← Economic Update with Richard D. Wolff
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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.
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B
Thanks for inviting me.
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A
So let's begin by having me ask you to tell us in your own words, what's the point of democratizing the enterprise? Why have you and your people that you're working with set this up?
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B
Right. Well, it's a social movement, but it's also a political movement. It's basically an open sourced citizens lobby for economic democracy and also structural democracy. Because my work experience over the years has basically been, like you said, at the whim of my employer who is trying to remove the cost of labor. So it doesn't leave much for people to. It's hard to gain benefits that way. It's hard to gain hourly rate that's a little higher. They're always trying to remove, they're always trying to make it a little bit harder for you to have stable employment. So I, I figured the only way to do it is to change it on a legislative level. So what we decided to do was find a bill that basically incentivizes employee ownership and we're going to pass it. We're working on passing at a 50 state level.
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A
Okay, so the idea then Correct me if I'm wrong. The idea is to get laws passed that make it easier for workers, either in an existing business or in a new business, to own and operate it themselves so that they can control and they can shape the conditions of work rather than having them imposed by someone who's trying to save money.
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B
Right, exactly.
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A
Am I getting that right?
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Because labor is the number one expense of any business and the capitalist organization is always trying to make more profit. That's their only goal, is to make as much money as they possibly can. So if they can remove the expense of labor, they will. And the gig economy is an example of that. So the only way to change it is to change the capitalist structure to be more of a bottom up democratic structure so that the employees that work at the businesses own the business and they have democratic voting rights in the decisions of the business. So for example, if there needs to be changes in the business, if an employee is voting on that, they're not going to outsource their own job, they're not going to move all their jobs over to China. They're going to think about themselves and their family and what benefits the community as a whole because the community also is involved and is a stakeholder in the process as well.
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These are sometimes called worker co ops, the kind of enterprise you're describing. And yet when I talk about worker co ops, I often encounter the problem that other kinds of co ops are in people's minds because they really are different kinds. Nobody's fault. But I thought it would be helpful if I could draw you out a bit. Tell us about the different kinds of co ops and what particularly democratize the enterprise is going after among them.
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B
Well, you can call it a co op, a worker co op, where the worker own the business. We prefer to. But there's also consumer co ops, which people get those mixed up all the time. A consumer co op is like a food co op where the people that shop there are invested in it, but they don't own it. Right. They just kind of pitch in and get a benefit, maybe a group discount or something like this. This is not what we're talking about. We're talking about employee ownership, which is 100% ownership of the stocks of the business are owned by the employees, from the janitor all the way up to the CEO. In those type of enterprises there would be voting rights. So one person, one vote. Some of them are set up so that the more stock you own, the little bit more vote you have, but there's still no outside shareholders. And there's no outside board that does not work at the business. And there's a big variety of the type of employee owned businesses. We have one here in New York that's a good example. It's Cooperative Home Care Associates, I believe. And they are one of the largest ones in the U.S. but they hire, they basically nominate a board of directors from inside the employees every year. And those guys run the business on behalf of the whole enterprise. There's also ESOPs which are very popular, they've been around for a while and the employees own the business. But, but they have no voting rights. So what democratize the enterprise is trying to do Is get to 100% voting rights and 100% ownership. So we want the best of both worlds.
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And so what's crucial for me is you're then going to say that your goal, this is what excites me about what you're doing, to be honest, is to get the workers on a one person, one vote basis to make all the basic decisions where you produce, how you produce, what you produce, and what's done with the profits that you all helped to produce in the year that you worked. This is a fairly radical change in our society. Scary word to use, but let's put our cards on the table. What makes you think if you do that we're ready for this, that we, that we're here in the United States, for example, that there's an audience for this, that there are people who feel in their own way, in their own lives, that they want this change to happen. Because you must think that they're there because your organization is trying to find and gather them.
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B
Right. I know we're ready for the simple fact that over the past 40 years I have witnessed the opposite happening. And every, every time it gets worse and worse. It's like there's no concessions made for working people, but we are the majority of the population, 99 versus 1%. But unfortunately under our system it's top down and 1% makes all the decisions and it affects our daily lives. So whereas my mother went to College in the 60s, she got state funded college, she was able to get an education, her parents didn't go into debt, she and my father got jobs and they had a great life and they were able to kind of be upwardly mobile. And since my birth, and we've seen it go back down, sort of like gone right back down. And so far they're saying like the millennial generation will be much worse off than their parents were. And those are decisions that have been made from the top, bottom up decisions.
