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Sam. Sa. 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 and those coming down the road for us and for our children. I'm your host, Richard Wolff. I've been a professor of economics all my adult life, and I hope that that has prepared me for presenting these economic insights to you. As usual, we start with a very few brief announcements. For those of you who have kindly offered to be supportive of what we do, I want to urge you the simplest way to do that is to go to patreon.com P A T R E O N and there you can see this program as a TV program and express whatever support you you have in mind. I also want to thank you for making use of our websites. We maintain them 24 7, no charge whatsoever and they allow you to communicate with us what you like and don't about this program, to follow us on Facebook, Twitter and Instagram, and in general, to make use of the materials we upload literally every day to help us reach even more people through your partnership, which is a goal of this program. And finally, I want to remind everyone that we now have an arrangement with a speaker's bureau. It's called speakoutnow.org, located in Oakland, California. If you're interested in having me come to speak to an organization in your area, which I would enjoy doing, please get in touch with them. The easiest way to do that is to email them@infopeakoutnow.org let's then jump into our updates for today. Recently, the Christian Science Monitor did an interesting report that came to me as a reminder of what a recovery in economics should be but isn't. And I'm talking about the recovery in quotation marks today. Millennials, that famous group that we're all talking about now, young people basically have been studied and in the way that the Christian Science Monitor did it have been studied in terms of how their economic fortunes compare with that of their parents when the parents were the same age as the Millennials are today. And the result I found extraordinary. First, millennials today are getting 20% less income than their parents got at the same age, adjusting for the prices, in other words, the children are 20% less well off financially than are the parents, or rather than the parents were at the same age. It's interesting that Millennials not only earn less than the so called baby boomers, but they are hampered by much higher rates of student debt and they are much less likely than their parents to own their own homes. As the Christian Science Monitor points out, the notion that hard work and studying will get you ahead of where your parents were, that's not true anymore. They're working harder, they're studying longer. But between the debts they have to incur to study longer, they're not earning anywhere near what their parents earned. And since the pensions that their parents were able to get, which guaranteed them a certain amount of income after they reach 65, the current group of millennials either have no pension at all or have what's called a 401 plan, which depends on how much money you put in and how well it does in the stock market, which means at the very least that your future is more precarious as well as poorly, more poorly paid than that of your parents. The notion of the upward and onward quality of life in America is being destroyed person by person, month by month, and this study in the Christian Science Monitor documents it. The lesson here is that an economic system like ours has not built into it. Every generation does better than the one before. That was true for much of American history until the 1970s. It's over. It's not coming back, and the direction is the opposite. Let me turn now to a perennial, but one that cannot be overly the health care crisis. And I'm an economist, so we're going to look at it from an economic point of view. You can imagine that if one is interested in health care and how it's financed, that I would have had my attention really riveted when I picked up the Bloomberg News on August 2, 2017 and read the following headline. I'll read it to you. Americans die younger despite spending the Most on health care. That's what the headline in the Bloomberg News Service, that service that is used by virtually every financial institution in the United States. That's what they said article was by Lori Meisler and I urge you to read it if you have the time to go check out the Bloomberg archive. Here are some of the basic findings that she the United States does poorly in terms of longevity. The OECD, which ranks the 30 or 40 most developed economic countries in the world, ranks the United States 27th. When it comes to life expectancy, keep in mind we pay more for our health care than than anywhere on Earth. But 26 countries, all of whom spend less on their health care than we do, have people living longer. But that's the least of it. Listen to this. We have the fourth highest infant mortality rate of all the countries in the oecd. We have the sixth highest maternal mortality rate and the ninth highest likelihood of dying at a younger age from a host of ailments including cardiovascular disease and cancer. In one ranking we are at the top of the list. Here's what it we are the most obese country in the OECD. We lead in drug related death and we rank 33rd in the prevalence of diabetes. And here comes something the article really stunned me with. 88% of Americans say they are in good or very good health. By contrast the Japanese who have the highest life expectancy in the OECD, only 35% of the Japanese think they are