European Dream: Is it still alive? Read the interview if you want to know.
As the eurozone crisis continues to unfold there are lots of catastrophic headlines. We are a long way away from the picture of Europe you painted in your book, ‘The European Dream’. Europe, it seems, has lost its sense of solidarity, the euro is a shambles, our businesses are unable to compete in the world, and budgets are under pressure and cannot sustain our welfare systems. Is the European dream turning into a nightmare?
No. I don’t think it is turning into a nightmare. The problem is facing every country, including the United States. I have been sitting down with heads of state and government of the European Union in the last few months discussing this, with [European Commission President José Manuel] Barroso and [permanent Council President Herman] Van Rompuy. I am going to tell you what I told them. First, let me tell you what I think the crisis is and then tell you where I think the European dream is going. There are two elements to this: the real crisis hit in July 2008. That’s when oil reached $147 a barrel on the world market. Prices went through the roof from food to petrol. Food prices soared in 30 countries, because everything is embedded with oil: fossil fuel. Our food is made out of petrochemicals, fertilisers and pesticides. Almost all our pharmaceutical products are petrochemical-based: our clothes, our construction materials and our civilisation are based on fossil fuel. When prices hit $147 a barrel – world prices went through the roof – inflation soared and purchasing power plummeted. In July 2008, the economic engine of the second industrial revolution shut down. That was the economic earthquake. The collapse of financial markets 60 days later was the after-shock. This is what I call peak globalisation and it’s an end game for the second industrial revolution. As you know, leaders are dealing with the after shock: the financial bubble. As long as they are all dealing with this, they are not grasping the historic importance of what is happening.
Are you saying they are short-sighted and not looking at the big picture?
Precisely. They are looking at the side-show. Now, the reason the crisis has happened is because of peak oil per capita – not to be confused with peak oil production. These are two different things. Global peak oil production is a geological term – it’s when half of the oil reserves in the world are used up, prices go up and it becomes unaffordable. There is controversy about peak oil production, but that controversy is narrowing. The pessimists think global oil reserves will peak between now and 2020. The optimists say maybe it will peak between 2020 and 2030. But even the International Energy Agency, who were the optimists, now say supply will crunch in 2014. Now they are only arguing between 10-15 years. But that is not why we had a crisis of the second industrial revolution in July 2008. It was because of something called peak oil per capita. No controversy about that. It occurred in 1979, at the height of the second industrial revolution in America and Europe. British Petroleum did a study about that and other studies confirmed it over the year: we distributed all the oil reserves that we knew we had to everyone on Earth at that point in time – that’s the most oil that these persons could have if it was distributed equally. We have found more oil since then and the population is growing more quickly. So if we distribute the oil to the 6.8 billion people we have in the world now, there is less to go around. When China and India made a bid – starting in the 1990s at a 10% blistering growth rate – to bring a third of the human race into the second industrial revolution, the demand pressure started to build against supply and in 2008 the demand against supply was so great that it hit $147 a barrel and the engine turned off. The reason this is important for Europe and the world is that as soon as the economy is starting to recover, oil is going to go above $60-70 a barrel. Increasing demand against the limited oil reserves will inevitably force prices to go up, and when that happens it will collapse again and the engine will switch off again: that is an end game. Each time that we are trying to re-grow the global economy, it puts more demand out there, with developing countries like China and India joining the game. Oil prices will go up, short circuit and cut off the engine every single time. It is going to be a boomerang effect. When this happens for the second time, you are going to see panic.
Are our leaders aware of that or are they still in total denial?
I have been sitting down with leader after leader after leader in the last two months. Privately, they are aware. It is just that the economists have not gotten there yet. Now, the financial bubble is related to that. The reason for the financial bubble is that the second industrial revolution is based on centralised electricity communication and oil – the internal combustion engine and suburban construction. In our country the juvenile infrastructure was put together for the second industrial revolution between 1900 and 1929. Then we had the Great Depression and the war. The mature infrastructure was put together in the 1950s-60s: it was called the interstate highway – the biggest public works project in US history. Europe followed with its interstate highways in the 70s and 80s. So you were a little behind us. That was the infrastructure shift that allowed us to get the full multiplier effect out of the auto age, the oil age with suburban construction, travel and tourism and all the things that go with that. The productivity of that technology and infrastructure boomed in the late 80s. We overbuilt in housing, commercial, real estate. We overshot. At that point, we went into a housing recession, which became a global recession. How did we get out of the recession? We didn’t. We did not have a third industrial revolution in place with the same multiplier effect as the auto age, the oil age and suburban construction, so we began to eat up the savings of the second industrial revolution through extended credit. Family savings became the purchasing power to move globalisation in the early 90s.
