[This is a travel essay, which elaborates two questions: How do taxation and labor market policies influence societies and how can rather homogenous societies tolerate increased immigration without failing to function?]
Europe’s Shared Worries
Whenever I travel to my HQ in Austria, I naturally talk to people and listen to what their minds are busy with. I find it most intriguing to hang out in our sharead general manager office, where I always meet a few colleagues from the 25 global subsidiaries our group encompasses. The GM of our Ukrainian subsidiary naturally has other issues on his mind than the Australian; European colleagues lately share more concerns than usual.
During the last few visits there are a few recurring topics which are being discussed. This is a summary of what my European colleagues are concerned with.
The explosive regional situation with potential global impact in Far East Asia is definitely not a concern to most Europeans. Far East Asia is simply to far away ;) But Europe’s economic outlook is of course closely connected to Far East Asia. A shrinking industrial basis in the West comes hand in hand with the growing manufacturing might of Japan, Taiwan, Korea and China. Many South East Asian nations are about to follow en route. Is Confucian capitalism outpacing postnational capitalist democracy? What is left for the cradle of Western civilization? Where is Europe’s faith and how can it be restored? I am sure that these questions lately crossed many Europeans’ mind in the one or other way, and I believe that rebuilding a sound individual and supra-national psyche will be essential in the years to come.
With provincial elections in two important provinces of Austria resulting in strong wins for the far right party, and the ruling center left and center right party claiming that the elections are an answer of the electorate to an European problem, i.e. an increasing number of African, Middle East and Central Asian migrants coming into Schengen countries, I feel like I have to work out my own view on things.
I listened to an excellent national radio broadcast on the state of affairs of the Upper Austrian economy a few days ago. Upper Austria, bordering Germany and the Czech Republic, has long profited from its proximity to the German automotive OEM headquarters and the comparatively cheaper Czech labor market; it has developed into the Austrian export powerhouse. I like to compare it to Guangdong, because like Guangdong albeit on a different scale, it is responsible for one quarter of all Austrian respectively Chinese exports. With such a strong manufacturing base, these provinces are industrial backbones to both countries. From a European point of perspective, Upper Austria is also of interest in regard to overall economic performance. With one of the lowest unemployment rates in all of Europe, one of the highest per capita GDPs and excellent social welfare, it could be considered an example for many other European provinces. But it seems that most of the interviewed business executives feel that this well-off status quo is threatened. Wolfgang Eder, CEO of Voest Alpine, with almost 30.000 employees globally the largest enterprise in the region, puts is straight forward: Upper Austria is well off for the time being, but if structural reforms are not implemented now, the region will soon loose its competitiveness and wealth to others.
Crossing the border from Austria to Germany and further on into Liechtenstein (the world’s 2nd richest country per capita) and Switzerland, driving our car down South to Lugano and Milano gave us two insights. We waited more than an hour at the border crossing between Austria and Germany close to Salzburg, because the police checked cars for immigrants. Three lanes were narrowed to one only and a handful of policemen watched the 4km motorcade of annoyed EU citizens slowly rolling by. Insight #1: Only a really stupid refugee would choose the largest border checkpoints on his route. Insight #2: The German Ministry of Interior Affairs collaborates with the German and Austrian right wing parties. Why else would it annoy 99% Austrian and German citizens with time-consuming border controls? Only a single French car is checked, probably for Algerian refugees taking the East European immigration route …
The Beauty and Decay of Piedmont
Upon descending from Switzerland in the Lugano area into Italy I am strangely reminded of my 2010 border crossing from Tibet into Nepal: A massive loss of altitude combined with ubiquitous torrents of water amidst a lush green nature. The topography of the Alps for Europe is indeed only comparable to the topography of the Himalayas for Asia, albeit again on a different scale. There the Indian cultures are separated from the Sinitic; here the Germanic cultures are separated from the Romanic and Slavic. But nowhere is the towering might of the Alps as visible as in Turin, where an altitude difference of more than 4000 meters stuns the human eye. Having lived half my life North of the Alps, I was only theoretically aware of the topographical impact of the Alps upon Europe’s history and development. Still in Shanghai I have a beautiful map hanging in our dining room showing the topography of central Europe in a North-South perspective. But never before did I see the true impact of this mountain massive like I did in Turin. A city which is situated at the river Po at barely 200 meters altitude is sheltered from the French and in particular the German barbarians by a natural Great Wall which piles up to Monte Rosa, Matterhorn and Mont Blanc, all of them almost 5000 meters high. Vienna, which is located at the very far East of the Alps is also situated at a river, the Danube, at the same altitude like Turin, but the highest peak, the Schneeberg, which is visible, good weather conditions permitting such a view, is only 2000 meters high. Therefore the view in Turin is simply breathtaking and has nothing comparable in Europe that I know of.
Considering the superb location of Turin, situated at the Fiume Po, the largest Italian River, backed by the Alps in the North and West, with tremendously fertile highlands to its South where agriculture flourished already hundreds of years ago and even more to the South the Mediterranean Sea, it can be well said that the Savoy made a very smart move – literally – when they changed the seat of their dynasty at the end of the 16th century from Chambery in France to Turin in Italy. Then, of course, nation states were not yet on the map neither in the minds of rulers nor ruled, but I believe that the House of Savoy got its hands on one of the most beautiful and by nature richly endorsed territories on this planet.
It is therefore not a big surprise that the city has flourished even more than the agriculture did before. Turin is a masterpiece of enlightened city planning of the 17th to 19th century and it seems that its architects did their drawings from a bird’s eye perspective. The enormously large historic city center feels like being one giant sketch with roads planned in a chessboard matrix and imperial corsi cutting across. With this heritage the Italians respectively the Savoy deserve to be called one of the cradles of tasteful design and architecture. We stop at almost every block because of a jaw dropping façade.
The global financial crisis has nevertheless left very obvious traces on the city’s face. To be sure, Italy is not Germany and the stereotypes of rather loose governance and less perfectionist entrepreneurship are always at the back of my mind. But there are some clear indicators that Turin has slid into a less prosperous period – some say that it did so already as early as in the 80ies. The public transport infrastructure is poor for a city proper of 900k and a metropolitan area of more than 2 mio. There is only one short metro line and the tram coaches seem to be mostly from the 70ies. Traffic is congested, in particular on the main roads leading to and from the city center. Most Italians seem to save money by avoiding the tolled highways, which have the same retarded check point system like China that wastes the traveler’s time. We do see some open poverty, but also some less obvious. Many Italians seem to suffer from the economic downturn and the rich-poor split grows.
When we want to visit the archeological museum, the main gate, a huge 5m high, ornate steel construction is half open with a red bike lock hanging down from one gate hemisphere; we stroll across the excavation sites of old Taurino, which are in the front yard of the 18th century museum complex, once part of the royal palace, and find a small hand written piece of paper at the massive wooden but locked entrance doors indicating a phone number of the museum administration. We turn our heels somehow not believing what we just experienced. Just imagine such a note at the doors of New York Moma or Copenhagen National Museet. Monday mornings, my Turin friends tell us, people go late to work, and we notice that most shops open either around 10am or 2pm. But even the afternoons feel awkwardly tranquil for the center of the fourth largest Italian city, which was once one of the centers of European manufacturing.
