Degrees, Money and the Future

For a long time, it was politically incorrect to protest the huge increase in university/college attendance across developed nations in Europe and North America. University attendance went from approximately 14% in the 1970s to over 40% today. Tony Blair famously wanted 50% of youngsters to attend university. A degree was lauded as a springboard to socio-economic mobility, and graduates were supposed to boost GDP growth and tax revenues by taking up high-skilled jobs.

But the reality is turning the dream into a nightmare. The sad truth is that the number of graduates exceeds the number of graduate jobs, and many graduates—particularly from some of the humanities and social sciences—end up under-employed. Furthermore, the burden of college debt acts like a vice on the economy. It doesn’t matter whether the debt is private debt (like in the US) or public debt (like in most European countries). Most obviously, debt harms consumption. It has knock-on social effects on fertility and demographics; young people burdened with debt start a family later (or don’t start it at all), and struggle to afford a house. Moreover, from a macroeconomic perspective, the loans are dangerous, since a lot of them are bad—that is to say, many debtors won’t repay the full amount, or the interest, or repay within the expected maturity period.

The hard truth, that young people, parents, and policymakers don’t want to hear, is that high-skilled, university-level jobs make up at best 20% of the available jobs. I am also highly skeptical that this will increase in the future. The percentage may increase, but only because the total number of jobs will decrease as more jobs are destroyed by automation (high-skilled jobs are much more resistant to the effect of automation). The jobs that require a degree are highly technical and/or vocational: medicine, pharma, nursing, dentistry; programming; engineering; data science; and so on.

Automation, AI and the post-scarcity economy are things that have been discussed elsewhere in more detail than I will go into here. The long and short of it is: we are heading towards are a post-scarcity economy. We are not there yet, and the process will take time. Also, let me be clear that a post-scarcity economy does not mean the end of scarcity; some goods and services will remain scarce, but the majority will be available in abundance. To give you an idea: food, energy and consumer goods will be abundant. Heck, they are already pretty abundant right now. Have you ever seen a shortage of nails? Nails, like many other goods, can be mass-produced for a very low price, and they require almost no human input in their creation. Other things will remain more scarce, especially things that require a lot of high-skill human labour.

That’s the key, the salient point of this little essay: labour. Historically, we have regarded labour, work, as something valuable and worthy. An entire religion, Protestantism, revolves around the value of work. Work means steady payment; a livelihood. But labour is inherently tied to scarcity. Humans have to labour because things are scarce: food, shelter, medicine and so on. So what happens when all the work is done by robots and software? Let’s assume that everything could be done by robots or computers, just for the purposes of this thought experiment.

Ideally, we would live in a utopia; humanity would never want for anything. In reality, the barrier lying between us and this utopian vision is capitalism. We admire capitalism because it has worked well for the last two centuries or so—with government regulation and the managing of natural monopolies, of course. Adam Smith was more or less right. He was misunderstood by the braying free market neoliberals; Adam Smith never argued that the “invisible hand” would make markets self-regulating in general (only if a very specific set of criteria were fulfilled). A mixed market+command economy is the way to go. This is something that France, the UK, Scandinavia and Germany understood, but which the US and Soviet Union did not.

Unfortunately, I think the economic model of the past century may no longer function in this post-scarcity future, because it is still predicated on the idea of renumeration for labour. To put it bluntly: in the future, many, perhaps most, of the population will be unemployed. They will be unemployed for no other reason than that they will have nothing to do.

I believe that we will need a Universal Basic Income at some point in the not-too-distant future. Moreover, I think a successful economic model of the future will still have capitalism (i.e. capital, companies, competition etc.) but in a far more diminished way. Capitalism will be limited to areas of rapid innovation, scarcity, and high differentiation. Everything else will be administrated by organs of the state, be it local, regional or national governments. Money will still exist, so this will be socialism, not communism. The state already administers 40–50% of the economy measured by GDP, so this should not be a big pill to swallow (newsflash, Americans). Why will it be adminstered by the state, you ask?

This leads onto the next point. Capitalism is unstable and destructive. It creates a small number of winners and a large number of losers. (Sorry, right-wing Americans.) In the future, this tendency will be exaggerated until society will fray apart. An industrial reserve army of the unemployed—an army of losers—will be created. There are only three possible scenarios. One, capitalism tries to maintain itself through coercion. Two, socialism prevails. Or three, massive social unrest results in anarchy, and the post-scarcity economy is destroyed, bringing us back to the status quo ante… by which I mean something before 1770: the medieval world. This scenario seems more likely in third world countries that are politically unstable.

Let’s go back to square one, and the original point of this essay. More university degrees will not lead to better pay or employment. There are powerful economic and technological forces at play that are leading us to a world with high unemployment. Instead of creating more debt and broken dreams, policymakers need to focus on managing the transition to a post-scarcity economy based on UBI, the provision of basic goods, and reduced inequality.

