Ulrich Klüh became an economics professor in 2015, focusing on Macroeconomics and Economic Policy at Darmstadt University for Applied Sciences (h_da). Following his studies at Frankfurt am Main and Berkeley, he did his doctorate on the financial crisis at LMU Munich. He was employed as an economist at the International Monetary Fund  in Washington, D.C., and as General Secretary at the Council of Experts for the Assessment of Macroeconomic Development. Klüh is spokesperson at the Centre for Sustainable Economic and Corporate Policy. During this ‘impact’ interview he makes a strong case for ‘mindful de-globalization’ and the introduction of a wealth tax.

An interview by Christina Janssen, 5.10.2020

impact: in 1972 the Club of Rome warned about the repercussions of resource consumption and population growth at present levels in their report ‘The Limits to Growth’, a seminal, key document for environmental movements. Do you think that half a century later, Corona may finally have given us a rude-enough awakening?

Klüh: I would advise people not to claim prematurely that the Corona pandemic will effect a lasting change on our society. There’s a lot of speculation flying around, but essentially we still know too little. I would also be very wary of us allowing a pandemic to prompt a drift in a particular direction, for democratic-theoretical reasons. This applies to sustainability issues, and especially also for the subject of digitalization.

impact: the Corona pandemic has nonetheless intensified those political and social trends that were already apparent.

Klüh: yes, for certain. There are definitely topics that play a role in my research. There’s firstly the question which role do market-based control mechanisms play in comparison to alternatives, which are generally coordinated by governmental agencies. We’ve been witnessing a clear shift towards the governmental side for quite some time – and this shift is being amplified by Covid. The second issue is that over the past few years the nation state has re-surged in importance, whilst the dynamism behind globalization has been depleted. We’re witnessing a kind of de-globalization, which is being accelerated by Covid. The third issue is growth. We’ve seen a negative trend here for some time, which again is being strengthened through the Covid pandemic.  

impact: are we witnessing the advent of ‘strong government’ then, which many are calling out for? Which aspects could we take as examples for this trend?

Klüh: one example is national health systems which states are clearly intervening in. Then of course the various rescue and stimulus packages, with a simultaneous and long overdue ditching of the ‘balanced budget’ doctrine. These developments would not have progressed so quickly in the absence of any previous trends. Covid has simply made it so apparent that the market has no satisfying solutions for many social issues and problems, and that these require a strong, cohesive community.

impact: do you feel the Federal Government is intervening in a reasonable way?

Klüh: I’m in two minds about it. Politics has done most things correctly in a difficult situation, but naturally not everything – cue the independent self-employed, along with other occupational groups. Furthermore, politics continues to underestimate the dramatic implications this pandemic has on the issue of allocation. For one thing that annoys me is the state’s own perception of its role. If a state rescues major concerns, it ought to exert its own influence and question, for instance: how can I utilise my shareholdings in Lufthansa, my subsidies for the car industry and my permanent investments in Deutschen Bahn in order to impose on them a truly sustainable, ecological mobility concept? The state needs to have more faith in itself. Public stakeholders need to become the central driving force, the movers and shakers, of a socio-ecological transformation.

impact: socio-ecological transformation is the key catchphrase of our times. Why do so many people in Germany believe economics and ecology are unnatural bedfellows?

Klüh: that’s a very good question. Many people grasp, in principle, that a sufficiently rapid ecological transformation of the economy is only feasible through a substantial level of state intervention – after all, we need to introduce  radical changes over the next 10 to 15 years, which are frequently at odds with the aims of profit-oriented investors. However, in Germany we have a deep-seated mistrust of a state with extensive power. These is based on the one side in the nature of Rhenish Capitalism, and on the other in the lessons drawn from the era of National Socialism. It actually is the case that a powerful state is an ambivalent affair, standing as it does, one the one hand, for a wonderfully communal social system, whilst on the other lurks the constant threat of power abuse. Prevailing Ordo-liberalism in Germany renders such impressions highly potent, whereby general opinions relate mainly to rather static notions of the relationship between politics and the economy that are focused on maintaining order. By contrast, transformation implies radical, system-spanning change, propelled by major players in a phase of dramatic processes – which doesn’t sit well with traditional ‘German’ attitudes towards the economy, politics and social progress.

impact: does transformation also mean that we would have to abandon the paradigm of growth?

