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Sam. Saint gonna change. 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, those of our children that worry us at night and those coming down the road. Here at a time of momentous change, not only in the United States, with a new government coming in, but around the world as continuing efforts are made to cope with the second worst breakdown of capitalism as a global system in the last century. I'm your host, Richard Wolff. I've been a professor of economics all my adult life, and currently I teach at the New School University here in New York City. I don't have a jacket today, and I wanted to tell you why, because it's 60 degrees here in New York City, which for January is another little piece of evidence that there's, if not global warming, then at least global weirding, as some folks have told me. All right, let's get right into economic Updates for today. I want to begin with the city of Detroit. Now, the city of Detroit figures often in the updates we do here because it is such a statement about what American capitalism does, or put it more honestly, what its costs are. Detroit has been a city in decline for 40 years. Its population 40 years ago was just shy of 2 million. Its population today is 700,000. Those people, 1.3 million people, voted with their feet to leave the places they were born, their families, their friends, their churches, their communities, because there was no work, no decent job that they could build a life around. Today in Detroit, the statistics are stark. 40% of the people live under the poverty line. 40%. A full 11% is officially out of work. It is a disaster that 40 years of presidents, governors, and mayors proved incapable of recognizing or doing much about. So what has happened is remarkable. This is a story with a happy ending. Well, if not ending, happy news. A whole new underground economy has developed in Detroit. And the best word I can think of and won't come as a surprise to you, is that it's a cooperative economy. People are helping one another, particularly those in the lower half of the income distribution, by doing work for one another. They have developed time banks. I'll help you for three hours with something you need, and then in a few weeks or a couple of months, when I need some help, you'll come and give me three hours. So it's an equal exchange. If I have something extra in my home that you need, I'll give it to you and we'll kind of understand each other that you will come and we'll do the reverse exchange at some later point. It's a fair exchange. Nobody is asking to get more than what they give. There's no police to enforce it. There are no courts to make it happen. And the people who are involved in this have discovered something truly revolutionary. This economy is working better than the one that failed them. The cooperative fair equal exchange economy works better than an economy driven by employers figuring out how they can use people to make money. It is a comment on capitalism born in the depths of the city that capitalism has betrayed and abandoned, perhaps more than any other in the United States. And that brings me to another story like this. Far away from Detroit, in Fridley, Minnesota, F R I D L E Y In Fridley, Minnesota, another story like this. I'm going to take you for a moment with me to a place first visited in the public eye by Daniels Wordling of National Public Radio, to whom I am indebted for this information I'm about to share with you. There is something called the Park Plaza mobile home community in Fridley, Minnesota. A whole bunch of people living in trailers grouped on a plot of land, very common in America. Tens of millions of Americans live in mobile home communities because the mobile homes are cheaper than the other kind of. And typically, here's how the business works. A company or an individual buys some land and locates a bunch of mobile homes on the land, runs electricity and water supplies, mows the lawn, keeps the driveways cleared. Individuals buy the mobile home located in the mobile home park. As I say, it's because it's much cheaper than a conventional house, also much smaller. The folks there in Fridley, however, discovered that a capitalist business running a mobile home park is no fun. The business that owns it is trying to make a profit, because that's how capitalism works. So if they can economize on keeping the roads clear, they will. And if they can economize on mowing the lawn, they will, they will. And if they can economize on the little playground for the children, they will. So that the quality of the mobile home park can very quickly deteriorate, even as the fees paid by the owners, each family, are raised as much as the mobile home management can get away with. You can see where this ends up, and many of you have seen it in mobile homes near where you live or work. But the people of Fridley, Minnesota reacted differently. Led by a very courageous young woman living in the mobile home park, they discovered that there are ways for people in this situation to get together and change Their situation in a nutshell. Here's what they did. They got help from local academics, from local political activists, and they discovered that they could, as a group, all of them together, get a loan from a bank and buy out the company that owned and operated the mobile home park, which is what they did. Here are the people consuming the services provided by the mobile home park owner operator getting together to create what is in effect a owner cooperative. They all became owners of the business, not just owners of their little individual mobile home, but owners of the land and the business that they were occupying. And it made the situation much better. The roads got better, the lawn got mowed, and the children's park was expanded. It turns out that cooperative ownership can make you much better off than not doing it. And now they've gone on to discover something else. Instead of hiring people to do the work of maintaining the park, they're going to cooperatize that too. That is, they're going to make it a worker co op to manage the whole thing alongside of an ownership co op. They're going to put the two kinds of co ops together, figuring that the benefits they got by owning cooperatively can be matched by the benefits they'll get if. If the work is done cooperatively by all the people charged with that task, rather than having the employer employee relationship. How interesting that while everybody is paying attention to other things, worker co ops and cooperative economy, whether in Detroit or Fridley, Minnesota, is happening all around us. Let me turn next to a couple of other economic updates of importance, and here what I want to do is talk first about something that happened this last week. Volkswagen Corporation, vw, as it's known, entered into an agreement with the United States government to pay a fine of $4.3 billion for the