← Economic Update with Richard D. Wolff
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- [00:10]
A
Welcome friends to another edition of Economic Update, the weekly program devoted to the economic dimensions of our lives. Jobs, debts, incomes, our own, our children's. I'm your host, Richard Wolff. I've been a professor of economics all my adult life and in a way been preparing to offer these economic updates each week. Before jumping in today, let me quickly announce that we have a new mailing address, a new post office box, and we'd urge those of you that are mailing anything to us, check with our website democracyatwork.info for that new address. And likewise, those of you interested in starting or joining an action group based on what we do that may already be in your city, please go to our website. Again, address is action.democracyatwork.info and there you will get all the ways to proceed along those lines. So, turning now to the economic updates, there's a theme for today's and the theme might be best described as how and why we can do better than capitalism as a system. And much of what we do today will illustrate that point. I start with a remarkable experiment undertaken by a capitalist enterprise in New Zealand. It basically went from a five day work week to a four day work week. Salaries were not reduced. Workers simply had four days rather than five days to do their job. And the result? By the way, the name of the company is the Perpetual Guardian, a financial company that employs 240workers. It did the trial in March and April of 2018 and the Guardian newspaper covered it, as did other newspapers around the world. But I want to make sure you get the message. The company loves it. The company reported better results that way than in the old five day week. In other words, workers had a better, what they call their life work balance because they had the extra weekend day Friday off. They worked better, they worked harder, they had more energy. It turns out that the old capitalist system of making everybody work five days a week just convenienced the employer. It wasn't even good for them and it sure wasn't good for the workers. It's a failure of the system to have taken this long to discover what this New Zealand company found out. Here's another example of how capitalism is something we surely can do better than it has to do with the capital of the country of Austria, namely the city of Vienna. And there's something about housing in Vienna that I want to talk to you about, because my guess is you probably don't know, which is itself a reflection of something important that we don't know about these things. 62% of the citizens of Vienna live in public housing. Housing built by, owned by and operated by, by the city of Vienna. In other words, public housing is the dominant form of life in that city. Nearly two thirds of the people live in public housing. And let's now talk about it. It turns out for example, that a average monthly rent paid by folks in there is between 470 and $600 a month. Yeah, you heard me right. That's because it's not profit making housing. It doesn't have to profit the builder, it doesn't have to profit the operator, it doesn't have to profit the maintainer. And because it doesn't have to make profits because it's a public service, the benefits are passed on to the tenants whose rent is far, far below the average percentage of a homeowner, a home renter, excuse me, in Vienna, the percentage of rent out of their income is 27%. I checked. And in New York City it was 58%. In other words, the percentage of your income you have to spend for rent is twice in New York City what it is in the capital of Austria, one of the great cities of Europe, Vienna. It turns out that if housing isn't a profit making business, you can do much better for people. And if you ever go to Vienna, as I've done, and you visit the public housing as I've done, you will understand what the difference is. The homes are well kept, the landscaping is beautiful, the comfort is obvious and, and the happiness of the people clear. A hundred years ago this project was started. Ever since then, ever since the 1920s when conservative and liberal and left wing and right wing governments came and went, none of them ever dared do anything about that public housing structure because it is so popular and so satisfactory. Nobody wants to go back to private enterprise housing. It's a little bit like the state of North Dakota here in the United States, which has a publicly owned and operated bank. And despite lots of right wing, left wing Democratic Republican governors, nobody dares to mess with their public bank. Here's another example of how we can do better than capitalism. Fordham University in New York City, a Jesuit institution, just signed a contract with their non tenure track faculty, usually called adjuncts. The contract gives these adjuncts teachers who teach one or two courses, raises between get ready 67 and 90%. The SEIU union representing these faculty adjuncts says that they will be getting at the end of this three year contract between 7 and $8,000 per course they teach. Despite anti union sentiment, despite the hostility of all kinds of forces, when the Unions got the adjuncts together, which they did, and they voted 16 to 1 to have this contract and to fight for it. The university decided it's wiser to come to terms than to try to defeat something when workers are that unified and that determined. Now, of course, let's be fair here. Is it a victory for labor? For sure. Is it a recognition of the grotesque underpayment of adjuncts across the United States? For sure. But let's be real. Adjuncts remain, even if they are paid 7,000 or $8,000 per course. Much cheaper as a way of providing instruction than having the old system of professors teaching two to three to four courses and getting a proper salary you can live on. So universities are still moving to the cheap, but they're not as able to exploit when workers begin to push back. Who knows, if the adjuncts keep at it, we may reconstruct the really fine educational system at the higher level that we once had. And now some more examples of how we