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And you feel that there's a growing audience, there's a growing feeling among the American people that this kind of change is needed and can be brought about.
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Absolutely.
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So tell me what particularly that your organization Democratize the enterprise. What is it focusing on as a way to move this forward, this plan, this program?
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Right. Well, it's focusing on right now we have a website which is basically a place where we're storing a bill. It's a model bill similar to we've all heard about alec, American Legislative Exchange Council, where corporations write these model bills that benefit them and them only. And then they get a lot of lobbyists to go around the 50 states and pass it. We're actually trying to do that with just regular old citizens. You know, we've written a bill, it's 100% capital gains tax exemption for all retiring business owners that sell to their employees with a loan guarantee. Because another problem is money is hard to find for purchasing these businesses or as corporations transferring the shares. Exactly. So those two things need to happen. We need to makes to have not a huge wealth transfer in the wrong direction. We want it to go back down to the bottom, to the community, to revitalize economies that really need help. The best way to do it is to sell off the existing businesses to employees so that they can start this model for themselves.
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A
Tell me the website where people can see this bill and see if they can get involved. Which one is it?
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It's called DemocratizeTheEnterprise.org and all one word.
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Democratize the enterprise.
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Democratize TheEnterprise.org you can find us on social media. Emocratizeit. It's a little bit shorter and easier to remember. But you go on, you sign up to be involved and you download the bill. It will come to you in an email and then what you do is you take it to your own legislator in your own state because nobody really should be lobbying your representative but you. So. So if you want to get a couple of friends together that live in your area and hand them the bill, tell them it's going to help the economy, it's going to help revitalize the economy. Every politician likes that and then they like to take credit for it. So just give them credit, go in there, help to lobby for it and hopefully it will be passed. It's been passed in a form in New Jersey, it was recently passed in New York, it's been introduced into the Wisconsin legislature. So it's actually gaining a little Traction without even having been formally launched and democratize the enterprise.
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Your organization wants to inform people about all that's involved in all of this, right?
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B
Exactly.
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Tell me, have you gotten any pushback? Have you had any kind of criticism, you might say about what you're doing or have people basically been supportive?
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B
Well, the pushback that I've received is basically from a populist, which is, unsurprisingly, a little bit discouraged about the whole system in general. They say, you know, politicians are too corrupt and the system is too rigged and nobody really, you know, there's no way to get it back. It's just too far gone. And I have to say I disagree, because if we don't present the idea to politicians to champion, it won't be presented. Nobody will do it except for us. So I feel like it's important for the government is us. We are taxpayers. You can run for office. So it is actually not a separate entity from the American people. It is supposed to be part of something to facilitate better things for all of us. So we just have to take that mindset and say, you know what? It belongs to us. My representative works for me, so I'm going to take this to him and say, hey, listen, he or she. And listen, this is going to really help things. It's going to help the economy. Do you want to be involved? And I think it will happen.
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A
Are there politicians that you can identify for us who are sympathetic?
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B
Absolutely. We actually had one in New York who is in the Bronx and that's where the Home Care Associates is. So it's an idea that she was very familiar with and she actually was the perfect candidate because she's an independent in the Senate. So she's not quite in either party firmly, and she decided to take it and sort of team up with a guy from Buffalo who has had a really hard time. Buffalo in general has been de industrialized and they both realized that their local economies could be helped by this. And it very easily passed. And unfortunately, a lot of state legislators are very worried about is this going to cost us money? So they passed it as a study bill to see if it would have a negative impact on the economy or if it would cost the taxpayers too much. And of course it won't. It will actually be very beneficial. So we will have to revisit it. But it's basically any place that's been de industrialized is probably the first place you want to introduce this. Detroit would be another great example.