What does this look like, in practical terms? Well, it won’t be a world of perfect equality. I don’t believe such a thing is possible or even desirable—and I say this as a staunch socialist. Natural inequality is the reality of the world we live in. Some humans are smarter than others, or more talented, or hardworking; they should be rewarded. So the economic situation will look like this. Everyone will be guaranteed a basic income of, say, 2000 euro a month. They can earn extra by participating in the labour market when possible. Some people will earn high salaries, like 3K, 4K, 5K a month because they do something difficult (and they will pay taxes on their income). And there will be a few millionaires or billionaires, but fewer than there are today. The state’s revenues will shift from being predominantly taxation funded to being funded more by the sale of goods, e.g. food and housing. This is because there won’t be enough taxpayers to fund public goods like healthcare and (obviously) UBI itself otherwise.

Money is hard to understand for the layperson. Money is not scarce; it can be created at will. But scarce things do have a higher price. This is why creating more money causes inflation: there is more money, but the number of goods does not increase.

How can the state fund UBI? It’s not through taxation: you can tax UBI, but since that money comes from the government, there is no mathematical way to fund UBI with itself. Rather, the state can simply print money and ensure that the supply of goods (which it controls) matches up. The state will also tax corporations that make large amounts of money through the sale of goods and services. This system will ensure that basic goods are provided, but also that people have disposable income to spend on more whimsical things—art, fine dining, holidays, whatever—at their discretion. Remember that this will not be a truly post-scarcity society, just a “mostly” post-scarcity one. Provided that the money supply is managed sensibly, this system will work very well.

Now that I think about it, this system could already be partially implemented in the world we live in today, since we are already approaching post-scarcity in some ways. But to accomplish this, we have to have political awareness. We cannot allow our politicians to further the interests of the rich, and pull the wool over our eyes. People are not unemployed because they are lazy, or because they don’t have a degree, or because they don’t know how to code. Only 1% of the population knows how to code, and demand is at most 2 or 3%. People are unemployed because of technological growth.

Some people will not like what I am saying about degrees. Humanities people in particular think that humanities degrees are being devalued in favour of STEM. But actually my argument has nothing to do with funding one or the other. It is true that humanities degrees do not pay as well as (most) STEM degrees, so that is a good argument to avoid going into debt for one. But I would very much be in favour of subsiding degrees so that the best humanities students can study for free. The real problem—which I want you, the reader, to understand—is when we make 1 in 2 youngsters get a degree just for the sake of it. Believe me, all those psychology students (psychology is one of the most popular majors) don’t really want to be doing a degree; they just want to party. Them getting a degree, however, prejudices bright students who are genuinely interested in learning. It strains financial resources and devalues the worth of a degree.

Thanks for reading this far. If you have some thoughts to share, please comment below.

So Long, the Netherlands

Hello, dear readers!

It has been a while since I wrote a blog post on here. Blame it on my master’s degree, and moving prepations. Yes: I am moving from the Netherlands back to Romania and completing my thesis remotely. This is largely a practical decision to save money on rent. But it got me thinking about the deeper issues with this country, and made me seriously rethink any long-term plans to stay here.

So, without further ado, let me talk about the downsides of living here, because not everything in the Netherlands is rainbows and sunshine. (We’ll get to the rainbow part.)

Forget about owning a house

It is a mathemetical impossibility for anyone on an average income, or even above-average income, to afford a nice place in the Randstad. To buy an average apartment in Amsterdam for €335,000, assuming a 30K euro downpayment, a 1.85% interest rate, and a 20 year repayment period, would cost an average of €1500 a month, with total interest amounting to €60K. Yes, I did the math!

A single person earning €3300/month and paying 35% income tax would not be able to afford this. A couple might, if they also have sufficient unemployment insurance and emergency funds. But that’s not exactly what I envisaged as my dream for the future: living in a tiny 57 square metre apartment, for 20 years, both partners working full time, just to afford the mortgage. It also makes the prospects for a family even slimmer.

OK, so how about living outside the Randstad, in a place like Enschede? Well, unfortunately, house prices have increased dramatically even here, especially in the last couple of years. My colleague at work is paying 300K for a house in the area.

Self-building might be the only affordable option left, but that’s assuming you find a buildable plot at a decent price, and you have planning permission from the gemeente. There are far too many legal and bureaucratic hurdles to building in this country.

Think twice about living outside the Randstad

Even if you can build (somewhat) affordably in a place like Enschede, Nijmegen or Tilburg, you might not like the people there. Unlike Randstad Dutchies, these people are among the most closed-off in Europe; it’s very difficult to get involved in friend groups and make life-long friends. This isn’t just me—studies have shown this.

So the Netherlands is super gay friendly, right?