I am again reminded of the radio broadcast to which I listened when still in Austria. Stefan Pierer, CEO of KTM, a technology leader in motorbike production, said in his interview with some warning tone, that an economy needs a strong manufacturing base. I also recall James Kynge’s title China Shakes the World, where he describes the decay of the US manufacturing base. As my eyes wander over Turin’s streets, I ask myself what there is left of the North-Italian manufacturing might with FIAT in the lack of successful upper class vehicles and thus low margins struggling to stay afloat. Italians drive only small cars, it seems, with the Fiat Panda being the most popular vehicle on the roads. FIAT, after the merger with Chrysler now called FCA, still has its headquarters in Turin. We visit the former manufacturing plant of Lingotto, which was in the 1920ies the largest car factory at the time with its own testing course on the roof. The industrial complex, which has been turned into a mall in the 80ies and also provides office space is not only worth a visit because of its unique architecture, but also because it is a monument of how a society’s labor market changes within not even a 100 years.
Technology Rules All Progress
A short drive from the Lingotto plant we visit the stunning National Automotive Museum. The beauty of the exhibited vehicles is breathtaking, but what stirs my mind is the historical development of the automotive industry, which is beautifully showcased on three floors each more than 3000m2. Italy was one of the cradles of the modern automobile. In the 90ies of the 19th century German, French and Italian pioneers competed against each other in developing fuel combustion engines; England and the US joined in a few years later, but it is these three countries which driven by the industrial revolution must get the credit of most automotive technology which we now take for granted. I wonder why we do not perceive technology more as a central part of culture considering its far-reaching impact on our lives.
Between 1890 and 1910, i.e. within only 20 years, horses were extinguished from the streets of European capitals and cars, which in the beginning still looked like coaches, but soon resembled modern vehicles took their place. The turn to the 20th century must have indeed been an exciting time in Europe; and I sometimes feel exactly that excitement in nowadays FEA. The automotive industry was for the last 120 years at the very center of technological development; and a workshop reconstruction in the museum shows how every single part of these early cars were engineered, prototyped and how the best technology eventually spread to other manufacturers. We walk past vehicles of extinct brands like Itala, Tucker, Studebaker, Yugo or Trabant and I ponder how many of the 100 plus car manufacturers which are nowadays active in China will survive the next 20 years.
When I ask in deep admiration how these people with rather simple tools and basic knowledge did achieve such grand feats, my wife answers dryly: they were focused, because then nothing could divert their attention. And how right she is. No telly, no web, no soaps, no shoddy shopping. Europeans then, were in Maslow’s terminology there, where most Chinese are still today. They had satisfied their biological and physiological needs, their safety needs and due to growing nationalism their belonging needs; even if they were completely weird psychopaths like folks still are nowadays when confusing genuine attachment with nationalism. What they strived for were the higher needs of human nature and they were completely focused because there was no room to err. Having only recently been liberated from serfdom and agricultural plight most Europeans who had left the countryside to work in the plants of big cities could in the lack of social insurance and welfare only move diligently forward. Like my own father always used to say: if you stand with your back against a wall, you can only make a step ahead.
Stefan Zweig’s autobiographic account The World of Yesterday is the ultimate read about European life between the 1890ies and the 1930ies and the poisoning power of nationalism. There was a particularly interesting documentary shown in the museum about the connection between the automotive industry and Italian as well as German fascism. How much does that period resemble contemporary China and how much could FEA learn from European history considering that FEA seems to head directly into a similar nationalist conflict like the European nations did at the turn to the 20th century; fueled by the hubris of governments, which can’t control the new might of technology. After all – it can’t be said often enough – it was rarely an enlightened government during the last 150 years that brought upon change and progress, but technology. Niall Ferguson in Civilization and David S. Landes in The Wealth and Poverty of Nations have more to say on this and might not agree with me.
Where once cars where produced with a high percentage of the workforce active in the secondary sector, we now witness many overweight people shopping and eating, and all of them active in the tertiary sector. From an anthropological point of view Lingotto is a truly interesting biotope. A society bereft of its manufacturing base (Italy is according to the OECD still considered a major manufacturing nation) and detached from its agricultural roots (Italy is one of the largest agricultural economies according to output, in particular it is home to the world’s largest wine production) going about its business in the former spaces of industrial productivity. I get the feeling that affluent societies are on the wrong track. Even if it seems as if we moan and groan on a level of high saturation, growing unhappiness needs to be addressed. But what can the individual do on its own within such a society? Not everybody has the chance and the guts to emigrate and look for new fortunes abroad. More than four million Italian citizens living abroad and more than 60 million with Italian ancestry tell a story of 100 years of economic diaspora.
Capitalist Democracy vs. Confucian Capitalism
What can governments do to bring upon a better and healthier outlook on those who have to stay? In Italy as well as in most of Europe I see two main issues that need to be addressed: Taxation and labor market restructuring. Italy has with 22% not only one of the highest VAT in Europe (an increase to 25% is being discussed), it is also know for notoriously wasting tax money. I still recall an article about the private clinic for members of the Italian parliament, which alone consumes many million Euros per annum. It was for me one of the paradigms of a decadent democracy, which in effect has degenerated from its liberating outset to create a more equal society into a renaissance of aristocracy. I have expressed my views on the fake use of contemporary political terminology and its socio-economic implication already in another essay. This decadence boils down to a revival of feudalism and aristocracy; the rulers are not called aristocrats, but bureaucrats; the ruled not day laborers, but employees without or with minimum social benefits or even unemployed.
Modern societies need to shrink its governance. They need to apply in governance the same principles, which have been applied by private businesses under the pressure of competition to increase efficiency. Todays competition occurs on equal terms between businesses and between governments, but only a few European politicians want to acknowledge that they have adapt rigorous measures if they want to prevail against the increasingly nationalist FEA governments. Western economists and philosophers dread the emergence of a new capitalist system in the orient; the state-controlled FEA capitalism, which was called fascism 100 years ago in Europe, poses a tangible threat. Slovenian philosopher Slavoj Zizek pinpoints the issue in this interview; do also watch the BBC journalist’s mimicry, indicating that he does not believe a word what this Southern European idiot says.
Electronic data processing has opened to governance many new possibilities of saving money and thus reducing the tax burden of its citizens. But quite on the contrary it seems that the advanced societies of industrialized nations suffocate under an ever-heavier burden of public expenditure. Steven Johnson describes in his two books Where Do Good Ideas Come From? and Future Perfect how recent innovations could improve governance. Initiatives like GovLab collect information on modern and enlightened governance and show the way into an optimistic future of democracy. So, after all there is a silver lining at the grey cloud of European governance and democracy per se? I doubt it, to be frank. Democratic capitalism will fail against Confucian capitalism like Volvo’s flat hierarchy management model did fail against Toyota’s Confucian.
Money is the blood of a society and anemic societies look like Greece, England or Italy. The social democracies of Austria and Germany could well be next, if not in depth restructuring following the example of our Nordic neighbors is implemented. A government shall impose a fair taxation system that gives its citizens an incentive to pay a reasonable amount in exchange for being part of a larger community, which provides with essential institutions and infrastructure. If a government under whatever label extracts from its subjects more than is beneficial for the flourishing of regional, national or supranational communities, it will sooner or later face its own defeat and with that the decline of the society at large. Therefore a modern government must implement a less selfish taxation policy as one of two central measures.
Giancarlo, a mid 50 graphics designer and our airbnb host in Turin, tells us upon my asking that the taxation of labor is much higher than the taxation of wealth. What a sick system puts less tax on profit from stock than on profit from work? Ordinary people only have their time and energy to sell; therefore labor should enjoy the lowest tax rate of all. Italy and its largest agglomeration, Milano, have turned the nation into a place where the rich thrive and the division of the well to do and the poor is getting worse by the day. I believe that this Italian tendency also has its root in a wide spread veneration of the US; I was not aware that a country with such a grand history and culture is so much under the spell of a faltering system across the Atlantic. Not only 90% of the Lingotto mall restaurants imitate US cuisine, but also Milan imitates and serves to the US financial system. Why are Europeans not aware that as long as they play according to the rules of the US in whatever game, they are only part of a pyramid scheme? It might be easier for those who follow business models like franchising to profit, but true and sustainable growth is only generated from genuinely local initiatives.