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A
Let me tell you about a situation you may be familiar with, but I find intriguing. In Great Britain there are two major parties like we have in the United States, the Conservative and the Labour Party. The Labour Party has officially over the last two or three years, adopted a commitment to dramatically enlarge the worker co op sector of their economy. It's already larger than that of the United States by a factor of many. But here's what they said they would do if elected. And there is increasing polling evidence that the next government in Britain will be the Labour Party. So we're not talking about a hypothetical million years from now. We're talking about a reality emerging. They have two parts. One, they will pass a law that requires any business currently existing in Britain, if it wants to shut down, if it wants to sell itself to another business, if it wants. If it wants to go public by becoming a share company, any of those kinds of things, it has to first before it does those. Give its own workers what's called the right of first refusal, so that the workers have the first option to buy the company rather than have it shut or be sold to someone else or become a public company. And the second part of what they promise to do is the real kicker. They, the government, if they become the government, will lend the money to the workers so that they can act on their right of first refusal and in that way bring over a large sector of the British economy, companies that are thinking of closing or companies whose owners are elderly and retiring or whatever the circumstance. Is this a kind of parallel? Is this kind of an evidence that what you're thinking is available to us in the United States is perhaps closer than we thought it was? Do you take some encouragement from this development in England?
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B
Absolutely. I think that's a great idea. So we don't have the right of first refusal in the bill, but essentially it is a carrot instead of a stick. So we've got the 100% capital gains tax exemption and the funding mechanism. And once we get that in a number of states and we start to see a lot of improvement in the an economic democracy, meaning you see a lot more bubbling up from the bottom when the economies start improving. We can definitely put in the stick of right of first refusal.
- [45:34]
A
And it kind of suggests the relative importance of the social forces in England and the United States that we have to be more careful. This exemption of all capital gains tax is a very bad big carrot. It means, for example, some proverbial couple, Mr. And Mrs. Smith, let's call them, who've built up a business over their lifetimes and end up in their 60s, with 200 employees doing real well, they really are confronted in our society with an awful situation. What are they going to do? Their children, let's assume, and this is often true, are off becoming doctors, lawyers, or whatever else in their life. They don't want to continue the business their folks did so that they can't give it to their kids. They don't want to shut it because it's their life's work and because they probably know most or all of the people they've hired over the years and they don't want to destroy their lives and they don't want to sell it to another company because who knows what that company will do the day after the sale closes. And the same if they could close it. That's right, they could close it or transform it, or fire half the people, which would devastate those people, their families, the community that won't get the tax revenue. So it turns out for them the best option on many levels is to give it to the workers. That keeps the jobs, that keeps the community getting the tax revenue. If you add the sweetener that they will not have to pay any capital gains tax on, on their business, you really have created an enormous, it seems to me, incentive for this kind of a segment of the economy to emerge.
- [47:14]
B
Right. And I feel like for wide adoption in the United States we have to show that this is sort of not government control of anything because people on the right are not going to like that at all. And it's not 100% laissez faire capitalism. It's, it's a market system, but it is really fair for people that are employees and workers and owners as opposed to just the guys on the top.
- [47:42]
A
I wonder whether the following is going too far. So you tell me that you almost could build support for this by saying to the capitalist system, the companies that are top down, that have a tiny number of people at the top making all the decisions, that even they should support this because if they don't, the mass of people are becoming so disaffected by the conditional, the conditions of conventional capitalism, that it's in their interest to broaden the range of options that people have because otherwise they may be stoking the fire that will in the end consume them too.
- [48:22]
B
Right.
- [48:22]
A
Does that ring a bell with you?
- [48:24]
B
Absolutely. And my first thought, I've been thinking about this a lot was the sale of Whole Foods to Amazon to Jeff Bezos. And the most perfect situation would have been them selling to the employees, because it was that kind of business, but now it's been sold off to this guy who really doesn't care about healthy food or anything like that. He's just that he just wants the distribution, right? And it's of kind, kind of losing its flavor. And now he's trying to lay off cashiers. In the case of Amazon, go. So you don't even have to have cashiers. He's not thinking about employees at all. If we had had this mechanism at that time, wouldn't it be fantastic if it had been sold to the employees, you know what I mean? And there was financing for it and there was a capital gains tax exemption and it would be a totally different situation right now. We wouldn't be creating these massive of monopolies that are just trying to lay people off.
