← Economic Update with Richard D. Wolff
Economic Update with Richard D. Wolff
Capitalism's Tools: Bankruptcy, China-Bashing and Gov't Suppor
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Welcome, friends, to another edition of Economic Update, a weekly program devoted to the economic dimensions of our lives and those of our children. I'm your host, Richard Wolff. Today's program is going to be talking about the bankruptcy of a major trucking company and what it teaches us about the problems of American capitalism. We'll also be talking about the US versus China tensions that are shaping the modern economic, global economy in ways that we haven't seen before and that need a little historical context so we understand what's happening. And finally, we're going to be talking about certain fundamental similarities between the Republicans and Democrats that ought to be understood alongside the things that differentiate them. And before jumping in, I want to remind you that we are very open to suggestions about topics and questions to respond to. If any of you that are listening or watching have such suggestions, please know that we have a volunteer, Charlie, who who handles them and transmits them to us. So if you have any, here is Charlie's email. Just send them in and we will look at each and every one. Charlie.info438mail.com Once again, Charlie spelled C H A R l I e charlie.infox438mail.com okay, let's jump right in. The bankrupt trucking company known as Yellow Freight, its former name was YRC Worldwide, is one of the, or I shouldn't say is, was one of the largest trucking companies in the United states. It employed 30,000 people, 22,000 of whom were truckers, members of the Teamsters union here in the United States. It was a special kind of trucking company because it was famous for carrying non full loads. In other words, if you had something to ship but it wasn't big enough to take the whole container, you could get part of a container. Very important for many, many, many businesses around the United States. This company has had its problems, but it was able to continue for quite a long time. Until recently, the instabilities of American capitalism, the up and down bouncing took its toll on all trucking companies, as is pretty well known, including Yellow Freight. It was particularly hard hit during COVID for all the reasons you can imagine because all kinds of shipments stopped and changed to cope with the pandemic. All of those thousands and thousands of truckers were crucial because more and more stuff had to be distributed in new ways to cope with the pandemic. The truckers kept on working. They took risks with their health. They took risks of all kinds to keep goods flowing in this difficult time. The company went and got a $700 million bailout help during COVID But here's something that interestingly got worked out between the creditors of the company, the board of directors and the government. Even though the government gave them $700 million, even though they were those essential workers during COVID they inserted into the deal a little detail which said that the creditor, the major creditor, the Apollo Group, would be ahead of the government should the company ever go bankrupt. In other words, the government would be third in line and therefore might not get anything out of what was left if the company ever went bankrupt, which it has now done. Think about the collusion between the government, the board of directors of that company and the major creditor setting up a deal in which taxpayer money bails a company out. But the government representing taxpayers has to be third in line in the event that the company goes belly up, which it then did. Barely a year after Covid declines, this company crashes. It's thrown 30,000 people out of their jobs, out of their incomes, crashing the lives of those 30,000. Remember, each of those people has a family that's affected by this decision. So it's really 30,000 families. And who decided what happened to those 30,000 families? Here's the people, the board of directors, a dozen or so folks, the Apollo Group as the major creditor, maybe another three or four people representing the Apollo leadership, and then the major shareholders of the company. And who are they? Another dozen at most. So we're talking maybe 20, 25 people involved in making the decision making to pull the plug on this corporation who's affected by this decision of maybe 20, 25 people, 30,000 families. And I'm not even going to talk about the communities in which those families will no longer be able to go to the neighborhood store because they don't have any income or they're on much reduced unemployment if they qualify and if their state provides it, and who knows for how long. No, this is a devastating act imposed on 30,000 families by 20 people. Do those 30,000 have any voice in selecting those people? Absolutely zero. Do they even know the names of those 20 people? Chances are they don't. They'd have to do some research to find it out. And even some of that may not be publicly available. Wow. And let's look at some of the other consequences. When a big trucking company goes belly up, it means there are fewer trucker companies left and there weren't that many big ones. And though the fewer