt, and the U.S. Congress keeps raising the debt ceiling again and again. In this situation, the administration of President Joe Biden has irresponsibly increased government spending in 2021 and 2022.
Another factor is the coronavirus pandemic. The new coronavirus known as COVID-19 spread worldwide during 2020 and 2021. It was first recorded in late 2019 in the city of Wuhan in China. Partly due to Chinese censorship, we may never know the full truth of what happened there. However, the most likely explanation is that the coronavirus spread from the virus laboratory in Wuhan, perhaps by an accidental leak. The virus also bears indications of having been deliberately altered by humans. If that is true, the Wuhan coronavirus is the first known case of a global pandemic created by a pathogen that had been actively manipulated by humans.
The coronavirus has made many humans sick and killed millions of people. Yet its greatest negative effects have arguably been economic. Several billion people from India to Canada have been affected by strict coronavirus lockdowns imposed by the authorities. Critics argue that some of these restrictions may have caused more problems than they solved. Millions of people have lost their jobs, and hundreds of millions of people have suffered negative effects from the lockdowns. Western countries have become more authoritarian and less free in just two years.
The war between Russia and the Ukraine thus came before the world had a chance to recover from the global effects of the coronavirus pandemic. This added another layer to the international economic turmoil.
An emerging energy crisis, largely created by political decisions, seems to have contributed directly to rising rates of inflation. On both sides of the Atlantic, Western politicians proclaim that the world is threatened by alleged man-made climate change and global warming caused by greenhouse gas emission from the use of fossil fuels. The European Union has approved a European Green Deal. It is supposed to make the EU climate neutral in 2050 through huge and costly changes to the economy and energy supply. Such drastic changes are allegedly needed to save our planet. The Biden Administration promotes similar policies in the USA.
Despite claims to the contrary, not all scientists are convinced that human actions are causing big changes to the Earth’s climate. Moreover, some of the suggested policies will probably not make any major difference to future climate if they are implemented. These policies will first and foremost cause major economic harm, and undermine the energy supplies of the Western world.
The Neolithic Revolution was the great transformation that occurred when hunter-gatherers became more settled and started growing their own food through the domestication of plants and animals. This changed human societies forever. It was also a gradual change that took thousands of years, and seems to have started independently in many different places.
The Industrial Revolution was another great transformation that changed the face of this planet. However, this revolution began in one civilization only, and spread everywhere within a few generations. Britain had an early leading role, followed by other European countries, North America and eventually the rest of the world.
The Industrial Revolution took place shortly after Europeans had created the Scientific Revolution and the Enlightenment. Some economic historians such as Joel Mokyr suspect that there was an indirect link between the Scientific Revolution and the Industrial Revolution. By the 1700s, Europeans had spent several centuries exploring new lands, developing new ideas and systematically experimenting with new tools and machines of various kinds. All of this laid a fruitful basis for the innovations that spawned new industries and production methods.
European scholars experimented with electricity throughout the eighteenth century. When the Italian physicist Alessandro Volta announced the invention of his battery (voltaic pile) in the year 1800, humanity had its first device capable of producing a continuous electric current. Over the next two hundred years, Europeans spread the use of electricity throughout the entire world. Every city on this planet is today full of electrical devices. Of course, this also means that vital functions of a modern society may quickly collapse without a steady supply of electricity.
Yet the Industrial Revolution would not have been possible without the use of fossil fuels. It began with coal, which the British had an ample natural supply of, and gradually included oil and natural gas.
Civilization is based on energy. Early civilizations had to rely on the muscle power of animals and humans. Some civilizations, such as Europe during the Middle Ages, also experimented with watermills and windmills. The use of coal, oil and gas made it possible to establish a more complex civilization for a much larger number of people. Fossil fuels cannot be replaced easily or in a hurry. However, that is precisely what Western countries are attempting to do now, through harmful environmental policies.
Renewable energy sources such as windmills or solar panels are not yet efficient enough to fully replace fossil fuels. They will probably remain supplemental energy sources for the foreseeable future.
If you want to reduce your dependency on oil, gas and coal, you simply cannot ignore nuclear power. Yet that is precisely what Europe’s largest economy has done. Germany has already switched off several of its nuclear power plants, and is scheduled to close the rest of them in 2022. At the same time, after the 2022 Russian invasion of Ukraine, Germany wants to stop importing Russian natural gas. That leaves Germany dangerously reliant on windmills to generate its energy supplies. Can you really base a modern industrial economy on windmills?
Messing up a country’s energy supplies is dangerous. It will have instant ripple effects throughout all parts of society. Farmers use energy and machinery for the production, harvesting and transportation of food. The production of fertilizers also requires energy. Rising costs of energy will therefore immediately lead to rising costs of food and transportation. The effects of this will soon be felt by everybody. They already are.
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