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Sowing Egoism and Harvesting Trump

by Thomas Straubhaar Monday, Jan. 13, 2020 at 4:10 PM

Thomas Straubhaar urges rethinking globalization and inequality. "We have believed too long in the theory that free trade, free entrepreneurship and little state automatically lead to balance and that everyone would be rewarded in the end...We need a new reconciliation of social values."

[This interview published in Der Spiegel on 2/11/2017 is translated from the German on the Internet.]

SPIEGEL: You have traveled a lot to get an idea of the consequences of globalization. What have you learned?

Straubhaar: That we have to rethink. About how we evaluate inequality. How we measure it. It is not enough to look at the average of national economies. Economic figures do not tell the whole story.

SPIEGEL: What do they conceal?

Straubhaar: I was travelling in Latin America. Of course I knew that inequality was greatest there. But it's something else to experience inequality directly. The subways in Mexico City are jam-packed, people travel one or two hours in the morning to work and one or two hours in the evening back home. And then they earn the minimum wage of 80 pesos, or around four euros - a day. That's in a city that certainly has its everyday costs.

SPIEGEL: You are known as an economist who is familiar with market mechanisms. Has your view of the world begun to falter?

Straubhaar: I had already doubted pure efficiency theory before. My empirical observations have reinforced these critical considerations. We have believed too long in the theory that free trade, free entrepreneurship, little state automatically leads to compensation and that we only have to wait long enough until everyone is rewarded in the end. When you travel through these countries, doubts grow.

SPIEGEL: It sounds as if you think globalization has failed.

Straubhaar: Well, first of all, globalization has made it possible for so many people to be better off today than ever before. Never before have so many lived so well and for so long and so healthily as today, and practically all societies are experiencing this.

SPIEGEL: So where is the problem?

Straubhaar: People reject win-win situations when profits are unequally distributed. If you create a situation in which 100 can be won, but you distribute this profit 99 to 1, then the person who gets 1 will not consider the solution fair and thus acceptable. ...even though objectively he'd have more than before.

SPIEGEL: That means: Everyone has won, only some have won a lot more.

Straubhaar: Most people are aware that they are economically better off than their parents or grandparents. But they see that the scissors are noticeably diverging. And that, as in the banking crisis, profits are being privatised and losses socialized. Younger people say that life has become harder. Uncertainty is greater, planning has become more difficult. For the first time in a long time, the mortality rate of middle-aged working people in America is rising again.

SPIEGEL: Will the digitalization drive exacerbate this gap?

Straubhaar: Yes, that's why I'm in favor of learning from the mistakes of recent years. We have to find ways to ensure that globalization and digitization do not further polarize society.

SPIEGEL: Isn't it too late for that? Now that those who think they are the victims of globalization have promoted Donald Trump to the White House?

Straubhaar: Perhaps we still have a chance. In Europe, the elections are still being held this year. I think we could create something like a new beginning that shows We understand, we react. But if we do not do this, we will experience Trumpism and neo-nationalism in Europe too. If we do not want a European Trump, we must offer something that will send a signal to the people that they are not being left behind.

SPIEGEL: Does Trump mark the end of globalization?

Straubhaar: It was too short a jump to complain about Trump. He only exploited what the elite had caused before. The mistakes were made earlier. An egotism has established itself, which has also celebrated itself in recent years. Selfishness was sown and Trump was harvested. We should be wise enough not to exhaust this selfishness, in our own interest. We need a new reconciliation of social and liberal values.

SPIEGEL: And for you, that lies in the idea of an unconditional basic income of perhaps 1000 euros a month, which replaces all social benefits such as pension, unemployment benefit or social assistance.

Straubhaar: Yes. Our social system, our tax system: Everything is based on foundations that are crumbling. All models are based on the assumption that we work continuously for 45 years, that families consist of a husband and wife and two children. But this is no longer the norm and will be even less so in the future. The system is full of injustices. There are the income threshold: Those who stay below them have to pay. Anyone who exceeds them can buy their way out of solidarity. Civil servants do not pay at all. Those who have income from rent or capital are off the hook.

SPIEGEL: That can all be changed. But do we need a complete change of system?

You could make adjustments based on the old model.

Straubhair: That does not work. Such a thing never works. Small reforms usually fail because of interest groups. You need a big shot to bring about change. Repairing the existing is not enough. But there is another reason for a basic income: It gives us a historic opportunity to rethink work.

SPIEGEL: What do you mean?

Straubhaar: So far, our system has been based on people being forced to take jobs that are actually inhumane. That was the case for around 200 years. But in a world where robots can do almost any job, we no longer need that. No one has to take on jobs for little money that nobody likes to do. Work is no longer an existential obligation.

SPIEGEL: Employers could also see the basic income as a historic opportunity to elegantly get rid of costs. Doesn't it make you suspicious if top managers suddenly start raving about the basic income?

Straubhaar: Up to now, the situation has been that as soon as someone was made redundant, the state had to take care of them. The companies had nothing to do with it. In future, employers will have to make an effort to create an environment in which employees want to perform.

SPIEGEL: Some people will take the 1000 euros and make themselves comfortable.

Straubhaar: Even the basic income will not produce a better person. There are always people who refuse, even in the current system. But it is not a set-aside premium, as is often claimed. A basic income empowers the people who want to achieve something. People who are poorly educated can take a break for a certain period of time and continue their education. That then benefits everyone.

SPIEGEL: But the individual would lose his individual entitlements. With 1000 euros, everything would be settled. But that is unfair. Anyone living in the Bavarian Forest can make ends meet with such a sum, but a Munich resident certainly can't.

Straubhaar: If there are good reasons for exceptions, then it is perfectly okay to make them. Of course, even a disabled person in a wheelchair can't make ends meet with 1000 euros. The state must then grant a supplement.

SPIEGEL: Then one group after the other will make claims, the thicket of social benefits would be as big as before.

Straubhaar: Not necessarily. It must be really well justified if you deviate from the basic model in individual cases. This does not immediately make it less attractive. It is much more transparent, much fairer. It helps to reduce bureaucracy. And it comes at the right time, because machines are taking over more and more activities and the financing of the welfare state through wage contributions is becoming less and less effective.

SPIEGEL: What makes you so sure? Even decades ago, many people thought that automation would create mass unemployment. In fact, robots are now installed in many factory buildings, and yet there are currently more people in work in Germany than ever before.

Straubhaar: I am not saying that we are running out of work. Digitization will destroy millions of jobs, but it will also create millions of jobs that we are not even thinking about today.

SPIEGEL: Then there is no need for a basic income.

Straubhaar: Yes, the technological thrust will inevitably come, and the working world of the future will have different requirements. People will no longer work eight hours a day, 46 weeks a year for 45 years without interruption, to earn an income for the rest of their lives. The process will be much more fragile, and leisure time will become more important. This upheaval will overstretch the current financing of the welfare state.

SPIEGEL: Do you think it is realistic to expect the idea to become reality?

Straubhaar: I am not interested in implementing the model tomorrow. A lot would be gained if a discussion were to develop so that citizens do not have the feeling that things are going as badly with digitization as they are with globalization. With globalization, we blew it because we were only interested in efficiency and because questions of the distribution of wealth remained subordinate. Let us learn from this and put the distribution issue at the top of the agenda when it comes to the consequences of digitization.

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