The year 1776 is legendary for precisely one thing: the Declaration of Independence.
But 1776 was actually a REALLY big year. Because in addition to the formation of the United States (which undoubtedly had an extraordinary impact on the course of the world), 1776 also saw two other historic trends take shape.
The first was the birth of capitalism.
1776 was the year that Scottish economist Adam Smith published his famous work An Inquiry into the Nature and Causes of the Wealth of Nations, which was the first book ever to outline the case for free markets and laissez-faire governments.
Not to take anything away from the impact that US independence had on the world, but you could easily make an argument that the idea of capitalism has been just as profound to human history.
Capitalism is responsible for more wealth creation and more prosperity in the past 246 years than every economic system combined over the previous 5,000. That’s a pretty significant impact.
But we’re not even finished yet with the big events from 1776. Because that year saw something else take place that was truly profound… again, potentially outweighing the impact of both US independence AND capitalism.
It was the invention of the steam engine… which at the time may have been the most disruptive technology in human history up to that point.
For thousands of years prior, nearly all work done on the planet was powered by muscle, i.e. human beings and animals toiling away in fields and factories. Just about everything required physical labor.
The steam engine changed all of that. For the first time on a mass scale, an inanimate fuel source (like coal or wood) could power machinery, which could do the work of dozens, even hundreds of people.
It was the steam engine that really kicked off the Industrial Revolution and brought about an extraordinary period of growth to the world, where wealth and standards of living increased like never before.
Over time, human beings figured out better, faster, cheaper ways to produce energy to fuel their machines. And there is an inextricable link between prosperity… and cheap energy.
When energy is cheap and abundant, societies are able to invest heavily in growth; they have more resources (i.e. more energy) available to grow, to produce goods and services, to invest in the future.
When energy is expensive and scarce, the opposite happens. A society has to spend most of its energy just to sustain itself, and there is limited surplus left over for growth and investment.
After generations of enjoying cheap energy and declining costs that fueled unparalleled prosperity, we are now facing steeply rising energy costs.
And I don’t even mean in dollar terms. Sure, the cost of a barrel of oil has more than doubled in the last year. Gasoline prices and electricity prices are high too.
But what I’m really talking about is the cost, in energy, of producing energy.
Oil wells, for example, require electricity or diesel fuel to power their pumpjacks. So oil wells essentially consume oil in order to pump oil.
In the past, this ratio of oil produced vs. oil used was quite attractive. For every barrel of oil it burned in fuel, an oil well would produce 30-40 barrels of output. And that was a great cost/benefit ratio.
But this ratio is falling rapidly, making energy a lot more expensive. And that’s a terrible trend. Again, cheap and abundant energy is a critical factor in driving prosperity. More expensive energy has the opposite effect.
Europe is already in a full-blown energy crisis, and many developing countries aren’t able to get their hands on enough energy to sustain themselves agriculturally. So this is already becoming a major issue, and it could potentially become much worse.
Obviously the war doesn’t help. But there has also been a deliberate political agenda to drive investment and enthusiasm away from fossil fuels towards more expensive, inefficient forms of energy production… like installing solar panels across cloudy Germany.
Again, I cannot overstate how important cheap energy is to human prosperity. So these incompetent, spineless politicians and climate fanatics are dragging the world down a terrible path.
Fortunately there is a real solution to this problem that already exists: nuclear.
It’s controversial (even though it shouldn’t be). But momentum is really starting to build for a new energy renaissance driven by nuclear power.
And this is a major trend you ought to be aware of, because it could drive human prosperity for generations to come. (Plus there are a LOT of ways to invest in it now.)
– the intriguing history of energy, and why there was very little growth for 5,000 years
– how everything changed in 1776
– basic energy terminology you should know, like EROEI, specific energy, and more
– why cheap energy is so important to prosperity
– why energy is becoming more expensive… in energy terms
– why nuclear is the obvious answer, and how it can drive future growth