← Economic Update with Richard D. Wolff
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Sam. Saint gonna change. Welcome friends. Another edition of Economic Update, a weekly program of the economic details and dimensions of our lives, jobs, incomes, debts, the prospects for our future and those of our children. I'm your host, Richard Wolff. I've been a professor of economics all my adult life. Currently I teach at the New School University in New York City. We are very loaded with materials today, so I want to keep my announcements very short. I want to ask you all to make use of our websites rdwolff with two Fs com and democracyatwork.info There's a great deal of material that we add literally every day and we want you to make use of them. And it's free and it's available at your convenience. If you go to our websites, you will see also a chance to do a number of things that may interest you. Sign up for our free newsletter to keep you in touch with what we're doing. Click on the Facebook or Twitter icons to follow us in that way, send us your comments, your questions, your criticisms, and all of that. Find out where I'll be speaking and to help you in that regard, I want to both thank my charming hosts in Kansas City. This last week where I spoke at the All Souls Church in downtown Kansas City and also gave some talks at the University of Missouri in Kansas City to interesting crowds of interested people. Was a very good experience and I want to express my appreciation to the folks who brought me to Kansas City in the months ahead before Thanksgiving. I will be speaking in Tampa, Florida Houston, Texas Ames, Iowa Fresno, California, Seattle and Bellingham, Washington and Berkeley, California, as well as Farmingdale, New York. There may be other engagements, but those are the ones on the docket now and you can get all the details and communicate to us about it by going to those websites again, rdwolf.com and democracyatwork.info. turning now to the updates that we want to talk about. The first is a culmination, if that's the right word, of a story we've been following. The last couple of years have seen the greatest number of recalls of a automobiles produced and sold here in the United States, some of them produced outside of the United States, but most of them here in the United States because of faulty and in often in quite a few cases, deadly flaws. Perhaps the most outstanding of these were the over 2 million cars recalled by the General Motors Corporation, particularly for a Ford faulty ignition switch. There was a great deal of coverage and this last week the government of the United States and General Motors reached a Settlement around the criminal or civil or both, depending on your perspective. Errors of the General Motors Corporation. We now know from the press reports that General Motors officials, at least some of them knew for at least 10 years that there was this faulty ignition problem. And so here was what the settlement came to. Oh, and a footnote, 124 people, that's the number now given out, were killed as a consequence of this disaster and this cover up. Another 275 were injured, many of them quite seriously. And then there were the 2 million people put at risk and filled with anxiety for varying lengths of time as they found out about it. The settlement is, though, what I want you to know about. General motors was fined $900 million to pay to the government and has had to set aside $625 million as compensation for the victims of its behavior over 10 years. Well, that might sound like a lot comes together to about $1.5 billion, but I want you to see what it really means. I went and looked at the annual report for the last full year of General Motors. That would be 2014. During that one year alone, General Motors sales were $156 billion. So let's be clear. The penalty for 10, 10 years of death, mayhem, danger, hidden flaws, is less than 1% of one year's sales. Let me do that again. Total cost to General Motors of 10 Years of Misbehavior killing significant numbers of people is less than 1% of the sales it made last year. In other words, the punishment is a small bump in the road for General Motors. What kind of society does that? What kind of a message does it send, not only to General Motors and the other automobile companies, but to all companies in terms of the costs of doing things that are dangerous and illegal, illegal versus the gains and the very minor slaps on the wrist. That is what this government does for that kind of behavior. Second update this last week saw a report from the United States Census Bureau. It's a report they put out each year, and this is the 2014 edition because it comes out this year in 2015. It covers the last full year. It's called the Income and Poverty in the United states report for 2014. It's part of what's called current population reports that are issued, and this one was issued in September of 2015. It has two authors if you're interested in pursuing it. And when I tell you what's in the report, I think you will be. The first is Carmen de Navas Walt. The second author, co author, is Bernadette Proctor P R O C T O R. Okay, Census Bureau report. Here's what they found. And actually, before I tell you, let me give you the hint that comes from the title of the story in the Bloomberg News Service covering this report. By the way, the Bloomberg News Service carried this docu this article on September 16, 2015. The title of