The disaster has already begun

Economist Dr. Karl Georg Zinn: "The disaster has already begun"
INTERVIEW | SIGRID SCHAMALL
May 27, 2014 ,
The capitalist growth has become a problem, promotes famines and chokes full employment - Karl Georg Zinn paints a bleak picture of the future.
Is the world to be saved? Mass unemployment has never lasted as long as today, global problems are increasing, reminders like that of John Maynard Keynes went unheeded, says economist Karl Georg Zinn.

SIGRID SCHAMALL: income and wealth are distributed increasingly unequal today. But to discuss redistribution is still taboo, or are appearances deceptive?

Zinn: The capitalist growth has steadily increased the distribution inequality. Nearly 17 percent of the world's population now draw far more than half of the global value on themselves. But experiences someone who has in any case an adequate income, really greater consumer 's quality of life ? I think it is, mutatis mutandis, like the French Enlightener, Jean -Jacques Rousseau : "Distribution means that no one is so rich that he can buy another individual, and none so poor that he has to sell himself. "

SIGRID SCHAMALL: How can quality of life be increased accordingly?

Zinn: The question is whether it not would make us go better if the working hours were reduced gradually in line with productivity developments. In fact, there is this already. If you distributed the payments made on average in the life of 40,000 hours to 70 years, there is another quantum, than if you spread this to 80 years due to the increased life expectancy.

SIGRID SCHAMALL: Has growth itself therefore become a problem?

Zinn: we can not solve today's problems by growth. Of course, distributive justice does not include complete leveling. The question is, what's a reasonable human differentiation. Instead, we see the highest peak income to be paid in the least productive sector - namely the financial capital sector.
What we needed, is a shift in consciousness, so that the population vigorously strived for equality and put increasing pressure on the politicians. Whether this will succeed is debatable, as we have just seen an example for a global bank bailout:
Policy is in a large scale blackmailed by the financial capital, and at the same time the public is talked into the conviction, there were no alternatives.

SIGRID SCHAMALL: Can we in our democracies talk of "growth fetishism"?

Zinn: Fetishism is obviously somewhat metaphorical. But I think so, because the majority, despite all the uncertainty, still believes that without growth we lacked jobs. The idea that one could solve almost all socio-economic problems by firering up the growth machine, is fatal.
The famous English economist John Maynard Keynes had in the 1930s and 1940s foreseen clearly, that the developed countries will experience inevitable decline in growth rates. This forecast was clearly confirmed by the real economy. Growth has since about 30 years remained weak - too weak to return to the growth path towards full employment.
Such a long period - it corresponds to a generation - with mass unemployment have industrialized countries never gone through. Even during the Great Depression of the 1930s, mass unemployment lasted "only" about ten years, before World War II then ended it abruptly.

SIGRID SCHAMALL: Unemployment in many countries tragically especially hits the young ones.

Zinn: The young generation of today is socialized under conditions in which mass unemployment is now perceived as something normal. Three decades of mass unemployment are, as I say, unprecedented. The absence of system-threatening violent mass protests is not at least owed to the ideological propaganda, telling that there is no alternative to neo-liberal ruthlessness. The population seems to me to be turned into powerless, politically inactive citizens. But there also is a lack of education on economic policy alternatives.

SIGRID SCHAMALL: Also in this regard, you like to quote Keynes.

Zinn: About Keynesian-ism there are spread completely reduced and distorted ideas. It is virtually unknown that Keynes towards unemployment had suggested far more than just an anti-cyclical economic policy. Especially with permanently low growth as it became the rule for three decades, far-reaching distributive and working time policies are essential. The "long-term" Keynesian economics, which deals with the problem of how full employment can be achieved without growth,
remained for far too many "Keynesians" a book with seven seals.
Keynes already in1930 anticipated many insights, which were virtually rediscovered as news by economic happiness research only in recent times: for example, the fact that above a critical income level or a critical level of consumption hardly any noticeable increase in satisfaction or quality of life is experienced. It should be understood also to anyone with common sense that no endless economic growth and no endless population growth are possible on a "not duplicable planet".
For not to speak of the human folly of growth fetishism. Keynes had recognized all this decades ago, but still too many Keynesians are still hanging in the growth paradigm.

SIGRID SCHAMALL: Do you have an explanation?

Zinn: Keynes considerations were so visionary that he was in many places dismissed as a "looney". In 1943, the midst of war, in the Keynes short text about "The Long Term Problem of Full Employment"ⁱ among others, is to be found the recommendation of reductions in working time at permanently low growth rates and mass unemployment.
Those, who take note of Keynes “long-term forecast of 1943”, which has been present also in German translation for several years, will experience a joyful eye-opener. But precisely because of this enlightenment potential, the defenders of status quo, the growth fetishists, have no inclination to deal seriously with the "revolutionary" Keynes. Therefore, that text dating back to 1943 is almost exclusively known by insiders and too explosive in politics.

