Over the past few months, the world economy has crashed. Global
trade is falling, unemployment is rapidly rising, and
consumption rates are plummeting. There is a very real
possibility that the global financial system will collapse
completely, which would throw the world into an unprecedented
state of chaos and confusion. Why is this happening? Why is it
happening now? And what can be done? In order to answer these
questions it is important to understand a little economic
history. Economies grow and contract, sometimes in cycles, and
this has been going on since the beginning of civilization. But
during the past century the world has seen growth on an
unprecedented scale—and this steady, rapid growth has coincided
with the increasing availability of cheap energy (principally
oil). Once it is understood that growth in economic activity
(the production and distribution of more goods, more travel, and
so on) depends on increasing supplies of energy, it becomes
clear that a decline in the availability of cheap oi