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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, the interest rates we pay, the foreign trade that affects us, all of that. I'm your host, Rich Richard Wolff. I've been a professor of economics all my adult life, and I hope that that has prepared me well to present this overview of recent economic events and why they matter. Well, let me begin, as I often have to do, by talking a little bit about something that's being said about the economy, but that isn't really true, and there's an awful lot of that. After the tax cuts that were rammed through the Congress by the Republicans and by President Trump at the end of last year, there were a bevy of press releases in which companies, some of them quite well known, announced that they were going to share the benefit of having their tax rate reduced from 35% to 21% by giving their workers bonuses or wage increases. A lot of publicity they got for doing that. That might be less than what you would need to get a mention on my program. But then President Trump, both publicly, before he went to Davos, Switzerland, for the World Economic Forum and while he was there, talked about it as well in, in glowing terms of the sharing of the benefit of the tax cuts. So they wouldn't just go, as most people know they did, to corporations and the rich, but would, in fact, make everybody better off. Well, nice story to tell. Is it true? And from the best we can tell, it's not even close. Let me explain. The Bloomberg Financial News Service, which is certainly on the side of corporations and the rich, did some research and reported on, went to talk with a human relations firm or human resources firm, it's sometimes called Willis Towers and Watson, and they did a survey. They asked 333 employers, who in each case were employers of 1,000 workers or more, what they planned to do with the tax cut revenues newly available to them after the Republicans and Trump cut the taxes. Here were the results. 4% of the firms said they had already done an increase in either the wages or the bonuses. 3% said they planned to do it now, next year. Okay, you with me? 4% have done it. 3% say they're planning to do it. But let's give them the benefit of the doubt. 13% said they were considering doing it. The other 80% of the firms interviewed said they neither did nor planned any wage increases for their workers ever next year or in the future having to do with this tax cut. Let me read to you the Bloomberg Financial News article's conclusion about the impact of the tax cut on wages, and this is contained in their January 26th release. At this rate, it's too early to tell what the trickle down impact of the bill will be, if any. The bonus and wage increases provided to employees have so far been a fraction of the savings companies are seeing from the tax bill. It will take years to determine the full impacts of the bill, economists say. End of quotation. Here's the if you cut the taxes of corporations from 35% to 21%, that's a 40% cut in the taxes. You are saving billions and billions of dollars for America's corporations. They are free because that's what a free enterprise system means. They are free to do with the money they don't have to pay in taxes anymore. Whatever they want, they are not required to pay it out in wages or salaries, in bonuses, in benefits to their workers. They are free to take it and build up the dividends they pay to shareholders, increase the salaries they pay to top executives, invest abroad or sit on the money. They are free. And what the interviews have shown us and what the real research has shown us is that claims from the president on down that this has produced a significant trickle down effect in rising wages and bonuses is not true. The second update for today has to do with another activity taken by President Trump and the Republican Party. With great fanfare over the recent days, they have imposed tariffs on a variety of products, thereby demonstrating, according to them, that they are committed to what the campaign promised, building up American manufacturing jobs, building up the number of jobs in general by making it harder for foreigners to ship their products into the United States. Let me explain how, and let me again correct the untruth that's involved here first. So we're all on the same page. A tariff is just a special word for a tax. Here's how it works. A product produced abroad, when it crosses the border inside into the United States for sale here, is subjected to a tax that the tax on an imported good is called the tariff. That's all. And the president imposed tariffs on washing machines and solar panels. Later in this program, we'll explore what the implications are for solar panels in particular and for us as people living in a society that is getting more and more energy from solar sources. Here I want only to talk about what a tariff in general does. It hurts the sale of products produced abroad in the United States. Why? Because the price has gone up. Why? Because there's now a tax. This tariff, it's called on that product. So whatever it costs to produce and ship the product here has added onto it this new tariff, this new tax. Well, here's the problem. The idea behind this is if the price of imported goods goes up because of the tariff, we as consumers in the United States will buy less of those imported goods and shift our business to produce goods here in the United States because they are not subject to a tariff, because they're not imported into the