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Welcome, friends, to another edition of Economic Update, a weekly program devoted to the economic dimensions of our lives. Jobs, debts, incomes, ours and our children's. I'm your host, Richard Wolff. I've been a professor of economics all my adult life, and I hope that that's prepared me well to offer you these insights and updates about what's going on in the economy around us. The theme of the first half of today's program is about political theater versus economic realities. A great deal of what passes for economic news is actually pretty well staged theater. And I want to give you some examples because it's important to see through that. I start with a very old story, but I'm going to use a modern example. The state of Maine in the United States suffers from the decline, it's been going on for a long time, of the paper industry cutting down trees, processing them, and making the paper that we use in so many ways in our economic system. Because of technological changes, because of changes in resource availability, the paper mills of Maine have had to close over the last many, many years. There are still some left, but they're having a rough time. I bring this up because the difficulties of that industry have been well known. I could take other steel coaldozens of other examples, but the one in Maine will do, and so will paper mills. Now, the logical intelligent way for an economic system to deal with this is to recognize that every industry faces the possibility that changes in technology or changes in resources will make an industry that was once thriving, shut down, close down. And of course, there needs to be planning for that eventuality. You have to take steps. Here are some of them that are obvious. Don't put all your eggs in one basket. Don't build your economic system in the way that capitalism unfortunately does. If there's a successful industry, say paper, you, you have everybody come there, the suppliers of paper industry inputs come, set up their businesses. Everybody collects around it. Well, what that does is make part of the state of Maine industrial successful, have some income, have a decent community, but as little as 10 miles away or further. You have the opposite poverty, loss of people as they move to where the jobs are. This produces what has been called in economics, uneven development. It's not healthy for a state to have differences like that. It creates cultural problems and political problems. Everybody knows that. But in order to deal with it, you have to plan. You have to create the situation in which industry is spread out. You have to plan for what to do if difficulties arrive for that industry. Maine didn't do it. The United States Government didn't do it, and I want to talk about that, because it happens all the time. It's continuing to happen. Now, why isn't there the planning, developing new industries early on, as you begin to see, even before the technological changes, so you're more diversified, so you're more spread out in a community, so you won't be hit so hard when. When the change comes, the way Maine has been. So why isn't the government doing that when it's the obvious thing to plan, diversify? And the answer is, in capitalism, the government has to be kept poor, small, hamstrung for revenue. Why? Because of a fundamental fear. In all capitalist systems where there is universal suffrage, if everybody has the vote anywhere, it means that the majority of people, who are always workers, not capitalists, have the votes to win any struggle politically. The capitalists clearly know this. They may be number one in the economy, they may have all the power in the enterprise, and they may have all the wealth in their hands. But. But the vote is still dispersed. They can't let the government become powerful for fear that the people's majority will determine who's in power in the government, and then the political system will undo the inequalities of the economic system. So the government is held back. The government is made dependent on business as much as possible. And so it can't do the very things that capitalism needs it to do because of this fear. It's an irrational breakdown of the system that comes out of the system itself. Let me give you some more examples. President Trump did a lot of hoopla about a new NAFTA agreement between Canada, Mexico and the United States. Lots of theater. The end result is a new treaty that is very little different from from the old one. Lots of hoopla and lots of nasty politics between Mr. Trump trying to look like he's the tough guy, and Mexico and Canada worried about their dependence on the United States, which is a big economy, compared to each of them, which are smaller. End result, not much change. But the people of Canada and the people of Mexico and their politicians were taught a lesson. Don't rely on the United States. You can't. They will use their bigness to hurt you at your expense, to help them when their economy is in a jam, because that's all Mr. Trump did, and he didn't get very much. And in the long run, the enmity and hostility of Mexicans and Canadians was enormously increased. Their politicians were put on notice. Appear to be the patsy of the United States, or we'll vote. You out the long run, effects on the United States will be very negative. The short term political theater is positive for Mr. Trump. And that's the equation you should keep in mind when you evaluate that story. Give me another example of theater. Very recently we went through a national trauma around the Kavanaugh Supreme Court issue. Lost in the discussion on who said what to whom was a denigration of women's position in our society that most women understand and understood in this case, too. And I'm not going to repeat the horror of what that means to the way women are treated. Many have spoken about that. I want to talk about the economics. Allowing women to be put in a second class position, to be the butt of and the object of assaults and inappropriate