their article is the Richest Americans Are Winning the Economic Recovery. Okay, that's a strange title. Recovery isn't the race and how you win it is a little murky to say the least. So let me tell you real clearly what this report shows, as indeed the Bloomberg article does, which is one of the reasons why I've mentioned it to you. Between 2006, the last year before the crisis that we're still in hit between 2006 and 2014, that's the last year that we have complete data. Only the top 10% of income earners saw their income recover. In other words, in 2014, only the top 10% of America, the richest Americans, had their income back to where it was before the crisis hit. The other 90% have not recovered. That is, their income is less today, in 2014, at least less today than it was before this crisis. So let's stop talking about an economic recovery because for 90% of the people, there hasn't been one. Let me give you the overall data that are just as dramatic. If you take everybody together, all of them, those who gained and those who lost, the 10% who did better in 2014 than the last year before the crash and all of the other 90% who didn't. Here's what it is. Bottom median household income is 6.5% lower today than it was in 2006. Indeed, the median income, and let's remind everyone, median is the income where 50% of the people get more than that and 50% get less. Median income in 2014 actually fell from what it was in 2013. Meanwhile, the poverty rate in the United States, 14.8%, which means that 46.7 million Americans live in poverty. That rate is 2.3% higher than what it was before the great economic crash of 2007 and 2008. Bottom line, the the U.S. census reinforces what we know. There has been no recovery for the bottom 90% of the American people. So if you're in that group and you're feeling as though maybe the economic well being that everybody talks about, the improvement that everybody talks about has passed you by, this is not a mistake on your part. It means you understand very clearly exactly what has happened to you another update. General Electric announced this last week that it was getting rid of 500 jobs in the United States and moving them overseas. And it made no secret of why it was angry that the United States Congress is no longer funding the Export Import Bank. Why is that relevant? Well, here's how that works. The American bank, funded by taxpayer money and so on, makes loans of this government money or makes guarantees so that customers of American corporations can get cheaper credit to buy American companies exports. George wants its customers to get that benefit so they can sell more stuff. GE wants to make profits and he wants the government Export Import bank to continue subsidizing the GE Corporation, one of the largest richest corporations in the world. And when they didn't get their way, when the Congress of the United States decided not to fund this gambit of subsidized credit for American corporations, they express their hostility by moving jobs out. And they've been threatening to do that. So here we have it. Blackmail, it's called in other circles. You don't do what we want. We, the government, the corporations are in a position to punish you, the government. And we will. Let me turn to perhaps the biggest issues that got attention this last week and that we have to deal with. The first is the staggering refugee problem that now confronts Europe. Europe has traditionally taken in fewer refugees than most other parts of the world. That is now changing as people from North Africa, the western part of Asia, the Middle east in general, flood into Europe. The single most important country sending refugees into Europe is Syria, a very poor Middle Eastern country that has been embroiled in a horrific civil war with foreign intervention for the last four or five years. Years. The conditions of these refugees is awful. And let me remind everyone, because it sometimes slips our minds what it means to be a refugee entering Europe these days. It means you have had to tear yourself out of a community in which you were born, in which you were raised, where your family, your friends, your neighbors or live ripped away from the culture you participated in, the church or temple or mosque you may have attended. Ripped away from the language you know. To be a refugee is an unspeakable trauma for everyone involved, especially the children who are a large part of this refugee flood. No one does that who isn't forced by extreme circumstances to do it. And remember where you are going is no picnic. You don't know the language into which you are moving. You don't know the customs, you don't know the rules. You don't know if they'll recognize any education you may have. You will be in all likelihood herded into ghettos, into poor, unmaintained housing conditions, with maybe a job or maybe not. Your children will have extraordinary difficulty adjusting to the schools, and on and on and on. No one will do this unless under extraordinary pressure. It's a disaster. And it's not only a disaster for the refugees themselves. Although they clearly suffer the most, it's also a danger in and for the country to which they go. Let's make no mistake. They will need all kinds of help. They will need to get the support of the governments and the communities into which they move. And that takes adjustment, and that takes money. And in many of the European countries, money and adjustment is what