Nicola, one of my Italian friends, who works as in house counsel for a large US credit card company in Milan, sustains with his brainpower, I guess in exchange for a nice paycheck, exactly such a scheme. Credit card companies with their headquarters in the US scoop off two to three percent cream from the top of every transaction, which is executed with the plastic. Brussels would be obliged to raise its own budget from such global undertakings, but instead exactly these large MNOs are granted beneficial taxation or even exemption. All roads lead to Rome, whether it is corruption in Beijing and Delhi or lobbying in Washington and Brussels. The 2012 French documentary Evasion Fiscale showed how MNOs, elite bureaucrats and international tax consultants like KPMG or PwC collaborate in global tax evasion. The Financial Time writes this weekend that a recent OECD agreement on new rules over dodging taxes will be a first step into the right direction. It is estimated that an additional tax revenue of USD 250 bln can be generated by denying corporations like Starbucks, Amazon, Ikea or Google access to tax havens like the Caymans or Dutch stichtingen legislation. But the finance ministers of the OECD countries shall not deceive themselves over this new agreement; it is the western democratic system itself, which needs to be overhauled if it is not to fail against Confucian capitalism. Western governments need to get more efficient.
With the governments of most advanced economies generating approximately one third of their tax revenue from VAT and another third from IIT all other tax is minuscule compared to these two. Taxation is always limited in volume and a government cannot continue to introduce new taxes over and over like a Sheriff of Nottingham. Structural reforms of the taxation system always have to be based on cutting expenses. Less spending on judicative, executive and legislative systems; the complete elimination of unnecessary government levels; a tax reform which does not put budget and government work force reduction at its very center is just another prolongation of the status quo to cement the positions of those in power.
Airbnb and Bureaucratic Futilism
For this trip to Italy’s Piedmont and France’s Cote d’Azure we have entirely relied on airbnb to book our accommodation. Past experiences have confirmed that most airbnb hosts are naturally welcoming, provide authentic information and you get a rather fair deal. It is in Turin when staying with Giancarlo that I realize the real draw of airbnb: It provides individuals with a rather steady tax-free income. In Italy with a stagnating if not even shrinking economy, where my friends tell me that nobody dares to change his job, because its almost impossible to find a new one, in particular in another industry, such a new source of income is more than welcome.
Giancarlo rents out two rooms in his perfectly located Turin apartment with rather low effort and generates with an assumed occupancy rate of 50% more than EUR 1500 net a month. I would call this a nice and above all tax-free side income. Stefano rents out two rooms in half of his grand father’s house in the Langhe for EUR 60 a night. Both him and his aunt Chiara make a decent and again tax-free income of roughly EUR 2-4k a month and have a steady circulation of international guests who are likely to buy their produce. Pieter rents out his guest room with balcony and sea view close to the Nice harbor for EUR 70 per night and can surely pay with that income more than just his utility costs at price Cote d’Azure.
Some rather successful Bay Area start-ups have recently based their business model on exactly the same logic: providing a community and usability based tax evasion method. Airbnb and Uber, but also amazon, taobao and ebay to some extent use the transnational power of the internet to outpace traditional concepts of generating tax revenue. Not only such corporations, but also their users fly below the radar of fiscal authorities. People like Joe Gebbia, founder of airbnb, are therefore in the short- and midterm view modern Robin Hoods, enabling ordinary citizens to generate an income without having to pay ludicrous taxes to their inefficient governments. In the long run they nevertheless also substantially undermine social welfare in societies where such payments are granted to its members: with shrinking tax revenue it will be increasingly difficult to sustain such benefits. As I google this issue I find that the New York Attorney General has recently launched a law suit against airbnb because of similar charges; but even if he prevails, it will not resolve the challenge, which the democratic governments of affluent societies face: stiff competition from FEA.
Man’s Search for Meaning
Another important observation, which I made these days, concerns the labor market. When watching the office people in the Lingotto mall having their slow lunch, the way they leisurely stroll along the shopping windows to and from the restaurants, I could not help but to remember the difference in lifestyle and work pace of both blue collar workers who were part of the long ago manufacturing routine in the Lingotto plant or modern entrepreneurs who are driven by either profit or enthusiasm. I also recall the great Fritz Lange movie Metropolis, which shot in 1927 showed a dystopian society of 2026 with people forced to work at the pace of the machines. I believe that the dystopian depiction of Metropolis has long given way to the real advantages of industrialization. Most people are aware that progress, which our societies made in the past, is the result of technological developments, not governmental policy changes. Industrial automation enables man to retire from dangerous and physically tiresome occupations. Machines enable man to focus his needs on the higher levels of Maslow’s pyramid given that those in power distribute their wealth somehow equally. That there is not only a humanistic but also an economic argument in favor of such a wealth distribution is nowadays without question.
If we simplify human existence to the very question of productivity, which is after all what economies are all about, there are only but three forms of living: productive, consumptive and destructive. These life dynamics are not exclusive, but they overlap constantly. It can be observed that modern affluent societies tend to accommodate men who have consumption focused life dynamics, which at times turn destructive, whereas the societies of Europe a 100 years ago or FEA now put their focus on productivity. My holiday read Man’s Search for Meaning by Viktor E. Frankl is an account of his concentration camp experiences, but from a psychoanalyst’s perspective. This little book can probably best shed light on what productivity and destructiveness as well as suffering and enjoyment mean to man’s existence and how our consumptive behaviors either favor the one or the other.
Auschwitz had obviously different dynamics than Google headquarters; and life dynamics not only vary from economy to economy, but also from industry to industry, from organization to organization and from individual to individual. When we leave Turin for Langhe and arrive in the small village of Perno, 30-year-old Stefano Oreste, who runs a 0.8-hectare large winery in the Barolo area, which he inherited from his grand father, greets us. It becomes very soon apparent that he is ultra busy, but still enjoys his life dynamics. Stefano grows five different kinds of grapes and this is the last day the harvest, which lasted three weeks in total. His aunt Chiara and her boyfriend help harvesting and crushing the grapes, and he explains that the harvest is still mainly done by family members, because tax for employed labor is too high. We drop off our suitcases in one of the two B&B rooms that he rents out on airbnb and are offered a glass Barbaresco each on the big terrace overlooking the beautiful Langhe region. Stefano and his brother are busy with the degustation of two clients who stay for two hours our more. During the two and a half days, which we spent with Stefano, I had the feeling that he was busy from early morning to late evening, producing and selling his wine, but still his life dynamics seemed to be positively balanced between consumption and production; quite contrary to the impression I got from the office workers in Lingotto. I believe that modern, small scale and machine supported agriculture, which has overcome the plight of man and beast, indeed provides a livelihood of genuine productivity. Not only growing, but also selling one’s products must in spite of all the still existing hardship be truly rewarding and fulfilling. I am therefore not surprised that many young people seek their salvation in a back to the roots movement to farming. But are the life dynamics of the small-scale primary sector salvation for everybody? Rather not.
The ideal life dynamics are probably described in the Japanese term ikigai, men’s reason to live. Growing depression in affluent societies as described e.g. by Martin E. Seligmen in his book Learned Optimism reflects that many people have lost their reason to get up in the morning and greet a new day of creativity and productivity. Travelling across Central Europe I ponder if it is only the duty of the individual to uphold an optimistic outlook on life. Is it not also the responsibility of governments to provide a framework in which individuals and organizations can thrive? The burden of heavy taxation in an economy can have an equally disastrous impact on the life dynamics of individuals as their own (learned) negativity and (learned) helplessness. Again: not everybody is made for emigration.