Klüh: the paradigm, perhaps, yet not growth in itself. I find it extremely counter- productive to debate socio-economical transformation solely on the basis of growth and post-growth periods. Successful transformation is also possible with strongly varying rates of growth, depending upon how I measure growth and which phase of the transformation I find myself in. It shouldn’t worry us if we make great progress in establishing sustainability, only to find growth taking place during the process – for this is almost unavoidable, because many of the tasks we face, especially during a transition period, will initially generate growth. This incorporates not only a necessary re-distribution of wealth and income, but also the high levels of public investments required, as well as robust technical progress that is absolutely essential.

impact: you are clearly no firm adherent of the notion that we require negative growth?

Klüh: the first question I would raise in this regard is: who does ‘we’ refer to? Global society most certainly requires at least some growth, because so many people are still forced to eke out an existence in abject poverty. Although the post-growth movement claim they take this factor into account, by imposing negative growth on Northern regions to encourage growth in Southern regions – but the term ‘post-growth’ is unsuitable for such a political programme of differentiated growth. In my opinion this attitude persists with a focus on the global North’s perspective, and furthermore that of the social classes who could actually afford the effects of post-growth. But a political programme for a sustainable world requires a guiding principle that is applicable for, and able to connect, North and South, poor and rich – one capable of inspiring political enthusiasm.

impact: growth can mean a variety of things – for instance, growth is achievable without depleting resources. Might this be a plausible route?

Klüh: it even needs to be growth with negative resource consumption, and the second vital question is whether this could be possible for us, for most people will imagine growth along previous patterns, whereby new, ‘green’ technologies and production methods would replace the old forms. Most studies conducted are rather sceptical as to whether such a ‘Green Growth’ is at all feasible, with corresponding visions assigning it at best a bit-part in a viable solution. But such visions won’t suffice if they imagine growth to continue playing the role it had done previously – a process of modernisation. If we genuinely are aiming for a transformation there will have to be completely new forms of growth, perhaps then we can achieve types of growth with negative resource consumption.

impact: for example …?

Klüh: One example would be so-called Sorgearbeit ‘Care Labour’ (?). If after tomorrow I was to be paid a hefty wage for visiting my mother, who is in need of care, the economy would expand, the use of resources sink. Previous visits would be incorporated within the gross domestic product = resource-neutral growth. Moreover, I wouldn’t be driving to Darmstadt by car, or employing environmentally-damaging digital technologies, but rather taking a ten minute stroll across the fields to the care centre – resource-preserving growth. Advocates of post-growth like to argue that these a merely accounting tricks, and of course this is ‘accounting’, but the economy consists to a not inconsiderable degree of accounting. The question is: is this what we actually want? Do we wish to drive the market and monetary evaluation of such activities quite this far, or not?

impact: why shouldn’t we?

Klüh: because life is supposed to be more than just an economic entity? If too many aspects and things within it are viewed as commodities, a society will develop a kind of natural ‘immune system’ towards them, in much the same way our bodies react to Covid. If we turn the soil and Nature itself too resolutely into commodities, we expose them to the logic of capitalist exploitation, and therein lies a destructive potential. If we define human activities  too strongly as commodities, people – with their individual needs and desires to fulfil themselves within a community – will be brought to, possibly beyond, their own limits. The aversion or reluctance which would result places a natural limit on being able to monetize everything. This doesn’t imply that it is completely false to monetize things – cue ‘Care Labour’. By the way, the discomfort being expressed towards globalization and its limits could be described as just such an immune reaction.

impact: an ‘immune reaction’, in other words against the elimination of market boundaries at local and global levels. However, sometimes an immune system will over-react, as in the case of an allergy, for instance ...

Klüh: yes, such counter-reactions can adopt a healthy or destructive form. In beneficial cases social, as well as state, institutions are able to develop further and more robustly – when they manage to keep the markets in check – then everyone is able to benefit a bit. Yet what this can also lead to –  something we witnessed during the 1930s in Germany and several other countries – are devastating attempts to ‘re-establish the markets’. This is a phenomenon we are witnessing today: Trump, Brexit, the AfD, the emergence of all these right-wing nationalist forces …

impact: which constructive alternatives are available?

Klüh: during the 1930s there was a strong conviction prevalent in the United States that society needed to be fundamentally shook up in order to counter fascist tendencies. President Franklin D. Roosevelt called it ‘the New Deal’ – initiating ground-breaking economical and social reforms in order to re-align relations between the state and the markets, between employers and employees, between the financial markets and the real economy – with reduced competition. A new macro-regime, as I call it. This all led to a re-establishment of the markets, yet after a reasonable fashion, and I believe we have momentarily reached precisely this stage yet again.

impact: the EU is currently pursuing a path it calls the ‘Green Deal’.