behavior has terrible economic consequences that could be and should be at the forefront of our conversation. Millions of women don't go into whole areas of our economy because they're afraid of how they'll be treated there. Millions more go into those areas, suffer abuse, harassment, assault, and so on, and leave a job even if they're good at it, even if they're rising or ought to be rising to take more responsibility. They leave because they can't handle it. And those who do stay and get abused have traumas of the sort we've learned about that affect them and their children and whatever productivity they bring to the economy for decades to come. The price paid by a system like our capitalist system that gives men the dominance over women from school age on through adulthood. The costs are enormous. They're as irrational as having a NAFTA theater of the sort I described or having a government that can't plan the most obvious ways to cope with a declining industry like paper mills in Maine. And then we have the latest Mr. Trump again and the GOP and a lot of Democrats too, beating up on China. Suddenly China is the bad guy. It's doing this, it's doing that. Who are you fooling? China is being targeted because it has had a successful economic growth. This has nothing to do with its internal political struggles. Of course they have loads of those. And of course they have all kinds of things politically. Racism we don't like. That's true about pretty much every society where the dominant capitalist system operates. Employers and employees. What's the problem with China? It's threatening the United States by becoming richer than the United States or at least becoming richer faster than the United States can match. And that's been true for 20 years. There's a little bit of the closing of the barn door after all the Horses got out here. If you wanted to stop China, you would have had to do that long ago. Now, China has lots of ways of solving the problem of American hostility. America slaps tariffs on the Chinese and they can't export. The Chinese respond slap tariffs on American goods, so we can't export there. So the Chinese who might have lost their jobs because Americans don't buy will keep their jobs because Chinese will stop buying American goods with the tariffs they and buy their own goods instead. And China is a very rich country now. It's the largest creditor of the United States. It can cash in many of those dollars. It has all kinds of power. There'll be lots of hand waving and fakery and political theater, and Mr. Trump will trumpet whatever deal they finally make, just in the same exaggerated nonsense that he used to pretend what he did in NAFTA was a great achievement. There's a lot of theater here and very little substance. Here's an area, though, where there is both theater and substance. And I can conclude this first half with this. Back In December of 2017, the GOP and Mr. Trump rammed through the Congress that they control a tax cut for corporations. They dropped the profits tax rate from 35% to 21%. A 40% reduction in corporations taxes, an unspeakable gift from the government to corporations. After the last 25 years when corporations have enjoyed the greatest boom they've ever had in the United States, they never needed less what they got from Mr. Trump and the GOP who, who are buying their support for political reasons. But of course they can't say that. So with lots of theater about how the money that the companies didn't have to pay in taxes anymore would make it possible for them to increase wages. We were told, and the workers therefore should celebrate that a little bit of this gift to business would trickle down in into higher wages for them. Over the last 10 months, we've been able to see what happens to all that money that these corporations don't pay to Uncle Sam anymore. And guess what? Virtually none of it went to wages. And here's the if you cut the taxes of corporations, they hold on to money they used to have to give to Uncle Sam. What they do with that money is entirely their own decision. They are not constrained in any way. They could have been the tax cut could have said you get a tax cut, but within the six months after the tax cut, you have to increase the number of jobs you offer by 20% or else the tax cut is rescinded. If you cared about jobs or for that matter, wages. You would have had a restriction. You would have had a string, if you like, on this tax gift to the corporations. But the GOP and Mr. Trump offered none, and the Democrats neither. Wow. A gift with no strings. And they used it for what? More dividends to their shareholders? Higher packages for their executives, Investments overseas? You get the picture. They did what they want. The notion of wages going up was political theater, not the reality. But we've come to the end of the first half of today's show. Please remember to subscribe to our YouTube channel and to follow us on Facebook, Twitter and Instagram. And please make use of our website, democracyatwork, where you can find all kinds of ways that you can work with us, partner with us, and move this project forward. And a particular word of thanks to our Patreon community. Your support is absolutely crucial to everything we do, and we are grateful for it. Stay with me. We'll be right back. Welcome back, friends, to the second half of today's economic update. In today's second half, I want to talk about how capitalism as an economic system displaces many of its irrationalities, its costs, its contradictions onto politics. It's a very old game in capitalism that the difficulties between employers and employees are understood and kind of fought out politically. Let me give you the worst example. When workers are laid off, fired, not rehired, and unemployment stalks the economy, what Americans tend to do is blame politicians. It's kind of funny. The people who fired you are capitalists, employers. Why are you angry at the politician? The first target of your upset, if you're treated like that, fired, and all you want to do