Amsterdam certainly is a gay Mecca, but Enschede is more like a gay desert in terms of the quality and quantity of partners. Furthermore, if you want to start a family as a gay couple, it’s better to look elsewhere.

Paid surrogacy is illegal in the borders of the Netherlands; domestic adoption is almost impossible because the demand for healthy children is greater than the supply; while international adoption was recently banned. Even when it is eventually allowed again, international adoption is astronomically expensive in this country, with prices starting from €20,000. (No, that is not a typo.)

To be perfectly frank, the amount of bureaucracy around adoption makes me angry, and constitutes de facto discrimination against gay couples and infertile heterosexual couples. So much for a country that prides itself on being liberal.

In the UK, domestic adoption is much easier, and international adoption starts from 2000 pounds (notice that there is one less zero in that sum). In Scotland, the government will even offer a discount on the adoption fee to low income households.

The only realistic option in the Netherlands is to join forces with a lesbian couple and father children through artificial insemination. This can be done with a quid-pro-quo arrangement, where the lesbian couple adopts the first child, and the gay couple adopts the second. This is sometimes called “altruistic surrogacy”. Of course, it assumes you are good friends with a reasonably young, fertile lesbian couple. Another option might be for my husband’s sister (if he has one) to act as a surrogate (if she agrees).

Private healthcare sucks

When people think of European countries, especially Americans, they imagine universal healthcare. This is the case in the UK, where the NHS will treat any resident free of charge, and the costs are funded entirely through general taxation. The UK is one of the few countries in the world that has this system.

What we actually have in most of Europe is a system where healthcare entitlement is on the basis of contributions (taxes) by people who are employed. This means that it is possible to lose your health insurance if you do not pay into the system for more than a few months (although the legislation usually has a provision for life-or-death scenarios). Reasonable exceptions are made for students under 26, old people and disabled people.

In the Netherlands, it is worse, because public healthcare does not exist, unlike say in Germany, Spain, France, Italy, Romania or even Ireland. In the Netherlands, everything is private, and you are required to pay for private health insurance. The only other developed country in Europe that has this system, as far as I know, is Switzerland.

This means that healthcare in the Netherlands is one of the most expensive in Europe, with high premiums and high “eigen risico” (out of pocket expenses even if you are insured) – the Netherlands has one of the highest healthcare costs, as a percentage of GDP, of any high income EU country.

Not only that, but Dutch GPs are among the most incompetent I’ve ever met, and switching GPs is a hassle. Dental healthcare is likewise problematic, with long waiting lists and fairly expensive procedures. I go to Romania for my dental needs; in the Netherlands, I can only go to the emergency dentist.

In conclusion

I have been doing some thinking about my future, and have come to the conclusion that the Netherlands has no future for me. I have given up on serious efforts to learn Dutch, because what’s the point? I can live with private healthcare, but no house and no kid are dealbreakers.

Instead, I have crunched the numbers, and remote work is a no-brainer for a data analyst like me. I plan to live a short amount of time in Romania, in order to save money; sell an apartment; and renovate my ancestral farmhouse (this is a backup option for my me and my family). From then on, I will migrate to greener pastures. Rural Spain is top of the list for gay friendly and affordable; rural Scotland is the second option, with higher prices but more options to adopt.

To put it more pithily: when the system is broken, you need to hack around it. That means adieu, the Netherlands.

Some thoughts on the situation in Ukraine

I would like to share my opinion on the war in Ukraine. This desire stems from the fact that I have Ukrainian friends whose families are affected by the situation. It’s also because my country, Romania, has been taking in Ukrainian refugees. And of course: this should concern all European citizens, and even citizens from across the globe, in places as far away as Taiwan.

Sanctions vs Military Aid

I wouldn’t say that sanctions are useless—but it’s clear the EU has relied on them too much. When a country starts an unprovoked invasion of their neighbour, it’s not like a trade dispute or a diplomatic spat; military action should be countered, and can only be countered, by military counter-action.

That said, sanctions can do useful things, but we have to be selective about them, and think about unintended consequences. For example: sanctions targeting individual oligarchs, like seizing their yachts and freezing their accounts, hurts those loyal to Putin. It gives them incentive to pressure Putin into stopping the war. Or killing him outright.

Another sanction that has proven extremely effective is seizing Russian foreign currency reserves, as this has made the ruble plummet, which makes it harder for them to buy military hardware on the international market. Even domestically produced arms usually require components manufactured outside Russia, such as chips.

Sanctions that punish ordinary Russians, however, are more likely to make the Russian populace support Putin. Of course, not all sanctions fall into neat categories. Removing Russia from swift makes it harder for them to finance the war, but it also hurts ordinary Russians.