Are you saying that we started living beyond our means?
Correct. It was not about new wealth or productivity. It was using the wealth that we generated when we matured the second industrial revolution infrastructure. You were lagging behind in Europe for 10 years or so. Family savings were about 9% in the 1990s. It has been negative for the last three years. We depleted the family savings of the US in the last 15 years in order to build globalisation. That was the credit bubble. Then when we ran out of savings we had a second bubble – the housing bubble. People were not buying houses because they had new wealth based on new productivity, but we were giving them away for nothing with sub-prime interests to pay later – it was a bubble which later burst and then it spread to Europe. The credit bubble is the result of a second industrial revolution that peaked in the 80s in our country, maybe a decade later in Europe. Then, when the oil prices went to $147 because the late players came in – India and China – that was too much. It is too late for India and China to build a second industrial revolution. The game is over. In other words, they are the last guys in. It is not going to happen, because every time they are trying to push demand, the prices are going to shoot up again. When you add into that the entropy bill, climate change – now we have to pay for 200 years of spewing CO2 into the atmosphere – then the price becomes enormous. That’s why Copenhagen [the UN-led conference in December 2009 which aimed to agree on a legally-binding agreement to replace the Kyoto Protocol] collapsed. Now we have our scientists telling us we might be threatened with mass extinction of life on our planet. Our own species is now threatened with agricultural losses. We are at an end game of the second industrial revolution.
So are you saying it’s a nightmare for the planet, not just for Europe…
It’s a nightmare for the planet. But remember the EU is still the leading economy – its GDP exceeds ours [the United States]. However, everyone is in this end game. But the EU is in the position – the best position in the world – to make a transition from a second to a third industrial revolution, and it has a key asset to allow it to do so. The third industrial revolution which I was privileged to develop for the EU was formally endorsed as the medium to long-term plan by the [European] Parliament in 2007 by written declaration. It started with [former European Commission President] Romano Prodi and now various parts of the European Commission, the agencies and the Parliament are moving this vision. It is also moving more quickly in some member states than others: Germany, Scandinavian countries, Spain. This is a four-pillar infrastructure revolution that will give us the same economic multiplier effect, as the first and second industrial revolution did, over the next 50 years.
I am going to explain what it is and then I am going to tell you what the asset is that Europe has that makes unique so it can move this. The EU has committed to 20% renewable energy – pillar one. We have to get off oil and all the other fossil fuels that shadow oil.
Is that enough – 20%?
No. It is enough for 2020, but past that, we need to move to zero emissions and post-carbon by 2050 – not low carbon, but post-carbon. So pillar one, the EU committed to 20% renewable energy by 2020, which is one-third of the electricity. That is a mandate, not a benchmark. Pillar two: we ask how to collect renewable energy, because it is everywhere – the sun, the wind, the heat out of the ground, garbage, ocean tides, etc. The first inclination in the EU was to go where the wind and sun is and collect it in a centralised way. Go to the Mediterranean where the sun is, go to Ireland where the wind is, go to Norway where the hydro is, centralise and build big power lines across Europe. We don’t oppose that – that is transitional – but not sufficient. In other words, we started to ask the question: if renewable energy is distributed and is found everywhere, why would we collect it in Europe at a few central points? That led to pillar two: buildings. They are the major cause of climate change. Buildings use 40% of the energy [consumed in Europe] and produce 40% of CO2. We see buildings as the solution. They are the problem, and they are the solution. We are beginning to envision converting every single building that exists in Europe to a partial power plant that can collect the energy around the building: a little bit of sun on the roof, a little bit of wind on the walls, heat from the ground – partial power plants. Every home, office, factory becomes its own power plant – like you can have your own personal computer. The new buildings that are coming up now: they are positive power. They produce more power than they