is work, is the employer who makes the decision, not the politician who three moves away. And imagine the glee of employers who discover that when they hurt you by firing you, you get angry, not at them, but at the politician. Remarkable. It's a training of a population to see the politician as the problem, when in fact it's the economic system that is their problem. Let me give you some examples of how this works. Recently, the city of Baltimore in Maryland has had a problem. It has a very old water system, and it's frightened that this water system can break down at any time or produce the kind of horror that we had in Flint when the lead got in there and hurt so many families and children and so on. So let's take a look at the crisis of water in Baltimore simply as an example. Here's how it works. It starts with the fundamental irrationality of politics in capitalism. Here's how it. Think of all the taxpayers as divided into two groups, whether this is in Baltimore or anywhere else. One group are corporations and the people they make rich, the executives, the shareholders, and all of that. And on the other side, that's a minority, and on the other side is the majority, the mass of employees. The government raises money for all the things it does by taxing these two groups. But here's the problem. It tries to tax corporations and the rich, at least some of the time. But the corporations and the rich come right back and say, if you tax us, we're going to give money to the enemies you have to the other politicians, to the other political party. And they will become in power. They will get there because we're going to give them the money, which nowadays you need to run in politics. So you better not tax us. They get the message, so they shift the burden of taxes onto the mass of people. This works for a while. That's in our history. But at a certain point, the mass of people say, enough. We don't want more taxes. Now the politician is stuck. If the politician taxes corporations and the rich, they won't get the money they need to get elected. And if they tax the mass of people anymore, they. They won't get the votes they need to get elected. What are they to do? Well, they do two things, and you know both what they are. Number one, they borrow money. That's right. They run the government more and more on borrowed money. So they can tell the corporations and the rich, see, I didn't tax you. And they can say to the mass of people, see, I didn't tax you anymore. And still I'm running the schools and the hospitals. But of course, that's not the only thing politicians do. They start to economize on what, for example, the water system. They don't spend the money to maintain it. They don't spend the money to repair it as they should. They don't spend the money to renew it. Because that money they don't spend, they then don't have to go and risk their political careers by raising people's taxes or corporations taxes. And so over time they save money and pretend how wonderfully clever they are, how they're managing the budget, when the truth is they're simply pushing the problem into the future. And then the future arrives, doesn't it? And we have today in Baltimore, the crisis of the water system. And now come private capitalists. And this is remarkable, saying to the city fathers and mothers, now you're stuck. Aren't you, you're going to have to spend a ton of money on doing for the water system what your predecessors should have been doing for years. We'll solve your problem. Privatize the water system. Sell the water system to us. You'll get a bit of money that'll see you through the next election. You and we will take over the water system. And they do. And everybody plays this absurd game. The privatization of water leads to fixing some things and charging the public for water like you never saw before. That goes on for a few years until people push back and say, we're paying more for water than we ever did before. We don't want a private system. And the government comes in, takes it over, buys it back. The whole thing costs a fortune of money, all to be paid by taxpayers, and then the whole game is repeated. Multiply this by every city and state and you got the billions and billions of irrational outlays because of a political system that is dysfunctional, because of of the way capitalism organizes its society. Let me give you another example. That tax cut that we talked about earlier back in December, it not only gave back huge amounts of money that corporations paid in taxes, but because that money wasn't coming into the government and because the politicians dared not cut public services, they had to borrow the money. And now, if you understand this, you'll get the craziness of America. Who did the government borrow much of the money from that it needed to borrow? Because it didn't tax corporations and the rich, right? Some of you guessed it. It's the same corporations and the rich. They were able to lend to the government because the government hadn't taxed them the way it used to. From the point of view of the corporations and the rich, this is wonderful. Instead of paying taxes, once paid, they're lost to you. You don't, you lend that money instead to the government. You, you earn interest for years on it, and at the end of those years, the government gives you the money back. That's a lot better than taxes, don't you think? So this whole game not only gave a tax gift to the corporations, it provided them with a wonderful, very secure investment instead. And for the mass of us, all we know is we're going to have to pay more taxes to give interest to those wealthy and then pay more to give them all that money back. No justification, especially after 30 to 40 years of boom for our corporations. But that's the way our dysfunctional political system works. Here's another example. Almost all of the 50 states have cut Back the amount of money they provide to for public higher education colleges and universities. Let's trace through what this means. After World War II, state