Post-Keynesianism and peak oil: economics' impossible equation

Post-Keynesianism and peak oil: when growth hits the energy wall

It was February 2013, and the program «Economía Directa» briefly touched on an uncomfortable contradiction: post-Keynesian prescriptions for escaping the crisis —stimulating demand through public spending and employment— seem to collide head-on with resource depletion, especially oil. The thesis, thrown out almost in passing, sparked a thread of 70 replies that remains a mirror of the two souls of Spanish heterodox economics.

On one side, Vicenç Navarro's proposal to create five million public jobs in sectors such as education, healthcare and renewables. On the other, the warning that every solar panel, every hired researcher, every new iPhone user consumes oil and raw materials —and that Keynesian stimulus accelerates depletion instead of solving it. Can effective demand be reconciled with a finite planet?

The growth dilemma in a world with physical limits

Post-Keynesianism inherits from Keynes the idea that aggregate demand determines output, and that in times of recession the state must spend to reactivate consumption. But the critique from ecological economics is direct: if that spending translates into more resource consumption, the cycle accelerates. The debate reveals two opposing positions. One holds that the problem is not economic but technological: scarcity will drive R&D and recycling, as peine with whale oil in the 18th century. The other responds that the energy return on investment of oil is falling inexorably and that no technical advance will be able to replace the energy density of crude at scale —this is the «crash oil» thesis that Javier Pérez was detailing on his blog at the time.

Fiat money, corruption and the growth trap

A lesser-known but recurring argument pointed to fiat money as the ultimate culprit of environmental degradation. Unbacked issuance would prevent technological pogre by perpetuating obsolete processes through state and corporate corruption. The proposal called for a free market in money —no monopoly money, they were saying— that internalizes ecological constraints. Against this, the degrowth camp replied that any theory based on growth, whether Keynesian or liberal, is doomed to collapse: if we degrow, the financial system crumbles; if we grow, resources run out.

The perfect storm and the way out nobody sees

The discussion ended in a logical dead end. Post-Keynesianism needs growth to reduce unemployment and inequality, but the planet cannot sustain growth. Degrowth, in turn, clashes with a financial structure that demands perpetual expansion. Part of the analysis pointed to a radical redistribution of resources, but without solving how to maintain jobs and pensions in a shrinking economy. The thread's implicit conclusion was that the incompatibility between post-Keynesianism and resource scarcity is not a design flaw, but the structural trap of a civilization that built its prosperity on cheap fossil energy.

The unsettling figure

Years later, the peak of conventional oil is a documented fact, but total liquids production has remained stable thanks to unconventional sources —fracking, tar sands— at a rising energy and financial cost. The question the thread left open still stands: can a post-Keynesian economy survive without the net energy margins of the 20th century? The numbers of the global energy balance, year after year, suggest it cannot.

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