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Welcome, friends, to another edition of Economic Update, a weekly program, as you know, that's devoted to the dimensions of our lives that go by the name economic, you know, jobs, incomes, debts, our own, our children. I'm your host, Richard Wolff. I've been a professor of economics all my adult life, and I hope that has prepared me to offer you these updates. I'm talking these days about capitalism as a system. And so I want to continue, as we did earlier, to talk about this as a system that has a set of contradictions, ways in which it undermines itself because eventually these accumulate and then the system itself begins to totter. I'll leave it to you to decide in your own mind, as we all do, whether it's tottering now or not. But let's pick up some of the signs of contradiction that are important. I'm going to begin with the Public Policy Institute of California. It just finished a study of poverty in the state of California, the biggest and one of the richest states in our country. And I thought the results of what they found were arresting. 40% of state residents in California live at or near the poverty line. 4 out of 10, whereas Latinos are 39% of the population. They're 53% of California's poor, 46%. That's just shy of half of children live at or near the poverty line. And this is how capitalism works out in one of the richest states in the United States. It produces really serious poverty because if you know what the poverty line is in America, you are really poor. And if you have to live at that level. So being told that 40% of the folks in a state are at or near the poverty line tells you how bad things are. Now, why am I telling you this besides showing you that capitalism leaves a lot to be desired? Because children carry the effects of poverty throughout their lives. It affects their education, it affects their training, it affects their mental and physical well being. This system is going to be dealing with the effects of submitting that many people to poverty for the rest of your and my lifetime. What's the solution here? Well, obviously the solution is not to have 40% of your people, 46% of your children living at or near poverty. But I want to caution that the solution is not redistributing wealth, as so many seem to think, taking it from some and giving it so that the poor aren't so poor. This is a different kind of problem. This is a system that shouldn't be distributing it that way in the first place. We shouldn't be angry at one another as those who have get taken from to give who those who don't have. Because guess what that leads to tension, bitterness, anger, envy and maneuvers by those who have who don't want to lose would be far better, far better not to distribute wealth so unequally in the first place. Jeff Bezos doesn't have to have $150 billion while half of his employees get less than 28,000 a year. Think about it. Here's another example. Childhood obesity, serious problem here in the United States. One in 25 children, 11 to 12 years old is severely obese in 2016. And here was the result of the study that produced this understanding. I'm going to quote More deprived areas have a much higher rate of over overweight and obese children compared to the most well off. Keep that in your mind as I tell you what obesity in children does. Children with obesity are five times more likely to have obesity as adults. They therefore are at heightened risk of having type 2 diabetes, cancer, heart and liver disease, as well as associated mental health conditions. In other words, not dealing with the obesity problem in our children produces an enormous burden on our health care system and costs us in thousands of ways health, the very lives and the money to take care of what we're not doing to deal with this problem. But that's not the worst. As I read further, I learned that the government has decided the Department of Health, as part of our plan, sweets and high fat snacks will be banned from supermarket checkouts and there will be tighter restrictions on junk food ads on tv. Come on, you just told us in the report that well off areas don't have these problems. They go to supermarkets too, and they watch TV too. So apparently if you're well off, it isn't the supermarket shelf and it isn't the tv. It's that you're poor. There's a problem. This is a system that shoots itself in the foot, gives itself enormous dysfunctional populations, illnesses and the costs of dealing with them because it can't cope with its own consequences. A mass of poor people, many of whom become overweight. I want to turn next to another way that this system is full of contradictions. It produces a Trump and in producing a Trump, it produces a strange political animal responding to and largely created by the very inequality and troubled economic lives of so many Americans for the last several decades. And so they put in office this fellow and he has to try to come up with some kind of identity, some plan, something that it can at least look like he's attending to the needs of the people who put him there. So he has decided to use the government's power of tariffs. Remember what a tariff is? It's a tax on goods that come into the country from outside. And the first tariffs he imposed were tariffs on steel and aluminum. So I've studied what the effects of that were, and I want to bring that to you because it's an example of how capitalism undoes itself. Let's see. Mr. Trump used an obscure law from 1962 to claim that our national security was threatened because we didn't have more steel and aluminum produced inside the