Interview With Prof. Richard Werner. Part II

Let’s talk about the social aspects of our lives and discuss the big, influential reality that is social media.  We get an overload of information today, and the information we get influences how we look at the world. Do you believe that there is an increase in social unrest in the world and is this actually taking place, or are we just experiencing this through an overkill of alarming news in the social media?

In fact I guess the topic is a bit of a taboo topic. Everything’s supposed to be stable most of the time, and as you know in economics, it’s all in equilibrium, which is even more than stable, it’s in a perfect state! So these things are not supposed to happen, but we know they do happen. You will have heard about some of the developments in Latin America where countries were listening carefully to what the IMF and the World Bank were saying, and they were implementing those policies and it turned out that people didn’t have access to water anymore. It had been privatised, and they were getting huge bills to pay for this water and they certainly didn’t have the money. And people went out into the streets, in fact, I think this was in Ecuador as one example, where the people then succeeded. They succeeded in persuading the Mayor, the National Government officials to change that program and renationalise the water industry that had been privatised. Now you may have heard of TPP, Trans-Pacific Partnership, this is the latest round of trade agreements that America is trying to push through, and according to a recent article in The Americas, Ecuador is now being sued by a big American utility company because it renationalized its water utility.  So expressing the people’s will when it’s against corporate interests becomes an offense, and corporations can sue governments now and demand billions in compensation.

There’s this huge claim on Ecuador to pay billions because some fat cat investors are not earning enough profits. Thinking about this question, in many ways we do see a democratic groundswell of opinion forming, and often it is successful at changing government policy. When people realise that often governments and politicians are in the pockets of big companies, and then of course that’s not really democratic. So when they get organised on a grassroots level they can change things. So yes, your local community can get organized and get things done, and this is one of the positive aspects of the current situation.

What would you say needs to be done to minimise social unrest in the world?

I think the expression of people’s opinion, which is usually a reflection of people’s social and economic needs, it is sort of a sequence, there are economic and social needs, and then when they are being expressed, then of course it becomes political. If it’s done in a peaceful way, this can be very constructive and lead to better outcomes, which actually benefit everyone including those who previously wanted to make quick money, quick profits. If you just have a system that just helps the big fat cat capitalists, they will find that society becomes very unstable, there is unrest. It’s unsafe for the capitalists. I think it’s in everyone’s interests to reflect people’s needs, and allow them to express their economic and social needs. One interesting thing that is sort of the crossover between economics and politics, if you think about it, is a form of vaulting. What we have in capitalism, one vote per one euro, one vote per pound, one vote per dollar, so you got more dollars, you get more votes. This is how the giant stock company system works, and the more shareholdings you have of a company, the more votes you have. Now that is of course very different from a democratic system where it is recognised that we are all equal. How much money we have should be irrelevant, all individuals have their own dignity and value in the eyes of God, we are all equal. I’m Christian, and in the bible its quite clear, Jesus made it very clear, it was a bit of a revolutionary message – you can be as rich as you want, God is not going to listen to you more because you are rich. So what is the equivalent in the economics sphere? Because economics is actually about social relations, how we treat each other. It is just another dimension that is emphasized, but in the end it can only be about how people interact. What else can it be? The equivalent in the economics sphere is to have one person one vote, not one dollar one vote. And there is a form of economic organisation that reflects that, and that is called the Cooperative Movement. In Germany it’s called Genossenschaftsbewegung.

Question from the audience: I’m from Pakistan, but study in Germany. Why are the people in the EU telling me to leave?  And what are the factors that restrict them?  If you look at the crisis in Italy or Spain or Greece, they don’t want to leave.  So if they leave, what will be the outcome for the EU?