A New Classification of the Labor Market’s Third Sector
Governments of affluent societies are advised to look at the labor markets closer, probably with the support of psychologists. It seems to me that a healthy mix of primary, secondary and tertiary sector still waits for a definition. Without doubt, agriculture, in particular with the support of modern machinery if kept at small scale can generate uniquely productive and creative life dynamics. Industry can do so as well, but has a much harder challenge to provide a similar setting to most of the blue-collar workers who form part of automated production processes or assembly lines. The tertiary sector, in particular much hyped financial services, needs to undergo a new classification, which applies the concept of creative-productive, consumptive and destructive life dynamics. Governments should promote productive tertiary sector industries and restrict consumptive and destructive ones; like governance itself.
Modern industrial economies usually have less than 5% of their work force in the primary sector, around 20% in the secondary and up to 75, sometimes even more than 75% in the tertiary sector. Is there a key to a healthy ratio of these three sectors? I have the feeling that the more economies focus their labor forces on the tertiary sector the more long-term unhappiness is generated. People in many tertiary industries become alienated from reality, they quite often don’t understand anymore the purpose of their daily shuffling, and bluntly spoken, quite often there is none left.
We nowadays often speak of life style design and I ask myself if we are not meant to live our lives in multiple sectors at once – again not everybody can or wants to do so; this is only a softly spoken deliberation on how we could do better. My foremost example is the boyfriend of a former landlord in Vienna. He had a day job as technical mathematician in some engineering office, but started every day 6 am with his father, a physics professor at the Vienna Technical University in the workshop of his deceased carpenter grand father. They both worked there until around 10 am, when they left to their white-collar office life. It is the mix between mental and manual work, which provides a healthy balance to body and mind.
Harmonious Immigration in Homogenous Societies
Stefano Oreste tells us during our first evening in Perno on the sun filled terrace overlooking the Langhe, that the law is very strict with wine growing farmers. Only farmers with south and southeast looking plots are allowed to produce Barolo wines, the other plots are only good for Barbaresco and other wines. The Orestes sell one bottle of Barolo for 20 Euros, a bottle of Barbarsco for 7 Euros, so there would be quite some incentive to produce more Barolo. The Italian Ministry of Agriculture checks all farmers in the region every four months in order to maintain a high quality standard of wines produced with the label Barolo DOC. Land is already very pricy in the Langhe, but even if one could afford to buy, property can only be acquired if going through complicated paperwork. Stefano says that he does not know of any foreigner having succeeded to purchase a winery in his home municipality of Monfort d’Alba.
The Langhe has only recently been declared a UNESCO World Heritage for its unique agricultural landscape formed by man’s hand over many centuries. As we talk about the rigorous regulations of wine making and having still at the back of my mind the current migration crisis, I ask myself, if the Langhe could have ever come into existence if there was not a very homogenous society tending to the land for hundreds of years. I believe that in particular agricultural regions clearly show that loose immigration and uncontrolled change of societies is not beneficial to the development of certain habitats. But history also shows that a society’s openness produced some of mankind’s greatest achievements: both the Chinese Tang dynasty and the fin de siècle Habsburg monarchy are great examples, in particular in comparison to their contemporary counterparts.
At least since the immigration of thousands of south European and Turkish workers during the Wirtschaftswunder years of the 60ies and 70ies uneasiness grows in central and north European countries. In particular radical Muslims bloodily attacking western societies have recently caused many European citizens to reject immigration at all and has given rise to right wing parties throughout Europe. But thousands of refugees continue to arrive from Northern Africa and Central Asia. Some Western intellectual voices like Slovoj Zizek or Richard Dawkins are growing deafening loud, in particular about the naiveté of some European societies to believe that there is any moral obligation to integrate orthodox Muslims or people from different cultural background without commitment to integrate. Gutmenschpolitik prevails, but neglects the fact that doing the right thing doesn’t necessarily imply to do it without brains.
I reckon that European immigration policy could learn from China’s hukou system. It basically restricts the free movement of people according to their household registry. And yes, it creates a two-class society of those who can move freely and those who can’t. This will sound like an attack on human rights to some who elevate the theoretical equality of man. But lets be pragmatic: the refugees seeking shelter in Europe have not lived a life in equality and will even under the best of all conditions not lead a life in equality for years to come. Equality is for the most part a theoretical concept. Improvement is a pragmatic matter of gradual changes. One step after another. Therefore a sound framework with clear rules needs to be implemented in all of Europe. Issuing household registries to not only immigrants, but also EU citizens who move from one country into another, would be such a practical framework. Therefore the compulsory registration of immigrants to the EU at the borders it the right thing to do, but this measure must be flanked with the provision of more data like profession and competences. Refugees shall then according to the requirements of the EU labor market be assigned to a region, where they are entitled to live for three years until they have to fulfill criteria like language tests or additional qualifications in order to be granted the extension of their visa.
Declaring only certain regions open to migration would be another measure, which can be applied similar to the German model of spatial structure (Raumordnung), i.e. the division of land for agricultural, residential, industrial or commercial use. To make sure that no ghettos are being formed, sociologists need to find in collaboration with local industry unions the right key of distribution according to the requirements of the local labor markets. Moreover, in order to maintain a local culture, it must be obligatory for immigrants to learn the host countries language within three years maximum. All these measures might not avoid that cultural conflicts still arise, but they can mitigate the risk and support the objective of true integration whilst not depriving a country of its specific socio-cultural collective identity.
On top of these measures I am very much in favor of strict laws regulating the purchase of real estate (Grundverkehrsordnung). In particular land, but also real estate for housing purposes shall only be open to purchase for foreigners who have lived in the respective country for a certain amount of years and have passed certain levels of integration, i.e. language proficiency, a certain period of IIT payment, etc. Regions like Italian Langhe, French Bordeaux or Austrian Salzkammergut must be entitled to enforce even stricter laws, if maintaining the cultural homogeneity requires them to do so. If the EU and its member states don’t address these issues, they risk the decay of these homogenous societies more than they already have to be blamed for. Again we can learn from China, where the purchase of land is not possible, where land can only be leased for a certain number of years from the government, but never belongs to a private entity, where foreign investors are forced into JV with local counterparts. It is therefore (not only) Chinese billionaires who have found a new hobby in purchasing Australian islands, French wineries and German enterprises.
So, after all there is a silver lining at the grey cloud of European governance and democracy per se? I doubt it, to be frank. Societies are like huge flywheels and can only be changed by abrupt friction or if they are jolted out of their wheel hubs by external forces. Sir Karl Popper once defined democracy in contrast to dictatorship or tyranny, thus focusing on opportunities for the people to control their leaders and to oust them without the need for a revolution. According to his definition, we don’t live anymore in a democracy. But as individuals we can take responsibility of our own life; stop being part of systems we do not approve of as far as possible; and look inwards for salvation instead of blaming others for the misery we have to endure.
Austrian comedian Roland Düringer put this ancient Buddhist insight in a recent late night show into a contemporary setting: we can not only blame governments for turning into system zombies. But I am convinced that we should also not be oblivious to their deeds and neglects. Sleek and efficient governments are an important cell of a societies body. Large and inefficient governments are metaplasmic cancer cells that eat away the body. Bureaucratic futilism was the answer of great sinologist Joseph Needham to the question why 18th century Ming China fell into decay. Brussels and it’s democratic member state governments suffer from the same endemic disease.
Europe’s Shared Worries
Whenever I travel to my HQ in Austria, I naturally talk to people and listen to what their minds are busy with. I find it most intriguing to hang out in our sharead general manager office, where I always meet a few colleagues from the 25 global subsidiaries our group encompasses. The GM of our Ukrainian subsidiary naturally has other issues on his mind than the Australian; European colleagues lately share more concerns than usual.
