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Second World War

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Basic Income: A Done Deal?

The First World War speeded up the emancipation of women; the Second World War led to the creation of welfare states in all the industrialised countries. What great change will the coronavirus crisis bring us?

This crisis has not yet killed tens of millions, and it probably never will. No great empires have fallen, and no human villain can be blamed for the problem. Yet there will probably be changes as great as those after the two world wars.

One great change will be in the pace of automation. As Microsoft CEO Satya Nadella put it, we have seen “two years’ worth of digital transformation in two weeks,” as tens of millions of people stayed at home and worked online. A great many of them will not go back to working in an office when the threat of the coronavirus recedes.

So does five weeks of lock-down equal five years’ worth of digital transformation? Probably yes. Last week Twitter became the first major Silicon Valley company to publicly accept this new reality, announcing that “If our employees are in a role and situation that enables them to work from home and they want to continue to do so forever, we will make that happen.”

But for the considerably larger number of people whose occupations do not allow them to work at home, the news is not so good. For them, the digital transformation means automation and unemployment. In a recent survey of company executives in 45 countries,
auditors Ernst and Young found that 41% of them are investing in greater automation of their work processes.

More will follow. The reason that the service industries (apart from retail sales) have largely escaped automation so far is that the new technology is expensive, disruptive, and annoys the customers, not that it doesn’t exist. But now the crisis is forcing the customers to get used to that kind of service, at the same time that the owners and managers are realising what a nuisance it is to depend on human employees.

The process that has already destroyed the assembly lines (and given us Donald Trump) will continue through the workforce until around half the existing jobs have been destroyed, as Carl Benedikt Frey and Michael Osborne of Oxford University predicted in their famous 2013 study. Their prediction was for the year 2033, but the coronavirus may be bringing that date forward.

However, the other great change wrought by the coronavirus works in the opposite direction. When unemployment suddenly leapt to 30% as lock-downs spread across the world, we were suddenly confronted with a working model of that future – and the social and economic changes that might deal with the mass destruction of jobs by automation are actually being road-tested right now.

In some countries, like the United States, it is real unemployment, only slightly alleviated by hand-outs like a $1,200 cheque signed by Trump. In most richer countries, it is some form of ‘furlough’, with the government paying 75%-85% of people’s wages, up to a limit that is high enough to let them live in modest comfort, until their jobs resume in two or three or four months’ time.

Either way, it does concentrate people’s minds, rather like the prospect of being hanged in the morning. A lot of them will notice a) that this is the level of unemployment that already lies in wait for them down the road; and b) that there is still enough money around to keep them going anyway. Or, in the case of the US, that there could be if the government was willing to try.

It’s a small step from there to the concept of a guaranteed basic income as the long-term solution for a society where half the jobs have been destroyed by automation but productivity is higher than ever.

There are, of course, a number of codicils to this conclusion. The current levels of income support could not be sustained long-term without a significantly higher rate of tax. Widespread job-sharing would be needed to avoid creating a permanent under-class of the unemployed and to keep people connected. There are no magic bullets.

We were already sleep-walking towards this level of unemployment anyway, just over a much longer period. At least now we’re awake to the fact that such things can happen, and we know that they can be managed.

More or less normal service will probably be resumed in a few months, or at worst in a year or so, but automation is getting a big boost and from now on it will be an ever-present companion. But the experience we are going through right now makes it a lot less scary.
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To shorten to 700 words, omit paragraphs 4. (“So does…happen”)

Is This Really a Turning Point?

People who look for silver linings (aka optimists) think that Covid-19 might be the inflection point where we start getting serious about our relationship with the planet. There’s no direct link between coronavirus and climate change, but if a tiny virus can bring our whole bustling civilisation to a halt, then how vulnerable will we be to a disordered environment driven by out-of-control global heating?

Just in time we are being taught humility and perspective, the optimists say. Even better, some of the things we urgently needed to do are now happening without our help. People are learning to work from home, air travel has been closed down, the oil industry is collapsing. Etc., etc.

By contrast, the pessimists (who often refer to themselves as realists) believe that crises don’t make people behave better. The Great Depression led to the Second World War, 9/11 led to wars all over the Middle East, the Crash of 2008 led to ‘austerity’, slow growth, mounting popular anger and the rise of populist regimes across the world. Don’t expect any better from this crisis.

Moreover, they say, most people can only process one problem at a time, and that has the unfortunate ring of truth.

Last year saw an unprecedented upsurge in public concern about climate change – Australian wildfires, record floods all over the place, Extinction Rebellion, Greta Thunberg – but all that has now been pushed aside by the coronavirus. Global heating and its associated disasters will kill far more people in the long run, but Covid-19 is killing them now.

There’s no time for climate this year, and last year’s climate momentum will not automatically return when the virus is under control. Momentum takes time to build, and we are running out of time. There is no magical deliverance on the way, and on balance the current health emergency is setting back the cause of climate sanity, not advancing it.