they really can't do these days, as they still wallow in this catastrophe of a collapsed capitalism since 2008, with more refugees coming in looking for work, There's a natural tendency of capitalist employers to take advantage of this situation and offer refugees jobs paying less than they used to pay to local citizens. And that makes the tension between refugees and local citizens even worse than it might already be. And the signs of that have been in the press all week. This is therefore a burden of extraordinary weight on the refugees and a provocation for social problems in the countries to which they go. And this is all beside the question of the moral and ethical imperative to help people under such terrible conditions as refugees are fleeing. But the real solution here is to understand that the best thing that could have happened to everybody is not to have the refugees need to leave. They didn't want to. They don't need this trauma in their life to say it as politely as I know how. Best favor to don't have the conditions in their country that forced them to flee. Best for the people into whose countries they are moving would have been to remove the need for the move in the first place. That's obvious. The answer, then, is what about the conditions? In the case of Syria, There are two clear conditions provoking them to extreme poverty and extreme warfare. You don't want refugees. Don't visit either of these two plagues upon them. What about the poverty? As the economic crisis spread from New York on through the rest of the world, starting in 2007 and 8, what always happened happened again. Every country that could deal with the crisis did so by trying to pass it on to people poorer than themselves. Big businesses passed it on to little ones. Little businesses passed it on to their employees, as the big businesses did, too. The result was the very story about incomes not rising and falling that I finished five minutes ago. On this program. Well, in the world of countries, better off countries stick it to the less well off the Germans to relieve the pressure of the crisis on them, Savaged Greece and so on. Well, at the bottom of the pile of countries in the world are places like Libya, Iraq, Afghanistan and Syria. And in those four names you've accounted for the vast majority of the refugees pouring into Europe. Don't make them poor, don't have a global economic system. Capitalism is its name that divides the world into a relatively small number of countries that do very well and a very large number of countries that, that don't and don't leave. At the bottom of the pile, the countries that have to suffer the worst in an economic crisis they did have no responsibility for causing. But that's the way this unjust economic system works. It produces the extremes of poverty in the countries that can cope least well with them, and so they send refugees. You want to avoid the refugee problem, the trauma for the refugees, the difficulties for the countries into which they move, then do something about an economic system that provokes these problems. And likewise, the intervention of many countries, including the United States, in the internal affairs of Syria, exacerbating whatever struggles and civil wars might have happened there anyway, is a major factor adding to the misery of this poor country at the bottom of the suffering of the great crisis by adding to their woes, military conflagration. And of course it produces refugees. Last point, when the countries debate, that is the countries that intervene in Syria debate the costs of their policies in the Middle east, they never take into account the costs of the refugees. Now you can't measure the death and the injury of the thousands who have lost their lives crossing in bad boats the Mediterranean, or at least trying to those you can't count. But I'm talking about the costs you can, the policies, had they been understood to cause this kind of trauma and this kind of cost would have been even less likely to pass, despite the corruption of the politics that lets these things happen over and over again in the time that remains. I want to deal with a couple of your questions. So let me begin. One of you asks, I keep reading about how 5% unemployment more or less here in the United States is sort of the best we can do. It's kind of full employment, even though you know that 5% of the people are out of work. Is that really the case? Are we in some sense an economic system that counts 5% of the people unemployed as quote, unquote, the best we can do? Good question. The answer is in the economics profession, at least a large part of it, that's pretty much what is thought that best you're going to be able to do is 5% unemployment. Then there are some economists who will go even further and say those 5% aren't really unemployed, they're just caught between jobs. Most of the research shows that that's completely false. But that doesn't prevent folks from repeating it and saying it or who want to minimize the cost. Let's take a look in answering this question at the reality and what an alternative might be. The size of the labor force, United states is roughly 150 million. That means that 5% of that is seven and a half million people. So what is being said here is that seven and a half million people not working is acceptable. Is, quote, unquote, the best we can do. It's the way capitalism works, we are told. True enough. 