universities, states 48, then 50 now, helped public education provided subsidized college and university opportunities for millions of Americans who'd never had it before. It was very successful. It helped develop the productivity and the success of the American economy. In the last few years, particularly after 2008's crash, money has been taken away from public higher education and of course the schools to survive. If the government doesn't give them money, raises the rates for all of the families that want their kids to have a college education that they can afford in a public university or college. What have the families done? Well, since wages haven't gone up really in this country for decades, and especially in the face of the crash of 2008, families could only pay the higher costs to them of public higher education by borrowing money. So let's see. We had two reactions to this cutting back of money for public higher education. One, a good number of young people who used to go to college don't go anymore. They can't afford it and they don't want to pile up what debts. Those who still go now have enormous debts. Where do they go to borrow that money? The government. The government that used to pay directly to run the higher education now pays indirectly by lending money to students who have a record rate of default because they can't get the kinds of jobs that allow them to pay back this debt. This is a mess and it is constraining and hurting public education everywhere. It forces money strapped colleges to get rid of professorships where teachers could really keep up with their profession and teach and replace them with adjuncts. People paid a small amount of money to teach one course who can only make a living by doing it in six schools at the same time. The end result is that the quality of education deteriorates to keep from taxing corporations and the rich. That's what state and governments do in the United States. It's irrational. Cutting back public education where over three quarters of all university trained students get that education in public schools is destroying the future of the American economy. That's irrational. At a time of competition from, you guessed it, China, India and all those other places. We are diminishing our trained young people. That's called shooting yourself in the economic foot. It makes no sense. What irrationality this is comes out of the dysfunctional political system that our economic system allows us to have. Corporations and the rich with the money to avoid Taxes and the mass of people who can't pay anymore, leading politicians to do one irrational thing after the other. And while I'm on that, public education, one last point. For a while, public higher education was an independent thing. It wasn't directly dependent on corporations because the community paying taxes altogether provided the states with the money that they then made available for public higher education. And that gave a place for some freedom of inquiry, for some open ended, honest research. No matter where it went, you had the community that supported it. When the government takes back its support, one of the things corporations do is they come to private universities and say with a smirk, we know you're hurting. We know you don't have enough money. We know you're squeezing the students and they can't handle it anymore. So we'll give you some money, but we want to see you teach this and not that. We want to see you emphasize this and not that. We want you to gather loads of young people learning how to be computer whizzes so that when we hire them after their education is over, there are so many competing for jobs, we won't have to pay them very much. The corporations call the tune in a way they never did before. When you see Secretary of education Betty DeVos running around putting down public education and touting private education, that's a billionaire lady who understands, understands. She wants to take public education away from public control and make it like everything else in the government, dependent on corporations and the rich, so that they can call the tune. That's the reality of a political system governed by a divided, broken economic system that is now even dangerous to itself. Welcome back, friends, to Economic Update Extra. This is where we continue the conversation from the regular program in a kind of nod to our Patreon community, a nod of appreciation for the support and the enthusiasm that you show us, and that makes all the difference to the work that we do in the regular program. I was discussing a dysfunctional political system that capitalism has slowly accumulated and created over the decades and that now hubbles this very system even as it screams its irrationality to us. Let me give you the example that I think is probably the most important and that I've left for this part of the conversation over and over again. The business community demands and gets subsidies, tax cuts, special breaks, special regulations, or deregulations in the name of, quote, unquote, our role as job creators. In other words, we're supposed to give them all the things they demand because if we do, they will create jobs with the nasty implication that if we don't, they won't. It's a little bit like taking a hostage or demanding a bribe for something you ought to do as a member of a community. But put that aside. I'm going to take the example of tax cuts that will, quote, unquote, create jobs. Let's take a close look first. When the government cuts taxes for businesses in the name of job creation, the logical thing to expect is would be that you give the tax break to business on condition that they create a minimum number of jobs if you really cared about it, or maybe even a minimum number of jobs at a minimum decent salary, if you cared about the jobs in the United States. Taking, for example, the immense tax cut on business passed in December of 2017, absolutely no condition was applied. The tax cut was given all kinds of promises about wage increases, which we earlier