Transcript
Richard Wolff (0:10)
Welcome, friends, to another edition of Economic.
Richard Wolff (0:13)
Update, a weekly program devoted to the economic dimensions of our lives.
Richard Wolff (0:18)
Jobs, incomes, debts, those of our children.
Richard Wolff (0:22)
Our own, and those looming down the road. I'm your host, Richard Wolff. I've been a professor of economics and all my adult life, and I put these updates together to give another perspective on what's going on in the economy all around us and that we all depend on. My first couple of updates today have to do with something that's more and more in the news, and that is the upcoming economic downturn. That's right. Capitalism is a fundamentally unstable economic system. On average, every four to seven years, wherever capitalism has become the dominant economy over the last 250 years, we have an economic downturn when typically millions of people are thrown out of work, large numbers of businesses dissolve. We go through a period of time of real suffering and poverty and interrupted lives, interrupted educations before we get back up again. And to have it all happen again four to seven years later. Sometimes these downturns are short and shallow, other times they're deep and last a long time. The famous ones, 1929 and again 2008, were the kind that were long and deep. We're still working our way out of the crash of 2008. So that gave a particular poignancy last week when the International Monetary Fund issued a report that global economic growth is slowing dangerously. And one of the major reasons are the trade wars that were initiated by Mr. Trump and the Republican Party in power as they imposed tariffs first on the Mexicans and the Canadians and demands for rewriting treaties and then tariffs on steel and aluminum and then on China. You know the story and unfolding all the time, turns out that these trade wars and tariffs are bad for economic growth around the world and are another contributing factor in the uncertainty of how to plan for the world. That leads businesses not to invest, which in turn drives the economy down. It's interesting for me to point out, not only to remind everyone of how unstable capitalism is, but to point out that this time the instability may be considerably worse because of what Mr. Trump and the Republicans are doing in order to appear to their political base as though Mr. Trump is the tough guy who's redesigning the global economy to better serve the United States. America first. This theater is actually gonna cost everybody, including Americans, an economic slowdown already and a maybe worse crash than usual anytime soon. And just to make sure you understand, this is not just me speaking. The largest bank in the United States, JPMorgan Chase, issued a report a couple of weeks ago, literally predicting that the next downturn here in the United States will happen early in the year 2020. 20. That's less than a year and a half from now. I don't do predictions. I don't believe in them. But it's interesting that so certain is the bank, the largest bank in America, that they're ready to make a prediction. Why do people accept an economic system that's so unstable? That's the real question. As if to underscore the point, the bank of England, which is the equivalent in Great Britain to what the Federal Reserve is here in the United States, issued another report last week, very worried about subprime debt. Here's what they Businesses have been borrowing money like crazy over the last 10 years. Why? Because in the aftermath of the crash of 2008, when the government of England, like America and many other countries, feared that the whole economy would collapse, interest rates were brought down near zero to make it easy for people to borrow and businesses to borrow in the hopes that that would stimulate the economy and prevent another Great Depression. So interest rates being brought down led every business, well run, mediocrely run, poorly run, to see a solution to whatever problems they encountered by borrowing virtually costless money. The result is, says the bank of England, that if the economy turns down now and hurts a lot of businesses, they won't be able to pay back the excess borrowing that they have undertaken because of the last crash. In other words, the last crash led the bank of England to bring interest rates down, which leads to an excess of borrowing, which sets up the next crash. Talk about an unstable system. Here you have it literally showing its instability as it functions. My next updates have to do with markets. Yes, markets. This institution, which we are supposed to believe is either perfect or if not able to be perfected, if only we take the right steps. The latest example of this was the winner of last week's Nobel Prize, William Nordhaus. There were two winners. He shared it with another economist. I happen to know Mr. Nordhaus because he and I, our times at Yale University overlapped, and I once and twice did him a favor. When his course came to a short section on Marxian economics, he invited me to teach that, which I did, to do him a favor. Anyway, in response to his winning of the Nobel Prize, which he got, by the way, for studying climate change, global warming and how to solve this climate problem, which he took seriously, his solutionindeed, he said it was the only solution, was a market raise the price of institutions, companies that pollute the air, basically well, I've always found this extraordinary. You raise the price, that means people who have to buy these things are, are going to be hurt. What an interesting way of solving a problem, hurting large numbers of people. Wouldn't it be easier just to outlaw the practice? Why this playing around with markets and to tell us that the market solution is the only solution that's straight out wrong? Let me give you a couple of examples. A hundred years ago, one of the great horrors of capitalism was child labor, the practice of capitalists to lower the wages they had to pay to hire children as young as 5 and 