5% unemployment has been the goal now for some years, all of which were years during which we had higher unemployment, millions more out of work. And there are questions with these numbers that I go over in other programs. I don't want to do that again here. Here I want to make another point, an important one that your question raises. Is it necessary for an economic system to handle unemployment, the lack of jobs for millions of people who want them by saying some people will be unemployed, that is they won't work at all and other people will be continuing to work at the same normal 40 hours a week, or as is the case in the United States today, we will have millions of people doing overtime work working more than the standard 40 hours per week, even while we have other people with no jobs at all. And the answer is no. That's not a necessity. That's not even rational, and it certainly isn't fair. Here's an alternative way to handle the unemployment. If we don't have work, and I underscore the word if, because the conditions that determine whether or not there are jobs are themselves something to argue and disagree about. But let's just for the sake of argument, assume that we don't have work for, say, 5% of the people to do. We have 5% more people then we have jobs needing to be done. Here's the rational way a society would distribute that. First it would ask and answer the question, is it any particular worker's fault that there aren't 5% more jobs 99% of the time? The answer is no. For example, the unemployment we've suffered in the last six years has been due to the crash that happened in 2007 and and 2008. Suddenly millions of people were thrown out of work. These people didn't suddenly become unskilled. These people didn't suddenly become bad behavior. These people didn't suddenly exhibit any problem with the quality and the quantity of their work. There simply was no profit in it for their employer to keep them working. So when workers are laid off or fired, or when there's too many workers relative to the number of jobs we have, the rational thing to do, since it's no one worker's fault or one group of workers fault, it's the fault of the economy that can't do the first thing an economy ought to do, which is provide work for people. The rational thing to do is. Here we go now, share the unemployment. What would that mean? Well, to take the current rate of 5% rather than making 5% of the people doing nothing, sitting on the corner, losing touch with their fellow workers, losing touch with their employer, losing some of their skills, losing their self esteem, rather than that everybody should take. Here we go, a 5% cut in their work week. That's right. Two hours a week less. That's what 5% of a 40 hour week comes to. Two hours less for the employers who need that work done, who now suffer that they have to let their workers all go two hours early. They will therefore have to go hire some of the unemployed to do the work that their regular workforce doesn't do since each of them got a two hour reduction per week. Oh, that's how it would work. The unemployed would get jobs because Everybody would have 5% less of a job to handle a 5% unemployment rate. We would share equally the burden of an economy that can't provide jobs for for all its people. Why would this be a good idea? Well, let's see folks. First, it would do away with the terrible tendency in many societies to impose unemployment on particular parts of the community. In the United States it is African Americans, Hispanic Americans who, who consistently have much higher unemployment rates than do white Americans. And what that does is create tensions among whites. A tendency to blame the black and Hispanic part of the population as if their unemployment was their fault. Resentments, understandably on the part of the African Americans and the Hispanic Americans that they're being asked which is exactly what the economy is doing to absorb the full burden of an economy that isn't working well by being all the time unemployed while other people are doing not only regular job but overtime. Seems unfair to them. Seems unfair to me too. And why create and support and build those tensions. If the unemployment were shared, everybody would be in the boat together and there wouldn't be this kind of tension. Here's another consequence of it. If everybody had to share the unemployment, everybody would feel the pain. And that would mean that if people didn't want to have unemployment, didn't want to lose two hours a week, then everybody would band together, that is every worker, and put the pressure where it has to be put on the employers and the government to give the full employment that everybody wants. Now we don't have that. We have the majority of people who escape unemployment and then have no incentive and often no understanding that all the burden is being put on a minority of others. Sharing the unemployment would create and mobilize the mass of workers to change everything. It would make everyone understand the cost of an economic system that produces unemployment like this. We've come to the end of the first half of our program, Ladies and gentlemen. I want to ask you please to stay with me. We'll have a short interlude and then we'll be back for the second half of the program where we will deal with another question that you sent in and a couple of the major topics that demand our attention this day. Please stay with us. We will be right back.