extraordinary thing that they did. Just to remind you, and they, by the way, admitted guilt for what I'm about to say. They faked the emissions measurements on their cars, particularly their diesel cars. What that means is they put in technical devices that gave a much better reading for how much pollution was coming out of the back of the car when it was being tested and for pollution than it actually put out when you drove it on the road. In other words, they faked the pollution control mechanism. So they got the ability to say to the public, our car doesn't pollute because the measurement shows that, meanwhile, the car did pollute. And the reason for that was if you don't have a device that controls pollution, you get a peppier drive from your car. So VW was able to out compete other capitalists by boasting, we have a zippy car that isn't polluting. The truth was, we have a zippy car that does pollute. In other words, the company was lying, systematically faking it systematically. And when it was caught a couple years ago, it began lying about the fact that it had been lying. All of this is made clear in the documents released this last week by the government. And meanwhile, VW issues press releases in which it blames a handful of engineers who are going to be fired or have been fired. It tries in every way, as they always do, these big companies, to paper over the underlying reality, which is what Profit drives companies to take all kinds of risks and and shortcuts. This one polluted the air, causing how many people to get lung cancer, how many people to get emphysema, how many children to have asthma who didn't need it or didn't wouldn't have gotten it so badly. The cost of what they did is incalculable. The fine is a small fraction of it. The problem isn't VW because countless other people do the same thing. That's how capitalism works. And instead of being shocked each time that we discover it works this way, it's about time for us to understand that what companies say about what they do and what they actually do is often not the same thing. And not even close. As if to underscore the point about paying close attention if you have the time or the energy or if I can boast, if you listen to programs like this, Governor Cuomo here in New York State, where I reside and where this program originates, did an interesting thing this last week. He appeared with maximum publicity alongside Bernie Sanders to announce that he has a plan Governor Cuomo does to make tuition free at public schools here in New York State, the city university system in New York City, and the state university system across the state. Appearing with Bernie Sanders, who made this kind of a proposal as part of his presidential campaign, is also clearly a sign that Mr. Cuomo sees which way the political winds are blowing. They're not blowing towards the Clintons and the center of the Democratic Party. They're blowing towards the left and Mr. Sanders and all of that. And he announced that he was going to commit $163 million to enable families who earn less than $125,000 a year to basically have their children go to a state or city university, tuition free. At that point, a number of economists, including the Bloomberg News Service, began to say, whoa, wait a minute. If it's as cheap as $163 million. Why wasn't this done 20 years ago? And when they looked into it, they discovered the following. If you look at how much financial support people in that range of income already get from existing state and federal programs like the Pell Grants and so on, it comes to a situation where the individual still pays about, if you add them all up here in New York, $2.5 billion. The government pays the rest of it. But out of pocket for people in the range of folks who get help is still 2.5 billion. So there's a problem, Governor Cuomo. There's 2.5 billion that have to be given to people if they're not going to have to pay tuition. And you only talked about 163 million. There's something wrong here. And I was just reminded of the VW story all over again. What they say and what the reality is are not the same. And. And we have to remember to be careful about it. Okay, next item. This last week, the noise began to become a crescendo. The Republicans, together with President elect Trump, are going to repeal the Affordable Care act, otherwise known as Obamacare. They are going to repeal it. There's lots of noise about why things like the government shouldn't tell us what to do in the way of medical care. A remarkable argument when you understand that Medicare has been doing that for decades. And the people who get Medicare are among the fiercest supporters of continuing it. Nor does it take into account the Veterans Administration, which is the government taking care of the medical needs of ex military people and so on, all kinds of arguments. It's inefficient. It's this or it's that. Look, folks, I'm not going to get into the debate about how successful or not Obamacare was. Did it enhance the number of people, increase the number of people who get medical insurance? Yes, it did. That's clearly one of its achievements. The United States, even after Obamacare, remains one of the fewest, among the very few industrial advanced countries that doesn't provide medical insurance as a matter of right to all its citizens. But at least it moved in that direction. Obamacare was supposed to also control medical costs for people. It hasn't been very successful on that. But that's not what I want to emphasize. I want to emphasize why Obamacare is being repealed. It isn't because it wasn't successful in cutting our medical expenses, and it isn't because it was successful in extending insurance. The answer is really very simple. The way the Obamacare system was paid for was by two special taxes that were passed to raise the money to provide for the medical care exchanges, the subsidies to low income people, and the other parts of Obamacare. And those taxes only apply to people earning over 2, $200,000 a year as individuals or $250,000 a year as married couples. In other words, the cost of the Obamacare program fell on those most able to pay the people at the top who earn a quarter of a million dollars or more and they don't want to pay. And the Republicans and Trump look at those people and say, those are the people that fund us as a political party. Those are the people that give us the money that enables us to be a political party, to run for office and to capture the government. In short, killing off Obamacare repealing. That is simply the payback paid by the Republicans and the Trump folks for the support of the rich who put them into office. There's no mystery why we're getting rid of Obamacare. It's to save money. And it means, for example, that if you take the top 0.1% of American income earners, those earning $3.8 million a year or more, and that's 1/10 of 1% of our people, the repeal of Obamacare will save those people an average of $195,000 