In these periods of uncertainty, it is time to reflect on the consequences for Europe of a sluggish – if any – growth, that could last a very long time.
The idea of a zero growth in GDP is not new: in the 1970s, people had naively believed that this would solve all the environmental and scarcity of resources problems; to realize that growth does not cause pollution, but production does, and that to change its nature (and in particular to make it more energy efficient), it is necessary to invest, hence grow, or at least heavily improve productivity.
Indeed, even without GDP growth, the continuous and global improvement of labor productivity and computing speed of machines are leading to considerable and permanent progress made in objects performance, in particular of those using digital technology: washing machines, phones, computers, TV sets, automobiles are infinitely more powerful, and increasingly inexpensive.
And in these countries with slow growth, those that are at the forefront of innovation, or who received profits, take home a growing proportion of the wealth produced, and in a constant quantity.
The real victim of zero growth is therefore the future: the financing of public debt, employment and pensions no longer comes from new wealth, but by a transfer of assets between social groups and between generations.
The best example is Japan, who has experienced virtually zero growth for the past 20 years. It was, and it continues to be relatively easy to live through this situation, because the population has decreased, and that enables the purchasing power of each person in Japan to be maintained, in a society of relative equality. In addition, government borrowing and the considerable savings of Japanese have allowed the country to maintain a great capacity for innovation, and to remain the world leader in most of the technologies that facilitate labor and energy savings…
With the global crisis, the economic growth of the West has slowed down further and problems found in Japan will spread to other countries…
In particular, the annual rate of French growth has declined by one percentage point per decade; it could now average 1% per year over the long term, or less. This growth performance would increase further the per-capita GDP by 0.5% per year, or about 165 euros.
Of course, in the current status of balance-of-power, the richest few will keep the lion’s share and the poorest will see their incomes collapse.
And to add insult to injury, zero growth would lead to low household average food purchasing power per head of 0.5% per year (measured in purchasing power standards, PPS), permanent increases in the stock of government debt, and an inexorable increase in unemployment. With increasing inequality.
Learning to live with this, will require many reforms: reducing budgetary deficit below that of GDP growth rate, better distribution of vocational training resources by favoring unemployed people. And financing differently expenditure for the future by taking the money where it is, that is to say in assets, and not in incomes.
In Japan, the most advanced country in this development, it would be necessary in order to reduce the public debt, almost entirely held by Japanese, to convert it into a tax, thereby reducing the savers’ assets, which would not have any substantial impact on their standard of living, due to very low government bond yields. Or even bolder, have the Central bank of Japan purchase all public debt, with likely inflationary consequences, the effect of this would be to reduce, in some other way, the assets value of every Japanese person, and, above all, that of savings.
In France, the problem could soon be the same: at a time of poor economic growth, the choice is clear: either there is a massive overhaul of government expenditures and State structures and vocational training, or else public debt and unemployment will continue to rise inexorably. Until bankruptcy, and/or revolution.
Because in order to finance them, then either the savings of the poorest would have to be robbed or the assets of the richest would have to be taxed heavily. From taxing wage-earners’ savings deposits or with a tax on all assets, without exception.
Increased indebtedness and unemployment will not allow to evade this choice much longer.
j@attali.com