that are left will be in a better position to jack up prices because one of the competitors is gone. So we can expect the price of trucking to go up. And that will show up in the price of everything those trucks carry, won't it? So this is not good for an inflation we are supposedly battling. Wow. And you know who'll have to pay most? The smaller businesses. The ones who don't use a full load of a truck, they only use a part. They'll be particularly hit with higher rates, won't they? And that'll make it harder for medium and small businesses relative to big ones. I could go on talking about the social consequences of this decision, but it is two things I want to leave you with about it. It is the most undemocratic event you could imagine. A tiny group of unaccountable, unelected, undemocratic folks deciding whenever they want to to declare the business is over, to reward the Apollo folks because they're number one in line to get their loans taken care of. When you sell off all the trucks and you sell off all the depots and you sell off all the computers and all the rest of what that company gets rid of in bankruptcy. The undemocratic nature is what I want to stress. Because it's that way in every major American capitalist corporation. And it's right on display in the yellow freight bankruptcy. And here's the second thing. In a rational society, When a capitalist enterprise like this goes belly up, having been around for a long time and we're supposed to trust and believe that the management there did all they could do to save the company. By the way, the management is blaming the Teamsters. Par for the course. Blame the workers. They want concessions, which the Teamsters said we're not giving you because we've already given you loads of them during COVID And since you're just milking us to take away the big salaries you give yourselves. All of which is true, but here again is that last point. In a rational society, if the capitalists running that company couldn't make a go of it, why not create a fund to enable the workers themselves to take over the trucking company? There are worker co op trucking companies in this country. Wouldn't be the first time. Why not give them a chance to see what they could do? Maybe the Teamsters would give a concession. And if it was the Teamsters themselves that took over, ran that business that wasn't even tried. Because in the capitalist system they dare not give such an opportunity. Lest we all draw the lesson of what's the better way to run a business top down capitalist or democratically worker owned and operated. But we'll never know because in our system the rational chance isn't even provided. To see how that might work, I want to turn now to the US China story because so much is said about it and so much is kind of nonsensical. So I want to devote some time in the time that remains in this first half of the program and then after the break in the second half too. So let's do it historically, which often leads to better understanding. China became a Communist Party led country at the end of a civil war. The civil war inside China pitted a government that the United States supported, led by that Chinese leader named Chiang Kai Shek. Right after World War II, 1945, the Civil War broke out and lasted four years to 1949. The leader of the Communist revolution there, Mao Zedong, was the opponent of Chiang Kai Shek. And my apologies if my pronunciation leaves something to be desired, in that civil war that the United States supported Chiang Kai Shek, the United States had put its money on a loser. He lost. He was defeated by Mao Zedong and the Communist Party and their army. And they took over, declaring victory. In 1949, not surprisingly, since that was the beginning, the years of the beginning of the Cold War, the United States refused to recognize the, the revolutionary government of Mao Zedong. And they refused. In 1949 and across the 1950s and across the 1960s, for an entire generation, the United States government looked upon China as a great enemy. But they discovered the Americans, that they were making a hell of a big mistake. Why? Because the Communists were able to do in China what had not been done for at least a century and a half before. A huge country, a terribly poor country, was changed significantly. Roads were built, schools were built. A modern society began to be constructed by the Communist Party in China. And along the way it became clear to capitalist businesses in Britain, in France, in Germany, in Italy, in Japan that one could do profitable business in China as the Communist Party developed it. The only country whose capitalist enterprises couldn't participate was the United States. And the businesses here got jealous and they put pressure on Republican President Richard Nixon in the 70s, in the early 70s, to get together with Henry Kissinger to go to China and to open China up. That was their language. What it really meant was to ask the Chinese, please, could we open diplomatic relationships so our companies could have the access to your country that our competitors in Europe and Japan have? And the Chinese agreed. We've come to the end of the first half of today's program. Please stay with us. We're going to continue analyzing what happened in US China