Western economies have become mired in low productivity resulting in insufficient funds to pay for essential services. Sadly, this is not a new phenomenon. For the first couple of hundred thousand years of man' s history on this planet productivity was stagnant. This was not due to a lack of technological innovations. Huge advances were made in the arts and sciences by numerous empires including the Sumerians. the Egyptians, the Persians, the Greeks and the Romans. There were several great flowerings of art and science yet productivity remained largely unchanged. Why? The fundamental problem was a lack of cheap energy. Work required human or animal effort. Some work was done by harnessing water or wind power and the use of watermills and windmills did increase productivity a little. However it was not until the start of the industrial revolution when coal fired steam engines began to provide abundant and cheap energy that productivity increased by leaps and bounds.
Wealth Creation
In the simplest terms we create wealth by producing and selling things that people want to buy. The creation of wealth gives us and our governments the funds to do the things we and they do. Economics teaches us that to produce stuff, be that food, houses, furniture, cars, washing machines, jewellery or whatever, we need Labour, Capital, Materials and Energy. We need people to work in our organisations. We need capital to buy the equipment we need, and we need materials to work on. Then we need energy to drive our machines and to light and heat our buildings. Here in this country enormous wealth was generated during and following the industrial revolution. We still have large coal reserves but we have chosen to stop using them. In the early 1900s the USA began to supersede the UK in wealth creation. This was not because Americans worked harder than their British counterparts. It was not because Capital was cheaper or material costs were lower. Yes, there were a few small differences but interest rates and the costs of raising capital were similar. Material costs were similar throughout the world apart from transport costs and taxation. The primary reason for the increases in productivity in the USA were due to cheap oil and gas. Hydrocarbon fuels transformed our lives. They provided the power and energy to do so much of the grunt work that humans and animals had done in the past. Single blade horse drawn plough shares were replaced by tractors with 6 blade reversible ploughs. Horses and carts were replaced by cars, vans and trucks. Hand saws were replaced by chain saws. Hand looms were replaced power looms. Wood fired wash tubs were replaced by washing machines and on and on. Hydrocarbon fuels have given us the life styles we now enjoy.
Now, living standards are stagnating or falling because we have chosen to demonise these hydrocarbon fossil fuels. In the USA under both the Obama and the Biden administrations oil and gas development and production has been cut and energy costs have increased. Much the same has been happening in Europe. Governments have subsidised renewable energy sources by applying taxes and other levies to hydrocarbon fossil fuel production and use. Here in the UK the Labour Government has cancelled new licences to drill for oil and gas. Productivity, (or wealth created for each one of us), has stagnated or fallen as a result.
Energy and the Climate
We have seen from other articles on this site that industrial releases of CO2 have a negligible impact on the Earth's climate. We have been blessed with an abundant amount of natural oil, gas and coal and they and they alone have been the most important factor responsible for the prosperity we now enjoy. They will probably remain available for at least another 250 years so there is no reason to take extreme measures damaging to our prosperity. Exploiting existing reserves will remain critical to our living standards until we have abundant alternatives in operation.
So What Should We Do?
We have to recognise that to increase productivity and thereby generate more wealth for everyone we need cheap and abundant energy. We can't cut labour costs because people won't accept pay cuts. We can't do much to cut the interest rates on the capital in our businesses or the costs of raising it and we can't change global material costs. We might make a few efficiency gains by embracing new technologies but still the only significant thing we can do to raise productivity is to provide cheaper and more abundant energy. At present, oil and gas are the two cheapest energy sources. Wind and solar power have their place but at present they suffer from higher costs as well as being unavailable at times when the wind is not blowing and the sun is not shining. At best they could never provide more than about a quarter of our total energy needs. Nuclear power may be our best long term solution for the majority of our energy. However we need to build a lot more nuclear power facilities and we need to build them quickly if we are to reduce our dependence on foreign oil and gas anytime soon. Wrecking our prosperity by abandoning oil and gas before we have adequate and competitively priced alternatives would be a colossal act of self harm.
Small modular reactors seem to be most appropriate to reduce the cost and time involved in the construction of major nuclear power plants. For decades we have built very small modular nuclear power units for our nuclear submarine fleet so the technologies required are well known and understood. We could proceed with these developments while continuing to exploit our natural oil, gas and coal deposits. As these become more scarce their costs will rise and at some point they may no longer be competitive with nuclear and renewable alternatives. That point is still a long way into the future so there is no need to rush.