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Welcome, friends, to another edition of Economic Update, a weekly program devoted to the economic dimensions of our lives, our jobs, our incomes, our debts, those of our children, what's coming down the pike in terms of economic problems and, hopefully, solutions. I'm your host, Richard Wolff. I've been a professor of economics all my adult life, and currently I teach at the New School University in New York City. This week there have been so many events that it's hard for me to choose what to speak about on Economic update. But let's begin with the week's developments from the United States government, which have been numerous. Probably the most consequential is word from the Federal Reserve that the economic recovery, so called is so fragile, so weak, affecting so few people in terms of any genuine recovery, that they've had to change their plans. It wasn't that many weeks ago that we were told the Federal Reserve was so confident that the economy was in great shape that it was going to raise interest rates. That makes it more expensive for people to buy homes or cars, more expensive for companies to borrow money, and all of those things tend to slow an economy down. They were going to do that four times in the year 2016, slowly but steadily. Well, it's all off. They're not doing it now. The earliest they may resume doing it, and underlined May is in the month of June, some time away. So you can see after all the malarkey and the spin that the basic decision of the Federal Reserve is to face the reality that the economic recovery, so called, is on such shaky legs that even the minuscule interest rate increase they had contemplated is too much and too soon. The Bureau of Labor Statistics reported that basically over the last year, wages, real wagesthat is, if you adjust how much more money the average American worker got relative to the prices he or she has to pay, went absolutely nowhere. Yes, more people are getting jobs, but the jobs are at low pay and the jobs are not increasing the incomes of the American people, which is one of the major reasons why the so called recovery has stalled and led the Federal Reserve to make the decision it did. We're going to come back to a longer and therefore better take on what's going on. A longer perspective in a few minutes. I want to turn to a couple of other items very much in the news. This item concerns, in a way, both the United States and the United Kingdom. Two big issues are emerging, and they're really part of the political conflict in those countries as well as the economic realities, probably more the politics than the Economics, but they are being presented in economic terms here in the United States, led particularly by Mr. Trump, but also by other candidates. There is, once again, because it comes up perennially, the question of whether the trade between the United States and China is in some sense unfair, inappropriate, lopsided, one sided, and so on. The hard reality, of course, is that the Chinese economy is highly productive and is sending way more materials exports from China into the United States than flows in the reverse way. But before you get all excited about the Chinese versus the Americansthe absurdly incorrect way that Mr. Trump speaks, let's remember that about half of what comes from China to the United States is produced in China by subsidiaries of American corporations. That's right. American companies who close their factories here in the United States or opened other new factories in China in order to pay Chinese workers for the same work, but pay them much, much less than Americans. So to get angry at Washington or President Obama or the Congress for something that is fundamentally a decision made by private capitalist enterprise is itself a bizarre form of reasoning. But Mr. Trump following suit because that's the way he's been taught, and the American people so often are taught to think about this as US vs China neatly allows the corporations who are making the key decisions here to escape criticism, escape blame, escape all the finger pointing. But that's not really what I want to focus you on. I want to focus you on the question, what do we do about it? Do we raise tariffs? That's apparently Mr. Trump's brilliant new idea. We raise tariffs, we make it more expensive to buy all those goods from China. Let's take a look at all of that. Well, his idea is because he doesn't think in complex terms, at least he doesn't speak in them. I can't obviously speak about how he thinks, but he doesn't speak very clearly about it. He seems to think if you put a tariff on Chinese goods and therefore they're more expensive, Americans will turn instead to American goods and will have jobs here. What a nice, simple story. That it's wrong bothers apparently no one in the Trump entourage. Maybe it's good for political rallies. Let's take a look. Number one, millions of Americans have become used to buying things that are produced in China for a very simple reason. They're cheaper than things produced in the United States. That's why your Walmart supermarket, your Walmart department store are full of things from China. If you put a tariff on those, the costs of those things are going to go way up. Making them too expensive for Americans. To buy taxes. Is this going to make Americans happy? Unlikely. Is this going to improve job situation? Well, it's a little hard to tell because on the one hand, there'll be more produced in America to replace what is not being bought from China. But because the prices of everything have gone up, they'll be less produced and less purchased because people can't afford it. How does that all work out? The answer is we we don't know. Not only don't we know, but it will be affected by many other things. The incomes, the prospects in America for the future. Whole lots of variables we can't know in advance. And that's the point. Foreign trade with or without protection, Protection by a tariff, protection by any other means, allowing free trade versus controlling the trade. This is a debateand this is the most important point I can make. This is a debate between two sets of businesses. Those who will be helped if we slap tariffs on Chinese goods and those that will be hurt. Walmart, for example, will be hurt. And you can betcha that Walmart will be working against whatever Mr. Trump tries to do were he to become president. Nor will Walmart be alone. This is a fight between companies that see themselves getting more profits if Mr. Trump's tariffs were to go in versus companies that see their profits hurt. Now, when those companies fight it out for and against tariffs, for and against free trade, they know they have to win over the Congress to get the votes passed because a tariff is something that the government puts into effect or it doesn't. So the two contesting groups of