in good health. It is a wonderful testimony to what you can make people believe and how different it can be from what they actually experience. Well, when the Bloomberg survey in this article asks the obvious with these poor or mediocre results in terms of the quality of our health, why are we paying way more than anybody else on this planet? They mentioned in this article as one big reason the cost of drugs and of medicines which are higher in this country than in all the other OECD countries. And the question is, well why? How is that possible? How can drug companies get away with charging more here than the same country does for the same medicine elsewhere? Sometimes just across the border in Canada to our north or in Mexico to our south? And there my attention was caught by a recent article in the New York Times which pointed out very cleverly that there's a whole problem in the United States of drug companies requiring doctors, hospitals and drug distributors to push onto the clients, you and me, brand name drugs. Even after what are called generics. When a brand name drugs patent runs out, then other companies can produce the same drug but much, much more cheaply. And they do. Those are called generics. They're the exact chemical equivalent of whatever the brand name was. They don't carry the brand name and they sell for the cost of production, which is typically a small fraction of what the brand name drug sells for. Well it turns out the drug companies cut deals with the doctors and the hospitals and the drug distributors to push the brand name on the client, to force it, in some cases to just urge it to give kickbacks. One of the companies names was CVS Caremark as a distributor who has deals with the drug makers to try to push brand name drugs. Well I'd like to summarize the message here. Medical care in our country is a monopoly operated by four industries that work. Hospitals, doctors, the insurance companies, medical insurance companies, and finally the drug and device makers. Those four help each other like we just Illustrated with a drug company working in cahoots with an insurance company to get the insurance company or the doctor or the hospital to push the brand name drugs. And you can be sure that the drug companies do good things for them in return. Together they make the cost of medical care higher in the United States, even though the quality of the medical care we get is mediocre or poor. And in any case much poorer than that in many countries which do not allow such a monopoly to function. The next economic update takes me back to a topic I have addressed before. This has to do with the automobile companies and in particular the German automobile companies. Now they have been caught and have admitted to fouling the air by deliberately installing in their diesel cars devices that fake the emissions during the emissions test so that you could get on the road. Millions of their cars that are polluting the air because they have fooled the emissions control that is trying to be made. This has so enraged people around the world at being systematically damaged by this fraudulent, profit driven behavior of the big automobile companies in Germany, above all Volkswagen, but the others are caught in it too. Mercedes Benz and others. It has led a number of places in the world to say they don't trust these companies anymore. They don't want to have anything to do with diesel, since that's where this was done. So you have across Europe, cities that are banning all diesel vehicles. Athens in Greece has done that. Madrid in Spain has done that. And that is pushing a development which the German car companies and you have to give them some respect for the sheer audacity here they are pushing against that. They are lobbying and spending money and effort to, to prevent cities from banning the diesel. Second thing they're doing, which I find amazing and again audacious, is they don't want to install devices on all the old diesel cars which would stop them from doing the pollution that they've gotten away with. But instead they want to give rebates for people to trade in the old deal diesel for a new one. That's asking the world to trust them after the reasonableness of trusting them has been proven by them to not exist. What is going on here? What are the lessons in this ongoing horrible story out of the German automobile industry? Number one, they put profit above human health. There's no nice way to say it and why should one bother? It's important to look this truth in the face. They made a decision that was good for their company's profits. The fact that it polluted the air for millions of people, Germans included, wasn't Enough to prevent them from doing it. You have to stop and let that horrible truth sink in. Number two, the German government is in a very cozy relationship with the car companies. It's the largest industry in the country, so it isn't very surprising. There was a recent case where a leading Social Democratic Party official, the Social Democratic Party, is often in a coalition government with Angela Merkel's Christian Democratic Union Party. He was caught having given a speech he gave on the floor of Parliament to VW to look at before he gave it, as if VW has the final word on what is said by a leading politician. That's called a cozy relationship, in which the business helps the politician and vice versa. But the point is not that they're doing that, that's bad enough, but that they're doing it at the expense of the people they sell the cars to and the people who they're