can do better than capitalism. The next one has to do with the Burberry Company. You know, the ones who make those famous British style raincoats and plaid outfits of one kind or another. They were recently caught and exposed in the press for having burned tens of millions of dollars of goods they had produced. Coats, clothing of various kinds and so on. Why did they do that? To protect our brand. See, they were afraid that these perfectly good new coats could, jackets, boots, you name it, would get into the hands of discounters and become available at discount clothing shops. This for them would threaten their profits. So here's what they did. They burned clothing that could have helped countless people. Tens, maybe hundreds of thousands of people could have had important clothing. And it wasn't destroyed because of Burberry. I'm not interested in attacking Burberry. They did what other companies do because it's the logic of capitalism to make a profit. If you're a high end producer, you've got to make sure that folks can't find your stuff at a lower price. And if that means destroying what could clothe people, that's what you do. The fault here isn't Burberry. The fault is a system that makes that irrational action, destroying brand new clothing logical. The system is the problem. Here's another sad statistic that suggests we can do better than capitalism. 25 to 34 year olds in the United States have been dying annually from alcohol related liver disease in record numbers, growing rapidly over the last few years. And as per the reporting of the NPR system, the economic troubles of The United States are the logical conclusions making it capitalism can kill. Does it pay us to find alternatives to a system for that drives young people in the prime of their lives to die from alcohol related diseases? We can't do better than a system that works that way. Sure we can. And now the last one, and I leave it for last only because in a sense, it is so grotesque a critique of capitalism that I want to say it slowly so it sinks in. Airlines in the United States, who have been doing quite well in recent years partly because of organizing their routes so that airplanes are full because we just don't have that much choice as we once did, have decided they can make even more money. And so here's what they've done. And if you don't believe this, let me urge you, NBC News has a big nice spread on this. Go look it up. You'll get the details. What the airline companies, the producers, together with the airline companies at Fly you have worked out is they have narrowed the walls of the lavatories. They've not only narrowed the wall to enable us, I guess in the rest of the airplane to hear what's going on inside there, but they've also narrowed the space. So you better learn how to do what brings you into the bathroom in a narrower space than you're accustomed to. You won't just be a sardine in your seat in the main part of the plane, you'll now be an even greater squeezed sardine when you're in the bathroom. And why they have no shame. So they tell us why it will allow them to to squeeze in another row of two to three seats right there in the back of the airplane where the lavatory for most folks is. Yes, it's a way of profiting the airline and the 1% of Americans who own most airline stocks at the expense of the millions of people who ride the airplanes. And, and yes, once again, capitalism divides us. Because if you have enough money to sit in business class or first class, rest easy, those bathrooms aren't being shrunken. Just the ones where most of us sit. That's where they're being shrunk. That's a system called capitalism, driven by profit, that constantly finds ways, mostly hidden. But some of them, like this one, you can't really hide. It finds ways to hide or disguise, prioritizing profits over people's needs, over people's comforts. Of course, we can do better than that, especially when we see clearly what that is and where it leads as a system that does it for the first part of the show. But before we meet today's guests, folks associated with the Toys R Us toy chain, please remember to subscribe to our YouTube channel, follow us on Facebook, Twitter and Instagram, and be sure to check out our website, democracyatwork.info and as always, I want to thank our Patreon community for your continued support. It is a big part of what helps us bring these insights and updates to you each week. So please stay tuned. We will be right back. Welcome back, friends, to the second half of Economic Update. For today, it is my pleasure and my honor to to welcome two guests. We normally have one, but today we're doubly fortunate we have two. And both of them have been involved with something that occasioned today's program, namely the clothing of an iconic store here in the United States, Toys R Us. So I want to introduce my guests and then we'll get into a conversation of what happened to that remarkable nationwide store. My first guest is Cheryl Claude. She is an assistant manager, or rather she was an assistant manager at Toys R us in Woodbridge, New Jersey. She's been with the company for 33 years and is one of the thousands of Toys R Us employees who have not received severance pay since the store closed. She is helping to lead the movement for severance pay for 33,000 laid off employees of the Toys R Us company. This movement, backed by Rise Up Retail, also calls for greater accountability of the Wall street private equity firms Bain Capital and KKR that were responsible for the bankruptcy and liquidation that we're going to be talking about. Our second guest, Charles Kahn, is an organizing director at the Strong Economy for All Coalition. He has many things to his credit, but the one that caught my eye that I want to share with you is that he is a leader with the Hedge Clippers, a national organization dedicated to shining a light on the damage that private equity and hedge funds have on our communities and making sure that they are held accountable. Welcome, Charles. Welcome, Cheryl.
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B
Good to be here.
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C
Thank you.