need. The first building that is positive power went up in Spain. Pillar two gets construction moving, as we see that construction is always the way you rebuild an economy. In the first industrial revolution it was construction that gave us the first huge vertical cities, like London and New York. In the second industrial revolution it was suburban construction, because the automobile and the interstate highways gave us construction of new suburbs. In the third industrial revolution it is taking the existing building stock across Europe and turning them into a dual purpose utility – it is going to be both a power plant and a dwelling. It appreciates the real estate stocks and creates millions of jobs not thousands, because you have to actually reconvert every single building in the EU to become a partial power plant. Germany has begun to do that, the Scandinavian countries and Spain too. It is not theoretical, but we have to move it. Pillar three: the EU is committed to hydrogen as a means of storing these intermittent energies. The EU has committed two billion euros R&D when Romano Prodi was there. The Barroso Commission allocated eight billion euro public-private joint technology initiatives, which you reported about on EurActiv. Hydrogen is basically a storage technology like digital to media. So when the sun is shining on your roof and you have a little extra electricity, you use some of the surplus you don’t need and you electrolyse water – like in high-school chemistry. Hydrogen comes out of water in a tank and when the sun is not shining on your roof, you convert hydrogen into electricity. We have to set up hydrogen infrastructure across all buildings, infrastructure and the power lines of Europe. Pillar four is the most interesting pillar, because this is where you take the Internet communication technology revolution and combine it with the distributive renewable energy revolution and create the third industrial revolution. We take the same technology that we used to create the Internet and we take the transmission and power grid of Europe and turn into an intergrid, which acts like the Internet. Millions and millions of buildings are producing their own energy, storing some of the surplus hydrogen –like you store digital and media–, then what they don’t use, they can share across 27 states with 500 million people on an intergrid that acts exactly like the Internet. The technology is there and we are beginning to lay down the master plan. This is the third industrial revolution. The democratisation of energy. But it creates a totally new economic infrastructure, equivalent to the intestate highway in the 20th century or equivalent to the railroad that connected cities in the 19th century. The intergrid that connects energy with communication. Now what does this have to do with Europe…
Just a minute: you said this revolution is going to create millions of jobs – but these are skilled labour jobs. In your book 'The European Dream', you said Europe had very good primary and secondary education, but lagged behind in higher education compared to the US. Do we have the right skilled labour force to implement this third industrial revolution?
Let me get to that in a few minutes. I will also get to the question on how you finance that in a period of austerity.
Okay…I am listening.
Let me finish this on the four pillars. The first is renewable energy. The second, the buildings become your power plant to convert local, distributive energy. The third, hydrogen lets you store energy. Fourth, you have an intergrid that acts like the Internet so that you can distribute energy among millions and millions of people. The fourth pillar fits in also because we are coming out with plug-in electric and hydrogen fuel cell cars in the next 24-36 months, and they have to be plugged into the grid. This is all happening. It is not theoretical. Utility companies are beginning to become distributive, moving towards the third industrial revolution, because they have to deal with the plug-in and transportation of electric and fuel-cell cars. Germany has got a massive partnership with Royal Dutch Shell, RWE and others to set up hydrogen fuelling stations across the country, because production is coming out in 36 months. The reason we can do this – and this is crucial because we could not do that 10 years ago – is because we have second-generation grid IT (IT 2.0). In the last seven years we have developed software that allows us to connect millions of little desktop computers – they don’t have much power by themselves – but when the software connects them, the distributive power of hundreds of thousands of computers working together exceeds anything that you can imagine with centralised super computers. We know we can do it technologically.
What's Europe’s asset in this?