supposed to represent as their elected leaders. And yet there's a good point here, too, and a good lesson. Massive anger of the mass of people. That's what is stopping this. The people were able to get the politicians in Athens and Madrid to ban those diesel automobiles. They were able to hit back. They were able to teach a lesson to these companies that you can get caught. You will pay a heavy price. Your whole business of diesel automobiles looks to be over in the world. They're not going to trust you anymore. You took a chance in behaving in the way your profits dictated. Maybe you oughtn't to. And maybe for us, the lesson is why do we allow profits to be the driver of what companies do? Maybe we ought to have companies run by a kind of mixed board. People who work in the company and the people they're supposed to serve, the customer together, having their representatives on the board. So nothing happens that privileges one of them at the expense of the other because they're both in on the key decisions together. Well, that's the idea behind a co op, especially a co op that includes not only the workers in the plants, in the factories, but the people who live around them, who live with the consequences of what they do, the customers who live with the consequences of the product they produce. Let the people who have a stake in what these companies do run them, the stakeholders, all of them. Not a tiny group who can profit at the expense of everybody else. The last economic update we will have time for today is also one with rich lessons for us. The story is about something that happened recently in Little Rock, Arkansas, a city I don't talk about that often, but Here it's a very important story. In the late 1990s, as happened in so many parts of the United States, eastern Arkansas saw the disappearance of thousands and thousands of jobs as manufacturing of textiles and other things basically shut down and the jobs were moved overseas where workers could be paid much, much less than those workers were paid. Then it plunged Little Rock, the whole state of Arkansas, but particularly eastern Arkansas, into a depression that has lasted the last 20 years, made worse by the collapse in 2008, but from which no recovery has been possible. Thus, it was with great fanfare that the governor of Arkansas announced in Little Rock the wonderful news that the Tianyuan. I apologize for my Chinese pronunciation, the Tianyuan garments company of Suzhou signed an agreement recently to buy an old factory in Little Rock to refit it with new technology so that it would become a fully automated T shirt production line, ultimately producing 800,000 T shirts a day to be sold to the main customer of Tianyuan Garments company, namely the Adidas corporation that I'm sure most of you know about. Proudly, the chairman of Tian Yuan Garments announced that they will be producing one T shirt every 22 seconds with this marvelous new machinery. And now I'm going to read you the announcement this chair of the company, the Chinese company announced. The statement he made when he announced this was with the governor, quote, around the world, even the cheapest labor market can't compete with us. I am really excited about this. He said, let me make sure everybody understands what this means, what the message here is. First, companies producing T shirts and many other things were providing the living, a decent living for many thousands of Arkansas residents. Then they left, moved to China, made a lot more money by paying workers there a lot less, enjoyed those profits for 20 years while the families, the people, the economy, the neighborhoods, the cities of eastern Arkansas declined and suffered the decline of so many in America. Now, after 20 years, the governor is all excited about the return of a factory once again making T shirts in eastern Arkansas. How many jobs will it produce? They hope within four years, 400 jobs. What will be the average pay? And when I tell you this, I hope you gasp the way I did when I read it. $14 an hour. That's what the people of Arkansas can look for. They lost thousands of jobs, paying well, suffered 20 years, and are now supposed to be overjoyed the way their governor was when they're going to get over four years, 400 jobs at $14 an hour. But the story isn't over. In order to get the company to settle in Little Rock, Arkansas, Gave them the following $1.6 million a year for each of the next five years as a tax reduction. Hmm. That means they won't have to pay the taxes they would otherwise have had to pay to the state of Arkansas. So it can do things, but we're still not done. One million in a straight out cash subsidy. Half a million for worker retraining. Do have to do a lot of retraining for a work that pays $14 an hour. They were also given as part of this deal by both Little Rock and the Pulaski county, of which Little Rock is a part, a cut of 65% in the property tax they would have had to pay. If you own land and a factory in Arkansas, you have to pay property tax to the city and the county where it's located. But 65% of that tax they won't have to pay. Now, friends, let's be clear. If you give them a subsidy, that's money the state of Arkansas or the city of Little Rock can't use for all the other things it needs to do. If you give them a break, if you give them a subsidy, you either have to tax other people to find that money or you have to stop spending that money on other things in order to make it available. So the people of Arkansas are paying really well. Not just the 20 years of economic