Klüh: foolishly. The EU has understood half of the concept because they call it a ‘Deal’. They have also sufficiently gathered that a ‘Deal’ made today must address limits of a planetary nature. However, they have deliberately omitted the ‘New’ component, because this would have incorporated a social transformation, in other words a shift in the balance of power. One might also suspect that this rather modernist Green Deal is actually an attempt to thwart a truly transformative, socio-ecological ‘Green New Deal’. The EU is imbued with its own genetic code, after all, which is powerfully influenced by a preference for free trade and the logic dictated by the markets. However, we may retain a certain degree of optimism. Firstly, this Green Deal comprises a plan which can now be haggled over – and after all, transformation means and involves, resolving political conflicts. Secondly, Corona has lent the Green Deal an unexpected degree of dynamism. To date it had simply been under-funded, yet now, substantial funding is being made available as part of the Corona aid programmes. Then thirdly we arrive at the de-globalization process already mentioned, because the Green Deal must be positioned in this regard.  

impact: as a response to the Corona pandemic, Japan is endeavouring to return production facilities currently located in China to its domestic shores. Should the EU follow suit – for example in critical areas such as medical technology or the pharmaceutical industry?

Klüh: I can answer this with an unequivocal yes. It seems to be occurring anyway, one only needs to turn to the economics section in a newspaper. The population at large will no longer accept the circumstance that in cases of emergency we are no longer capable of producing effective antibiotic serums on the domestic market. Equally, current discussions of supply chains prove that genuine regulation of effective human rights make a reduction in the complexity of value-added manufacturing chains absolutely unavoidable. Should we then begin to question whether a genuine, urgently necessary, political climate and ecologically-based recycling economy would be more effective as a regional value-added chain – and whether such a thing is feasible – then we can rapidly see just how acute the issue of de-globalization really is.

impact: yet simultaneously, de-globalization should not mean that the impoverished countries of our world are denied an opportunity to develop for themselves – or how do you see this?

Klüh: to this end I would re-phrase the term ‘Mindful Globalization’, coined by EU Commission President Ursula von der Leyen, as ‘Mindful De-globalization’. Global problems require global responses, global cooperation plus international trade, yet not merely free trade for its own sake. An example would be the hydrogen strategy, which was recently the subject of a master thesis that landed on my desk. This incorporates the idea that we help to transform regions such as west Africa into new locations of energy production, along with giving the countries involved opportunities to develop their own technologies. Simultaneously it would have a beneficial effect on our climate balance, and utilize existing gas network structures, along with resource-preserving recycling of existing technologies. There is a huge amount of potential if the implementation of a socio-ecological transformation is only taken seriously. But as already stated, this means that the state needs to establish a promising direction. Simply re-locating energy production from the Arab peninsula to West Africa – we can’t expect the markets to do this stuff off their own bat …

impact: state regulation is one thing, people accepting such changes is something else entirely. Lots of things become much more expensive due to ecological re-routing. So everyone would have to be capable and also willing to pay more for certain products and services.

Klüh: absolutely correct, especially important in view of the fact that many jobs would inevitably be lost during the structural changes necessary. A socio-ecological transformation therefore requires a high level of re-distribution. I therefore consider a higher tax on wealth to be an unavoidable, integral aspect of any socio-ecological transformation – for several good reasons. A wealth tax would not only help to finance the requisite public investments and flank the transformation with a political vision of fair distribution. New research has shown that it would also promote structural change and innovation because a misuse of wealth would effectively be penalized. Then we have ecological directional impulses. The implementation of property tax makes it clear that the way land is utilized can be influenced. Yet we could also consider taxing specific luxury objects, such as pools, private jets or yachts. Such steps  would naturally evoke resistance, but in order to generate a broad consensus such measures would be far better than making annual holidays on the Canary Islands utterly unaffordable.

impact: in the USA you’d be pigeonholed as a socialist.

Klüh: that’s correct.

impact: in this country as well, partly.

Klüh: I’d just like to point out firstly that in the USA many democratic presidential candidates have recently called for higher wealth taxation in conjunction with a Green New Deal, and that neither Bernie Sanders nor Elizabeth Warren was interested in dismantling the market. Additionally: no-one can be sure whether we can effectively stem the ecological and social challenges inherent to capitalism. However, we have no other option than to try to manage matters with capitalism in place. The time-frame left available to us, especially in view of impending climate change, is so tiny that a fundamental system change is simply out of the question. We can only use this one chance to re-conform this current system so radically so that it somehow functions – hopefully, properly. We’ll have to see what can come after all of that. As an economist I’m essentially neutral as to what economic system prevails.

impact: really?