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At the bottom of a river then in a bed with him he said till you try both, you won't know what you like better. Why don't we go for a swim? Well, friends told her this and friends told her that but friends don't choose what echoes in your head. When she got bored with all the idol, Chitin chat kept thinking about what.
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He said.
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I'll swim even when the water's cold that's the one thing that I know I swim even when the water's cold that's the one thing that I know I'll swim even when the water's cold that's even when that I go out Swim even when the water's cold.
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She remembers she doesn't remember it all but what she does she sees clearly she lost his number and he never called but all she really lost was me Hearing the others in her boss thought that she is lost I wonder if she still hears me gossips I've.
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Slipped Even when the water's cold that's the one thing that I know Swim even when the water's cold that's the one thing that I know I swim even when the water's cold that's the one thing that I know when the water's cold.
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Welcome back, friends, to the second half of today's Economic Update program at the beginning of this second half hour. Before we resume with another response on my part to questions you've sent in, I want to remind you again that we welcome your questions, we welcome your comments. Please make use of our websites democracyatwork.info. that's all one word. Democracyatwork.info and RD Wolff with two Fs. Make use of those websites to send us your questions, Send us your comments and criticisms. Click on the icons to follow us Facebook and Twitter on a regular basis. Sign up for our free newsletter make use of these websites that have classes and listing of my speaking engagements around the country. A whole host of services at no charge available for you to make use of, etcetera, etcetera. And I wanted again, because it's very important to thank those of you that have responded in recent weeks to our request that if you have connections, any of you listening to local radio stations, public radio stations, NPR affiliates, Pacifica affiliates, college and university radio stations, community independent stations, and so on, we are interested in finding other stations to carry this program. We are extremely proud that we grew from one station in New York City, WBAI, back in March of 2011 to nearly 50 stations today. We're trying to grow even faster than we've been able to and we will follow up any lead, any connection, any suggestion. You send us through the websites and we will be extremely grateful. Also, I'm heading in the next couple of months to Tampa, Houston, Ames, Iowa, Farmingdale, New York, Fresno, California, Seattle and Bellingham, Washington, Berkeley, California. Quite a trek around the country. If any of those places are near you or you near them, look up in our websites under events and you can see the details of where and when I'll be. And I would love to meet as many of you as possible. Well, many of you have asked me questions about the Federal Reserve, and the Federal Reserve has been in the news this last week. So it seemed a good time to talk in a way that the media doesn't about what's at stake. Literally, for months, culminating Thursday of this week, 17th September, there has been speculation and debate about whether and how the Federal Reserve can, should, would, might raise interest rates. Now, rather than get into the particulars, there'll be more than enough press coverage about that. I wanted to make sure everyone understands what's at stake, and this applies in the event of an increase in the rate, a decrease in the rate, or the rate staying the same. Let's understand what this is all about to do that, we have to go back to the crisis of capitalism that begins in 2007. 08. It was extremely severe. It was the kind of crash of capitalism that was not supposed to happen. We were supposed to believe and we were told that, and certainly my profession is completely guilty of this. We said to the students for generations that the lessons had been learned in the Great depression of the 1930s. We had the tools, the monetary policies and the fiscal policies to make sure we never suffer a crash like 1929 again. Well, we misinformed our students. We were self deluded as a profession. Some of us have learned the lesson. Most of us not yet. But Here we were 2008 with a crash nobody was prepared for. No one knew what to do about it, which is one of the reasons why it has lasted so long and cut us so deeply. But the Federal Reserve had to act to try to do something to turn this disaster around. Particularly in the final months of 2008 and early 2009 when things looked bleak indeed. And here's what the Federal Reserve did did. It decided that the way to get the economy going again, to reverse or offset the collapse of purchasing power, the laying off of millions of workers and all the rest by flooding the economy with lots of new money, pumping the money in in the hope that that money would be lent around to people, spent by those people, and then kind of get the economy going again. And besides increasing the quantity of money, and really, as part of the same