One also has to look into the history of the EU. There’s a lot of idealistic talk about this as well, and particularly young people in Europe have always been very supportive because we’ve always thought, we like all the European countries and it’s great to be together. But when you look into the history of the EU, you find out that there is another second story, the Honne, the true story, and it’s not just this official story. I first encountered this in Britain, with the only newspaper in the world that covered this story. In 2005, this British journalist in The Telegraph called Ambrose Evans Pritchard, and he met a PhD student who was about to finish his degree in Georgetown, Washington, and he gave him his PhD dissertation, and he used declassified information from the OSS (The Office of Strategic Services) and CIA. This was written in The Telegraph, I‘ll give you what was written there. When the EU predecessor, the Treaty of Rome and so forth, came along in the ’50s and ’60s, there was one, particularly influential person in the process named Jean Monnet, and if you go to Brussels, there are streets and buildings named after him.  He’s known as the father of Europe, but he didn’t have an actual position or title and was never elected, but he was always there as a mover and shaker in these treaties. Then there was something called the European Movement, which had a lot of money and approached all parties, opposition and government parties in Europe, and gave them cash if they put the unification of the EU ever closer into their programme. So all parties did this in Europe, the older parties that is. There was also a European Youth Movement, and they staged a demonstration at the French-German border shouting, “We youth don’t want borders . . .” click, click, media reporting!  What this PhD candidate uncovered was these key guys like Jean Monnet, Paul-Henri Spaak, Robert Schumannn, they were CIA agents, and the European Movement was 60% funded by the CIA and the European Youth Movement was 100% funded by the CIA, and it’s about creating a centralist, non-democratic structure to process orders and instructions from Washington in Europe and implement them.  Which explains a lot when suddenly these European negotiations about some kind of further unification are slowing down. The American president said “”do more, do it faster” when we’re always being told it’s for Europe to become independent from America. So there is a lot more to discover when you go into the history, and history is our data source, and somebody said we should try to be objective, and if you think this story sounds wild that you just heard, I encourage you to do your research, get the data, dig out the history. The facts are there for us to uncover and it’s our responsibility to question a bit more. Think critically, don’t always believe the first propaganda you hear, and then you start to see the bigger picture of what’s happening.

It’s time to move onto the last topic, which is how to overcome this risk, or how to prevent certain social economic risks. Immigrants – whether students, migrants or refugees – could provide the solution to the spiral of decay. How can immigrants help revitalise a city?

First, immigrants can help transform an area simply by being resident. Newcomers rent or buy property which would otherwise be derelict, buy goods and services and pay income taxes. In cities like Detroit where decades of pension liabilities accumulated when the population was much larger, increasing the population of taxpayers can staunch the flow of cuts to police, schools, infrastructure and other services which make a city worth living in.

Second, immigrants can differ from normal residents in ways which may benefit struggling cities in particular. Because they often can’t get mortgages they move to the toughest–and so cheapest–neighbourhoods, sprucing up houses that natives have left abandoned for years. They usually settle in places where they know family or friends–which means that when an immigrant cluster forms, it attracts new residents from elsewhere. With repopulation, crime often falls, because more people are on the streets to deter scavengers or drug dealers.

Third, because they may not be able to get more ordinary jobs, immigrants set up businesses that can help transform depressed areas. In Baltimore for example 7% of the population was born abroad but 21% of the city’s businesses are owned by foreigners. The districts where they live are often the only places where restaurants and grocery shops outnumber liquor stores and bail bond merchants. That can end up attracting well-heeled natives: one study suggests that for every 1,000 immigrants arriving in a district, 250 natives may follow. Baltimore and Philadelphia, two areas where there are a reasonable number of jobs, have seen neighbourhoods transformed.

But the policy of luring immigrants to cities in decline isn’t working everywhere. Detroit, despite attracting some new immigrants, struggles to keep them in the city. Cities still have to fix the problems that scare off locals and immigrants alike: Terrible schools, poor infrastructure, crime, and most of all, the lack of good jobs nearby. Immigrants can help revitalise a city, but they cannot do it on their own.”

If you are a legal immigrant, you have the same title, but do you have the same rights?

That’s a general problem. Even if you meet formal criteria you may not be accepted, particularly when you apply for jobs. Using my lectures as an example of how markets are never in equilibrium but always rationed, you will find out when you apply for jobs. This is an example of how the official economics is totally wrong, it’s a theory but not reality. In economics we’re told the prices then move to give us equilibrium, demand equals supply, and it’s all in equilibrium. When you apply for a job, you will find that there is more than one applicant for that job, it could be a large number, 200 or more, so they draw up a short list, and if you’re lucky you’re on that short list, and then there are maybe 20 people being interviewed for one job. Do you think now that that one job is being given on the criteria of the price? In other words, whoever is willing to work for the lowest salary is going to get the job. It’s interesting, and it’s a complete contradiction to economics, which says that the price is the key and the only criteria. Well, its not. So on what basis is that job being given? The salary is first decided, then they pick and choose on the basis on many other criteria, which are non-market, it can be extracting some other benefits. Think about how Hollywood actresses are being selected, or other ways of building an empire, or building loyalty or it may be connections of the person and so on. And that’s the reality, and one level, we know this, but we have to also reflect this is in our analysis of the economy. I would answer this more generally, markets always function differently, and there is always in a way discrimination, and it clearly will be worse for immigrants, there’s always selection, because the reality is there is no equilibrium in any market. All markets are rational which means that in effect, allocation decisions will be made. In rationed markets, it’s the shortsighted principles, whichever demand or supply is smaller, that side is power. In the labour market, those who offer the job have the power, and they’ll try to get benefits from it, and that’s the reality.