Let me tell you that now. This is what I said to EU leaders in Brussels. I said to them that this is the next stage of integration for Europe. This is the way to achieve the Lisbon Agenda that has not been delivered. The European dream is an integrated, seamless market across Europe – so that the European dream of sustainability, quality of life, peace – so that all the elements of that dream can come together. An integrated single market that can deliver the Lisbon Agenda – the most competitive knowledge-based society in the world. What is the asset? Europe, which is the leading economy in the world, also has the largest commercial market in the world (500 million consumers). In addition, its associated partnerships with the Mediterranean regions – North Africa, the Middle East, add another 500 million people. That is one billion people, potentially the largest internal market in the world, way beyond anything that China could imagine. What is missing is that it has not been integrated in a single internal market – what is missing an economic vision and game plan that would create a seamless, distributive renewable energy grid across Europe, a seamless communication grid and logistics and transport grid to go with the new seamless energy grid – that is the third industrial revolution. That will create an internal market so that you can engage in commerce and trade with a billion people in a post-carbon, sustainable manner. Secondly, it will allow you to advance the subsidiarity principle, because all that energy is local. You have to generate locally so that everyone is an entrepreneur, but you have to do it collaboratively in order to share it across the continent. The old geopolitics gives way to biosphere politics. With energy cooperatives, small businesses and communities, you have to create that energy across Europe so that it creates a biosphere politics that leaves geopolitics behind. You are not beholden to some far up geopolitical power – whether it is Russian oil or gas or Middle Eastern oil. I am being very frank. That is the asset. That is the integration of Europe, the next project for Europe, and if it fails, the European dream will fail. If it succeeds, the European dream becomes a dream for an empathic civilization, a global dream of living together in a shared biosphere. Because if you can integrate Europe in an internal market with a third industrial revolution and a post-carbon energy infrastructure, it is going to create millions of jobs to implement the four pillar strategy.
Now, the question is how do you finance this? Across Europe member states are adopting austerity measures to reduce spending and slash deficits. How do you finance this revolution?
Yes. There is austerity. They are cutting budgets. People say we cannot do this. The problem is they do not understand how you approach it. If you approach it as a public expenditure – because you are dealing with energy, climate change, public jobs in a vacuum – that is not the right way to go. You have to look at this as an economic development model. The reason it is important is that it changes the whole way one thinks about where the money is. The third industrial revolution model that we are talking about is an economic investment model – an economic development, not a public expenditure model. Here is the way it works. I have set up the third industrial revolution CEO business roundtable, made up of 100 companies and cooperatives around the world. We are beginning to lay down master plans. We just presented one for Rome. It took us six months with the lead development team. We put out a 150-page report on how Rome can move to a third post-carbon revolution economy. We are doing Utrecht in the Netherlands. We have just finished Monaco too. Here is how these economic developments work. They are collaborative efforts between the cities and regions and our development teams, based on economic investments. Let me take Rome as an example. Rome spends about [this year] €26 billion on economic investment – that’s approximately one fifth of its GDP. Now what is economic investment? That’s money you spend anyway, even in bad times, on economic improvements, bridges, roads, new infrastructure, fixing power lines, transmission… When our global development team went in and ran the numbers for them, we found that what they would need to do in Rome over the next twenty to thirty years to get a 40% reduction in CO2, which is really high, is spend less than 1.4% of what they would spend anyway on economic investment – that’s only three-tenths of 1% of their GDP per year on average. But the reason they can do this at such a low amount is to leverage with the right kind of public-private long-term planning so that at each step, you know what you have to lay down on infrastructure on pillar one, pillar two, pillar three, pillar four…you can create a juvenile infrastructure in twenty years and a mature one in forty. Now, what we say to them is: you’re spending that money anyway, do you want to spend all 100% of your economic investment on an old, second industrial revolution that’s on life support? Whose energies have sun-setted, whose technologies are obsolete and whose infrastructure is collapsing? You can’t let the second industrial revolution completely die, because then we’re all in trouble…
But it would still take twenty years to set up a juvenile infrastructure.
For sure, but you have jobs along the way. So your multiplier effect starts immediately, as soon as you start the project. You would have the infrastructure in place step-by-step, it’s a process, it’s organic and you start building the jobs on day one. So you are starting to benefit from it right away. So this is what the EU needs to do. The EU has the first continental governing body and the third industrial revolution favours continents, because it’s across land masses: everyone is producing their own power on a land mass and then sharing it across the largest land mass you can find – and that’s a continent. The EU has formally endorsed this – the Parliament has, the Commission is working on it at various levels – but it hasn’t yet gone the extra yard and acknowledged that this is what we have to do as the centre-piece of the next stage of European integration. How do you create that single internal market? You need a new energy regime, it needs to be distributed, you have to use it as an economic investment model and you have to see it across Europe and the associated regions. If they don’t do it, then I don’t think there is a Plan B – and I think the European dream fails.
We have to go towards the ‘Energy Community’?
