Thursday, 23 December 2010

Book Review: Why Your World Is About To Get A Whole Lot Smaller, by Jeff Rubin (2009)

A barrel of oil at $200.  $2 for a litre at Canadian gas stations; $7 for a gallon at US stations.  No new new easy sources of oil supply.  Demand for oil increasing in the developing economies of China, India, South America and the Middle East.  The increasing cost of freight effectively rolling back years of manufacturing efficiency gains from trade tariff reductions.  Carbon pricing further adding to the cost of burning oil.  Higher inflation rates and effectively bankrupt countries, having already spent their reserves and future credit propping up obsolete industries.

Jeff Rubin, formerly the Chief Economist at the Canadian Imperial Bank Of Commerce, looks into the near future and sees the end of the era of cheap energy, the driving force for the world's prosperity since the end of the Second World War.

Without cheap oil and with viable alternatives still years and possibly decades in the future, Rubin predicts a return of manufacturing jobs to industrialized countries as lower overseas wages are rendered irrelevant due to higher transportation costs.  Agriculture also makes a return, as suburbs are abandoned, fertile land is reclaimed, and proximity to market becomes a critical factor in the successful distribution of food.

With the price of oil dramatically reducing the affordability of driving, Rubin expects a surge in demand for improved public transit across North America.  The piling of recent stimulus dollars into road building projects and the bail-outs of the auto industry will be seen as a colossal waste of resources, as the road system empties out and cars become associated with energy waste.  Air travel will once again be seen as a privilege that only the rich can afford.

Even more worrisome, after the end of cheap energy Rubin expects bankrupt governments to dramatically curtail social programs.  Community-based support systems in education and health will make a comeback.

What Rubin describes is the reversal of globalization, the last 70 years on  rewind. It's generally a pretty grim outlook.  Some parts of the book are loaded with a sense of doom only marginally removed from humanity returning to live in the disease-infested tattered tents of the Middle Ages, huddled around open fire pits and fending off savages and scavengers roaming the scorched landscape.  

Hyperbole aside, Rubin does stress that the end of cheap energy will not all be bad, and the return to a more local economy may hold rich benefits at the community level.  He also leaves the door open for innovation to find solutions not easily predicted today.

With an accessible, entertaining and clear writing style, Rubin successfully distills the world's greatest economic challenge to its fundamentals. His message is convincing, challenging, thought-provoking, and most difficult to ignore.

Published in paperback by Vintage Canada.
300 pages, plus Notes and Index.

All Ace Black Book Reviews are here.

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