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A
Okay, so let's start for our audience, tell us what happened to the Toys R US Corporation and what it meant for you. Cheryl, why don't we start with you?
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C
Well, I've been with the company 33 years and when 2005, when KKR Vernado and Bain Capital took over our company, they just drained us. They just took all our money, invested it and just drained it. And that's. They took everything from us. I mean everything.
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A
Including your job itself.
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C
Including my job itself, and made us go bankrupt.
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A
Let me ask you just a simple question. Did the company look like it was doing well? That your job was secure, that your future looked pretty good in all the years that you were there?
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C
Leading up to this, Toys R Us was profitable. They made $11 billion last year. $11 billion?
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A
No. But the whole time.
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C
Yes, absolutely. Absolutely. I thought I was going to retire from the company.
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A
Right. So you didn't regret your decision to work with them?
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C
Absolutely not.
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A
Okay.
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C
Absolutely. I thought I was going to retire from the company. I felt my job was secure.
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A
And when did you kind of get the message, uh, oh, something's really wrong here.
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C
In 2005, when we didn't have parties, we didn't have picnics, we used to have all this stuff. In 2005, we didn't have anything anymore.
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A
Okay.
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B
And I think part of what happened is, you know, when Bain and KKR and Vornado took over, they changed the soul of the company. Instead of investing in their workers, they decided to charge exorbitant fees and enrich themselves. And in the end, that's really the story of what happened to the company. Instead of investing in their workers, their workers used to have better benefits. Their workers used to have stock options. They, instead of that, there were fees. They didn't tell the workers what was going on with the company. And ultimately the debt that they loaded the company up with is what led to an $11 billion a year company filing for bankruptcy.
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A
For those who don't know the familiarity with it, this is a fairly common occurrence in American capitalism in which sometimes people called corporate raiders or words to that effect see an opportunity to borrow a ton of money and buy a company from whoever owns it. Not with the intention of keeping the company going, not with the intention of growing the company, but with the intention of making a lot of lenders very wealthy by paying huge interest fees for the money they use to borrow the company and paying themselves a lot of fees to manage the company. And then if it goes downhill, if the next 10 years, it disappears. As long as they've gotten the interest payments and the fees along the way, they're happy. And the loss is to the community that doesn't have the store, to the workers that don't have a job, and to the local communities that don't have the tax payments that stores that are successful make. And in a sense, you, particularly you, Cheryl, are a victim of how this system, how this system works. Tell me, how much blame do you put for this on the people who had the company before? And how much do you criticize Bain, KKR and the others who came in since what happened in 1905, sorry, in 25, seems to be a crucial moment in changing the history of all this.
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B
I mean, I think what Sheryl will tell you, what other workers will tell you, is that the company really changed direction in 2005. That's really when Toys R Us began this downward spiral, Right? Vornado Bain, kkr. They forced them to sell the land that their stores were on to pay rent, you know, and any homeowner would know that rent is not. Is not what you want to be paying. They changed the culture. They charged all of these fees, and I think the blame squarely lies on them. And that's the story that we've heard. That is what the facts have represented. And that's why so many elected officials and so many media outlets have come out with really strong support of the workers, because it's so clear what happened. And it's also really clear that it didn't need to happen. It was excessive greed that caused it to happen.
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A
They can make money. In other words, in this system, these people can use borrowing and all the laws that exist to do this. They're free to do it. And you were a spectator. You and the other workers, in a sense, were a spectator to your own situation unraveling on you. What did you do? How did you handle those years? What did you tell yourself as this was unfolding?
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C
I just told myself to just keep going. I mean, I had to stay with the company. I mean, there was nothing. I had to supply my work to the employees. I tried to keep the employees happy and keep. I stayed to the very, very end because that was me. I worked hard. I stayed to the end. I stayed till the June 30. I was the one that locked that door. When I locked that door and put the key in the box, that was me. I worked very hard for that company to walk away with nothing.
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A
And that's what they literally did. They told you, you're done.
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C
Yeah, actually, there was no other. No other manager in the building. It was me and the liquidator. We boxed up the registers, put the key in the box, walked out the door. That was it.
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A
How did it affect the other workers around you?
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C
They didn't even want to work anymore. They came in, left. I mean, they didn't have the will to work. They said, how are you so happy? I said, I have to be happy. This was my life. 33 years I spent in that building. I worked in four different stores in the 33 years three different stores. I worked in one store for 28.
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A
Years, and it's a total of 33,000 people. 33,000 employees, more or less, in your situation?
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C
Absolutely.
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All over the country.
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All over the country.
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And did the company do anything?
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C
They did nothing for us. They gave us 60 days.
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A
60.
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60 days to work. And that was our. They said that was our severance pay. 60 days. They gave us work.