I’m saying that they need to have a new economic development plan that lays down an infrastructure for a third industrial revolution. Just like the first industrial revolution laid down rails and set up new cities across the continents and created new construction booms. The second industrial revolution did the same thing: we set up inter-state highway systems, the automobile internal combustion engine allowed us to have travel and tourism, suburban construction…you have to lay down the infrastructure. This third industrial revolution is an economic development plan, endorsed by the Parliament to set up the infrastructure – which is a smart, distributed power grid around Europe that combines ICT with distributed energy, converting all your building stock to local power plants that can produce their own energy and share it across Europe.
A political question: do you sense that Europe has the political will to embark in the third industrial revolution? The EU failed with the Lisbon Strategy. Now it is reducing its ambitions on the 'Europe 2020' strategy – do we have the political visionaries that led the other industrial revolutions?
This is a challenging moment for the EU. [German] Chancellor [Angela] Merkel has said to me privately on a few occasions that a third industrial revolution is the game plan for Germany and they’re doing it quietly: pillar one, renewables; pillar two, converting buildings all over Germany to partial power plants – solar, wind; pillar three, hydrogen storage for the new automobiles; pillar four, utility companies are starting to move towards distributed…Germany leads. Germany led the second industrial revolution with the internal combustion engine and the Autobahn. And they’re leading the third industrial revolution. Spainis not far behind – it is number one in renewables under Prime Minister [José Luis Rodríguez] Zapatero’s administration. It’s number one in terms of percentage of renewables in overall energy – it’s number two behind Germany because Germany has more renewables due to a bigger physical output. Scandinavian countries are moving this way. But what you’re asking is whether they see the Lisbon Agenda and Europe 2020 with the same kind of vision that a Jacques Delors would have?
Exactly, thanks for rephrasing it …
That is what’s required now. What they have to do is step to the fore. I gave President Barroso very strong points for his tenure: I think he has been very strong for the EU. You have a new president [Hermann Van Rompuy] – who I’ve just met for the first time – and I think he has an understanding of the big picture. And I think some of the heads of state do, but what I’m saying is that it’s very difficult for any political leader who has a crisis each day to get out of that and still be positioned with a long-term vision that they can get the public to embrace. I do believe that up to now, that the vision I’ve outlined has been an elite vision – a vision in Brussels, in the Parliament, the Commission and of some heads of state, but has it moved out to become a major public discussion that brings in the population of Europe in a significant way – like the expansion of the EU, the introduction of the euro or Maastricht? No. It needs to go from the elite areas to the people. In some countries, it is. As we’re moving in with our master plans, everyone in Rome and now Italy knows what we’re doing – the Mayor of Rome said 'let’s do it'. It requires political leaders who can ‘talk the talk’ with the public and still ‘walk the walk’. What that means is, there’s no reason why any political leader shouldn’t be able to get up in their county or in Brussels and say: the second industrial revolution has matured; the energies are clearly mature energies – coal, oil, gas and uranium – and the technologies based on those energies are old technologies, their multiplier effect is exhausted; the infrastructure built from fossil fuels is ageing. Any politician can say that. Second, they should say: where do we want to be in twenty years from now, in Europe? Do we want to have the sunset energies, sunset technologies and sunset infrastructure of a twentieth century second industrial revolution? Or do we want the sunrise energies, sunrise technologies and sunrise infrastructure of a twenty-first century third industrial revolution? Number three, they should say: this is the next stage in European integration, this is the way that Europe can be a European community – where you do not lose your own locality or your own identity, but you share it by sharing energy across Europe and creating an integrated market in the biggest integrated market in the world – for the 500 million people in Europe and another 500 million from associated partners in the region. You can complete Lisbon, you can have a 2020 agenda and you can build a third industrial revolution with millions of local jobs to create the entire infrastructure – like we did in the second industrial revolution: the highways, the suburbs, etc. Finally, point four, turn to the younger generation in Europe and say the following: for a younger generation under the age of thirty, who grew up on the Internet, who have become comfortable with the idea of creating their own information and sharing it with each other in common social spaces – YouTube, Wikipedia, Facebook, Google, etc. – say to them, why not join with us in a challenging journey for Europe: to create your own energy and share it peer-to-peer in open social spaces, like you create and share information in cyberspace. That should be the four-point winning formula that any political leader should be able to say to any audience – grandparents, parents and children – in Europe.