decline with the interrupted lives and the interrupted educations and the collapsed infrastructure and the poor schools that that meant. But now they're looking forward to having to spend money, taxpayer money they gave to the state for the things they need to, to give a subsidy to a company that's going to bring them maybe in four years, 400 jobs paying $14 an hour. It takes my breath away. But here's the lesson. The big that's how capitalism works. If it's profitable to leave the United States and go to a place like China, they do it. And they'll do it for as long as it's profitable. But if there's a new technology that they can use, one that might be expensive, but they've had 20 years of boosted profits by producing in China. So they can afford it. They can now come back into the United States, employ a small fraction of the people who once had jobs, get a nice fat subsidy out of the public sector to do it, and make even more profits. Because as the man said, even the cheapest labor market can't compete with us with this technology. What they don't get you by, if they bring a poor immigrant to take your job, what they don't get by moving your job to another part of the world where they can pay someone very little, they can get by replacing you with a machine. Whichever one of those is profitable will be pursued. It's a system that is driven by profits. What the consequences are. What are you saying about the future of Arkansas? If you're bringing in jobs at $14 an hour for factory work, what kind of a society do you think you're going to build? What kind of community can sustain itself on that, especially after 20 years of decline? You must be kidding. If this is the best you can do, Mr. Governor of Arkansas, you've basically thrown in the towel on the future economic development of your state, which you were not elected to do. Here's the reality, of course. If a machine can produce T shirts much more quickly and efficiently than the old machine, and that you need fewer labor hours to go with that machine than you once did, the humane, the good thing to do would be to let all the workers have a shorter workday. That's how you would have less work because you don't need it anymore. That's how to make a technical innovation really help people by shortening the work week. You're not doing that. You're laying off people. You're destroying the community. You're just doing it to make more money. And why don't you just be honest and admit that's the system you live in? We know it. Why do you have to fake it? And precisely because it's the system we live in. The problem is the system. And if we don't like these results, and Lord knows I hope you don't, then it's the system that has to be changed. We've come to the end of the first half of this program of economic update. Please stay with us. We will be right back. And I think you'll find the interview well worth your attention.
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I dreamed I saw Jo here last night, alive as you and me, says I. But Joel here, 10 years dead. I never died, says he. I never died, says he. In Salt Lake City, just as I am standing by my bed. They framed you on a murder charge, says Joe. But I did, says Joe. But I.
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Did.
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The copper bosses killed you, Joe. They shot you, Joe, says I. Takes more than guns to kill a man, says Joe. I didn't die, says Joe. I did die. And standing there as big as life, smiling with his eyes, says Joe. What they can never kill. Went on to organize. Went on to organize from San Diego up to Maine in every mine and mill where workers strike and organize. It's there you find your hill. It's there you'll find welcome back, friends.
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To the second half of this economic update. Well, many of you have asked for this and we've waited a bit, but I'm happy to announce that I have a wonderful guest for this second half. He is Michael Hudson, a professor of economics like I am and have been for a long time, both of us. He's the author of a new book. It's called J is for Junk A Guide to Reality in an Age of Deception. Michael Hudson is the author of Killing the How Financial Parasites and Debt Bondage Destroy the Global Economy. He teaches at the University of Missouri in Kansas City. This book, J is for Junk Economics, is a way of his coming to terms, I think, with the economics profession. And that's what we're going to talk about a good bit in the next half hour. In addition to teaching at the University of Missouri in Kansas City, he is a professor at Peking University in Beijing, the People's Republic of China. His work has been translated into many, many languages and you can find out more about him at his website, michael-hudson.com so my colleague and Professor Hudson, welcome to the program.
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It's really good to be here.
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Good morning. All right, let me get to the nub of things right off at the beginning. Every university, or almost every university in the United States, has a department of Economics where students are told they can go and learn about how the economy works and therefore find a good place for themselves in it. But there has been a criticism over the years that the economics departments don't teach how an economy works, but rather provide an elaborate, mathematically elegant justification for the status quo. What do you think?
