Economic Update with Richard D. Wolff

Episode: Gentrification: The Market Rules
Date: April 25, 2016
Host: Richard D. Wolff (Democracy at Work)

Episode Overview

In this episode, Richard D. Wolff critically examines contemporary economic issues through the lens of gentrification and "the market rules." Using recent news stories and listener questions, Wolff explores corporate salary disparities, corporate tax avoidance, public assistance for workers, and—most prominently—the destructive effects of gentrification driven by market capitalism. The episode culminates in a call for democratic alternatives to profit-driven market organization, especially in neighborhood development and housing.

Key Discussion Points & Insights

1. CEO Pay vs. Worker Pay (03:15)

• Comparing CEO and Worker Wages:
  Wolff sets the stage by highlighting the disparity between executive and worker pay in major retail and restaurant chains, referencing a USA Today piece. For example:
  • Larry Merlo (CVS): $13,914/hour
  • Leslie Wexner (L Brands/Victoria’s Secret): $13,062/hour
  • Howard Schultz (Starbucks): $9,659/hour
  • Douglas McMillan (Walmart): $9,323/hour
  • Meanwhile, these companies resist a $15/hr wage for clerks and service workers.
• Emphasized Point:
  "There is no comment I could invent that has anything to add to what the naked numbers say." (05:22)

2. Corporate Cheating: Automotive Emissions Scandals (06:30)

• Mitsubishi joins Volkswagen Scandal:
  Mitsubishi was found to have falsified fuel economy data, joining a list of auto manufacturers including Volkswagen.
• Analysis:
  The private, profit-driven car industry consistently prioritizes profit over public health, evading regulations and misleading consumers.
• Suggested Alternatives:
  Wolff advocates that industries crucial to public wellbeing (like automotive and banking) should be governed by democratic councils representing workers, consumers, and the public at large (09:30).
• Notable Quote:
  "These companies have failed the test of being allowed to exist. They have betrayed the public trust… What more do we need?" (08:48)

3. Public Assistance & Wages (12:18)

• Statistics from Economic Policy Institute:
  • 29.3% of all full-time American workers receive some form of public assistance.
  • 53.1% of low-wage workers (earning ≤$12.16/hr) receive public assistance.
• Key Insight:
  Government aid to low-wage workers, such as EITC, SNAP, or housing help, indirectly subsidizes employers by allowing them to pay less than a living wage.
• Memorable Line:
  "This is a wonderful benefit to an employer. It allows the employer to have the services of working people without having to pay for them." (15:17)

4. The Presidential Money Race (17:36)

• Data via Bloomberg (as of March 2016):
  • Hillary Clinton: $268 million
  • Bernie Sanders: $183 million
  • Jeb Bush: $156 million (no longer in the race)
  • Ted Cruz: $136 million
  • Marco Rubio: $117 million
  • Donald Trump: $49.3 million
• Insight:
  Stark disparities in fundraising expose the financial barriers and influence in US politics.

5. Corporate Tax Avoidance & The Panama Papers (19:42)

• Oxfam’s “Broken at the Top” Report:
  • 50 largest US corporates, e.g., Apple, Walmart, GE, stashed $1.4 trillion in tax havens.
  • Apple: $181 billion offshore
  • GE: $119 billion in 118 subsidiaries
  • Microsoft: $108 billion offshore
• Tax Law Mechanics:
  Although the nominal US corporate tax rate is 35%, deductions/exemptions reduce the effective rate to about 26%; if profits are held offshore, the rate drops to roughly 15.5%.
• Implication:
  Tax avoidance reduces US government revenue, shifting the burden to ordinary taxpayers.
• Quote:
  "Now you know why corporations set up tax havens—tax money they don't have to pay, tax money that the United States government doesn't get, which is why your taxes are higher than they would otherwise be." (24:07)

6. US Tax Structure & International Comparison (30:15)

• United States Tax Breakdown:
  • Income Tax: < 50% of federal revenue
  • Payroll Tax ("social insurance"): ~33% (regressive)
  • Corporate Tax: 11%
  • Excise/other: 9%
• Estate Tax:
  Barely applies: only 2 in 1000 estates pay any inheritance tax. This undermines claims of equal opportunity.
• International Tax Comparison (OECD):
  • Out of 31 advanced economies, the US is 30th in overall tax burden.
  • Only Korea taxes less.
  • Highest-taxed countries: Finland, Denmark, Norway, France, Sweden.
• Pointed Observations:
  "For anyone to argue there’s a big government taking all of our money is misleading you and carefully avoiding facing the relatively low taxes that Americans pay compared to people anywhere else in the world." (40:28)

7. Gentrification: The Market Rules (43:00)

• Definition:
  Gentrification means an area shifts from low/middle-income to high-income/rich, often rapidly, displacing existing communities.
• Mechanics:
  As wealth concentrates at the top, the newly rich seek housing in desirable areas, driving up prices—even in adjacent, previously affordable neighborhoods.
  Long-standing residents are forced out by rising rent, property values, and living costs—the economic power of the market (and those with the most money) disrupts community bonds, stability, and social cohesion.
• Core Analysis:
  "Gentrification is a fancy word for how the free market works… If you don't like the outcome... you’ve got a problem with the free market." (49:55)
• Alternative Vision:
  Replace profit-driven market allocation with democratic decision-making on neighborhood development and housing.
  "A democratic control, a democratic organization of where we live is the alternative to free market capitalism.” (51:07)

Notable Quotes & Memorable Moments

• On CEO Pay:
  "An executive who earns $13,914 an hour doesn't want to pay the clerks in his or her stores $15 an hour." (04:25)
• On Corporate Betrayal:
  "They have substituted their own private profits for what's good for society. They have lied, they have cheated, they've gotten caught, they've now admitted it. What more do we need?" (08:48)
• On Wage Subsidies:
  "We live in a capitalist system... that socializes a large part of the wage cost in this country." (16:06)
• On Corporate Tax Avoidance:
  "These are companies... who repay the kindness of the American people... by stashing money abroad, by hiding it, by not paying taxes to the United States government." (22:19)
• On Tax Myths:
  "The United States taxes its people less than most other countries do." (40:30)
• On Gentrification:
  "Gentrification is the free market doing its thing… If you don’t like deregulation, excuse me, if you don't like gentrification, well then your problem is... the very economic system you live in." (52:49)

Timestamps for Key Segments

• CEO to Worker Pay Disparity: 03:15 – 06:30
• Automotive Emissions Scandals: 06:30 – 09:30
• Public Assistance for Workers: 12:18 – 17:36
• Presidential Election Fundraising: 17:36 – 19:42
• Corporate Tax Avoidance/Panama Papers: 19:42 – 30:15
• US Tax Structure/International Comparison: 30:15 – 43:00
• Gentrification Discussion: 43:00 – 52:49

Episode Tone & Style

Wolff maintains a conversational, impassioned, and analytical tone throughout, peppering his arguments with vivid statistics and pointed critiques of capitalism’s failures. He seeks to connect economic theory to lived experience, foregrounding the social consequences of abstract policies, and invites listeners into an ongoing dialogue.

Conclusion

This episode unpacks the economic logic and human costs behind the market rules that govern everything from labor wages to neighborhood composition. Through case studies and data, Richard Wolff argues that gentrification and related injustices are not problems of policy failure, but rather are core features of capitalist market logic. The episode closes with a call for democratic alternatives in both the economy and community governance.