Let me take what you are saying and put it in the context of the failure of Copenhagen. Should we put our resources behind implementing the third industrial revolution and forget international negotiations that seem to be stuck in delivering an international legally-binding agreement?
I met with [UNFCCC chief] Yvo de Boer a year before Copenhagen and I told him then that if everyone comes to Copenhagen and it’s all about benchmarks of who has to commit to what to CO2 reductions, everyone is going to see it as a punishment. Every country will blame the other country, and say ‘not me, you first’. I said to him that Copenhagen has to stand as a moment for an economic vision and game plan that converts a punishment into an opportunity – from a terrible catastrophic loss for the planet to a great challenging opportunity for the future. Otherwise, I said, it would collapse. And it collapsed. Because everyone came to Copenhagen with a geopolitical frame of reference: that is battling each other to maintain their own position. It was a joke. [US] President [Barack] Obama barging into doors to try and sit down with the Chinese delegation… it was preposterous. It was sad, it was …
Leaderless. It was a big moment for the human race. We have been here 175,000 years, we are the youngest species on the planet – and here was a moment of crisis. Our scientists tell us that we may be seeing the potential mass extinction of life on this planet by the end of the century, our own species is in peril, we are seeing a real-time climate change: this is our moment, and we allowed it to slip by. This next stage after the collapse of Copenhagen and now with the collapse of the global economy, we have to change the way we think about all this and we have to see that opportunity for a new economic vision, game plan and a new economic revolution that will get us to a post-carbon society. If you are saying, what about if the EU does it and no one else does it, this is what I am going to tell you: if the EU does it, everyone is going to be jumping on board, because China and India, the United States and Japan do not want to be back in the pack in the sunset of the second industrial revolution, whose technologies are old, and whose infrastructure is collapsing, while the great world power, the EU, the lead economy is moving quickly to a third industrial revolution: new technology, new infrastructure, millions of jobs and economic sustainability and post-carbon. Why would anyone want to stay in the sunset of the second industrial revolution, which is collapsing?
So if everyone is on track to achieve what you are describing, then we can get a legally-binding agreement?
At that point, we don’t even need a legally-binding agreement. Once you have started moving towards a third industrial revolution, it is completely irrelevant, because it is post-carbon. The EU now needs to go out and… Communicate? That’s correct. In the midst of this crisis, this is the time for the EU to step back and look at where the recovery is, and instead it is looking at austerity, unemployment and cuts. We are going to have big troubles in the streets. We have it in the US, but not in the streets yet. But it is bad: we have real unemployment of 18%, if you count the detached workers that only work a few hours. If they just go day to day in trying to put out a fire, and they don’t have this new economic vision that is workable, that has been endorsed by the Parliament, that has been activated by the Commission, that is starting to move in some way as a major vision for Europe, they are going to deal with bigger and bigger fires and eventually they will not be able to put them out. You cannot live in a political space anywhere in the world that is all based on less opportunity and more crisis every day. Eventually, you will get people in the streets and we lose opportunities and get rebellion in the streets. Every day we lose an opportunity, we have one less day available to us.
Do you think this has been communicated enough? Are we capable of telling the story of a human revolution and convincing people to follow?
I am 65 years old and I will not see this. But this is what I really believe: for all of its faults – and I am not naïve about Europe, I have spent 20-odd years working there – with all of its problems, Europe is still the laboratory for the world. The new ideas on how we move from geopolitics to biosphere politics, how we move from a world based on military might to a world based on building bridges of peace, how we move to a world based on quality of life and not on individual accumulation of wealth, how we move to a continental form of government that is networked and not centralised – the European dream is to see Europe’s youngest generation, especially middle class, college-oriented, now beginning to have a sense of global humanity. I am not saying there is no populism or xenophobic movements, but the younger generation is on the Internet everyday. Now is the time for Europe to step to the fore – Europe has the idea. America is moving further and further back in time: politics is getting bad. China is a top-down centralised regime that is going to implode. What is left? Europe has to step to fore – we need some political leadership and as you say, they are going to have to start telling a story. What I have just said is not a difficult story. Yes, it makes sense, but is not easy. But people need to believe in it, because we can probably make it work.