process, interest rates were brought down. These are basically the interest rates that the government charges banks and other borrowers when they borrow from the government, which they do every day. So we had an absolutely historically unique situation. Never before has government pumped in that much money in that short a period of time. Never before had the government reduced the interest rate. And by the way, the basic interest rate got down to close to zero where it has been for the last several years, basically since late 2008, early 2009, a long period of time of massive increase in the quantity of money and a drop in interest rates. Okay, now let's take a look at what that means. The basic information is you're putting the economy on life support. You're saying to everybody who might borrow money here, it's essentially free. Banks can borrow at almost nothing. Everybody who wants to borrow can borrow. That was the idea. You make it cheaper for people to take out loans to buy cars and homes. You make it cheaper for businesses to borrow money, to do whatever they think they might be able to make a profit on. And you particularly enable people who like to speculate to borrow the money needed to speculate at a ridiculously low rate. So this was the idea. The problem here, which worries people is that the longer you have interest rates at such a historical low, the more risky the investments people will make with such cheap money that there's something inherently unsafe. In a capitalist economy, if money becomes so cheap, virtually zero to borrow it, it will lead people to to make speculations they would not have otherwise made because they would have had to pay hefty interest for the money they borrowed to speculate. So there's an anxiety that risk is overdone in our economy because of cheap money. The second fear is that with all that extra money pumped in, what would happen if the people with all that money started to want to spend it on land, on buildings, on real estate, on goods and services? We might suddenly see all that money chasing after unlimited amount of goods and services, and that would drive up their price. Or to say it in economics, this extra money could lead to an inflation. Now, it hasn't done so, and that's because the economy is in such tough shape that businesses are not going to raise prices. They're having a hard enough time selling what they produce as it is. But there have been people worried that to keep increasing the money supply brings the day of a dangerous inflation that much closer. And to keep lending money at ridiculous near zero rates builds up risky investments, which if they go bad, is going to lead the economy to another catastrophe of collapse. That's the debate. That's why half the folks advising the Federal Reserve said, raise the interest rates. Half the folks said, don't you dare raise the interest rates. The first group said, we're strong enough as an economy we can survive it. The second group says we're weak enough as an economy that it would be terribly inadvisable to do it. I'm not interested in that back and forth. I'm interested in everyone understanding the key lesson here. Capitalism is an extraordinarily unstable system. That's why not only it crashed in 2008 when it wasn't supposed to, not only because that's the second major collapse of capitalism in 75 years. The earlier one was in the 1930s. And it's not only because between the end of the 1930s collapse and the 2008 collapse, the economy turned down 11 other times. This is an economy that's unstable. Hence the argument I like to make, which some of my audiences enjoy. So I'll repeat it one more time. For you here, if you lived with a roommate as unstable as the economic system with which you live, you would have moved out long ago or demanded that your roommate get some professional help. Well, that's a rational way to respond to your roommate. But it isn't rational to accept an economic system that is this unstable. And what the Federal Reserve debate shows us is not only is capitalism unstable at plunging down periodically, but the very desperate steps taken by our leading economic authorities. The Federal Reserve is our central bank in many ways solves one problem by creating a whole new set of problems every bit as scary. That's what the debate over the Federal Reserve shows. Trying to cope with the collapse in 2008, we have pumped up the money supply and dropped down the interest rates in ways that are leading to more economic mess ups, more economic risks, and more danger of a collapse. Indeed, there's a growing chorus of advisors on Wall street who are predicting another serious downturn anytime now. This is not a system that we ought to accept. The costs of this instability outweigh the gains. Not to the top percent, we saw that earlier in the program, but to the bottom 90%. The real question is why are you still supporting a system that doesn't support you? I want to turn now to a question many of you have asked me about these things we talk about fairly often on the program called Workers Self Directed Enterprises. Here what I'm after is dealing with some of the questions you raised. Let's begin by remembering what that is. A worker self directed enterprise is an enterprise in which the workers not only make whatever the company sells, but are the bosses as well. That is right. The workers together are their own board of directors. It becomes what is sometimes called a worker co op or a