relations after that when we return. Welcome back, friends, to the second half of today's economic update. When we entered this break, we were talking about China and we had brought things up to the relationship between the United States and China that comes about in the 1970s. That's after President Nixon, a conservative Republican, and Henry Kissinger, his major advisor, went to China and asked to be allowed to participate in making money off of China's economic development the way the competitors in the rest of the capitalist world were already doing. And overnight we went from US versus China a great enmity coming out of the civil war, coming out of the fact that the United States had backed the loser, the Chiang Kai Shek, and that the Cold War demonized, of course, the Communist Party, big enemy. Suddenly after the early 1970s, we were the best of friends. Suddenly there weren't stories every day about how awful the Chinese leaders were or how awful the Communist Party was. We were best friends. The United States supported the entry of China into the World Trade Organization. American companies began to move production out of the United States to China with the blessing of the United States government. And huge investments were made by Americans in production facilities in the People's Republic of China, hundreds of billions of of dollars worth. The Chinese made a deal with Walmart so that Walmart would become the distributor throughout the United States of the goods made in China, goods made in China by subsidiaries of American corporations, but also goods made in China by Chinese, Japanese and other capitalist corporations that the Chinese welcomed into their country. So let me underscore US China relations. Enemy, enemy. Enemy evil. Evil versus good is gone. And from the early 70s to around 2015, a long time, nearly half a century, the United States and China were friends, collaborators, trading and investing in each other's businesses. Just a wonderful, warm, friendly, mutually supportive relationship. And what's more, let's take a look at the economics of it. The Chinese offered to the United States what they offered to other capitalists in other countries. You can come here, they said, and you can hire our workers. We are developing our country. We have better education than we've ever had before. We have more people in colleges and universities than ever before. We have a modern road system, we're building a modern rail system, and on and on. The thing is, our workers are way cheaper to hire than they are in your country. You can come here and get the same work done by skilled, trained, industrially disciplined, educated workers at a fraction of the cost. And not only that, because we're the biggest country in the world. And we are now finally developing instead of languishing in poverty. We are the biggest, fastest growing market you will see in the world in the years ahead. And, and you better get in on the ground floor and we will welcome you to do it. So American corporations looked at that and went in a rush, starting in the 1980s, 90s and so on, and they made a ton of money, which made the companies who didn't go in the first rush make sure to be in the second rush to China. But by the way, this was a two way street, a two way deal. The Chinese benefited too. What did they get? First of all, they got an enormous investment of Western capital, including US Capital in their country, building factories, building all kinds of arrangements. They also got to learn and share the technology that had been developed by big capitalist corporations in the west and especially in the United States. That was the US Capitalists get cheap labor and a growing market. Chinese get technology and capital investment. That was the economics making this period a period of joint growth, joint prosperity, joint profitability, and therefore friendship and solidarity. Here's the problem. Over those years, starting in the 1970s and running up to about 2015, the Chinese did, and there's no way around this, they did a better job of making this period of friendship pay off than the United States did. Yes, profits boomed in this country. Yes, rich people who own shares and, and all those companies paying low wages in China made out like bandits. Absolutely. The United States profited a lot, but so did the Chinese. And perhaps more distressing, they profited even more. They were able to grow their economy because of the particular way the Communist Party there manages and supervises both the private capitalists that are there who have a big chunk of their economy, and the government owned and operated enterprises who are also a big chunk of their economy. The Communist Party supervises and organizes all of that. And they've been able, for example, to grow their economy for the last 30 years two to three times faster than here in the United States. Our economy grew, we boomed, we profited. They just boomed and profited more faster year in and year out. By 2015, therefore, they had become a modern, high tech, well developed, middle level income country. From having been one of the poorest on earth, they had come an incredible long way. And since their population is four times that of the United States, when you put it all together, the