During the last few visits there are a few recurring topics which are being discussed. This is a summary of what my European colleagues are concerned with.
- Economic outlook – since the GFC always good for a chat with European colleagues
- Grexit – not that hot anymore, but considering the macro economic impact, it is interesting that it stirred media, politics and the European public more than the VW emission fraud; Greece, only 2% of EU GDP; yet the cradle of European civilization is probably rather an emotional subject than an economic one
- Ukrainian crisis – oblivious and weak EU politicians burn their fingers in a struggle for regional primacy with Russia; instead of long term integration of sun rich Northern Africa and Middle East Brussels gets into a fight with fossil resource rich Russia and must pay dearly for its naiveté
- Migration crisis with two main influx routes in Italy, in particular Lampedusa from Africa and Turkey as well as South East Europe from the Middle East and Central Asia
The explosive regional situation with potential global impact in Far East Asia is definitely not a concern to most Europeans. Far East Asia is simply to far away ;) But Europe’s economic outlook is of course closely connected to Far East Asia. A shrinking industrial basis in the West comes hand in hand with the growing manufacturing might of Japan, Taiwan, Korea and China. Many South East Asian nations are about to follow en route. Is Confucian capitalism outpacing postnational capitalist democracy? What is left for the cradle of Western civilization? Where is Europe’s faith and how can it be restored? I am sure that these questions lately crossed many Europeans’ mind in the one or other way, and I believe that rebuilding a sound individual and supra-national psyche will be essential in the years to come.
With provincial elections in two important provinces of Austria resulting in strong wins for the far right party, and the ruling center left and center right party claiming that the elections are an answer of the electorate to an European problem, i.e. an increasing number of African, Middle East and Central Asian migrants coming into Schengen countries, I feel like I have to work out my own view on things.
I listened to an excellent national radio broadcast on the state of affairs of the Upper Austrian economy a few days ago. Upper Austria, bordering Germany and the Czech Republic, has long profited from its proximity to the German automotive OEM headquarters and the comparatively cheaper Czech labor market; it has developed into the Austrian export powerhouse. I like to compare it to Guangdong, because like Guangdong albeit on a different scale, it is responsible for one quarter of all Austrian respectively Chinese exports. With such a strong manufacturing base, these provinces are industrial backbones to both countries. From a European point of perspective, Upper Austria is also of interest in regard to overall economic performance. With one of the lowest unemployment rates in all of Europe, one of the highest per capita GDPs and excellent social welfare, it could be considered an example for many other European provinces. But it seems that most of the interviewed business executives feel that this well-off status quo is threatened. Wolfgang Eder, CEO of Voest Alpine, with almost 30.000 employees globally the largest enterprise in the region, puts is straight forward: Upper Austria is well off for the time being, but if structural reforms are not implemented now, the region will soon loose its competitiveness and wealth to others.
Crossing the border from Austria to Germany and further on into Liechtenstein (the world’s 2nd richest country per capita) and Switzerland, driving our car down South to Lugano and Milano gave us two insights. We waited more than an hour at the border crossing between Austria and Germany close to Salzburg, because the police checked cars for immigrants. Three lanes were narrowed to one only and a handful of policemen watched the 4km motorcade of annoyed EU citizens slowly rolling by. Insight #1: Only a really stupid refugee would choose the largest border checkpoints on his route. Insight #2: The German Ministry of Interior Affairs collaborates with the German and Austrian right wing parties. Why else would it annoy 99% Austrian and German citizens with time-consuming border controls? Only a single French car is checked, probably for Algerian refugees taking the East European immigration route …
The Beauty and Decay of Piedmont
Upon descending from Switzerland in the Lugano area into Italy I am strangely reminded of my 2010 border crossing from Tibet into Nepal: A massive loss of altitude combined with ubiquitous torrents of water amidst a lush green nature. The topography of the Alps for Europe is indeed only comparable to the topography of the Himalayas for Asia, albeit again on a different scale. There the Indian cultures are separated from the Sinitic; here the Germanic cultures are separated from the Romanic and Slavic. But nowhere is the towering might of the Alps as visible as in Turin, where an altitude difference of more than 4000 meters stuns the human eye. Having lived half my life North of the Alps, I was only theoretically aware of the topographical impact of the Alps upon Europe’s history and development. Still in Shanghai I have a beautiful map hanging in our dining room showing the topography of central Europe in a North-South perspective. But never before did I see the true impact of this mountain massive like I did in Turin. A city which is situated at the river Po at barely 200 meters altitude is sheltered from the French and in particular the German barbarians by a natural Great Wall which piles up to Monte Rosa, Matterhorn and Mont Blanc, all of them almost 5000 meters high. Vienna, which is located at the very far East of the Alps is also situated at a river, the Danube, at the same altitude like Turin, but the highest peak, the Schneeberg, which is visible, good weather conditions permitting such a view, is only 2000 meters high. Therefore the view in Turin is simply breathtaking and has nothing comparable in Europe that I know of.
Considering the superb location of Turin, situated at the Fiume Po, the largest Italian River, backed by the Alps in the North and West, with tremendously fertile highlands to its South where agriculture flourished already hundreds of years ago and even more to the South the Mediterranean Sea, it can be well said that the Savoy made a very smart move – literally – when they changed the seat of their dynasty at the end of the 16th century from Chambery in France to Turin in Italy. Then, of course, nation states were not yet on the map neither in the minds of rulers nor ruled, but I believe that the House of Savoy got its hands on one of the most beautiful and by nature richly endorsed territories on this planet.
It is therefore not a big surprise that the city has flourished even more than the agriculture did before. Turin is a masterpiece of enlightened city planning of the 17th to 19th century and it seems that its architects did their drawings from a bird’s eye perspective. The enormously large historic city center feels like being one giant sketch with roads planned in a chessboard matrix and imperial corsi cutting across. With this heritage the Italians respectively the Savoy deserve to be called one of the cradles of tasteful design and architecture. We stop at almost every block because of a jaw dropping façade.
The global financial crisis has nevertheless left very obvious traces on the city’s face. To be sure, Italy is not Germany and the stereotypes of rather loose governance and less perfectionist entrepreneurship are always at the back of my mind. But there are some clear indicators that Turin has slid into a less prosperous period – some say that it did so already as early as in the 80ies. The public transport infrastructure is poor for a city proper of 900k and a metropolitan area of more than 2 mio. There is only one short metro line and the tram coaches seem to be mostly from the 70ies. Traffic is congested, in particular on the main roads leading to and from the city center. Most Italians seem to save money by avoiding the tolled highways, which have the same retarded check point system like China that wastes the traveler’s time. We do see some open poverty, but also some less obvious. Many Italians seem to suffer from the economic downturn and the rich-poor split grows.
When we want to visit the archeological museum, the main gate, a huge 5m high, ornate steel construction is half open with a red bike lock hanging down from one gate hemisphere; we stroll across the excavation sites of old Taurino, which are in the front yard of the 18th century museum complex, once part of the royal palace, and find a small hand written piece of paper at the massive wooden but locked entrance doors indicating a phone number of the museum administration. We turn our heels somehow not believing what we just experienced. Just imagine such a note at the doors of New York Moma or Copenhagen National Museet. Monday mornings, my Turin friends tell us, people go late to work, and we notice that most shops open either around 10am or 2pm. But even the afternoons feel awkwardly tranquil for the center of the fourth largest Italian city, which was once one of the centers of European manufacturing.