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Yeah. And I think.
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Did you have to come in to work those 60 days?
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C
Yeah. That was the only pay they were giving us. It was 60 days worth of work.
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B
Yeah. And I think what was another narrative that's happened is that last year in. Was it December, they gave some workers the option to leave and take severance pay. What they also said is that if we have a strong holiday season, the company is going to pull through. So a lot of workers like Sheryl, who have dedicated their lives to this company, decided to stay. Right. And when the company went under right after the holiday season, they were still telling the workers, we're going to take care of you. Everything's going to be okay. And then the story changed. And that's why all of those 33,000 workers are fighting for what they're owed.
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A
Right.
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They were promised severance pay. They were promised some kind of restitution for putting their lives into this company. Working in retail. You miss holidays, you know, all the holidays where most of us go to shop or spend time with our families, they're punching their time cards.
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C
It's like the dedication, the dedication I had with that company. I missed my daughter's high school graduation. My father died in February. I was out, and my father passed away in February. And then I came back to work that week, and that's when they told me that I didn't have a job after that.
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A
You know, this is an old story. The companies never want to tell the workers the truth.
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C
Absolutely.
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A
Because they don't want you to leave on your schedule. They want you to leave on their schedule. So that's why these funny stories, one way or the other or the possibility hold a little out for you, in the hope that something will survive so that they can make the break when it's convenient and profitable for them rather than for you. That's why in a number of European countries, there are strict laws that require an employer to notify six months or a year in advance so that the burden of the adjustment is not entirely on a labor force. They have to take the risk also of what it is they're doing to the community in this country, they don't have to do hardly anything. And so the chips fall and it's a social disaster. Let me ask you a couple of questions. Was there any involvement? Were workers brought in in any way to try to deal with the situation along the way?
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C
They were bringing people in a month before. We're getting ready to close just to cover the people that were leaving.
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A
Temporary.
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C
Temporary employees. I thought that was disgusting because we couldn't hold the people because everybody was leaving, because they were angry. I mean, how. I mean, I felt bad for the temporary people that were coming in. How do you bring temporary people in until they got 30 days to work? I felt bad.
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A
And what kind of work are you going to likely get from someone?
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C
Yeah, it's just ring and register. That's all they wanted for. And to clean the store. I just really felt bad for the people. And they said, how can you be so happy? Because that's the kind of person I am. Even though we're closing, what about the government?
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A
Were there any governmental supports to help? Was there anything that either local, state or federal government was able or willing to do to intervene and do something about a disaster for 33,000 people and the communities they come from?
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B
So I think that elected officials and many government officials have posted the bankruptcy announcement, come to stand with the workers. What we're also advocating for is not just for the workers to be paid what they're owed, but then also what can we do and what should we be doing to prevent this from happening in the future? Because Toys R Us is another victim in a long story of greed on the part of Wall street and on the part of our economy. And if we want to make a change to our economy, our financial system, to really talk about what capitalism looks like in our country, these elected officials that we've been working with, like Bernie Sanders, who's come out in support, like Cory Booker, who's in New Jersey, where Sheryl lives, and they've come out in support. And we're talking about changing laws, right, to outlaw leverage buyouts, right, that put that saddle companies with unsustainable amounts of debt to turn private equity into joint employers. So they're also responsible, right? They can't say, oh, hands off, we don't own the company anymore. And then also governors like Mark Dayton in Minnesota, right? Bain, kkr, they hold billions of dollars in pension fund money, right? That's how they make ton, you know, these. That's how they buy their Rolls Royce, right? It's pension money. And Governor Mark Dayton in Minnesota ceased all future investment in KKR until an investigation is done. They are doing what they can to hold these Wall street firms accountable. And I think what we'll need to see in the future is more kinds of action, more kinds of commitment, and more elected officials standing with workers so we can start to not only change the narrative, but change the tangible circumstances that so many Americans, so many workers are facing.
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A
Am I right to infer from what you've said that if the workers themselves owned and operated Toys R Us, you would never have sold it to kkr? Absolutely. You wouldn't have done it because you would have understood, in a sense.
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C
Absolutely.
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A
What was in store for you.
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C
Absolutely. Absolutely. Absolutely.
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It's something for people to think about.
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C
Absolutely.
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A
We've come to the end of the first part of our conversation. I want to thank you both for sharing this story. It's a sad story, but it can have a good ending if people learn from it. And I want to thank all of you for watching and finding this as important a story, I hope, as we did. And I want to remind you that this conversation and this interview will continue on our Patreon channel, patreon.com economicupdate and I hope you will join us there to continue it. Otherwise, I look forward to speaking with you next week.