country. They. They're made here. That's the idea. It's a nice, simple idea, but the complex reality makes it into a bad joke. Let me explain. The Chinese, who are, in a way, the targets. They're not the only targets, but the main target of these things. The Chinese do indeed export many things to the United States, and so their sales of their goods in the United States, which will be hurt by the tariff. But now the complexity. Many of the goods produced in China that are exported to the United States are themselves goods that have imports into China in them. In other words, the Chinese use imported products to produce what they then sell to the United States. And here comes the punchline. They buy those goods that they import into China from the United States and from other countries that use goods produced in the United States. So guess what? If you hurt the sales of Chinese goods into the United States with a tariff, you're also going to hurt the Americans who are producing those goods that are imports into China to make those goods that they then export to us. To ignore that is to show that you don't understand how global trade works. Second thing to consider, the Chinese are not passive. They are a powerful country. They happen to be the largest creditor of the United States, which is the world's biggest debtor country. They have lots of cards to play. One of the things the Chinese can do, and it's typically done in these situations, is to put tariffs on goods made in the United States and shipped to China, tit for tat. And if the Chinese do that, Americans will lose jobs in those industries that produce goods sold in China. Because the effect of a tariff imposed by China is on us is the exact parallel to the effect of a tariff we impose on the Chinese goods. I could go on, but the bottom line here is the effect of a tariff on jobs in America is uncertain, unknown, and could just as well be negative as positive. What that means is that Mr. Trump's pronouncements and the Republican Party's enthusiastic endorsements of these announcements are so much political theater, they will have very little impact over the net years of playing out their implications on jobs in America. And if there's retaliation by the Chinese, and If there are 47 other things that happen in the world over the next two or three years, they will not improve or increase jobs in the United States. And claiming otherwise is, to put a nice word on it, lying. The next set of updates have to do with the economics of universities. And I'm talking about things that are happening in many parts of the world. But the particular examples I draw on come from the United Kingdom, Britain and the United States. Let me begin with the United Kingdom. What's going on in British universities is, in a way a foretaste of what is coming down the pike for universities elsewhere in the Western world, including in the United States these days, as the capitalist system shifts its centers from Western Europe, North America and Japan to the new places where it is becoming the ascendant system. China, India, Brazil and so on. The question in the Western Europe, North America, Japan is who's going to have to suffer the consequences of capitalism going where the profits are highest and leaving those places where it was born and grew up? And everybody's busy trying to make sure the cost of the adjustment is on somebody else. Here's how the British are doing. They are changing the pensions they used to provide to teachers in the universities. Used to be said, this is a secure job. Focus yourself on being a good teacher. That's what you're here for. We will pay you a living wage, a salary, and, and it will include putting aside money for a pension that you can live on when you retire. That's being changed. The pensions are no longer going to be a commitment to give you a living outflow when you need to retire. They're going to be no longer defined benefit pensions. They're going to be instead defined contribution pensions. We'll set aside some money. It'll be invested in the stock market. And you better pray that the stock market is going up when you need that money and not going the other way. The response of teachers in Britain has been outrage. There are 14 days of strikes planned for the month of February 2018 by the University and College Union, which says the changes proposed by the government could cost teachers over £200,000 sterling. That's better than a quarter of a million dollars. Staff at 68 universities voted as to whether or not to go on strike. 61 out of 68 universities voted strongly in favor of the action. 88% voted in favor of strikes, 93% for action short of strikes. By the way, higher education In Britain is a public activity. It is subsidized by the government, is much cheaper than in the United States. But those professors are fighting against having the burden of a capitalism that is in decline put on them. And of course, through savaging the teachers pensions on the students here in the United States. I'm going to give two examples, one from Harvard University and one from Johns Hopkins University in Baltimore. Harvard University. And in the interest of full disclosure, I should mention that I am a graduate of that particular institution. Harvard University has now become subject, as a number of other universities have, to a new tax part of the bill to change taxes that passed in December of 2017. Harvard is now going to have to pay 1.4%. Yes, you heard that right, 1.4% on the investment income it earns, the