6 years of age, pay them very little, and stick them in in place of adults who would have had to be paid more. And of course, these children were lost in terms of their schooling, which they lost in terms of their childhood, which they lost. It was thought to be a horror. Now, of course, a market solution might have been to raise the wages that had to be paid to children. And there were some efforts to do that, but thankfully American families rose to the occasion and said, no, no, no, no. Market solution. Cut none of it. Make it a crime to hire children. Guess what solved the problem and it didn't have to do it by a market, which would have been difficult and slow. Market solution, not. Not advisable here. Let me give you another example. The Dutch government has been trying very hard, together with Dutch unions, to stop corporations from using Netherlands and the very special tax laws they have to locate an office there, make their profits, show up on their books in Netherlands, even though they do business everywhere else in the world, because that way they can pay taxes in Netherlands which are low, rather than to have to pay taxes in the actual countries where they do business. This is a scandal. The Europeans have been pressing the Netherlands government to stop it doing similar things with the Irish government that also does this. But I'm only struck by the fact that the market solution has been to let this kind of stuff go on on the grounds that the corporation must be free in the market to do whatever it wants. Market solution? You must be kidding. This is tax evasion using the market as an excuse, just as it's being used by folks like William Nordhaus to allow the process of dealing with climate change to go so slowly and to be costly to the people who can least afford it, those at the bottom who will have to pay the higher prices attached to the polluting items. And I'm also struck that while the Netherlands government and Netherlands Union and European governments are really squeezing on this tax evasion, the Trump administration The gop, the American government, for years, knowing that billions and billions of taxes are not paid that are owed by American companies, has again found it too complicated, too difficult, too slow to do anything about it. Extraordinary. Really extraordinary. And here's another angle that's worth mentioning. The market solution. Suppose, and this is a problem for Mr. Nordhaus, again, suppose politicians are for sale. Suppose there's a market in buying them, which we all know there is. And suppose those who are richest can buy the politicians best, because that's how market works. That's how the market always works. If things are scarce, the people with the most money bid up the price and get it. So the people with the most money get the politicians who write the laws that allow them to escape the taxes. That's a market solution. The market determines whose politicians get into a position of power. Mr. Nordhaus doesn't want the market to work there. He only wants the market to work where he's interested in it. Okay, then be honest and say that. Don't say you like markets because they produce as many horrors as. As they produce positive outcomes. And an honest appraisal of them would always have to take that into account. My final update for today is to remark for all of us that there's an upsurge in labor militancy in the United States, something we haven't been able to say for years. And I want to call out and recognize those workers that are no longer being passive and docile, not taking it, not being angry at politicians who are not their first line of problem, but to business and capitalism, which is. And I want to give out two shout outs. There could be many workers are moving across the board, but my first shout out is to the 8,000 workers at the Marriott hotel chain that are on strike in 23 cities across the United States as we make this program. The Marriott hotel chain, in case you're not aware of IT, runs over 6,500 hotels around the world under its own name, Marriott, but also under the following, Ritz, Carlton, Sheraton and Renaissance. Those are all Marriott hotels. Marriott is a $50 billion corporation, twice as large as the Hilton Hotel chain, which many of you probably think of as the premier hotel chain. It is very important that this leader in the hotel industry has had to face 8,000 strikers led by the Unite Here union, demanding the kinds of wages and working conditions that should have been given to these workers years ago. This militancy, this going to the point of strike, is a very important turning point in the labor movement. And so is the Next example, this one is the United Steelworkers of America. And here is something particularly poignant I want to point out. When Trump levied the tariff on steel coming in from the rest of the world, he gave a tremendous boost to steel companies in the United States. They didn't have to compete anymore with more efficient, lower priced steel coming from out of the country that was blocked by having to pay a tariff. So the American steel companies, patriotic to the core, immediately raised the prices of their steel, taking advantage of the protection of the tariffs. They didn't do anything for their workers. And the workers are saying if you get a benefit from the government's tariff, we want a share of the extra profits you got. Very interesting. They demand a share of the profits. They helped to produce more power to them. That's a labor movement that's becoming creative. Well, folks, we've come to the end of the first half of today's Economic Update. I want to remind you please to subscribe to us on our YouTube channel, follow us on Facebook, Twitter, Instagram, and be sure to check out our website, democracyatwork.info there you can find a variety of ways to make use of what we do and and to work with us. And I especially want to thank the Patreon community for the support they provide crucial to our growth and our survival. Thank you all. We will be right back.