United States. Okay? The law was passed in 1962. Countless Republican and Democratic presidents since then didn't see it that way. Countless Congresses, some of which were dominated by Republicans, some by Democrats, didn't see it that way, but he did. And so he made a big to do. He's going to say if steel is produced outside America, if it comes in here, it's going to pay a tax. The candidate of the Republican Party is hitting taxes, raising taxes. The government is thereby interfering in the market. Something else Republicans tend to say they don't seem to believe in. Ooh. All of that seems gone. But now let's follow what happens. The companies that produce steel inside the United States are overjoyed. Companies like US Steel and Nucor, major producers of steel, can now raise the price of domestic steel and people will still buy it from them because bringing in foreign steel has that tax and that makes it even more expensive. So they're doing very well and they're very happy. Everybody else who uses steel and aluminum, car manufacturers, soda can manufacturers, everybody who uses steel and aluminum, are very unhappy because they have to pay much higher prices, which either going to hurt their profits or they're going to pass it on to us in higher prices for what we buy. So they have applied for waivers. 20,000 companies have applied for waivers so they don't have to pay the tariff duty, it's called on imported steel. But the companies, as reported in the New York Times of August 6, the companies are busily working with the Trump administration to not give those waivers to make more money. In other words, the government is making more money for some companies in the steel and aluminum business at the expense of other companies who don't want to have to pay. It's a fight between two groups of companies, and Mr. Trump is surely counting on the fact or the hope that the companies he's helping will give him more support than he loses from the companies he's hurting. But here's one thing that all of you watching should understand. This has nothing to do with jobs. It has nothing to do with wages. It has nothing to do with working people at all. No one knows for sure whether the jobs gained in steel and aluminum will be more or less than the jobs lost in all the industries that cut back because they have to pay higher prices for steel and aluminum. No one has done that work. No one knows, because it doesn't matter. This is a fight among capitalists and their government. For you and me, we're just going to see where the chips fall. But there's more. The biggest winner so far because of these tariffs has been Arcelor Mittal. You may never have heard of them. They're the biggest steel company in the world. Now, here's why they gained. They produce steel. And in Europe, there was a fear that the companies around the world that could no longer sell in America, but because of Mr. Trump's tariff, would therefore take the steel they can't sell in America and dump it in Europe at a low price because that's better than not selling it at all. And that got the Europeans upset. They don't want to have to pay the price in effect, so they put tariffs, too. So wherever Arsalor Mittal is located, they can raise their prices inside the United States, inside Europe, in ways they couldn't before. They're doing great. Their profit is 40% higher this year than last year just because of the tariffs. And so let me tell you about Mr. Lakshmi Mittal, who is the head of that company, by the way, that company is based in Europe, not here. So keep in mind the profits. Luxembourg is where they're based. The profits that Arcelor Mittal gets from the Trump tariffs, he can and will invest anywhere in the world. There's no commitment here. In fact, when asked if he would be building new steel mills in the United States, he said, oh, no, we can't be sure that the Trump tariffs will last. So we're not going to invest in a 2, 3 year project to build a steel mill when there may not be this nice deal for us now. So there are no jobs coming from this. Not from Arsalor Mittal, but back to Lakshmi. He also sits on the board, you'll love this. Of the Goldman Sachs investment bank. It's the same people doing the same thing, pretending it has something to do with the mass of people's jobs or incomes. It doesn't. It's a game being played among them for their benefit, not yours. That's the biggest important takeaway. These are maneuvers among capitalists. Those who stand to gain from a tariff versus those who stand to lose. They're going to fight it out and whichever one wins, the jobs won't be there. The automation of jobs will continue. The outsourcing of jobs is continuing. Don't be fooled is the message here. And it's an important one. Well, that does it for the first half of the show. But before we continue with an interesting show, I guarantee you, I would like to ask you to remember to subscribe to our YouTube channel and likewise to follow us on Facebook, Twitter and Instagram. Be sure also to check out our website, democracyatwork.info where you will find all kinds of useful additions to what we do on this program. And I particularly want to thank our Patreon community their continuing support. Your continuing support is a very big part of what enables us to bring these updates to you each week. So please stay tuned. We will be right back. Welcome back, friends, to the second half of this edition of Economic Update. This time, instead of an interviewee, a guest to talk with and to talk to, I'm going to present some material myself that responds to a set of questions that many of you have been sending