a year. Now you understand why the repeal of an extension of medical insurance to millions of people is on the agenda for the new government. As if to stay with this question of medical care, I want to answer a question that one of you asked me to respond to. You asked me to tell you which industries pay their executives the highest amount of money. And very fortunately, there was recently a study done by the Bloomberg Financial News Service, one of the most respected sources of financial news in the United States, and clearly a source that is not troubled by the political approach that we take on this program. And I like to use those sources for just that reason. So they recently did, literally within the last week, a study based on Numbers, as of December 31, 2016, the top 10 sectors of the American economy in terms of how much is paid to the top executives, the CEO, the CFO, and all the others at the top 10 industries. I'm going to give you just a sample. The number one industry, which is what you asked me to find out, the industry that pays its executives the most is the health care industry. What does that mean? Hospitals, doctors, drug and medical device producers, and medical insurance companies. Those are the four industries within the sector called health care. They pay their executives the most. Why is this interesting? Well, the United States is an outlier observation, an outstanding example of how to overpay for medical care. We spend a larger share of the gdp, the total value of production in America, the total income we earn as a people, we spend more of it, roughly 18% for medical things than any other country in the world. In fact, the number two country is almost half of what we spend. Other countries who have, by the way, better health outcomes than we do, they live longer, they spend fewer time in the hospital, lose fewer days at work. Work, they're healthier than we are, spend way less than we do. We spend more on health care than people anywhere else. And I want you to know why. One of the reasons, there are several. One of the reasons is we pay the executives in the health care industry a much higher salary than we pay in any other industry. So, for example, who ranks number two, information technology, number three, energy, number four, financials. That's banks and insurance companies and so on. But number one is medical care. So when you discover how much you're paying for medical care, maybe you can take some pleasure in knowing you're helping to pay the highest executive salaries in the United States. And that's been the case for a long time. The last update we have time for today before we turn to our wonderful guest that I'm going to introduce a little bit later has to do with a growing fight across the world against inequality. Country after country, and I mean countries as different as the United States or Scandinavia or China or India or Brazil are experiencing a growing gap between, between a tiny number of extremely wealthy people and average people. The inequality inside these societies is widening so far so fast that it is providing now the basis for a backlash for angry people living in these societies. To be critical, and you might be interested in a whole host of international actions starting on the 14th of January and going for about a week, a global effort to fight. And you can look on the web@fightinequality.org and get a great deal of information about it. And obviously, this is something we talk about on the program a great deal, something I am very interested in. So I want to end this first half of the program with a comment on it. To fight inequality requires you to understand where it comes from, what its causes are. Otherwise you will treat the symptom, the gross inequality, without dealing with the cause. And inequality can be handled in one of two ways. You can try to deal with it by redistributing the wealth. That's a fancy way of saying taking it from those who have a lot and giving it to those who don't. That's a way to try to cope with it. But as you can imagine, this produces an awful political struggle. Those who have do everything they can to avoid losing it. Those who don't have Lord knows what they can do to prevent all of this from happening. So far, obviously this struggle is being won by those who have because they've been getting more and more. There is an alternative. Rather than distribute wealth unequally, income unequally, and then fight like crazy to redistribute it, maybe it would be smarter not to distribute it so unequally in the first place. And here I'm reminded of a lesson I learned as a parent with my second child, my daughter, when she and my son would go out with us and we would buy ice creams. You could of course buy an ice cream for one child and not for the other. You could then tell the child you bought the ice cream for to share with his her sibling. This is a very dangerous way of managing things. Much better to buy each of them an ice cream at the first point because then they don't have to struggle about redistributing anything. And the way you do this with income distribution is not distributed unequally in the first place. Capitalism cannot do that. It has a tiny group of people at the top who have all the power. They distribute income to themselves. A worker co op would be different because everybody in the business would be getting together to decide how to distribute the income and they would never do it as unequally as capitalism does it. As a matter of course. We've come to the end of the first half of this program. This is a good time as any for me to remind you that we maintain two websites that are available 247 at no charge whatsoever that provide you with more information, more background, ways to contact us to tell us what you'd like us to cover, ways to follow us on Facebook, Twitter and Instagram. These are resources we maintain and update every day, repeatedly. There's a blog that collects now all kinds of information on on worker co ops that I think you will find interesting. Such as the story about Fridley that I did earlier today. Make use of this resource we provide. One of the websites is called democracyatwork.info that's all one word, democracyatwork.info and the second one, rdwolf with two Fs.com that's me. Both of these websites are connected to one another, but provide you with ways of communicating to us and provide you with ways basically to partner with us, to share what we do with your own network of friends and associates and thereby to expand the reach. If you like this program, which is probably why you're listening, then make it available to others. You can do that better than we can, and therefore we ask you to partner with us to do that. Please stay with us. We're going to have a short break and then we're going to come back and talk about something extremely important going on in the American economy today with our guest. Stay with us. We'll be right back.