dividends, the interest from the tens of billions of dollars it has in its endowment and other funds. Harvard thereby no longer can evade income taxes as it has done for 300 years. And Harvard is not happy about what it complains about, the 1.4% tax on its income. Let me remind you, most Americans pay many, many, many times larger taxes on their incomes than Harvard is required to do. This is a tiny tax on Harvard. After 300 years of paying no taxes on its income at all, what does Harvard do? Well, the statement of the university carried in Harvard magazine in the last month of December, in the last month of 2017 complained bitterly about, I quote, now revenue hungry politicians. Oh goodness. The same politicians, often the same individuals who gave them tax exemption for 300 years have now morphed into revenue hungry politicians instead of great leaders, which is how they were referred to in the past. Revenue hungry politicians, they didn't get that label when they subjected the Social Security income of America's elderly to an income tax a few years ago about which millions of elderly complained. But Harvard didn't. No, no. Harvard is doing exactly what what people who have much more justification do complain about the taxes they have to pay and try not to remember what it is their taxes pay for. You know, the roads and the highways and the college educations and the hospital supports that we rely on as a civilized society. No, it's all about the revenue hungry politicians. Shame on Harvard. They just want other people to pay taxes in the future the way other people carried the tax burden for Harvard over the last 300 years. The next update concerns Johns Hopkins University, but it's a different story. But it's an interesting economic story. Johns Hopkins University announced last week that it got a gift of $75 million from William H. Miller III, a famous stock picker and investor on Wall Street. And why did the investor on Wall street give $75 million to Johns Hopkins? That, after all, isn't so unusual. But what is unusual is he gave it to the philosophy department. Wow. Philosophy departments are usually the last ones to get any kind of money from anybody. Turns out that the stock picker understands that what he does picks stocks, like so much in the world, really depends more on your basic philosophy of life than on all that technical stuff you're supposed to learn in school. He wants to develop philosophy. Interesting. And may suggest a new appreciation for the humanities coming to American universities. And none too soon. Before I go on, I want to remind you that we maintain 2rdwolf with 2 f's.com and democracy at work. That's all one word. Democracyatwork.info Please make use of these websites to partner with us. They're available to you at no charge 24. 7. They allow you to communicate to us what you like and don't like about the program. They allow you to follow us on Facebook, Twitter, and and Instagram. They really are resources that we fill up with material every day. And for those of you that are listening and might want to watch this program as a television program, which it is, we urge you to go to patreon.com p a t r e o n patreon.com economicupdate and there you can see this program as a television program whenever it suits your schedule. I want to return for a moment to the tariffs that Mr. Trump trumpeted so loudly in the previous weeks. The key one was on solar panels. Why would the President pick out solar panels? Well, I've already given you part of the answer because it looks like he is being tough with the Chinese. It might then interest you to know that what Mr. Trump was doing was following up on a recommendation of a commission that had heard the complaints of two companies that produce solar panels here in the United States who don't want to have to compete against the much cheaper solar panels that come from China. Actually, cheaper ones also come from Germany. And these two companies who produce here in the United States had complained. And Mr. Trump was basically coming down on their side, putting a tariff on imported solar panels so that what could happen so the domestic producer could raise the price because they no longer have competition from cheap imports. Here's what you might like to know. The two major companies, Suniva and Solar World, that produce in the United States, Suniva is owned by the Chinese and The solar world is owned by the Germans. In other words, we have some companies going to war to make profits against other companies and asking the government to side in their favor. That's what's really going on here. It has very little to do with jobs. And to drive the point home, Mr. Obama tried tariffs back in 2012 and he promised to get our manufacturing sector going. It didn't work. The the manufacturing sector shrank and Mr. Trump is following in footsteps we know didn't work last time. Number three, you might want to know that the Chinese have already for several years seeing this coming, moved production of their solar panels out of China into lower wage areas in Vietnam, Malaysia and elsewhere, precisely so that the tariff put on them will coincide with falling prices because they have cheaper wages to pay, thereby nullifying the effect in terms of losing business for them. In other words, it's not going to work. And China is already talking about retaliation. And we even know where the Chinese are looking. They might buy for their exploding international jet air traffic. They said they may switch to the Airbus, a European jet