I am again reminded of the radio broadcast to which I listened when still in Austria. Stefan Pierer, CEO of KTM, a technology leader in motorbike production, said in his interview with some warning tone, that an economy needs a strong manufacturing base. I also recall James Kynge’s title China Shakes the World, where he describes the decay of the US manufacturing base. As my eyes wander over Turin’s streets, I ask myself what there is left of the North-Italian manufacturing might with FIAT in the lack of successful upper class vehicles and thus low margins struggling to stay afloat. Italians drive only small cars, it seems, with the Fiat Panda being the most popular vehicle on the roads. FIAT, after the merger with Chrysler now called FCA, still has its headquarters in Turin. We visit the former manufacturing plant of Lingotto, which was in the 1920ies the largest car factory at the time with its own testing course on the roof. The industrial complex, which has been turned into a mall in the 80ies and also provides office space is not only worth a visit because of its unique architecture, but also because it is a monument of how a society’s labor market changes within not even a 100 years.
Technology Rules All Progress
A short drive from the Lingotto plant we visit the stunning National Automotive Museum. The beauty of the exhibited vehicles is breathtaking, but what stirs my mind is the historical development of the automotive industry, which is beautifully showcased on three floors each more than 3000m2. Italy was one of the cradles of the modern automobile. In the 90ies of the 19th century German, French and Italian pioneers competed against each other in developing fuel combustion engines; England and the US joined in a few years later, but it is these three countries which driven by the industrial revolution must get the credit of most automotive technology which we now take for granted. I wonder why we do not perceive technology more as a central part of culture considering its far-reaching impact on our lives.
Between 1890 and 1910, i.e. within only 20 years, horses were extinguished from the streets of European capitals and cars, which in the beginning still looked like coaches, but soon resembled modern vehicles took their place. The turn to the 20th century must have indeed been an exciting time in Europe; and I sometimes feel exactly that excitement in nowadays FEA. The automotive industry was for the last 120 years at the very center of technological development; and a workshop reconstruction in the museum shows how every single part of these early cars were engineered, prototyped and how the best technology eventually spread to other manufacturers. We walk past vehicles of extinct brands like Itala, Tucker, Studebaker, Yugo or Trabant and I ponder how many of the 100 plus car manufacturers which are nowadays active in China will survive the next 20 years.
When I ask in deep admiration how these people with rather simple tools and basic knowledge did achieve such grand feats, my wife answers dryly: they were focused, because then nothing could divert their attention. And how right she is. No telly, no web, no soaps, no shoddy shopping. Europeans then, were in Maslow’s terminology there, where most Chinese are still today. They had satisfied their biological and physiological needs, their safety needs and due to growing nationalism their belonging needs; even if they were completely weird psychopaths like folks still are nowadays when confusing genuine attachment with nationalism. What they strived for were the higher needs of human nature and they were completely focused because there was no room to err. Having only recently been liberated from serfdom and agricultural plight most Europeans who had left the countryside to work in the plants of big cities could in the lack of social insurance and welfare only move diligently forward. Like my own father always used to say: if you stand with your back against a wall, you can only make a step ahead.
Stefan Zweig’s autobiographic account The World of Yesterday is the ultimate read about European life between the 1890ies and the 1930ies and the poisoning power of nationalism. There was a particularly interesting documentary shown in the museum about the connection between the automotive industry and Italian as well as German fascism. How much does that period resemble contemporary China and how much could FEA learn from European history considering that FEA seems to head directly into a similar nationalist conflict like the European nations did at the turn to the 20th century; fueled by the hubris of governments, which can’t control the new might of technology. After all – it can’t be said often enough – it was rarely an enlightened government during the last 150 years that brought upon change and progress, but technology. Niall Ferguson in Civilization and David S. Landes in The Wealth and Poverty of Nations have more to say on this and might not agree with me.
Where once cars where produced with a high percentage of the workforce active in the secondary sector, we now witness many overweight people shopping and eating, and all of them active in the tertiary sector. From an anthropological point of view Lingotto is a truly interesting biotope. A society bereft of its manufacturing base (Italy is according to the OECD still considered a major manufacturing nation) and detached from its agricultural roots (Italy is one of the largest agricultural economies according to output, in particular it is home to the world’s largest wine production) going about its business in the former spaces of industrial productivity. I get the feeling that affluent societies are on the wrong track. Even if it seems as if we moan and groan on a level of high saturation, growing unhappiness needs to be addressed. But what can the individual do on its own within such a society? Not everybody has the chance and the guts to emigrate and look for new fortunes abroad. More than four million Italian citizens living abroad and more than 60 million with Italian ancestry tell a story of 100 years of economic diaspora.
Capitalist Democracy vs. Confucian Capitalism
What can governments do to bring upon a better and healthier outlook on those who have to stay? In Italy as well as in most of Europe I see two main issues that need to be addressed: Taxation and labor market restructuring. Italy has with 22% not only one of the highest VAT in Europe (an increase to 25% is being discussed), it is also know for notoriously wasting tax money. I still recall an article about the private clinic for members of the Italian parliament, which alone consumes many million Euros per annum. It was for me one of the paradigms of a decadent democracy, which in effect has degenerated from its liberating outset to create a more equal society into a renaissance of aristocracy. I have expressed my views on the fake use of contemporary political terminology and its socio-economic implication already in another essay. This decadence boils down to a revival of feudalism and aristocracy; the rulers are not called aristocrats, but bureaucrats; the ruled not day laborers, but employees without or with minimum social benefits or even unemployed.
Modern societies need to shrink its governance. They need to apply in governance the same principles, which have been applied by private businesses under the pressure of competition to increase efficiency. Todays competition occurs on equal terms between businesses and between governments, but only a few European politicians want to acknowledge that they have adapt rigorous measures if they want to prevail against the increasingly nationalist FEA governments. Western economists and philosophers dread the emergence of a new capitalist system in the orient; the state-controlled FEA capitalism, which was called fascism 100 years ago in Europe, poses a tangible threat. Slovenian philosopher Slavoj Zizek pinpoints the issue in this interview; do also watch the BBC journalist’s mimicry, indicating that he does not believe a word what this Southern European idiot says.
Electronic data processing has opened to governance many new possibilities of saving money and thus reducing the tax burden of its citizens. But quite on the contrary it seems that the advanced societies of industrialized nations suffocate under an ever-heavier burden of public expenditure. Steven Johnson describes in his two books Where Do Good Ideas Come From? and Future Perfect how recent innovations could improve governance. Initiatives like GovLab collect information on modern and enlightened governance and show the way into an optimistic future of democracy. So, after all there is a silver lining at the grey cloud of European governance and democracy per se? I doubt it, to be frank. Democratic capitalism will fail against Confucian capitalism like Volvo’s flat hierarchy management model did fail against Toyota’s Confucian.
Money is the blood of a society and anemic societies look like Greece, England or Italy. The social democracies of Austria and Germany could well be next, if not in depth restructuring following the example of our Nordic neighbors is implemented. A government shall impose a fair taxation system that gives its citizens an incentive to pay a reasonable amount in exchange for being part of a larger community, which provides with essential institutions and infrastructure. If a government under whatever label extracts from its subjects more than is beneficial for the flourishing of regional, national or supranational communities, it will sooner or later face its own defeat and with that the decline of the society at large. Therefore a modern government must implement a less selfish taxation policy as one of two central measures.
Giancarlo, a mid 50 graphics designer and our airbnb host in Turin, tells us upon my asking that the taxation of labor is much higher than the taxation of wealth. What a sick system puts less tax on profit from stock than on profit from work? Ordinary people only have their time and energy to sell; therefore labor should enjoy the lowest tax rate of all. Italy and its largest agglomeration, Milano, have turned the nation into a place where the rich thrive and the division of the well to do and the poor is getting worse by the day. I believe that this Italian tendency also has its root in a wide spread veneration of the US; I was not aware that a country with such a grand history and culture is so much under the spell of a faltering system across the Atlantic. Not only 90% of the Lingotto mall restaurants imitate US cuisine, but also Milan imitates and serves to the US financial system. Why are Europeans not aware that as long as they play according to the rules of the US in whatever game, they are only part of a pyramid scheme? It might be easier for those who follow business models like franchising to profit, but true and sustainable growth is only generated from genuinely local initiatives.
