Damn the Matrix

I use the phrase “race to the bottom” all the time. Evidence of this is everywhere. Absolutely NOBODY knows how to deal with Limits to Growth, and they start doing really weird shit. Like electing Trump, screw solar panels to roofs, buy EVs, all in the hope of turning things around. None of which will… everyone is in denial, pretending it’s not happening. I’ve been tapping my fingers on the table for 25 years, but this is not how I was expecting things to turn out. The Orange Buffoon has now destabilized the world to such an extent, WWIII, the thought of which I had always poopooed because, you know, been there done that twice now, and no-one in their right mind would do it again, looks more likely than ever…… anyhow, another great Art Berman essay everyone should read and share…

Welcome to the twilight of the Industrial Age. Growth is ending. That was the blunt thesis of a recent essay, and the signals are already here—deindustrialization, grid stress, financial instability, and rising geopolitical conflict.

The Honest Sorcerer’s argument is simple: growth depends on ever-faster drawdown of energy and materials as population and complexity increase. If extraction slows, growth slows. Growth becomes stagnation, then decline.

Vaclav Smil adds the physical reality beneath the abstractions. Modern civilization rests on four industrial pillars: cement, steel, plastics, and ammonia. Cement is the platform for cities and infrastructure. Steel is the universal structural and machine metal. Plastics are the lightweight, versatile base material embedded in packaging, electronics, and healthcare. Ammonia, through the Haber-Bosch process, is the foundation of nitrogen fertilizer and therefore modern food production. If one pillar weakens, the system strains. If several weaken at once, strain becomes systemic risk.

Those pillars are hitting limits. Steel and cement are declining (Figure 1). Fertilizer is flat. Plastics, despite a rebound, remain below peak.

Steel and cement are high-temperature processes, and at today’s scale there is no practical substitute for coal as the main industrial heat source and reducing agent. Global coal production is still rising, but consumption growth is slowing (Figure 2). You can read that two ways: “coal is ending” forecasts are premature; and if coal demand is flattening, it is hard to reconcile that with robust global growth.

In the United States, the picture is worse. Coal output is in long-term structural decline, regardless of political talk about “bringing coal back” (Figure 3). The implication is straightforward: any growth in steel and cement is more likely to come through imports than a domestic resurgence.

Energy underlies everything, and diesel is the workhorse of the material economy. It powers the machines that excavate, drill, and harvest, and the ships, trains, and trucks that move feedstocks and manufactured products. Global diesel consumption has been essentially flat since 2017 (Figure 4). That’s a strong signal of slowing growth, and forecasts suggest little change through the end of this decade.

The takeaway is that the era of material expansion is ending. Yet the IMF still projects only slightly slower global growth through 2030 (Figure 5). How is that possible?

GDP can rise for a while even as the material economy stalls. More capital can chase higher-cost energy and higher-priced services, funded by expanding debt that still counts as “growth.” Technology can stretch the story by delivering better performance without much more volume, and offshoring can hide constraints as long as some regions still have room to grow.

But the real economy isn’t money. It’s energy and materials being turned into useful work through machines, supply chains, and human labor. If surplus energy and the industrial base can’t expand, many claims can’t be met in real terms. The financial layer can stretch reality for a while, but it can’t defy physics. Eventually the bill comes due.

We’re already seeing early signs: inflation, pressure to hold interest rates below the rise in prices so savers take the loss, cuts to public services and benefits, and deflation in some real-economy prices like oil. This plays out unevenly because countries differ in resources, demographics, and policy room. But the direction is the same: slower real growth, more financial strain, and more conflict over who absorbs the losses. China and some emerging markets retain stronger industrial footing than most Western economies, and that gap is reshaping geopolitics.

Craig Tindale argues the West drifted into a fantasy where matter doesn’t matter: software, intellectual property, and finance were treated as the real sources of power while mining, smelting, and processing were outsourced as if there were no downside. For a while, it looked like a win. Then Covid and Ukraine delivered the Wile E. Coyote moment. In a constrained world, critical materials, not capital, become the binding constraint on power.

Tindale calls this the “feedstock paradox.” China’s leverage is deliberate: it built a midstream monopoly, uses export controls and pricing to squeeze Western projects, and captures value by making batteries, magnets, and other high-end components. The mines may be in the West, but China controls the midstream. Offtake agreements, financing terms, and processing locations can make projects functionally Chinese in everything but name.

Graphite is a key input for lithium-ion batteries. Figure 6 shows a 21% supply-demand deficit in 2024, projected to expand to more than 300% by 2030. China controls 96% of global supply because it dominates processing. Rare earths follow the same pattern, and copper is headed that way. Those are hard advantages to beat.