SIGRID SCHAMALL: That is, we ourselves drive our global problems forward?

Zinn: Each of the problems gets more urgent, as we go on growing just as before. It's a collective failure. The disaster has already begun. One must only look to Africa, the famine and the
associated conflicts. These are resource conflicts that are sold to us as ethnic or religious conflicts.
At the bottom it is about the constant shortage of options for a decent life.
The perversion is made obvious by for example the cheerful cruise-liners sailing the Mediterranean, while in the same region simultaneously man are drowning. The poor population is pressing into the richer regions. If this trend quantitatively grows, it will come to a brutal Social Darwinism. We already experience the beginning, but it will continue to affect a lot more massive. There are also the climatic changes: I guess, within ten to 15 years, they are getting even more apparent – until we in the middle of the Century will enter major disasters. Countermeasures can be taken, if not today, better yesterday. Unfortunately, we can no longer use the day before yesterday.

SIGRID SCHAMALL: Much is already visible today.

Zinn: Because of close settlement natural disasters effect even highly developed countries increasingly devastating. Just think of the tsunami in Japan. 30 million people, the population size of the Tokyo area, you can not just evacuate; you can only lie to them by saying that it was not all that bad. Moreover, as a result of corruption and the governments capitalist interest policy, the technically feasible has not been done.

SIGRID SCHAMALL: In addition to the capitalist growth the global population also increases rapidly, as you have already mentioned ,.

Zinn: The world's population has increased almost tenfold in the past 250 years - from 750 million to well over seven billion. But the demographic world problem is one of the taboos - even for some of the more progressive contemporaries. Hardly anyone dares to speak so clearly like the Englishman Stephen Emmott in his recent book "Ten billion" referring to the almost inevitable disaster.
The "left" think they can reject warnings of overpopulation with a long-outdated Anti-Malthusian-ism.
With regard to the sustainability problem, fx. the global food problem for soon eight, nine or ten billion people, I 'm a bit of a pessimistic optimist.
One can make a better world: Everything that is done in accordance with the laws of nature, is possible, but people have to want it and force the politicians to the necessary reforms. With regard to the technical and economic solvability of the problems mentioned above, I am optimistic and confident. But the political inertia and the capitalist greed of a small oligarchy with great political influence, preclude all optimism. Presumably that will not change until disasters, that could have been avoided, have triggered quasi revolutionary convulsions.


Dr. Karl Georg Zinn (74 ) is Emeritus Professor of
Economics at the Rheinisch -Westfälische Technische
University of Aachen . He is the son of former Hessian
Prime Minister Georg August Zinn . In the summer semester 2014
he works at the invitation of the Chamber of Labour Vienna
and the Institute for Political Science at the University of Vienna as a senior
Research Fellow.

iThe Long Term Problem of Full Employment

THE LONG-TERM PROBLEM OF FULL EMPLOYMENT

J.M. Keynes (May 1943):

1. It seems to be agreed today that the maintenance of a satisfactory level of employment depends on keeping total expenditure (consumption plus investment) at the optimum figure, namely that which generates a volume of incomes corresponding to what is earned by all sections of the community when employment is at the desired level.

2. At any given level and distribution of incomes the social habits and opportunities of the community, influenced (as it may be) by the form and weight of taxation and other deliberate policies and propaganda, lead them to spend a certain proportion of these incomes and to save the balance.

3. The problem of maintaining full employment is, therefore, the problem of ensuring that the scale of investment should be equal to the savings which may be expected to emerge under the above various influences when employment, and therefore incomes, are at the desired level. Let us call this the indicated level of savings.

4. After the war there are likely to ensure [sic] three phases-
(i) when the inducement to invest is likely to lead, if unchecked, to a volume of investment greater than the indicated level of savings in the absence of rationing and other controls;
(ii) when the urgently necessary investment is no longer greater than the indicated level of savings in conditions of freedom, but it still capable of being adjusted to the indicated level by deliberately encouraging or expediting less urgent, but nevertheless useful, investment;
(iii) when investment demand is so far saturated that it cannot be brought up to the indicated level of savings without embarking upon wasteful and unnecessary enterprises.

5. It is impossible to predict with any pretence to accuracy what the indicated level of savings after the war is likely to be in the absence of rationing. We have no experience of a community such as ours in the conditions assumed, with incomes and employment steadily at or near the optimum level over a period and with the distribution of incomes such as it is likely to be after the war. It is, however, safe to say that in the earliest years investment urgently necessary will be in excess of the indicated level of savings. To be a little more precise the former (at the present level of prices) is likely to exceed £m1000 in these years and the indicated level of savings to fall short of this.

