Winnipeg Free Press - PRINT EDITION
Rising oil prices threat to life we know
Toronto economist Jeff Rubin's point of view in this thorough and articulate polemic is blunt and, at first glance, unsettling.
The rising costs of oil, he forecasts, will continue to force material changes in the way Canadians live. Our children and grandchildren will not know the lifestyle to which so many of us have become accustomed.
Rubin has been acclaimed for writing and for his commentaries on radio and television, including the BBC and CNN. He is known for his insightful observations on energy and its significance in the global financial system.
His earlier work, Why Your World Is About to Get a Whole Lot Smaller, demonstrates the lively writing style he continues to display in The End of Growth.
He leads with a review of major world events, including the financial crisis in Europe, where the acronym PIIGS has become a common reference to the countries at the bottom of Europe's fiscal totem pole -- namely, Portugal, Ireland, Italy, Greece and Spain.
He then examines the plight of Greece and explains why it faces a future of financial default -- as eventually do its neighbours. He boldly forecasts and describes "the coming European banking crisis."
He raises a scary question, Will America default? He then goes on to explain why that development is possible. Not likely, but possible if China decides to stop lending to the United States (mainland China holds more than $3 trillion in foreign reserves, more than half of which are in U.S. assets).
He then proceeds to explain why China is not about to take such an action: "For the last decade, the relationship between a cheap yuan (China's currency) and a strong U.S. greenback has been a fundamental component of the global economy."
How did this happen? As Rubin explains, globalization was the condition that enabled Communist China to become the banker for the U.S., the world's capitalist giant. Consumers in the U.S. had the advantage of goods produced by cheap labour in China, while the People's Bank of China purchased U.S. Treasury bonds to keep its currency from rising against the greenback.
In this cycle of trade, China became the world's factory, with millions of peasants shifted from farm to factory. Besides, the world seemed to have an abundance of cheap resources, particularly oil, which made possible the transporting of goods over great distances.
Times and circumstances have changed, however. A massive domestic market has been growing within China (1.3 billion consumers); the automobile market is now the largest in the world.
Foreign customers have been diminishing in importance during this generation. Triple-digit oil prices have reduced the profits to be made from shipping goods across the oceans.
Governments today are faced with radically different financial realities. As Rubin explains, the days of "robust growth" are behind us; "the next recession may be just around the corner."
The uncertainty of conditions in the Middle East is one of many limits to growth with which Canada and the U.S. must contend. Is there no silver lining to the apparently gloomy story that Rubin insists he must tell?
His book deals with the end of growth, but it also gives the reader something to think about. As he reflects on the downside of the reality he describes, Rubin underlines the other side; namely that the benefits of growth are exaggerated. The solution to its negative effects is for people to make do with less.
To buttress his argument, Rubin gives cases from the present. Studies show that people of Denmark, which has relatively less "personal consumption," report higher life satisfaction than people of more affluent countries, such as Canada.
Ron Kirbyson is a Winnipeg writer and educator.
The End of Growth
By Jeff Rubin
Random House, 288 pages, $30
Republished from the Winnipeg Free Press print edition May 19, 2012 J7