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Well, when I went to school, it's true that the universities did not teach how the economy worked. I went to NYU because all they wanted was my money, not my brains. But I was working my way through on Wall Street. And there's a difference between the undergraduate economics and graduate economics. My BA was from the University of Chicago in Germanic Philosop, and when I registered for the ma I was told by the department chairman, that's very good. People who study economics as undergraduates usually don't do very well in the field. They're just not very imaginative. It's good you didn't have a math background. There wasn't much mathematics. Then there was a money and banking course and I was working as Chase Manhattan's balance of payments analyst. And I found that everything that was in the textbook was exactly the Opposite of what happened. They had the idea that banks lend out savings and that's how everybody gets rich. And I pointed out banks create credit, that there was a whole series of mythology about money. They don't realize that savings just grow by compound interest. There's an accumulation and the whole economy is getting more and more debt ridden. Even in the 60s. I got a C in the course because he said that I didn't understand how the banking system worked, that it lent to industry and industry employs workers carrying their lunch pails in and out of the factories and everybody gains. And I said, no, no, the large, Most bank loans, 80% are all mortgage loans to the real estate sector and after that to the oil and gas industry and the mining industries. And what these industries get, they get rent, land rent, economic rent, monopoly rent, really much more than profits. And they're not after profits. That's not good enough. And there was no discussion at all of the concept of economic rent and unearned income in the curriculum. All of the courses that we took, it wasn't even mathematized then, because if they would have tried to mathematize what economics in the mainstream is all about, you'd think people would laugh it all away. My friend Steve Kean is a mathematician. He wasn't trained in economics. But anybody who is trained in mathematics, as I was trained in statistics on Wall street, knows that the mathematics that economists use are junk mathematics. The concepts are wrong. It's the concept of garbage in, garbage out. And all of our courses, graduate school, were about gdp, gross national product, as it was then called. And the whole economy was sort of viewed as something homogeneous, grow and shrinking, but really operating on barter. And everybody earned what they got. So the growth sector at that time were the monopolies, real estate and banking. And that was because bankers and landlords add so much output to the economy by the effort of collecting interest and collecting rent. And now operating frauds like you've seen in the banks and today's news, Wells Fargo and the others. And by definition, this occurred about 100 years ago. There was a change away from classical economics to say that everybody earns whatever they make or can take home, and they earn their wealth by contributing to output instead of. There's no idea that they earn money by taking away what somebody else produces for output, which is really how the real world operates. So I found this, this was absolutely wonderful. They talked about my field was balance of payments at that time. And as I said, I worked for Chase. I left Chase for Arthur Anderson. And my job was to make a balance of payments model of the US economy. And I found that this is when there was a balance of payments deficit because of the war in Vietnam. And I was part of a group. SEYMOUR Melman, Terence McCarthy and myself were the three economists talking about the economic consequences of the Vietnam War. So after a year's work at Arthur Andersen, it takes that long to make a big statement. I found the entire balance of payments deficit of the United States is military. And that means that when America runs a deficit today and other central banks hold out treasury bills, that Russia, China, other countries are all really financing America's military spending throughout the world. Well, my boss at Arthur Andersen said that, you know, he'd shown a copy to the US government and that McNamara, Robert McNamara called him up and said, if you publish Hudson's study, you'll never get another contract job from the government. So they immediately fired me. I took the monograph to nyu, which published, was all published and everything. The Federal Reserve responded by writing a whole review of all of the institute that did at NYU saying they've lost all credibility with my study. Then I was teaching at the New School and one of my students worked for the Fed, showed me the internal memo confirming that everything that I said was correct. So I thought, well, okay, you've talked about the dual economy before. You know, the rich people versus the poor. We have a dual kind of economics. One is the kind of economics that people actually working on Wall street use and, and they know that it's all about getting something for nothing. And there's the economics in the textbooks. And that's how a parallel universe would work if it were fair and if everybody really earned everything and if Goldman Sachs partners really were the most productive in the United States because they earned so much and add so much to gdp. So it's really, I think the economics department that you describe should be part of the literary department. It's really a form of science fiction. It's a parallel universe. And they should put economics, I think maybe an anthropology or it should be a branch of mathematics. But you don't want someone who wants to become an economist have anything to do with talking about the real economy. They're talking, it's really, if you look at Paul Samuelson's textbook or almost any modern economics textbook, they're very clear saying the test of good economics is whether it's internally consistent. Well, that's what my literature professors told me as an undergraduate at Chicago. They said the key to a good novel or a good screenplay Is, is it consistent? Is there any hole? You don't like going to a movie and you think, oh, wait a minute, that's not real. It would have all changed. And reality is not a precondition for economics. In fact, the whole system of Nobel Prizes is given to people who can make the most beautiful mathematically sophisticated drawing of why the economy is perfectly fair and is in equilibrium. And everybody shares as a result of contracts that are all voluntary between companies and their customers and banks and their lenders. And everybody really decides that they want to make the economy just the way it is. And that's why some people are rich and some people are poor.