6. In the first phase, therefore, equilibrium will have to be brought about by limiting on the one hand the volume of investment by suitable controls, and on the other hand the volume of consumption by rationing and the like. Otherwise a tendency to inflation will set in. It will probably be desirable to allow consumption priority over investment except to the extent that the latter is exceptionally urgent, and, therefore, to ease off rationing and other restrictions on consumption before easing off controls and licences for investment. It will be a ticklish business to maintain the two sets of controls at precisely the right tension and will require a sensitive touch and the method of trial and error operating through small changes.

7. Perhaps this first phase might last five years,-but it is anybody's guess. Sooner or later it should be possible to abandon both types of control entirely (apart from controls on foreign lending). We then enter the second phase, which is the main point of emphasis in the paper of the Economic Section. If two-thirds or three-quarters of total investment is carried out or can be influenced by public or semi-public bodies, a long-term programme of a stable character should be capable of reducing the potential range of fluctuation to much narrower limits than formerly, when a smaller volume of investment was under public control and when even this part tended to follow, rather than correct, fluctuations of investment in the strictly private sector of the economy. Moreover the proportion of investment represented by the balance of trade, which is not easily brought under short-term control, may be smaller than before. The main task should be to prevent large fluctuations by a stable long-term programme. If this is successful it should not be too difficult to offset small fluctuations by expediting or retarding some items in this long-term programme.

8. I do not believe that it is useful to try to predict the scale of this long-term programme. It will depend on the social habits and propensities of a community with a distribution of taxed income significantly different from any of which we have experience, on the nature of the tax system and on the practices and conventions of business. But perhaps one can say that it is unlikely to be less than 7 per cent or more than 20 per cent of the net national income, except under new influences, deliberate or accidental, which are not yet in sight.

9. It is still more difficult to predict the length of the second, than of the first, phase. But one might expect it to last another five or ten years and to pass insensibly into the third phase.

10. As the third phase comes into sight; the problem stressed by Sir H. Henderson begins to be pressing. It becomes necessary to encourage wise consumption and discourage saving,-and to absorb some part of the unwanted surplus by increased leisure, more holidays (which are a wonderfully good way of getting rid of money) and shorter hours.

11. Various means will be open to us with the onset of this golden age. The object will be slowly to change social practices and habits so as to reduce the indicated level of saving. Eventually depreciation funds should be almost sufficient to provide all the gross investment that is required.

12. Emphasis should be placed primarily on measures to maintain a steady level of employment and thus to prevent fluctuations. If a large fluctuation is allowed to occur, it will be difficult to find adequate offsetting measures of sufficiently quick action. This can only be done through flexible methods by means of trial and error on the basis of experience, which has still to be gained. If the authorities know quite clearly what they are trying to do and are given sufficient powers, reasonable success in the performance of the task should not be too difficult.

13. I doubt if much is to be hoped from proposals to offset unforeseen short-period fluctuations in investment by stimulating short-period changes in consumption. But I see very great attractions and practical advantage in Mr Meade's proposal for varying social security contributions according to the state of employment.

14. The second and third phases are still academic. Is it necessary at the present time for Ministers to go beyond the first phase in preparing administrative measures? The main problems of the first phase appear to be covered by various memoranda already in course of preparation. insofar as it is useful to look ahead, I agree with Sir H. Henderson that we should be aiming at a steady long-period trend towards a reduction in the scale of net investment and an increase in the scale of consumption (or, alternatively, of leisure) but the saturation of investment is far from being in sight to-day The immediate task is the establishment and the adjustment of a double system of control and of sensitive, flexible means for gradually relaxing these controls in the light of day-by-day experience

I would conclude by two quotations from Sir H. Henderson's paper, which seem to me to embody much wisdom.

"Opponents of Socialism are on strong ground when they argue that the State would be unlikely in practice to run complicated industries more efficiency than they are run at present. Socialists are on strong ground when they argue that reliance on supply and demand, and the forces of market competition, as the mainspring of our economic system, produces most unsatisfactory results. Might we not conceivably find a modus vivendi for the next decade or so in an arrangement under which the State would fill the vacant post of entrepreneur-in-chief, while not interfering with the ownership or management of particular businesses, or rather only doing so on the merits of the case and not at the behests of dogma?

"We are more likely to succeed in maintaining employment if we do not make this our sole, or even our first, aim. Perhaps employment, like happiness, will come most readily when it is not sought for its own sake. The real problem is to use our productive powers to secure the greatest human welfare. Let us start then with the human welfare, and consider what is most needed to increase it. The needs will change from tune to time, they may shift, for example, from capital goods to consumers' goods and to services. Let us think in terms of organising and directing our productive resources, so as to meet these changing needs, and we shall be less likely to waste them."

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