Tindale’s conclusion is that the West must “rematerialize” by shifting capital and strategy into processing and manufacturing. That’s broadly what the U.S. and its NATO allies say they want. I’m skeptical it can happen fast enough, given election-cycle politics, fiscal limits, permitting lags, and weak coordination.

Rana Faroohar argues we’re in a new Great Game: the U.S. and China competing for resources, territory, and influence without open war. The flash points are places like Venezuela, Ukraine, Greenland, and the Arctic, along with the routes that move energy, goods, data, and weapons. It’s a scramble for minerals and fossil fuels, but also for ports, seabed claims, undersea cables, and logistics corridors.

How should we understand that in the context of the twilight of the Industrial Age: a world running into energy and material limits?

I see a long chain of events pointing to the breakdown of the old world order that include the Vietnam War, the oil shocks of the 1970s, and the end of Bretton Woods. The shift to a fiat, debt-based monetary system and globalization created the illusion that stability and growth had returned. The collapse of the Soviet Union seemed to confirm the triumph of Western economic ideology. Peak oil and the Global Financial Crisis were treated as setbacks that shale, central banking, and expanding debt could paper over.

Meanwhile, U.S. interventions in Afghanistan and Iraq shattered the Middle East balance and helped elevate Iran, even as the shale boom briefly made the region seem less critical. As Washington drifted, China methodically used globalization to lock up supply chains, build Belt and Road, and dominate critical-material midstream. Putin’s rise signaled that Russia would not accept a subordinate role in a Western-led system.

Covid then delivered a systemic shock, layering debt, fragility, and political strain onto an already unstable world. Putin invaded Ukraine as the world tried to exit the pandemic, triggering an energy and materials shock that echoed the 1970s. In that sense, Ukraine was not just a war but a tipping point where decades of financialization, energy limits, and geopolitical drift finally converged.

The war in Ukraine is the collision point between two systems: the post-1945 order built on U.S. primacy and expanding industrial surplus, and a multipolar world that no longer accepts Western financial, security, and political dominance. The postwar order assumed growth would continue and rising living standards would smooth friction. That assumption is breaking down. As the physical platform stalls, the financial system turns harsher, alliances strain, and politics becomes zero-sum. Ukraine is the first large-scale rupture inside that new structure.

Russia is not fighting Ukraine alone; it is pushing back against a system that treats Western military expansion, dollar dominance, and sanctions as permanent features of global governance. Much of the Global South sympathizes, not because it admires Moscow, but because it has lived under Western leverage for decades. That is why sanctions have fractured, trade has rerouted, and de-dollarization talk has intensified. The war exposed how shallow Western control of the real economy has become.

The pattern shows up elsewhere. Iran’s internal breakdown shows how quickly power can shift in a dynamic system that is strained by hard limits. Venezuela becomes another arena in the Great Game for energy and influence. Old allies like Saudi Arabia and the UAE become rivals. Gaza highlights a darker dilemma: prolonged hopelessness and complexity can look like moral collapse, and many confuse the two. None of this is centrally coordinated. It is emergent behavior in a system that has lost its direction.

Ukraine is where finance, energy, industry, and security all intersect. In a world where feedstocks matter more than economic theory and where processing power beats financial paper claims, the old order cannot hold. The war is not an aberration. It’s what systemic transition looks like when material limits meet geopolitical reality.

When survival and security move to the front of the line, the environment gets pushed to the back. The crusaders of the last twenty years haven’t fully absorbed that the age of abundance that made their program feel plausible is over. And yet climate change and ecological overshoot don’t pause just because politics has shifted. They keep grinding away at the system, showing up as higher insurance premiums, higher living costs, damaged infrastructure, and mounting fiscal stress after disasters.

A lot of people are still judging today’s leaders against the backdrop of an expired world: surplus energy, cheap materials, deep trust in institutions, and enough cooperation to negotiate trade-offs without everything turning existential. That period is over. The old playbook assumed there was slack in the system. Now there isn’t. Choices are being made in the moment, under pressure, with imperfect information and context, and the penalties for mistakes are rising.

Some decisions will be made poorly. But it’s also true that no one has a reliable yardstick for the world that is forming. The measures and mental models we inherited were built for a different time and different circumstances. Many leaders understand what few outside the halls of power are willing to admit: we’re entering a harsher phase where nations compete to offload costs, secure essentials, and protect internal stability. It’s a race to the bottom, and it won’t be pretty.

You can read more Art Berman articles here https://www.artberman.com/