Nevertheless, we can take some comfort from the fact that behavioural moulds are being broken all over the place, and several generations are learning together that disruptive changes, even very big ones, can be accepted by most people if they understand the need.

A small example from my own trade: this column has appeared in newspapers all over the world for decades, but the relentless retreat of the print media before the online onslaught has eaten deeply into the revenue base of the press everywhere.

Many papers have died, almost all have downsized, and that hit my own income hard. My solution was to do more speaking engagements, which involved more time away from my real job and a lot more travel. No show, no dough, so I did it – but then came coronavirus, social distancing and a temporary halt to air travel. End of that solution. What to do next?

So I put my talks on video and offered them to the usual suspects – universities, schools, libraries, conference organisers – saying I could do a live Q&A session afterwards on some web hosting site for the widely distributed audience. They would never have accepted that arrangement two months ago. Now there is no alternative, so we’re back in business.

Some of this business will go back to the old model when normal service is restored, but I suspect quite a lot of it will not. This is happening all across the business world, and will mean permanent, significant change: more working from home, less commuting, more teleconferencing, less travel. And lower greenhouse gas emissions.

Another positive change coming out of this emergency is that we are finally beginning to take a chunk out of our biggest problem: our heavy dependence on oil. Coal, the dirtiest of the fossil fuels, has been declining fast as an energy source for years in most places, but oil, the second-worst fossil fuel, just kept going up.

In January the world was pumping and burning 100 million barrels of oil a day. (That’s about two litres a day for every man, woman and child.) Demand this month has fallen to 70 million bpd, and while some of it will return when the coronavirus is contained, it will probably never see 100 million again. The inexorable decline of oil has begun.

But those are about the only bright spots. This year is forecast to be the hottest ever, and the major climate summit that was scheduled for November has been postponed until next year. Total annual emissions may be down by a few percentage points this year, but most of the decline is only temporary.

Do not despair. The planet is now hot enough to produce several major local calamities every year, so we’ll quickly get re-motivated to worry about global heating once the current emergency is past. Although probably not fast enough to save us from having to resort to geo-engineering by the 2030s.
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To shorten to 700 words, omit paragraphs 5 and 6. (“Last…advancing it”)

Gwynne Dyer’s new book is ‘Growing Pains: The Future of Democracy (and Work)’.

Nobody Mention UBI

When you lock the people down (to save their lives), you inevitably close down a lot of the economy as well. And the lockdown will definitely have to last in most countries until May or June: Donald Trump’s promise of a ‘beautiful timeline’ to reopening the US economy just two weeks hence is delusional. So where’s the money coming from in the meantime?

The majority of people still have jobs they get paid for: people in essential services who have to go to work, people who can do their work from home, and quite a few others as well.

However, between a third and quarter of the employed population has been left idle as their employers, from airlines to retail businesses, downsize or shut temporarily. If you leave these people without income, then you are reproducing the conditions of the Great Depression of the 1930s, when unemployment peaked at 24% in the United States and the country’s GDP shrank by almost half.

Adolf Hitler came to power when German unemployment reached 30%: misery and desperation can lead to violence. Nobody wanted to see that movie again, so after the Second World War every developed country created a welfare state to shelter its population from the worst effects of the ‘business cycle’.

The welfare state has served us well for most of a century (including in the United States, whose rudimentary welfare state was first in the field with Franklin Roosevelt’s New Deal of the 1930s). But it is not enough to keep the wheels turning when a huge chunk of the workforce had dropped out for reasons that are not economic but health-related.

That’s why governments, including deeply orthodox right-wing ones like the Conservatives in Britain and the Republicans in the United States, are turning to what economist Milton Friedman first named ‘helicopter money’ half a century ago.

The idea is that a government can reboot an economy in which spending power has collapsed (because so many are out of work) by simply giving the penniless consumers free money – as if throwing it out of a helicopter. After all, it’s free money for the government too: they just ask the central banks to print it for them.

At this point traditionalists will begin to mutter about inflation, and the risk of undermining the work ethic, and various other shibboleths, but the governments in all the bigger Western economies – the US, the UK, Germany, France – are in conservative hands at the moment, and they are all doing it.

As Robert Chote, director of Britain’s comically named Office for Budget Responsibility, said last week: “When the fire is large enough you just spray the water and worry about it later.” So get in the chopper and start dropping the money.

Sweden has guaranteed laid-off workers 90% of their incomes until the health crisis is past, France is offering ‘partial unemployment benefits’ equal to 84% of the workers’ incomes, and Britain is offering 80%. In every case the employers (who are also getting government aid) are expected to hold their employees’ jobs open for them when normal service is restored.

Even the self-employed, including the ‘gig’ workers who now make up around 10% of the workforce, are not being left out. Norway is giving them 80% of their income based on their last three years of tax returns (tough luck if they understated it), and most other European countries will follow suit.

The United States government is less generous, of course, and would be even under a Democratic administration: the free-market ideology is the real national religion. President Trump is talking about $1,200 per person (the same as Hong Kong is giving its citizens), but only for one month or at the most two. And the proposal is still stuck in Congress.

