An economic death spiral occurs when a system loses critical mass. For example, the UK’s energy death spiral – which is reaching its crisis phase – is the result of rising energy costs creating an involuntary loss of demand across the system. In part, businesses and households engage in energy-saving and conservation methods to lower their demand. And in part, they self-disconnect – in the case of businesses, they go bust, while household simply shiver in the dark. The reason this becomes a death spiral is because the system was designed around cheap energy and mass consumption. But as the cost of energy rises the mass consumption is lost. And so, the rising cost must fall on a shrinking consumer base… which, in turn, causes more businesses and households to disconnect. In the UK, this reached the point last year, that the state had to step in to bail out the energy companies by paying a portion of household energy bills – although with the cost running to billions of pounds, and with the UK economy outside London already in a recession, this is unsustainable. And so, the crisis point is reached. Without state aid, the energy industry is no longer profitable, companies will go bust, most likely followed by a period of mergers and acquisitions until it becomes clear that the entire economy will have to readjust to using far less energy and at a far higher cost.
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