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You know, it's wonderful because I remember. It's wonderful hearing you because I remember when I was a young person going to graduate school in economics and always stumbling at that point where the professor said, the output is divided in the community among people according to their contribution. Because in it is this enormous value judgment that basically sweeps away all of the struggle, all of the blood, sweat, tears, animosity, all the richness of it, and says that this is a perfectly worked out system. It's all perfect. Everybody gets back the equivalent of what they contribute. And the idea that the landlord who sits on land that he obviously didn't produce, since the land was there before he was the landlord who collects the rent is contributing. I remember scratching my head, contributing what? All he has is the right, which he shouldn't have, to withhold that piece of land from the community that needs it. And he extorts from the community that needs it a payment so he makes available something he didn't produce. This notion, which was so obvious to me, had no place in his economic remarkable kind of switcheroo. It's almost. I had a professor once, Paul Baran, who used the following joke. He said, it's as if a thief having stolen your wallet, then says to you, I'm keeping the money in your wallet. And I want you to understand this is a lesson for you. You have to hold your wallet in a different place. I am going to make your life more successful by having stolen this. And therefore it's appropriate that I take a payment for the improvement of your life that comes, you know, takes your breath away, this kind of reasoning. But then it can become a whole curriculum.
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Well, I think the thief in your story was a chief gate. I could pull out a gun and say, your money is your life. What I'm selling you is your life, and you're holding onto your money. Instead, this is a voluntary transaction. It's as voluntary as going to the bank. That's exactly it. The idea now, at least you mentioned mathematics today. When I was in school in the 60s, it wasn't mathematized back then. What they had was the history of economic thought. And at least in the history of economic thought, they did mention Adam Smith, John Stuart Mill, even Marx. Very briefly, I think, for what do you like to have for dinner and things like that? Soon after I left, and by the 1970s, all throughout the universities today, the history of economic thought has been dropped from the curriculum and replaced by mathematics. And the mathematics all say exactly what you've just described, that everything is natural, everything is in equilibrium. And when you say equilibrium, it somehow means that what's happened, the crash of 2008, could not have happened. The world we live could not exist according to the mathematics that they use. So now that they've got rid of the history of economic thought, they can pretend that Adam Smith was for this kind of free market and that John Stuart Mill and all of the busts that they have in the hall of the famous economists all were basically part of a long tradition. And that's not the case at all. There was, as you know, there was a completely different tradition, all from the physiocrats in France to Adam Smith to John Stuart Mill to Marx. And that's really why the last thing that the universities would want would be for students to read Adam Smith and Ricardo and even Malthus or Mill, because the logical conclusion of everything they were saying led up to the last great classical economist, Marx. And the rejection of classical economics really is a rejection of Marxism, because up until that, what every single major economist of the 19th century was talking about, even Ricardo and Malthus, was what do you do about the fact that industrial capitalism isn't really pure? It still has. We came out of feudalism and we have a landlord class. And these landlords inherited the money generation after generation, as you just mentioned, especially in England, this was the problem. And they conquered the land. And Marx called that primitive accumulation. And somehow industry has to pay to the landlords to produce food. Makes England, according to Ricardo, pay workers more and more. And Ricardo said if we don't lower the rents to the landlords, he did it by free trade, then we're going to have to pay our workers more in order to enable them to pay the rents to the landlords, and we can compete. And so we've got to destroy the landlords. Yes, basically. And at that time, he was a lobbyist for the bankers. He was in Parliament as officially the bank lobbyist of his day. And that's when industry was all. When banks were all in favor of industry because they had made their money since medieval times by financing international trade governments. That was the only way they could get around the Christian banning of interest. They called it a foreign exchange exchange fee. And instead of interest it would be agio a foreign exchange. Well, all of that has changed today. And now banks, everybody. Even in Marx's day, Marx thought it was