to us over the last several months. And to put them all together in one phrase, the questions ask how do you connect the politics of the United States, Republicans, Democrats, all of that, to the capitalist system that we talk about, usually critically on this program? So that's what we're going to do. We're going to talk about how American politics connects to, relates to the economic system we live in. And before jumping in, let me give a little historical background. Every economic system that has ever existed has needed a political system alongside it that supports it, that keeps it going. Slave economic systems had their politics, feudal economic systems had their politics, and capitalist economic systems have theirs. It's the job of politics to absorb the rough edges of an economic system, if it has them. It's the job of politics to fix the kinds of problems that an economic system can get itself into that it can't get out of on its own. And that's really most of them, particularly the serious ones. It's the job of politics to make people accept, live with, tolerate the economic system, even when it gives them a rough shake. So politics very important. And that's absolutely true with capitalism everywhere in the world, and it is certainly true with capitalism here in the United States. So that's what I want to talk about. By the way, it's not that politics always does its job. Sometimes politics fails to solve the problems of an economic system. When that happens, that economic system is in deep trouble and is often on its way out. If it hasn't got the political to help it hold together the society, then an economic system is indeed on the verge of a transition to an altogether different system which will need its politics in turn. So let's deal with the United States. And in order to get a sense of what politics does does and how it works to sustain capitalism here in the United States, I'm going to divide the American population into three groups. Very simple. The first group are the 10% richest. At the top, the people who own and operate the businesses that run our economy. The people who sit at the top of our institutions, in most cases, the richest folks, the ones with the most powerful, the top 10%. That's the first group. The second group is everybody else, the other 90%, and I assume that means mostly you and me. And I'm going to further divide this second group into two. The upper part and the lower part. The upper part, if you do your math, is 45% of the population. They're not as rich as the 10%. They're the group right below that. And. And at the bottom are the other 45%, the poorest 45%. So that's it, three groups. Top 10%, let's call it the middle 45% and the bottom 45%. With that in your mind, I think it can explain how American politics sustains our capitalist system. Let's deal first with the bottom 45%. These are the people who don't do well economically. They have bad jobs or no jobs at all. If they have a job, it doesn't pay very well. Even if it pays decently, it's insecure, it's a part time job, or it's a job that can at any time lose you hours of pay or disappear on you. The bottom 45%, and that's across the board in capitalism, United States, no different, are the people who have the least to lose if this economic system disappears because they get the worst shakes. And you all know about them. You know where in your community they live, you know roughly how they dress, you know what kind of cars they drive, if they drive any. You get the picture. Now, let's start with them. The political party that has traditionally spoken to those people has been the Democratic Party. And it has been the function of the Democratic Party to say to the people at the bottom, we're your friend, we're going to get you an unemployment compensation program so when you're out of work, you're not as desperate as you might otherwise have been. We're going to get you some job training so you have a better shot at a decent job than you do now. If you are a mother and you're responsible for children, we will give you some sort of help to raise the children or at least to feed them. The Democratic Party has been the party that says to the capitalists at the top, the top 10%, listen, those bottom 45, that you don't pay very well, that you don't give a secure job, that you don't give a nice home to, that you do not basically find a position. Those are always a danger to capitalism. If they get turned off enough, if they get bitter enough, if they're deprived enough, they may turn against the system that has put them in that position, and then where will you be? So the Democratic Party goes to the top 10% and it says, you should support us in our taking care or at least helping the bottom 45% because it's in your interest. It prevents the society from blowing up because capitalism creates a bottom 45% that live a pretty pinched life economically. And that's dangerous for the system to survive. And that's what the Democratic Party offers. So let's assume the Democratic Party wins, which they often do, and they take power in the presidency, in the state level, in the local level, for this argument doesn't much matter. What does the Democratic Party do? Well, it does what it. It's going to help the people at the bottom with welfare payments, with housing vouchers, with special programs for their children, with job training, you name it. And then the question immediately arises, okay, if the Democratic Party has won an election, it now has state power, and it's going to do these nice things for the bottom 45%, who's going to pay for it? That's the crucial moment. The