Nicola, one of my Italian friends, who works as in house counsel for a large US credit card company in Milan, sustains with his brainpower, I guess in exchange for a nice paycheck, exactly such a scheme. Credit card companies with their headquarters in the US scoop off two to three percent cream from the top of every transaction, which is executed with the plastic. Brussels would be obliged to raise its own budget from such global undertakings, but instead exactly these large MNOs are granted beneficial taxation or even exemption. All roads lead to Rome, whether it is corruption in Beijing and Delhi or lobbying in Washington and Brussels. The 2012 French documentary Evasion Fiscale showed how MNOs, elite bureaucrats and international tax consultants like KPMG or PwC collaborate in global tax evasion. The Financial Time writes this weekend that a recent OECD agreement on new rules over dodging taxes will be a first step into the right direction. It is estimated that an additional tax revenue of USD 250 bln can be generated by denying corporations like Starbucks, Amazon, Ikea or Google access to tax havens like the Caymans or Dutch stichtingen legislation. But the finance ministers of the OECD countries shall not deceive themselves over this new agreement; it is the western democratic system itself, which needs to be overhauled if it is not to fail against Confucian capitalism. Western governments need to get more efficient.
With the governments of most advanced economies generating approximately one third of their tax revenue from VAT and another third from IIT all other tax is minuscule compared to these two. Taxation is always limited in volume and a government cannot continue to introduce new taxes over and over like a Sheriff of Nottingham. Structural reforms of the taxation system always have to be based on cutting expenses. Less spending on judicative, executive and legislative systems; the complete elimination of unnecessary government levels; a tax reform which does not put budget and government work force reduction at its very center is just another prolongation of the status quo to cement the positions of those in power.
Airbnb and Bureaucratic Futilism
For this trip to Italy’s Piedmont and France’s Cote d’Azure we have entirely relied on airbnb to book our accommodation. Past experiences have confirmed that most airbnb hosts are naturally welcoming, provide authentic information and you get a rather fair deal. It is in Turin when staying with Giancarlo that I realize the real draw of airbnb: It provides individuals with a rather steady tax-free income. In Italy with a stagnating if not even shrinking economy, where my friends tell me that nobody dares to change his job, because its almost impossible to find a new one, in particular in another industry, such a new source of income is more than welcome.
Giancarlo rents out two rooms in his perfectly located Turin apartment with rather low effort and generates with an assumed occupancy rate of 50% more than EUR 1500 net a month. I would call this a nice and above all tax-free side income. Stefano rents out two rooms in half of his grand father’s house in the Langhe for EUR 60 a night. Both him and his aunt Chiara make a decent and again tax-free income of roughly EUR 2-4k a month and have a steady circulation of international guests who are likely to buy their produce. Pieter rents out his guest room with balcony and sea view close to the Nice harbor for EUR 70 per night and can surely pay with that income more than just his utility costs at price Cote d’Azure.
Some rather successful Bay Area start-ups have recently based their business model on exactly the same logic: providing a community and usability based tax evasion method. Airbnb and Uber, but also amazon, taobao and ebay to some extent use the transnational power of the internet to outpace traditional concepts of generating tax revenue. Not only such corporations, but also their users fly below the radar of fiscal authorities. People like Joe Gebbia, founder of airbnb, are therefore in the short- and midterm view modern Robin Hoods, enabling ordinary citizens to generate an income without having to pay ludicrous taxes to their inefficient governments. In the long run they nevertheless also substantially undermine social welfare in societies where such payments are granted to its members: with shrinking tax revenue it will be increasingly difficult to sustain such benefits. As I google this issue I find that the New York Attorney General has recently launched a law suit against airbnb because of similar charges; but even if he prevails, it will not resolve the challenge, which the democratic governments of affluent societies face: stiff competition from FEA.
Man’s Search for Meaning
Another important observation, which I made these days, concerns the labor market. When watching the office people in the Lingotto mall having their slow lunch, the way they leisurely stroll along the shopping windows to and from the restaurants, I could not help but to remember the difference in lifestyle and work pace of both blue collar workers who were part of the long ago manufacturing routine in the Lingotto plant or modern entrepreneurs who are driven by either profit or enthusiasm. I also recall the great Fritz Lange movie Metropolis, which shot in 1927 showed a dystopian society of 2026 with people forced to work at the pace of the machines. I believe that the dystopian depiction of Metropolis has long given way to the real advantages of industrialization. Most people are aware that progress, which our societies made in the past, is the result of technological developments, not governmental policy changes. Industrial automation enables man to retire from dangerous and physically tiresome occupations. Machines enable man to focus his needs on the higher levels of Maslow’s pyramid given that those in power distribute their wealth somehow equally. That there is not only a humanistic but also an economic argument in favor of such a wealth distribution is nowadays without question.
If we simplify human existence to the very question of productivity, which is after all what economies are all about, there are only but three forms of living: productive, consumptive and destructive. These life dynamics are not exclusive, but they overlap constantly. It can be observed that modern affluent societies tend to accommodate men who have consumption focused life dynamics, which at times turn destructive, whereas the societies of Europe a 100 years ago or FEA now put their focus on productivity. My holiday read Man’s Search for Meaning by Viktor E. Frankl is an account of his concentration camp experiences, but from a psychoanalyst’s perspective. This little book can probably best shed light on what productivity and destructiveness as well as suffering and enjoyment mean to man’s existence and how our consumptive behaviors either favor the one or the other.
Auschwitz had obviously different dynamics than Google headquarters; and life dynamics not only vary from economy to economy, but also from industry to industry, from organization to organization and from individual to individual. When we leave Turin for Langhe and arrive in the small village of Perno, 30-year-old Stefano Oreste, who runs a 0.8-hectare large winery in the Barolo area, which he inherited from his grand father, greets us. It becomes very soon apparent that he is ultra busy, but still enjoys his life dynamics. Stefano grows five different kinds of grapes and this is the last day the harvest, which lasted three weeks in total. His aunt Chiara and her boyfriend help harvesting and crushing the grapes, and he explains that the harvest is still mainly done by family members, because tax for employed labor is too high. We drop off our suitcases in one of the two B&B rooms that he rents out on airbnb and are offered a glass Barbaresco each on the big terrace overlooking the beautiful Langhe region. Stefano and his brother are busy with the degustation of two clients who stay for two hours our more. During the two and a half days, which we spent with Stefano, I had the feeling that he was busy from early morning to late evening, producing and selling his wine, but still his life dynamics seemed to be positively balanced between consumption and production; quite contrary to the impression I got from the office workers in Lingotto. I believe that modern, small scale and machine supported agriculture, which has overcome the plight of man and beast, indeed provides a livelihood of genuine productivity. Not only growing, but also selling one’s products must in spite of all the still existing hardship be truly rewarding and fulfilling. I am therefore not surprised that many young people seek their salvation in a back to the roots movement to farming. But are the life dynamics of the small-scale primary sector salvation for everybody? Rather not.