United States woke up and discovered it had a big, strong, rapidly growing competitor, the likes of which we have not had as a nation for a century. And so Things flipped again. Instead of China and the United States being good buddies and helping each other, profiting off each other, trading with each other, investing with each other, they became enemies again. Leading the charge, Donald Trump in 2016. But Mr. Biden is continuing exactly the same. Suddenly, you call the leaders of China dictators, evil people. We're right back to where we were between 1949 and the early 70s. But I want to stress with you that the Chinese now are a very serious competitor. The whole world understands that the attempt of the United States now to go against China is a completely new and different situation. In much of the world, it is now believed that the attempt of the United States to stop China is one of those proverbial doomed efforts to put the genie back into the bottle. In other words, it's too late. The Chinese are not only now the second economic power in the world, catching up to the United States, but it is also building global alliances. The brics, the alliance of Brazil, Russia, India, China and South Africa, is just one. The Shanghai Cooperation Organization, which has China, Russia, India and a bunch of other countries, is another. The Belt and Road Initiative, where China is investing to create an enormous link between Asia and Europe, is still another. All kinds of countries are shifting their loyalties. We see it in Argentina, we see it in Saudi Arabia, and so on. It's an open question whether we are in a desperate struggle, bashing China when it is no longer possible, trying to build hostile alliances against it when it's too late. And maybe the lesson to be learned is that having gone from an enemy to a friend and back to an enemy, maybe we should cut our losses and rebuild a friendly, cooperative way of both countries moving forward. It's worked better in the past when what we're doing now, and that suggests it maybe deserves another shot, especially when the alternative might be war. My last economic update for today has to do with something that needs to be understood about Republican Party politics in this country and Democratic Party politics. What it has to do with. With the basic capitalist system. They have differences on many subjects, obviously on abortion, on immigration. You could pick them. They're the ones you see in the press. But I want to talk about something in which they are practically identical. They support, they finance, they subsidize capitalism. The particular economic system we have, there's no debate, there's no discussion. There's no difference. Let me show you how that works. The Republicans like to give big corporations tons of money. Here's how they do it. Number one, with tax cuts. That's the Republican Cut the taxes. Cut the taxes. The Bush people did the tax cuts and Trump, that's the only major economic thing he did, was to cut taxes tremendously in December of 2017. The rest of the stuff he promised to do, he didn't. But he did cut the taxes, and that's very Republican. And so who gets to cut taxes? Corporations have their profits taxes cut and rich people have their taxes cut. That's what we have from the Republicans. What else do they do? They deregulate. They help corporations by cutting away the regulations that limit what they can do. So the consumer protection disappears and the occupational safety and health disappears and the minimum wage is untouched, et cetera. And they hate unions and they fight against them. That's how the Republicans help corporations. But now let's look at how the Democrats do likewise. They give huge funds to corporations. Not so much cutting their taxes, but they give them a lot of money. Most recently under Biden, the Inflation Recovery act and above all the infrastructure bill that's going to give ready many, many billions of dollars. Both of those major bills and those are the major achievements he has. He, he didn't raise him minimum wage either, amazingly, not a bit. But when they give that money for infrastructure, you know who they give it to? Large corporations. Because that's what fixes our roads and harbors, rebuilds our train lines, puts Internet available to everybody, cleans the water in this country. That's not your little mom and pop business. That money goes to the hugest corporations. And we know what they do with it. They give out fact dividends to the rich people who own the shares. 10% of our people own 80% of the shares. And they take another pot of that money and give it enormous salaries to ce. We know what they're going to do. They're going to reproduce the capitalism we live with. Extreme inequality, corporations that declare bankruptcy when it suits them. The Democrats fund these corporations with spending, the Republicans with tax cuts. But fund these corporations. Both parties always have. Both parties always do. Don't be fooled. On the question of financing and subsidizing capitalism, Republicans and Democrats march arm in arm and don't, please forget it. Thank you very much for your attention. I hope you found this program interesting and useful and as always, I look forward to speaking with you again next week.