- [49:24]
A
It's a real threat to the United States. Although you wonder whether those who are making that threat happen have the time or the space in their minds to take three steps into the future, like a chess player or a checkers player. Wonder what the response will be when you lay off all these people and you create the Jeff Bezos of the world with $100 billion of personal wealth and everybody else wondering how they're going to get through two weeks from today with the way their gig economy jobs are going. You kind of wonder whether you aren't, in a way, in your organization a good thing for the very kind of economic system you're criticizing. Because if they don't listen to this kind of criticism, harsher kinds are coming down the road.
- [50:10]
B
Well, the thing is, I always envision it as a big triangle with a vacuum cleaner hose right on top. And it sucks up all the wealth and the resources and the benefits from society and leaves nothing behind. But if you don't have employed people, you don't have a consumer economy. It's as simple as that. So if they're trying to sell you something and be rich and make money off of it, you need a job and you need disposable income, otherwise you can't buy anything. Exactly. So the whole income, entire system crumbles on itself if you don't think of employees first as opposed to profit first.
- [50:46]
A
It's sort of, you know, it's an old. Since I'm an economics professor, it's an old lesson. We try to teach students that the capitalist system is a peculiarly clumsy operation because it creates the incentive, as you said so poetically at the beginning of our discussion, it creates the incentive for every capitalist to save on his or her labor costs to lay Workers off to replace them with machines to cut their hours. And yet it depends in the end for its profits on selling what it produces to those same people. If you are depriving them of a job or an income, you are therefore depriving them of their ability to do what you need. It's a system that is self contradictory in a way that ought to worry the folks, particularly in a time when you live in a country like ours which is having to downgrade its consumption levels and is doing it in ways that are going to provoke trouble. Okay, suppose there's a person who's thinking along these lines or who's persuaded by you. What would you have them do? What is it that you're the listener and the viewer of this show could do that would move your project forward?
- [52:04]
B
Right. Well, we are a 501C4, which means we can lobby and we can electioneer. So we need citizens to go to DemocratizeTheEenterprise.org, download the bill, take it to your local state Senate or assemblyman and, and fight for it on your local level. Because that's really the only way it's going to work. Because we've been outsourcing our politics too to corporate lobbyists and special interests and groups like alec, and we haven't really been engaging our local representatives at all. So we just need to flip that on its head and we need to really get involved and just kind of take ownership of it. That if we want the system to change, we have to band together, create a citizen funded ALEC of sorts and really get these bills passed in all 50 states. And so someone who lives in Arkansas can't really lobby Missouri. So it's got to be locally done.
- [53:06]
A
If a person goes to your website, DemocratizeTheEenterprise.org will they be helped to connect to others where they are to, to get together and give each other the moral support to do this.
- [53:19]
B
We actually have a member site, so if you sign up, you'll immediately get the bill. Then you can go and register for our member site where you're gonna meet people from all 50 states. You're gonna meet people who are really invested in this and we'll give you advice about how to approach your legislator. Because a lot of us are not used to this. We haven't really taken, you know, taken ownership of our political lives in the United States. So. So it's kind of like a lot of us are starting from scratch, but we're all in this together.
- [53:46]
A
What I like about the way you talk about it is that there's all this political noise about take America back, take the government back, take it from who. But you're actually doing it. You're actually having the courage to say, look, we know who took it, people took it. We know who the corporations are. We know who buys the politicians. We know. And we know that the alternative is that we do it. And what's interesting is that you've gone that step beyond the individual to make it a group process, which is the only way that this is going to work.
- [54:23]
B
They only listen to you when you come at them with pitch work.
- [54:25]
A
So good to talk to you, Mary, and every luck in doing this project.
- [54:30]
B
Thank you.
- [54:31]
A
And for all of you, thank you very much as usual, for joining with us. I think you can see in Mary Douglas and people like her the beginning of a real serious movement to make the changes in the United States that are long overdue and unlike others, really go after the key problems and not afraid to say what they are, to identify who the obstacles and what the obstacles are and to come up with a plan to make a change. And this is a way to do that, and it deserves all the attention that we can provide to it. In addition to thanking Mary and all of you for watching, I want to thank our partners, and particularly among them, truthout.org, that remarkable independent source of news and analysis that has been working with us for a long time. We appreciate the partnership with Truth out and we appreciate the partnership with you. Make use of this program, make use of our websites. That's why we do what we do. And I look forward to speaking with you again next week.