Klüh: yes.

impact: that’s surprising, one imagines only few of your colleagues would say this.

Klüh: you’re right. In the economic sciences there is a strong tendency to accrue a ‘bias’ towards market mechanisms. There’s a certain attitude towards viewing economic science as market science. Yet this cannot make it my task to either fundamentally criticise market mechanisms or to essentially defend them. I see it as my task to make sure that we reflect on just this bias which is woven so deeply within our science.

impact: okay, we won’t refer to it as system change, but rather ‘mindful de-globalization’. How can we make a success of it?

Klüh: I outlined an initial idea earlier in the form of a hydrogen strategy. A more general approach would be to consider new forms of global divisions of labour. It will become equally important to consider new forms of statehood which prevail over the traditional nation state. European integration is of vital importance in this regard, just as a consequential bolstering of international organisations is. Over the long run we will also need and be reliant upon organisations such as my ex-employer, the International Monetary Fund. Its tasks and role will also need to radially change.

impact: How?

Klüh: One of the key mistakes in dealing with the financial and economic crisis that began in 2007 was that calls at that time for a new ‘Bretton Woods’ – the establishment of a new global economic order as was developed after the second world war – were left unheeded. As if this wasn’t complicated enough, there exists another, more arduous task: we need to develop brand new concepts of how different eco-systems and communities existing on a fragile, already partially destroyed globe, are connected. This involves developing new concepts of international relations which extend beyond the relations between governments. For instance, one important question is how can we organize global networks between local communities in the future? For this extends far beyond the popular earlier phrase of “think globally, act locally”. One of the best books written during the past five years is ‘Der Pilz am Ende der Welt“ by Anna Lowenhaupt Tsing.

impact: what’s the story of this mushroom then?

Klüh: it’s a mushroom that commands enormous sums in Japanese restaurants, and these mushrooms grow particularly well at sites which are ecologically degenerated or which have even been devastated by some kind of ecological catastrophe. There is a global market for these mushrooms, which is regulated by a complex value-added chain. There are people who collect them in destroyed forests in the USA, then the mushrooms are delivered to the markets. Export firms wait for them in San Francisco in order to deliver them to Japan. A global exchange develops between unexpected allies, new local amalgamations and a new form of globalization that begins where we increasingly find ourselves: in an incredibly precarious situation.

impact: the millionaire DAX manager would merely smile faintly, wouldn’t he?

Klüh: I always used to laugh at the Fair-Trade and one-world-movements, even though they formed part of my own socialisation, but in the meantime I take a different view. In terms of mindful de-globalization we need to find answers as to where international division of labour is unavoidable, and where it already provides robust contributions towards a sustainable economy and society. If an alpaca pullover or blanket made in Bolivia lasts for many decades, whilst producing it secures a reliable income for otherwise fragile local communities, then this is a form of export in line with ‘mindful globalization’ – which is necessary in order for us to effectively implement mindful de-globalization. Yet let’s return to the grinning manager, for his situation on a planet that is becoming increasingly hotter is becoming ever more precarious as well. This is precisely where Tsing’s book sets off from: the mushrooms, along with the people described in the book, stand for successful survival strategies in the ruins of capitalism, which has thus delivered us all into a realm of insecurity. Yet precisely because of this, perhaps we can draw some form of hope. Liberal fiction is deconstructed here, because it is no longer down to the individual – forging his fate and making his own way in the world. The fact that we live precarious lives leads us to collaborate, locally and globally – for just like the mushroom that thrives in the centre of this catastrophe, and which is connected with everything, right in the middle of this Corona crisis we have, all of us, experienced moments of flourishing: we have learnt that the fictitious society, built on strong independent individuals, has become decidedly brittle. Who knows, perhaps this could lead to something positive developing.

Translation: Paul Comley

Website of Prof. Dr. Ulrich Klüh: Lehrende am Fachbereich Wirtschaft
Centre for Sustainable Economic and Business Politics: https://znwu.de  
Showdown Papers, 3.4.2020: The pitiless crowbar of events
Karl Polanyi: The Great Transformation
Bruno Latour: Das terrestrische Manifest
Anna Lowenhaupt Tsing: Der Pilz am Ende der Welt
Report by the Club of Rome on the human condition, 1972: Die Grenzen des Wachstums