What history has shown time and again is that when an ally is attacked by an aggressive neighbour, the best response is always military. The weapons that have been sent to Ukraine have accomplished more than any sanctions. They have saved civilian lives; destroyed Russian material; limited Russian territorial gains; and forced Putin to seriously negotiate. If the war hadn’t been going so badly for Russia, they would never have entertained serious talks.

The EU should stop deluding itself into thinking that diplomacy and sanctions make up for a strong military. Diplomacy only works when it’s backed up by military might. Or, as Mao Tse-Tung put it: “Power grows out the barrel of a gun.”

Anyone who argues for pacifism needs to seriously evaluate their world view. We do not live in a world ruled by international law, UN crap, or even by economic forces; the world remains the same place as it’s always been since history began. A jungle.

Jets or no jets?

Some eastern European NATO and EU states, most notably Poland, have offered to send Ukraine Mig fighter jets and S-300 SAMs (surface-to-air missiles). Ukraine doesn’t have pilots who know how to fly American or European jets, so they can only use Soviet equipment they have trained to fly in.

The plan was to exchange Polish Migs for American F16s, after which the US would donate the Migs to Ukraine (making sure they changed the insignia and so on). Biden, however, got cold feet at the last minute.

Frankly, I don’t see why sending Migs or SAMs would be escalating when sending Javelins, NLAWs and Stingers is not escalating. Even if the war does escalate, so what? Russia clearly can’t win a conventional war against Europe or NATO. Their military is hampered by bad logistics, corruption, and limited spending power.

Nor am I convinced that we should allow Russia to conquer Ukraine, because as WW2 has shown, appeasing a tyrant never works. Give them a Suedentland and they’ll take Czechoslovakia, Poland, France… The sames goes for Putin.

The nuclear scare

Nobody wins in a nuclear war. Everyone knows this, including Putin. But Putin is relying on the so-called “Madman Doctrine” to scare everyone into believing he will use the red button. NATO and the EU should not allow themselves to be intimidated. I don’t think Putin’s threats are anything more than sabre-rattling, and if not, somebody rational will probably put a bullet in the back of his head if he gives the order.

As Benjamin Franklin put it: “Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety.”

What is the future of Ukraine?

I could be totally wrong here, but I’m betting this war will be over in several weeks or a few months. The invasion is too expensive for Russia in manpower, material and sanctions; they also have little to gain aside from offshore gas in Crimea. Most likely, Ukraine will cede Crimea and Donbas in exchange for withdrawal of Russian troops.

Zelensky and Boris Johnson have implied that Ukraine will not join NATO as part of the negotiations. To be honest, I don’t think this is such a great idea, as it will give Russia the option to try another invasion at some point in the future.

But, supposing Ukraine does not join NATO, they can still join the EU—which obliges member states to protect each other. Article 42.7 Treaty of the Functioning of the European Union (TFEU) is much like Article 5 of NATO:

If a Member State is the victim of armed aggression on its territory, the other Member States shall have towards it an obligation of aid and assistance by all the means in their power, in accordance with Article 51 of the United Nations Charter. This shall not prejudice the specific character of the security and defence policy of certain Member States.

Of course, joining the EU will take a long time. Even though I support Ukraine’s Accession to the Union, like Poland and the Baltics, I agree with Macron and other Western European leaders. Ukraine can’t join in a day. The rules are there for a reason: they aren’t just for the benefit of the EU—its Single Market, political cohesiveness and institutional functioning—but for Ukraine as well. Tackling corruption is vital.

Moreover, let us not forget the huge economic disparities between Ukraine and the EU. Poland has 4 times the GDP per capita of Ukraine: Ukraine has just €300/month for each citizen, whereas Poland has €1200 and Germany €3400. You can’t just give Ukrainians unlimited freedom of movement. Their country will need many years of financial aid, loans, and private/public investment to become a full member of the EU.

With that said… Nothing prevents the EU and US from cooking up a Marshall Plan. This could include money for rebuilding but also military training, equipment, and financial support to buy weapons systems. With a population of 40 million people, Ukraine can defend itself—provided it has enough hardware and the training to operate it.

I would even be in favour of stationing the EU army (which is going to happen) on Ukrainian soil—although that will be a hard sell for some EU countries, and will require a loose interpretation of the word “neutral”. But hey, Russia’s promises aren’t worth shit, so why should the West pretend otherwise?

Changes to the EU

Putin’s invasion has been terrible news for Ukrainian people… but great for the EU! East Europe and West Europe are united like never before. Putin has even driven a Russian-shaped wedge between Poland and Hungary. Orbán is alone now, with Poland and Slovenia distancing themselves from his pro-Putin politics.

As for the aforementioned EU army, it might not necessarily be called the EU army. Officially, it will be called the Bundeswehr, and the Luftwaffe. But it will be the EU’s army. It will be fuelled by German money, French military tech, and I’m willing to bet it will have an English-speaking foreign legion comprised of EU nationals.