companies need to endorse, enlist, make a coalition with the average person to swing the votes in Congress. So they start making up silly arguments why whatever they want is good for all working people. The people on the protection side, like Mr. Trump, assure working people that if we slap a tariff on Chinese goods, oh boy, will we all have more jobs. They leave out the parts of the story that work the other way and pretend they don't matter, they don't count, or they don't even exist. And on the other side, exactly the same. Oh no, we mustn't put tariffs on Chinese goods because it will hurt the average worker as prices go up, etc. Needless to say, each side points to whatever helps them. Here's my response and I urge you to think about it. This is not a struggle that the vast majority of American people could or should care about. No one knows what the net effect of either way will be. No one knows what the impact on the working class in the end when all the consequences play out, what that will be. We're not being asked to choose what is better for us because there is no way to know that we're being asked to side with one group of capitalists against another. It's their fight, it's their issue, it's not ours. That would be a much healthier way to look at these issues. Now, the same thing applies in England. In England, the fight is a little different. It's about something called Brexit. What does that mean? It's really putting together two Should Britain exit from the European Union? As I think most of you know, Britain has always had its own independence, obviously, but also a rather up and down relationship with the European Union, the Common Market that involves the bulk of the continental part of Europe. And now the question will Britain stay in its so so relationship or really pull out of its involvement in the European Union and take an independent position? And there's a great deal of debate inside Great Britain tending to pit more conservative types who want to pull out of Europe. They don't like Europe, they don't trust Europe, all of that on the one hand. And then the government of Mr. Cameron and what looks like a likely majority of British, but it's not so clear who want to stay in because they're fearful that being the odd man out in Europe from what everybody else in Europe is part of economically, is a dangerous movement in terms of the longer future for Great Britain economically and also politically. There is strong indication that Mr. Obama will be traveling to England to add his voice to that of their leader, Mr. Cameron, in favor of keeping Europe in the European Union with some special considerations. Back and forth, the fight goes well. My analysis is the same. This is a fight between chiefly businesses in Britain who see their own well being as requiring staying in the European Union versus businesses that see their preferred outcome being not part of the European Union because of what they think that will mean. It's not that either of them are right or wrong. It's the positions they take, it's the bet they make. But in order to win either a political decision to stay in the European Union or a political decision in favor of Brexit exiting, the thing they need to endorse enlisted the mass of people in some way on their side. So now we get all of these arguments about the British soul, the European culture, all of these other issues, immigration, whatever is there, you throw the kitchen sink at the mass of people to get them to believe that whatever it is your business group wants is what is best. For them, the arguments get longer and longer in the stretch they require any serious thinker to engage. They are often silly, and they are mostly beside the point. Once again, these are struggles between contending groups of big businesses who have the resources as well as the incentive to line people up on one side against the other. The mass of people, the majority shouldn't be fooled in England any more than they should be fooled here in the United States. Raising or lowering tariffs on the Chinese is an open ended unknowable, depending on too many variables into too long a future to know the end outcome for the mass of workers. Here's one thing you can be sure of. Not only is that true in England as well, apropos Brexit. But the thing that should clinch it for the mass of people is that all of the key players making these decisions, the big businesses, the big media that they're in cahoots with, and the politicians they've long ago purchased and put in their pockets, they're struggling over something that will leave the mass of working people out in the cold. Either way, labor unions are not at the table, organizations representing consumers not at the table. We're asked to line up on one side of another of a fight organized by, for and including only people who will make sure that their interests come first and those of the mass of people. Workers on the one side, consumers on the other, play as small a role in all of this as possible. Okay, next topic. The Guardian newspaper, a very wonderful paper in Great Britain, has recently produced a series of articles under the heading the Trials of Generation Y. This is a study of the 15 most advanced economies in the world and a study of what is happening to the generation of people born between 1980 and 1994. It includes the United States, it includes Great Britain, and as I say, the 15 most advanced economies in the world. And one of the results of this study in the Guardian is so important and so interesting that I wanted to share it with you. Here we go. In the 1970s and 80s, people in their 20s, that is this kind of millennial generation, averaged an income much higher than the national average. Today, people in their 20s have an average income 20% less than the average in their societies. Let me read to you a sentence from the Guardian newspaper series. It is likely to be the first time in industrialized history, save for periods of war or natural disaster, that the incomes of young adults have fallen so far when compared with the rest of society. Wow. Let's take a look. Adjusting for prices, the average income of young people in their 20s and early 30s in 1979 was just shy of $30,000. Adjusting for PricesWhat was it in 2010? $28,000. That's right, $2,000 less you could afford to buy if you were in your 20s or early 30s in 2010, as compared to 1979. 