perfectly logical for industrial capitalism to have banking fund industry and to get rid of the landlords and all of these unnecessary costs of production. I mean, imagine today in America when you have the workers having to get federally guaranteed loans, up to 43% of their income goes to pay rent to the landlords. And then 15% is for Social Security and another 10% taxation and other debts. The result, there's so much money paid to the landlords, to the banks, to the finance, insurance and real estate sector that about 75% of the paycheck before they even began to have money to spend on food and clothing. If you gave American workers all the food, all the clothing, all the transportation, everything that they consumed for nothing, they still couldn't undersell foreign labor because they have to spend so much money on the rent and to the fire sector. So finance, instead of somehow becoming the final stage of industrial capitalism, is Everybody in the 19th century thought they've rolled it back towards neo feudalism and we're going back to feudalism now. So I think economics really should be part of the history department. And you should study the long wave and you see that Rome fell back. You know, why do societies fall back? It's not just because of bad environment. It's because of basically every. The Roman historians got it right. It was the creditor class and it was debt that impoverished the population and forced it into bondage.
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Tell me how you think this kind of economics that you are critical of and that you expose in the effective way that you do, why is that there? In other words, why have universities been so slavishly committed to this way of thinking? Given that the history of the discipline shows that there were other ways before, Given that critics like yourself are making arguments, you might imagine that they would at least allow students to hear the debate about different perspectives, but they don't. It's unbelievable the rareness with which you will encounter a dissident economist, let alone a Marxist, in a major economics department. They not only don't allow it, but they seem perfectly comfortable. That one paradigm, theirs is the exclusive shaper of what students think. And let's remember those students include the political leaders of a few years later, the journalists of a few years later, the business leaders of a few years later. So they're shaping what you might almost call a dominant ideology. So the question is, is that functional to the status quo and in what way? How do you see these things?
- [48:47]
C
Well, Thorstein Veblen answered that question 100 years ago. He wrote a book, the Higher Education in America. He said, well, we're having the universities now funded by wealthy donors, Babbitt type people, and they want universities to somehow justify their role in the world and depict them as heroes, not as predators. And so you have this. Essentially, the economics discipline has turned into a lobbying effort for the Koch brothers, for the rentiers and for the bankers. And this was true above all at the University of Chicago in the school. And the University of Chicago realized something that was Milton Friedman's genius. He recognized that you can't have a free market economics unless you have totalitarian control of the economy and of the educational system. So the first thing that the Chicago boys did when they went into Chile after assassinating president was to close every economics department in the country except for the Catholic university where they were using the University of Chicago's book. And the University of Chicago people then took control of every major refereed economic journal in the United States. So many of our graduates at UMKC are taught monetary and Marxist economics. They can't get promoted and get hired as professors unless they publish in the refereed journals. And the referees all insist that they describe the economy as the best of all possible worlds, or at least the most inevitable. That, as Margaret Thatcher said, there is no alternative. And that's the genius of free market economics, that you have to have totalitarian control so that this is the only concept of freedom that people can have. This is Orwellianism. They've read 1984, they've applied it in practice. They know how it works.
- [50:45]
A
Right. So the economics department, just to restate what you're saying, the economics department teaches the joys, the efficiency, the, the perfectness or the optimality, to use the terms they like the optimality of a free market, of contesting desires. But in their own economics department, absolute control, no free market, no A chance for students to taste the different economic theories and decide for themselves what makes sense to them. Not at all. We have to the irony there, and the contradiction is, is wonderful to behold, you know, and it's also mirrored in the language. If the World is changing like the end of the 19th century. Then we have robber barons. 100 years later, we have entrepreneurs. The words themselves capture the changing way the same person in the same social role is defined.