democratic workplace, or other words to that effect. My interest is the board of directors in a wsde, a worker Self Directed enterprise. The board of directors isn't a group of people elected by major shareholders. It's the workers themselves. You know, all day, most days, workers do the jobs that they're skilled and prepared and designed to do. But once every couple weeks, they sit down during the day and they make the bigger decisions. One worker, one vote democratically. What to produce, how to produce, where to produce and what to do with the profits. That's the key difference. So the first question I want to deal with that you've sent in is is this a kind of minor affair? Is this a. A mere reform of the capitalist system? And I think what the people who say that or worry about that, what they have in mind is that traditionally the alternative to capitalism has been thought to be conventional socialism. And the idea there is that the government comes in and takes over the enterprises and that government planning substitutes for the buying and selling in markets. Government ownership plus government planning is socialism. Private ownership and markets is capitalism. That was the conventional idea. And if you think like that, yeah, then changing the way the firm works is a detail. But in my humble opinion, the tradition of socialism ignored what goes on inside the factory or the office or the store, where that is exactly as important as anything that goes on in terms of who owns what and markets and planning and all the rest. So for me, it's not a reformist act to change the organization of production. It is as profound a going beyond capitalism as was going from private to public ownership and going from markets to planning. Whatever you think about those things, they didn't survive in Soviet Union, China, Cuba, Vietnam, where they were tried. And in large part that was because they were not accompanied by a transformation inside the workplace. Most people spend most of their lives as adults in the workplace, not in the government, not in the planning apparatus, and not even in the market at the workplace. So if there's something about fundamentally changing the workplace, then that is not a reform, that is a fundamental change. And my argument is to go from an enterprises, the normal capitalist enterprises that we're surrounded by, that many of us work in, to a worker, self directed enterprise is a radical fundamental shift. Capitalist enterprises are owned by shareholders by and large or small families. When they're not owned by shareholders, very few people own most of the shares. Roughly 1% of shareholders own 75% of shares, highly concentrated. That's a very small group of people who own and they're the ones who elect the board of directors. Every year in a corporation, the board of directors is elected by the shareholders, not one person. One vote, one share. One vote. If you don't own any shares, you get no votes. If you own four shares left to you by your grandmother, you have four votes. If you're the head of a trust bank department and you are the person who has control over 5 million shares, you get 5 million votes. That's how it works. So a tiny number of owners elect every year the 15 to 20 individuals that sit on the board of directors of most corporations. Those 20 people, 20 is the long end of the range of possibilities. Those 15 to 20 people, they make by themselves the decision what to produce, how to produce, where to produce, and what to do with the profits. All the workers work to produce those profits. But a tiny group of people who aren't themselves workers sit at the top and make the decisions what to do with what all those workers have produced. That's a fundamentally undemocratic system. The decisions with which the workers have to live, they get excluded from participating in making them. We don't permit that in our communities. We make elected officials elected. They are accountable. The people who sit on the board of directors make decisions that affect workers. They're not accountable to the workers. In fact, they can fire the workers. They can fire the workers. They are not the people hired by the workers to do a job. They're the people who hire the workers. Workers self directed enterprise is the opposite. The workers hire the managers. The workers make the final decisions. That's not a reform. That's a fundamental going beyond capitalism. The second thing I want to deal with also is about worker self directed enterprises. But it's a different question that many of you have sent in. And that's why I've chosen it for a major discussion today. You've worried and you've asked me about it. How can worker self directed enterprises compete? And the logic behind your questions compelling and I want to spell it out so we're all on the same page. The argument many of you have sent to me is look, in a capitalist enterprise, the employer is constantly looking for ways to get more work out of the worker while paying the worker less. It's exploitative, it's ruthless, et cetera, et cetera. If and when the workers take over and run these enterprises in a collective, democratic way way as worker self directed enterprises, they won't be able to compete because the whole point and purpose of the workers doing that is not to be treated the way they were treated when it was a capitalist enterprise. That's why they convert to a worker co op. Now my answer to this is very important, I think, to