30 years of history radically alters the position of young people. Wow, what is going on? It is the ratcheting down of the economy that we talk about on this program, the decision by capitalists to move production not only of goods, but of services too, from Western Europe, North America and Japan on the one hand, over to India, China, Brazil and countries like that on the other. It's capitalism bidding goodbye to the areas of the world in which it was born and grew because it can make more profits elsewhere and it leaves behind fewer jobs. Decimated cities, European cities, Japanese cities, American cities that can't survive as living communities because their jobs are gone, or even if their jobs aren't gone. They pay much less, they provide fewer services, they make the lives, particularly of the young people, the new entrants into the labor market, more and more difficult. They are hemmed in by the laws that were passed in the past, by the pensions that were negotiated with workers. So they can't quite stick it to the older people, so they have to stick it harder to the younger ones just coming in to the labor market. And that leads me to another point about this that is opened but not really developed in the Guardian discussion. Here it is. When this kind of a discrimination, because there's no other word for it, impacts a particular group of workers, it's never long before folks arise who, knowing that this is going to make the younger generation angry, bitter, feel betrayed. All of which is happening in Britain, in the United States, indeed in all of those three areas, North America, Western Europe and Japan, there will always then be people who want to turn that anger not against the capitalist system, whose profit driven decisions lie at the base and the core of what all is going on, but instead somebody else, some scapegoat. You can see it all over the world now in the scapegoating of refugees and immigrants, people forced to move from their home by the same decisions of the same economic and political elites that are at the root of this whole problem that we are living through. Well then, how surprising is it that Mr. Mario Draghi, head of the European Central bank, has the following to say and pay attention to the words as I quote him. In many countries, the labor market is set up to protect older insiders People with permanent, high paid contracts and shielded by strong labor laws. One effect is that young people are stuck with lower paid temporary contracts and get fired first. Because in crisis times, Mr. Draghi is a cheerleader for blaming, get ready for this. Blaming older people and their labor laws and their protected contracts for the difficulties, the pain and the suffering of the young. It's not a system that works this way. It's not a system driven by profits which allows corporations to do what they want and let their chips fall where. No, no, no, no, no. Where young people should focus their anger, according to Mr. Draghi and people who think like him, is on the older workers. The ones who, through long struggles in the 1930s, 40s, 50s, 60s and 70s, won some of the benefits that are now being denied by the same system. They had to fight to get those benefits. Those are now being denied to the young people, which will continue unless and until the young people engage the same kind of struggle, hopefully with a better outcome than their parents and grandparents did. But don't be fooled. The problem is the system, not the particular benefits wrung by one generation of workers from that system. Last topic that we will have time for in this first half of our program, fascism. I need to talk to you about fascism because it keeps coming up and more and more of you are asking me to talk about it, at least from an economics standpoint. And indeed, Mr. Trump on the Republican side has now been accused by more than a few commentators of being either a fascist or taking the country in that direction. Well, let's see what economically speaking, fascism is. First of all, it was, it remains a kind of capitalism. Let's not make any mistake here. Fascism is not the overthrow of capitalism, it is not the negation of capitalism, and it is not an alternative to capitalism. Wherever fascists have arrived, Mussolini's Italy, Hitler's Germany, as the paradigm cases, although there are other examples, the role of the government has been to ensure, to guarantee the dominance of the capitalist class. Businesses were overwhelmingly left in the hands of private enterprises. The capitalists who sat at the top of these enterprises were left in their positions. The people who owned shares in the companies retained their shares. These enterprises were not turned over to the workers. They were not turned over to the unions. The opposite. What fascism is, is a moment in the history of capitalism when for capitalism to survive, it can't allow what we might like to believe are the quote, unquote, normal rules of political life. You know, multiple political parties contending for office in elections, refusing to engage in violence towards one another. Allowing civil liberties so that people can choose between various. All of that. When that becomes too dangerous in capitalist societies, what do I mean? When there are too many people who say that the capitalist system itself has become the problem and they don't want it anymore, when the mass of the working class is beginning to refuse not only this or that job and not only striking at this or that company, but rather saying the system as a whole has to go, then capitalism has a remarkable way of deciding. Okay, time to take the gloves off. And what does that mean? No more political parties, no more trade unions. The government is going to become the enforcer. The government is going to become not just the army and the police who keep order, allowing a certain amount of freedom of expression and political disagreements to be public. No, no, no. Now, the army and the police, often enhanced by the militarization of the supporters of a fascist political party, they all go together and they shut down everybody else. They shut down the unions, they ban them. They shut down all other political parties. They ban them, they arrest them, they torture their leaders. In the German case, they exterminate people. Fascism is when capitalism can only continue because it has the military and the militarized government enforcing can't anymore operate in the old ways. And that happens when it feels fundamentally threatened, threatened by a mass movement, by a labor movement, by socialist communists and other parties for whom capitalism itself is what they don't want anymore. Whether the United States goes in that direction is something we're going to see and probably sooner than we wish, we would have to face the either or about such a direction. I want to thank you for staying with me this first half hour. I'm going to transition in a few moments to the second half when we do a more detailed analysis of some major questions. I think you will find them very interesting today. I also want to remind you, please to take a look at our websites, rdwolf.com and democracyatwork.info for all the valuable information, all the valuable connections, ways to communicate with us and ways to follow us on social media that are available to you there. We will be right back. Please stay with us.