The ideal life dynamics are probably described in the Japanese term ikigai, men’s reason to live. Growing depression in affluent societies as described e.g. by Martin E. Seligmen in his book Learned Optimism reflects that many people have lost their reason to get up in the morning and greet a new day of creativity and productivity. Travelling across Central Europe I ponder if it is only the duty of the individual to uphold an optimistic outlook on life. Is it not also the responsibility of governments to provide a framework in which individuals and organizations can thrive? The burden of heavy taxation in an economy can have an equally disastrous impact on the life dynamics of individuals as their own (learned) negativity and (learned) helplessness. Again: not everybody is made for emigration.
A New Classification of the Labor Market’s Third Sector
Governments of affluent societies are advised to look at the labor markets closer, probably with the support of psychologists. It seems to me that a healthy mix of primary, secondary and tertiary sector still waits for a definition. Without doubt, agriculture, in particular with the support of modern machinery if kept at small scale can generate uniquely productive and creative life dynamics. Industry can do so as well, but has a much harder challenge to provide a similar setting to most of the blue-collar workers who form part of automated production processes or assembly lines. The tertiary sector, in particular much hyped financial services, needs to undergo a new classification, which applies the concept of creative-productive, consumptive and destructive life dynamics. Governments should promote productive tertiary sector industries and restrict consumptive and destructive ones; like governance itself.
Modern industrial economies usually have less than 5% of their work force in the primary sector, around 20% in the secondary and up to 75, sometimes even more than 75% in the tertiary sector. Is there a key to a healthy ratio of these three sectors? I have the feeling that the more economies focus their labor forces on the tertiary sector the more long-term unhappiness is generated. People in many tertiary industries become alienated from reality, they quite often don’t understand anymore the purpose of their daily shuffling, and bluntly spoken, quite often there is none left.
We nowadays often speak of life style design and I ask myself if we are not meant to live our lives in multiple sectors at once – again not everybody can or wants to do so; this is only a softly spoken deliberation on how we could do better. My foremost example is the boyfriend of a former landlord in Vienna. He had a day job as technical mathematician in some engineering office, but started every day 6 am with his father, a physics professor at the Vienna Technical University in the workshop of his deceased carpenter grand father. They both worked there until around 10 am, when they left to their white-collar office life. It is the mix between mental and manual work, which provides a healthy balance to body and mind.
Harmonious Immigration in Homogenous Societies
Stefano Oreste tells us during our first evening in Perno on the sun filled terrace overlooking the Langhe, that the law is very strict with wine growing farmers. Only farmers with south and southeast looking plots are allowed to produce Barolo wines, the other plots are only good for Barbaresco and other wines. The Orestes sell one bottle of Barolo for 20 Euros, a bottle of Barbarsco for 7 Euros, so there would be quite some incentive to produce more Barolo. The Italian Ministry of Agriculture checks all farmers in the region every four months in order to maintain a high quality standard of wines produced with the label Barolo DOC. Land is already very pricy in the Langhe, but even if one could afford to buy, property can only be acquired if going through complicated paperwork. Stefano says that he does not know of any foreigner having succeeded to purchase a winery in his home municipality of Monfort d’Alba.
The Langhe has only recently been declared a UNESCO World Heritage for its unique agricultural landscape formed by man’s hand over many centuries. As we talk about the rigorous regulations of wine making and having still at the back of my mind the current migration crisis, I ask myself, if the Langhe could have ever come into existence if there was not a very homogenous society tending to the land for hundreds of years. I believe that in particular agricultural regions clearly show that loose immigration and uncontrolled change of societies is not beneficial to the development of certain habitats. But history also shows that a society’s openness produced some of mankind’s greatest achievements: both the Chinese Tang dynasty and the fin de siècle Habsburg monarchy are great examples, in particular in comparison to their contemporary counterparts.
At least since the immigration of thousands of south European and Turkish workers during the Wirtschaftswunder years of the 60ies and 70ies uneasiness grows in central and north European countries. In particular radical Muslims bloodily attacking western societies have recently caused many European citizens to reject immigration at all and has given rise to right wing parties throughout Europe. But thousands of refugees continue to arrive from Northern Africa and Central Asia. Some Western intellectual voices like Slovoj Zizek or Richard Dawkins are growing deafening loud, in particular about the naiveté of some European societies to believe that there is any moral obligation to integrate orthodox Muslims or people from different cultural background without commitment to integrate. Gutmenschpolitik prevails, but neglects the fact that doing the right thing doesn’t necessarily imply to do it without brains.
I reckon that European immigration policy could learn from China’s hukou system. It basically restricts the free movement of people according to their household registry. And yes, it creates a two-class society of those who can move freely and those who can’t. This will sound like an attack on human rights to some who elevate the theoretical equality of man. But lets be pragmatic: the refugees seeking shelter in Europe have not lived a life in equality and will even under the best of all conditions not lead a life in equality for years to come. Equality is for the most part a theoretical concept. Improvement is a pragmatic matter of gradual changes. One step after another. Therefore a sound framework with clear rules needs to be implemented in all of Europe. Issuing household registries to not only immigrants, but also EU citizens who move from one country into another, would be such a practical framework. Therefore the compulsory registration of immigrants to the EU at the borders it the right thing to do, but this measure must be flanked with the provision of more data like profession and competences. Refugees shall then according to the requirements of the EU labor market be assigned to a region, where they are entitled to live for three years until they have to fulfill criteria like language tests or additional qualifications in order to be granted the extension of their visa.
Declaring only certain regions open to migration would be another measure, which can be applied similar to the German model of spatial structure (Raumordnung), i.e. the division of land for agricultural, residential, industrial or commercial use. To make sure that no ghettos are being formed, sociologists need to find in collaboration with local industry unions the right key of distribution according to the requirements of the local labor markets. Moreover, in order to maintain a local culture, it must be obligatory for immigrants to learn the host countries language within three years maximum. All these measures might not avoid that cultural conflicts still arise, but they can mitigate the risk and support the objective of true integration whilst not depriving a country of its specific socio-cultural collective identity.
On top of these measures I am very much in favor of strict laws regulating the purchase of real estate (Grundverkehrsordnung). In particular land, but also real estate for housing purposes shall only be open to purchase for foreigners who have lived in the respective country for a certain amount of years and have passed certain levels of integration, i.e. language proficiency, a certain period of IIT payment, etc. Regions like Italian Langhe, French Bordeaux or Austrian Salzkammergut must be entitled to enforce even stricter laws, if maintaining the cultural homogeneity requires them to do so. If the EU and its member states don’t address these issues, they risk the decay of these homogenous societies more than they already have to be blamed for. Again we can learn from China, where the purchase of land is not possible, where land can only be leased for a certain number of years from the government, but never belongs to a private entity, where foreign investors are forced into JV with local counterparts. It is therefore (not only) Chinese billionaires who have found a new hobby in purchasing Australian islands, French wineries and German enterprises.
So, after all there is a silver lining at the grey cloud of European governance and democracy per se? I doubt it, to be frank. Societies are like huge flywheels and can only be changed by abrupt friction or if they are jolted out of their wheel hubs by external forces. Sir Karl Popper once defined democracy in contrast to dictatorship or tyranny, thus focusing on opportunities for the people to control their leaders and to oust them without the need for a revolution. According to his definition, we don’t live anymore in a democracy. But as individuals we can take responsibility of our own life; stop being part of systems we do not approve of as far as possible; and look inwards for salvation instead of blaming others for the misery we have to endure.
Austrian comedian Roland Düringer put this ancient Buddhist insight in a recent late night show into a contemporary setting: we can not only blame governments for turning into system zombies. But I am convinced that we should also not be oblivious to their deeds and neglects. Sleek and efficient governments are an important cell of a societies body. Large and inefficient governments are metaplasmic cancer cells that eat away the body. Bureaucratic futilism was the answer of great sinologist Joseph Needham to the question why 18th century Ming China fell into decay. Brussels and it’s democratic member state governments suffer from the same endemic disease.
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