producer for from Boeing, the American one. They may cut back iPhone and US auto sales. They are cutting back on soybean and maize imports. You get the picture. Retaliation is serious and real. And then what? What'll happen to the jobs in those sectors that can't send their output to China anymore? And then there's a little history to remind people. Trade wars have often been the first step in what eventually became hot wars, military wars, which you can't solve by manipulating trade you try to solve with weapons. It's a bad road that often ends badly for a publicity hound president and a party trying to posture for the mass of Americans. It sounds like tough measures taken, but it's political theater of the cheapest sort. Economics indicates it's mostly nonsense and it should be understood for what it is. My last comment My last update for today is about a poet, a writer. Her name Ursula Le Guin. She's one of the most appreciated and celebrated science fiction writers in the history of that kind of writing, and particularly in the history of American science fiction. She died very recently at the age of 88. Why am I talking about her passing? It's not just that she was a great writer. This is a course in economics. It's that infused in all of her writings was a demand and a commitment for a different economic system in the world today. She described her goals in writing her science fiction as making an effort to help change the economic system we live in right now. And that's why she's important. And I want to mark her passing by reading two statements she made to you toward the end of her life. The first was her speech at the National Book Awards. In November of 2014, she received the U.S. national Book Foundation's Media Award for distinguished contribution to American Letters. Here is what she said upon getting this award. We live in capitalism. Its power seems inescapable, but so did the divine right of kings. Any human power can be resisted and changed by human beings. Resistance and change often begin in art and very often in our art, the art of words. That tells you what she devoted her art to. The second statement was a statement she made at a speech at the commencement of Bryn Mawr College in Pennsylvania. This was a speech she gave in 1986. When women speak truly, they speak subversively. They can't help it if you're underneath. If you're kept down, you break out, you subvert. We are volcanoes. When we women offer our experience as our truth, as human truth, all the maps change. There are new mountains. That's what I want to hear you erupting you young Mount St. Helenas who don't know the power in you. I want to hear you well, Ursula Le Guin added her own words to what she wanted to hear. She was a powerful artist in part because she spoke to an economic system that needs the criticism of all of us and is particularly indebted to the criticism of a great artist like Ursula Le Guin. We've come to the end of the first half of Economic Update. Please stay with us for the second half, which will involve an interview that I think you will find especially interesting. Welcome back, friends, to the second half of Economic Update. What we're going to do today is to interview a person that I've been working with for a while and who I think will bring you an interesting interpretation and an interesting opportunity to make some changes in the world that we talk about on this program fairly often. My guest today is Mary Douglas. She's the executive director of a new organization called Democratize the Enterprise. Mary came to this job, if you like it, this directorship of a new organization because of her own immediate personal circumstance. She describes herself sometimes as a freelancer in the gig economy who has experienced the particular hardships of this unfortunately rapidly growing part of of the US and other countries economies. This is a sector of the economy at which the person works at the pleasure of the employer. Typical are uneven hours, uneven days of the week, uneven weeks of the month. It makes it very difficult to have a vacation, very difficult to get any kind of what we used to call work life balance in your existence as a human being. Typically, these jobs have few or no benefits. This is a challenge, this gig economy, to a sustainable economy, to an economy that provides dignity, security and a basis upon which to live a modern life. Now many individuals are confronted by this. Millions in the United States and in other countries. And millions of those people try to find a personal solution to hold on or to find a job that isn't a gig economy job, the old kind of job, as young people these days refer to them as. What's different and unique about Mary Douglas is that she's decided that the way out of this bad situation for millions is not simply by some individual strategy. She's pursuing what we might call a social strategy. She's trying to build an organization that can gather people together who want and who believe in a change that will deal with this as a social problem. And that's a very important part of why I've thought to invite her, since I personally also agree that the gig economy is a social problem and that you don't solve social problems by individual decisions. To solve a social problem, you need a social movement of some kind, an organization of people coming together. Mary Douglas lives in New York City with her husband and her daughter. And it is my pleasure to welcome her to Economic Update. Hi, thank you very much, Mary, for coming.