Democratic Party then splits very quickly into a left wing and let's call it a not so left wing. What does the left wing say? It comes up with the idea, of course, we should make the people at the top pay for this because we're saving them by keeping the bottom 45% from becoming bitter, angry, revolutionary, criminal, whatever words you want, we're doing your job. You at the top, to keep the lid on this system, you should pay for through taxes or some other mechanism for what it costs to take care of the 45% of the people. You don't pay enough to live. But the other part of the Democratic Party, the not so left part, comes back and says to the first group, the left wingers in the Democratic Party, are you crazy? If we did that, the rich people at the top who give money to the Democratic Party, who donate to the candidates of the Democratic Party, without which it can't win elections because everything now depends on television ads and the expensive apparatus of running for office, you can't tax them at the top. Well, then the Democratic Party gets crazy. What is it going to do? And the solution the Democratic Party has found is at least over the last 60 to 70 years, has been to say, okay, we're going to take care of the people at the bottom. Not as much as we had hoped, because we dare not tax those at the top, but we will take care of them to some degree. And that's going to be by taxing the middle, that other 45% that's not the top 10, but is better off than the bottom 45, and we're going to go after them and we're going to tax them. The people at the top smile. They don't mind if you tax the other 45 to help those at the bottom, as long as you don't touch them, they're happy. And that's what the Democratic Party has done. Now let's look at the Republican Party. The Republican Party looks at the Democratic Party and says, fine, do your thing. Go out there, help the poor, help women to get an equal shot. Help non white people get an equal shot. Do all of that and tax the middle. And as the Democrats do it, and as everyone sees that the Republicans figure out their chance, they go to that middle 45% and they say, you're being ripped off. The lower 45% are all takers. They're people who are poor because they don't want to work. They're people who are in need because they haven't got the gumption to go out there and make a life for themselves. And you shouldn't have to pay the tax for people who are not qualified, who are not holding up their end of the bargain. Notice the Republicans carefully don't say a word about the folks at the top. For the Republicans, it's always the upper middle against the bottom. And they turn the upper middle into rageful people whose anger is not at the top, who don't pay, but at those at the bottom who they are being asked to pay for. And because it's the Republicans, they don't allow a left wing. So there's nobody to say, hey, we could take care of the bottom without taxing the middle if we were willing to tax those at the top. Top. No, no, no, no. Republicans say that. And if they do, they are immediately attacked for being class war people, don't belong in our party. So then the elections go how? Well, they oscillate back and forth, don't they? We have Republicans and then we have Democrats. And it's easy to see why when the middle can't stand being taxed and blames the bottom, it gets so angry that, that it makes a common front with the people at the top to throw the Democrats out. Then they cut back all the programs. I shouldn't have to explain that right now because we're in the middle of one of those. The Trump administration is cutting back all the programs that the Democrats invented over the last 50 years. So you can see it in action. Eventually, of course, that makes the people at the bottom so miserable, so angry, so bitter at what they've had taken away from them, that they become angry in a way that frightens those at the top. So those at the top say to the Republicans, you've had it, now we're going back to the Democrats. So the way politics in America works is we go back and forth between Republicans and Democrats, both of them making sure that the top 10% is untouched, free to get richer and richer, free to do what they do in their banks and their businesses because they will not be heavily taxed. They will always have accountants to get them out of whatever the taxes are. They will always hide it abroad. They will do all the things you've read about and I speak to you about. And politics in America will continue to be the way the Republicans want to help those at the top by sticking it to the folks at the bottom versus the way the Democrats serve the top, by doing something for those at the bottom, but charging those in the middle the cost of doing it. Oscillation between the two parties is how capitalism survives. It's how it deals with its rough edges, with the people it doesn't take care of, with the people it overtaxes by going back and forth and back and forth. So what's needed in this story, what's needed and what I will continue in the second part of this conversation, but let me give you the punchline. To get beyond this system, we can't anymore have a politics whose only existence, whose function is to reproduce capitalism, to sustain it by keeping the flow between Republicans and Democrats, between the bottom 45% and the 45% above them. To get out of this disaster requires a new political party with a new agenda. We've come to the end of our program for today. If you'd like to see this conversation continue, Please go to patreon.com/economic update. And I look forward to speaking with you again next week.