- [51:44]
C
Well, you get that every night on television. When the stock market goes up, it sells all as if everybody's somehow gaining. And they don't realize that the reason the stock market's going up isn't because it reflects a healthy economy. It's because corporations have given up on the economy. They're buying their own shares. That's what's pushing it all up. And they've decided the market, the boom is over. The economy's not going to grow. We're not going to hire more labor, we're not going to invest. We're going to buy our own shares and just dissolve the company and pay out everything we have and shrink.
- [52:16]
A
You know, I live in New York City, as you do, and I recently, because of schools I went to, I was invited to a group of business leaders and they said to me over lunch because I asked the question, what do you think is going on? They looked at me, they smiled, and they said, we're in that phase of the economic system where everybody's job is to go grab whatever is not yet nailed down and run. And I thought, wow, for people who are the leaders of their respective industries, that's quite a mentality to have in your mind. As a summary statement, let me ask you a question that is a big one. If economics were to be taught in a way that you would support, that you would enjoy, you would encourage, what would it look like? What would be the economics curriculum that you would think helps people to understand the actual conflicts, struggles and functioning of today's economy?
- [53:19]
C
Well, I actually have taught economics, so I can tell you how I do it.
- [53:22]
A
Good.
- [53:22]
C
Began teaching National Income Analysis at the New School graduate faculty in the late 60s and 70s. I begun with the history of economic thought to see all the different discussions over rent. And the textbook I used was the very first history of economic thought. It was Marx's theories of surplus value. So that basically was our text. The concept of economic rent, the concept of exploitation, that there are many different kinds of exploitation. Part of it would be that also there's no university that I know of in America that actually teaches how to use the government statistics. In teaching monetary theory, I'd use the Federal Reserve's flow of funds to analysis. I'd show the students how to go through the statistics and see what are banks actually lending for. You don't have to look at a textbook of, say, they're lending to factories to grow, they're lending for companies to buy their own stock, they're lending to Donald Trump 80% real estate, 10% for natural resources, and only a teeny little bit for consumer loans. Zero for capital formation. And banks don't lend for capital formation. There was a whole debate in the late 19th century about whether banking was going to take the German form where banks work with government to lend a heavy industry, or the Anglo American model where it's just hit and run, quick and miss. And when England entered World War I, critics of Marx said, we're worried England's going to lose because our banking system is predatory. Germany has a productive banking system And World War I is going to be fought over. What financial system is going to survive to make the future of capitalism? Well, as we all know, it was not Germany in the industrial system. But if you look at say, late 19th century thought everybody who was discussing the future, I mean, I would like to call economics futurology or future studies, everybody in all over the political spectrum thought, what kind of socialism are we going to have? They all saw capitalism as evolving into socialism. There was Christian socialism, there was libertarian socialism, there were the Henry George people, there were Marxists. And everybody saw that it was a period of transformation. And they all agreed that the dynamic of markets, if there was real competition, would be for the the most efficient system to drive out the inefficient system. And that was going to be socialism of one form or another. And just to read that, you see that you don't have to reinvent the wheel to analyze where we're going today, that there were brilliant people discussing this in the 1880s, 1890s, just to familiarize students with that is the takeoff point. Instead of beginning with Paul Samuelson or Gregory Mankiw or today Mathematic. Pretty soon I found that my most imaginative students at the New School wanted to drop out. They said, we wanted to study economics to see how the world works, and instead it's how to do mathematics. We're not interested in that. That's not the world, especially this mathematics. I want to get it back to a historical basis and to discuss how the economy is changing. The problem with mathematics is it's statistical and you assume the environment is constant. If the environment changes, if there's a change in the structure, then the formulas don't work anymore. But what's interesting is that the structure is changing. So if you want to make a revolution or if you want to change the world. That's what you have to look at, the process of change and the dynamics. That's what's made Mark so popular and why so many people are still reading him and not Paul Samuelson.
- [57:01]
A
On that note, thank you very much. I wish we had more time. Let's have you back and we'll continue the conversation about the gap between the economic reality and what is taught, which is so important for people. I want to thank you for being a partner with Economic Update. Make use of our website. Make use of this program. Share it. We do that already with truthout.org, that remarkable independent source of news and analysis. We'd like to be partners with you as well. I look forward to speaking with you again next week. Sam. Ra.