allay your concern. This topic. Is it true, first of all, that workers, when they operate their own enterprises will treat themselves better than they were treated by a capitalist? Likely so. Likely so. So I'm not arguing that that isn't likely to happen. It is. But what needs to be understood is that's not the only change that follows from converting a capitalist enterprise into a worker co op or a wsde. Let's look at some of the others. Before I look at them, I want to just do a little bit of history because you can see that in a way, history has answered this question. The most successful co op in the world is the Mondragon Cooperative Corporation. It is the seventh largest corporation in the country of Spain. It is over 50 years old. It has grown during that time from six workers. That's what it started as in 1956, to 100,000, give or take. These days it is really a family of about 200 to 300 co ops active across all industries in Spain and other countries. Here's the interesting thing. To get to be big this way over 50 years, a record that would be the envy of any capitalistically organized enterprise. They had to compete with lots of capitalist enterprises along the way. They did that, and in many of those competitions they won. That's why they got bigger. That's why they are so successful. That's why they are the seventh largest corporation in all of Spain. So the practical question, can co ops compete? Has been answered by the Mandraka. Do the co ops always succeed in competition? No. But neither do capitalist enterprises. So that isn't all that significant. But here are now the reasons why you don't need to worry about this the way you thought you might. What workers co ops do is they create a situation in which, to use a modern phrase, all workers have, quote, skin in the game. In other words, the workers now look upon the enterprise as theirs. They're not the worker who comes at 9 and leaves at 5 who feels ripped off or oppressed or disrespected half or more than half of the time. Who knows that if he works real hard or she comes up with a new way of doing things, it may help the profits, but it may never help them that the people who run the enterprise neither know nor care about them. If workers don't feel all these things because the enterprise has become theirs, because they're part of the board of directors, as is every other worker, they're going to care about the job and care about the enterprise in a way they never did before. If on the way out of the workplace on a Friday afternoon, they notice a machine still plugged in and whirring along, or a light that should be flicked off that isn't, they'll go that extra step. They care. It's their business. You know, Americans like to say if somebody owns their home, they take better care of it than if they rent it. If someone owns the automobile, they take better care than if they're just in there temporarily doing some task with it. Well, if those things apply to home ownership, car ownership, then they apply to, guess what? Enterprise ownership and management and control. If the enterprise is really yours, not so much a question of owning shares in it because that's really a very distant kind of connection. I mean, you run the enterprise, its success is yours, your success is its. The identification of person with enterprise is much greater than what exists in capitalism. We know that because in capitalist firms they're always trying to come up with one gimmick or another to make you feel more of this company's family. Most workers scoff at that because they know what it is, a bald attempt to get more out of you. It never goes with paying you more. It just goes with having you do something that is more profitable the company than what you might have been doing before. The profit is theirs, the adjustment yours. How different it would be to if the adjustment is yours and the reward and the recognition are also yours, that go with it. Why do I say this? Because when workers feel fundamentally different about the enterprise, when it's really theirs, you get from them the quality of work, the quantity of work, the attention to detail. That is the dream of capitalism that it has never achieved. That's why worker self directed enterprises can and often have out competed capitalist enterprises. Yes, the capitalist boss drives the workers harder, is more disrespectful. But the workers get back in countless ways, some of which they are conscious of and some of which they aren't, don't they? Don't we? There's no incentive for that kind of behavior if we're part of an honest, genuine collective where what we all do will determine what we all get. And the need to cooperate with one another is obvious. And the rewards from doing that are likewise obvious and shared among the people who, who make the extra effort. That's why worker self directed enterprises have nothing to worry about on the score of competitivity. They will be more efficient in many cases, as history has already shown, than their capitalist competitors can be. And that's because of how they interact in running their own business rather than working for the man. Thank you very much for your attention. We've come to the end of economic update. Take a look at our websites rdwolff with two Fs.com and democracyatwork.info for a great deal more of what this program delivers. I look forward to speaking with you again next week. Change, change, change, change. Thing on the change. Yes, it's it.