Ridley: The most important thing to happen in 1776

We have the revolution backwards

Happy Independence Day, rational optimist. As we celebrate America’s 250th birthday, Matt Ridley reflects on the 1776 innovation that made it possible for democracy and free enterprise to flourish... Enjoy.

The Declaration of Independence, written 250 years ago this week, was a bright torch of the Enlightenment. So was Adam Smith’s Wealth of Nations, also published 250 years ago this year. But for me the most momentous happening in 1776 was the inauguration of James Watt’s first practical steam engine.

We have the industrial revolution backwards. We tend to think that clever people in powdered wigs came up with ideas – democracy, free enterprise, stock markets, science, intellectual property – that enabled men with dirty fingernails to set about changing the world. But I think it was more that the fingernail fellows made the wig wearers possible. Smith’s division of labour and Jefferson’s democracy were all very well. But Thomas Newcomen and Watt mattered more. Thermodynamics – the science of heat and work – was invented to explain steam engines, not vice versa.

Hear me out. Before the steam engine, there were two distinct forms of energy in the world: heat and work. Heat came from wood and coal. Work came from people, horses, oxen, wind and water. Nobody had an inkling they were both forms of “energy”.

The energy return on energy invested in work was a dismally low ratio. Plough a field, grow some oats, feed them to horses, put the horses to work – mostly ploughing a field. You needed a lot of land to generate a tiny surplus of work energy for transport, manufacture, construction and everything else.

Then along came a device that turned heat into work and suddenly you were pumping out 57 feet of water from a pit in less than an hour by burning a small heap of stored sunlight from a petrified 300-million-year-old swamp forest. Coal was on hand to push a piston, turn a crank, drive a pile.

Once heat was doing work, it could be used to make machines that harnessed heat to do even more work: the mineral economy became a self-reinforcing phenomenon quite unlike the organic economy that preceded it. Diminishing returns gave way to increasing returns. The ratio of energy return on energy invested shot up: in 1850 coal miners produced about 100 times as much energy per head as farm labourers.

As the historian Robert Allen has argued, “the cheap energy economy was the foundation of Britain’s economic success”. Better still, the more coal that miners produced, the more the price of coal fell - unlike the cost of water mills or horses or wood. The great flywheel of positive feedback began delivering higher living standards not just for the rich but for the poor too. Previous civilisations in ancient India, China, Greece, Rome, Arabia, Italy, the Netherlands, had made the rich richer but had done little to help the poorest. This one was different - thanks almost entirely to coal, then oil and gas. As John Constable, the energy analyst, puts it, the economy is a thermodynamic machine: it takes random arrangements of atoms and turns them into improbable, useful forms.

But here’s the bad news. If hydrocarbon energy was vital to Britain’s pioneering rise in living standards through industrialisation, the war on hydrocarbons is the chief cause of Britain’s pioneering stagnation through de-industrialisation. The first country into the industrial revolution is now the first deliberately to drop out of it.

Our deceleration is accelerating. Britons are now consuming just 61 per cent as much energy per capita as they did in 2001 - almost halving the practical work we can do. China is consuming twice as much as us per head, or 350 per cent as much as it did in 2001. One by one, we have closed most of our productive industries: oil and gas, aluminium, steel, heavy engineering, mining, cement, chemicals, pharmaceuticals, fertiliser, ceramics. Now even artificial intelligence is leaving or shunning our shores.

The worst part of this is that we have done it deliberately. We set out to pretend we are reducing emissions of carbon dioxide when all we are doing is exporting them. We ban shale gas - but import shale gas from America at much higher cost and much higher carbon footprint. We ban North Sea oil exploration - but import North Sea oil from Norway. We subsidise wood burning at Drax power station - but don’t count the emissions because the wood comes from North Carolina. We load emissions trading taxes on to oil refineries, then wonder why two out of six closed last year and we must import most of our jet fuel, diesel, ethylene and fertiliser.

To generate electricity, we heavily subsidise the high-cost, low-ratio, low-density, unreliable, medieval technology of wind – and then pay again to connect it to the grid, back it up on still days and compensate it when the wind is too strong. As a direct result we now have the most expensive electricity in the developed world for industrial users and the second most expensive for domestic users. Since 2002 we have sluiced £227.7 billion from energy bill payers to crony capitalists in the unreliables sector who are laughing all the way to the pub.

In the fifteen years between 2009 and 2024, Britain increased its total electricity-generating capacity by 21 per cent but generated 24 per cent less electricity: a 37 per cent drop in the productivity of our electricity grid. That’s bad enough for the economy’s productivity, but the point of energy is to consume it, not produce it, and we are driving up its cost in every way we can.

Britain’s pursuit of high energy costs is a reckless catastrophe. Watt must be spinning so fast in his grave you could turn him into a dynamo.