discussed, didn't happen, and job increases, which I'm going to discuss in a minute. No conditions were applied. The politicians didn't feel they needed to, or maybe the corporations told them, don't you dare. And if you do, we will go get some other politicians and we can put you out to pasture, which, after all, is where you'll end up anyway. So now let's follow where this leads. First, corporations can and do use the money saved from taxes in any way that they wish, because the government put no conditions, because that's what we call free enterprise. So if the companies wanted to use the money they don't pay in taxes to pay out more dividends to their shareholders, which they did, they're free to do so. If they want to use that money to pay higher salaries to their top executives, which they did, they're free to do so. If they want to take some of that money and invest in jobs abroad for other people, which they did, they're free to do so. You get the picture. This is very important because you're allowing the government to deprive itself of enormously huge revenues, and it needs to perform all kinds of vital functions in order to do something which is wonderful for those corporations, but does absolutely nothing in the way of guaranteeing more jobs for people. But even if it did, take a look at the jobs that have been created by and large in the last 10 months, and you'll see something very quickly. The vast majority of them are poor jobs. They're jobs in the service sector, in fast food, in retail clerks, people who get among the lowest hourly wages in the country, people who get among the poorest benefit packages that workers anywhere in this economy have. Here's the truth that after giving them the tax break of the of almost a century, certainly this century, but for a whole century back, 40% cut in corporate taxes. What you got was a mediocre increase in the worst jobs this system has. That's what you got back from capitalists for giving them this enormous gift. No self respecting population would allow this if it understood what was going on. Here's what we need, which we all know we need to give the 5 to 10 million Americans, and that's a low estimate, who are now without work, but want to work. A decent job at a decent income, doing something useful for the community. The only way to get that is have the government step in and do it. We all know that. We all know that if you look back at the last time the government hired large numbers of people back in the 1930s. It built the national parks. It did the first ecological conservation program this country ever had. It rebuilt cities and towns. We with the wpa. It sent artists and playwrights and actors all over the country in an explosion of cultural programs for our people. Bigger than anything we've ever had before and bigger than anything we ever had since. We know how to do it. There's plenty of work needing to be done. Rebuilding our cities, allowing colleges and universities once again to flourish. Greening America, conserving our natural environment. Lots of work to be done. All the people we need to put to work. The government could do it, the government should do it. But the capitalists don't want it. They want there to be unemployed so that everybody's worried about their job. Look at those people sleeping in the doorway. They don't want a powerful government because the mass of people might then vote to have that government do things that capitalists don't want. They're always afraid of that. That's why they're anti government. And when they're not anti government, they buy whatever government is left to make sure it doesn't do what the majority can do, see? And what the majority wants. And finally, if we really understand the issue of jobs, we'd not only create them. Doing useful things, paying people a decent wage, making all wages be at a level that people can enjoy what they were supposed to get as the so called American Dream. We'd go an important step further. And here I acknowledge the inspiration that is coming from Jeremy Corbyn's Labor Party. We would say what we need in the United States today and what we can start by giving to the unemployed is not only a job at a decent salary, but A job in a democratic workplace. A job where you're not just a drone doing a task 9 to 5, Monday to Friday, but you're part of the government of this community of workers. You're part of a one person, one vote community of workers in an enterprise together deciding what to produce, how to produce, where to produce, and what to do with the profits that you all helped to produce. A democratic workplace. If we believe in democracy as a society, we, which this country says it does 10, 20 times a minute, then the first place it should be installed is the workplace. It should have been there throughout our history. It never was. We have workplaces where a tiny minority, major shareholders, and the boards of directors they select make all the decisions. Our job is to come, work, produce goods and services, go home and get ready to do it again the next day. All the control, all the design, all the direction is in the hands of a tiny minority. We don't vote for them, we don't want them, we do not respect them. Why do we allow it? We could follow the biblical injunction that the last shall be first. Let's take the unemployed, let's take those who don't get paid well. Let's give them an alternative opportunity, a worker co op, economic sector. Let us see what they can do. Let all Americans see what it's like to work in that kind of an environment, to have your work life be democratically organized. And then the rest of us can choose too, to change the way we work. Let's use the catastrophe of capitalism's failure to provide good jobs and good work as a way to promote new directions, new changes, new experiments that are long overdue and that this society so badly needs now more than ever. Thank you very much for your attention. And as I say at the end of the program, I look forward to doing another economic extra next week.