How should education be organised to prepare the next generation to have the best future?

One thing I noticed when I was in Tokyo as an Assistant Professor at Sophia University in Tokyo. It’s a Jesuit university that has links to other Jesuit universities all across the world. We had so many international students from every country, lots of Americans, UK, Belgium, France, Germany, and of course Asia, from everywhere in Asia, and some Latin America, some African countries. Very international. When I started out, my other colleagues could talk about the groups of students and they warn me off the German students “watch out in the class, there’s lots of German students – oh that’s hard work”, “what’s he talking about”, “they ask lots of difficult questions”. And at the time there was a lot of publicity in Germany, they did this PISA (The Programme for International Student Assessment) study, in 2002 or 2003, and that one conclusion that in the German media was propagated was that the German education is very bad, and we need to change it. The results of the studies showed we were very bad and need to change. And of course I saw the exact opposite, that the German students were almost feared by my colleagues because they were pretty good and especially respecting general knowledge.  In the UK, education is more specialized, and general knowledge is less well developed. So that taught me one thing that well, again, what they tell you in the media clearly may be quite misleading. Since then they actually started to change the education system in Germany and they’ve introduced, a UK style, American style bachelor degrees, using the English name Bachelor, and Master degrees. There were German names for these before, Diplom and so on and I thought it’s very ironic, because if you look into history, what is a bachelor? This is actually something that the monks, because there were monks, theologians at Oxford and Cambridge, when they wandered across Europe observed on the Continent, particularly in Germany, the apprenticeship system so that industry was organized in trade guilds which were like cooperative societies. And when you train to adopt a skill, like a baker, a butcher, a carpenter and so on, you would learn the tricks of the trade. How actually to run this business and make money and make a living, so that’s valuable. So you would really have to pay a lot of money to learn this, but you didn’t have any money, so you became an apprentice and worked for free. You were given a place to live and food, but you didn’t get a salary because really you were training and you’re paying the fee, so to speak by being cheap labour. And you did this for three years, and you did your exams, so if you were a carpenter you had to your wardrobe, or table or something, and the masters, the experienced carpenters would check and test you to see if you passed. If you then wanted to set up your own carpentry shop, you’d have to do some more training and then you become a master, meister. When you’re training its called a bachelor, because of course you couldn’t get married, because of course you didn’t have any money, you didn’t have a penny, working for free, so you were a bachelor. Only when you established your own shop and became a master could you do that.  So these expressions, used in English, bachelor and master, came from the continental European system of apprenticeship, which is actually a successful way to organize an important part of the education system, because not everyone is suited to go to university or would want to go to university, so diverse means of education are important to train people. Of course we know about the university avenue, but there needs to be other avenues that creates a more stable social economic environment. Everyone has a chance, and everyone can take pride in what they’re doing. There’s actually research about happiness, ultimately we all want to be loved and respected, and therefore you can design society to give everyone a chance to be respected and take pride in what they’re doing, and they will be happy and successful. They will perform. This is where some societies historically are better at organising. In Japan it’s worked really well, or other Scandinavian countries where people have the opportunities to thrive and feel like they’re respected for what they’re doing. It’s a very long answer but a difficult question you raised.

What do you believe is the biggest social economic risk of modern society and how should we deal with it?

I think it is an unfair economic system that creates many problems and delivers unhappiness and is against our common human interests, that is the biggest threat. Now this sounds pretty dire, but in many ways we’re heading towards this situation, assuming we continue with the same paradigm that we have maintained for the last 50 years. We need to look at alternatives and alternative approaches. Alternative ways are developing, countries are cooperating with one another and are moving towards a new paradigm. I think therefore that is really good news, therefore we can avoid these dire socio economic results.

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