Nevertheless, what all these governments (and others elsewhere in the world) are really playing with is the idea of a guaranteed national income that nobody can fall below. Only temporarily, you understand. Once the Covid-19 virus is tamed, we’ll go back to the dog-eat-dog, devil-take-the-hindmost economy we all know and love.

Really? You think that after six months or a year of this we will just go back tamely to the old economic rules? I rather doubt it.

The political and economic rules do not evolve gradually in modern societies; they shift in sudden great lurches. The First World War drew millions of women into the factories and kick-started women’s emancipation.

The rise of fascism and the Second World War required the creation of the full welfare state (which was previously restricted to meagre old age pensions) to avoid a replay the next time the economy tanked.

The current emergency may be fostering the rise of ideas previously seen as too radical to contemplate, but nobody say ‘Universal Basic Income’ yet. You’ll frighten the horses.
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To shorten to 700 words, omit paragraphs 8 and 11. (“At this…doing it”; and “Even…suit”)

Germany: The Rise of the Right

Angela Merkel’s slogan in her campaign for a fourth term as Chancellor was terminally bland and smug – “For a Germany in which we live well and love living” – but it did the job, sort of. Her Christian Democratic Union (CDU) is back as the largest party, so Merkel gets to form the next coalition government. But the neo-fascists are now in the Bundestag (parliament) too, for the first time since the collapse of Nazi Germany.

It’s not Merkel’s fault, exactly, but the numbers tell the tale. The CDU had its worst result ever, down from 40 percent of the vote at the last election to only 33 percent this time. And it looks like the 7 percent of the vote that the CDU lost went straight to the Alternative for Germany (AfD), the neo-fascist party, whose support was up from just under 5 percent last time to 12.6 percent this time.

That makes the AfD the third biggest party in the Bundestag. All the other parties have sworn to have nothing to do with it, so Merkel’s party will have to seek its coalition partners elsewhere. It will take at least a month to make the coalition deal, which will probably link the CDU with the business-friendly Free Democrats and the Greens, but that is not the big story. The rise of the hard right is.

‘Rise’ is a relative term, of course: only one German in eight actually voted for the AfD. But that is still shocking in a country that thought it had permanently excised all that old Nazi stuff from its politics. And if you look more closely, the AfD’s support was strongest in the same parts of the country that voted strongly for the Nazis in the 1933 election that brought Hitler to power.

The AfD was founded by an economics professor who just wanted Germany to leave the euro currency, but in the past four years it has been taken over anti-Muslim, anti-immigrant ultra-nationalists, and they do sound a little bit like You-Know-Who at times.

Alice Weidel, the AfD’s co-leader, has described Merkel’s government as “pigs” who merely serve as “marionettes of the victorious powers of the Second World War, whose task it is to keep down the German people.” And the party’s other co-leader, Alexander Gauland, said in an election speech last week: “We have the right to be proud of the achievements of the German soldiers in two world wars.”

That sort of comment might be interesting to debate in a university seminar on German history, but 72 years after Hitler’s death it is still too soon to say out loud in a Europe that was ravaged by German armies in the Second World War. Gauland, Weidel and their AfD colleagues are playing with fire and they are well aware of it.

The truly alarming thing, however, is not the occasional echo of the Nazis in AfD rhetoric. It is the fact that Germany is conforming to a general trend towards the authoritarian, ultra-nationalist right in Western politics.

Each country does it in its own historical style. The pro-Brexit campaign in the United Kingdom last year was actually led by isolationist “Little Englanders”. Their implausible promise of a glorious free-trading future for the UK outside the European Union was just a necessary nod in the direction of economic rationality – but the Brexiteers won because enough people wanted to believe them.

Similarly, Donald Trump fits comfortably into the American tradition: he is channelling American demagogues of the 1930 like Huey Long and Father Coughlin. The economic situation of American workers and the lower middle class today is close enough to that of the 1930s that they responded to his mixture of nationalism, dog-whistle racism and anti-big-business thetoric by voting him into the presidency.

In France, Marine Le Pen appealed to nationalism, anti-immigrant sentiment and the resentment of the long-term unemployed to win almost 34 percent of the vote in last May’s presidential election. She lost, but the more important fact is that one-third of French voters backed the neo-fascist candidate. And now, in German, the AfD.

The common thread that runs through all these events, beyond the racism, nationalism and xenophobia, is economic distress. The economies may be doing well, but a large proportion of the people are not. The gap between the rich and the rest was tolerated when everybody’s income was rising, but that has not been true for thirty years now, and patience among the “losers” has run out.

This is still early days, but the direction of the drift in Western politics is clear, and it is deeply undesirable. The only thing that will stop it is decisive action to narrow the income gap again, but that is very hard to do in the face of the currently dominant economic doctrine.

Houston, we have a problem.
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To shorten to 725 words, omit paragraphs 5 and 7. (“The AfD…times”; and “That sort…of it”)