Transcript
Richard Wolff (0:00)
Sam. Saint gonna change. Welcome, friends, to another edition of Economic Update, a weekly program devoted to the jobs, the incomes, the debts, the prospects for our kids, all the economic parts of our lives. 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 in New York City. Before we jump into today's very interesting program and my very interesting guest who, whom I will introduce a little later, I wanted to make a couple of quick announcements. I will be going shortly on a speaking tour in California, and I thought that some of you out there might like to know that I'll be speaking at the First Congregational Church in Berkeley the evening of February 10, and at the Sonoma Community center in Sonoma, California, on the afternoon of February 14th. So if either of those places are near you and you're interested, come on out and let's meet one another. I really like to do that, and I think you will find it interesting to see what kind of presentation I make in that setting as opposed to the radio. Indeed, if you're interested in some of my other appearances in various parts of California in the month of February, just go to our website, democracyatwork. That's all one word, democracyatwork.info check out events and you get all the details, the where, the when, how to get tickets and all of that material. I'll come back with some more of that kind of announcement a little bit later in the program. Let's turn now to the updates for this week. Well, I have to talk about those elections in Iowa. Even if you've heard more about them than you actually want to, I want to look at them in terms of economics. We don't endorse anyone on this program. And please don't understand what I say as an endorsement for or against anybody. But something extraordinary happened on both sides. But I'm going to talk about the Democratic Party side of the primaries that came out of the caucus in Iowa, because something happened there that is about economics. For the last 65 years in the United States, we have lived in a capitalist economic system, which is true for most of the rest of the world. But even more unusual is we've lived in a capitalist system without being able as a people to debate that system, to ask what are its strengths and weaknesses, to ask if we can do better, to figure out how we might do better and what we might do to get to a better situation. That kind of conversation was taboo. If you thought there was something wrong with capitalism, the majority of your fellow citizens would look at you as if you were either ignorant, poorly educated, or downright evil, as an agent of a foreign power, as disloyal. I mean, every negative thing you can think of was attached to being critical of capitalism and even more to be interested in the alternative known as socialism. Something has changed in the United States, and the people of Iowa brought that home to everyone. A clear half of the people who went to the polls on the Democratic side in Iowa voted for a person who calls himself a socialist, Mr. Sanders. They broke in that step. They broke from a tradition of thinking that that a socialist is beyond the pale, is something impossible, is something not to be taken seriously, if not immediately incarcerated. This is an enormous change. It's going to change our economic system because it puts capitalism on notice that it's not above criticism anymore. It's not out there all by itself with an unspoken rule that no one can cast a critical eye. It's never been healthy for our economic system that there's no criticism. Criticism is one of the ways you identify problems. Criticism is one of the way you begin to develop a strategy to fix, to improve, to go better. It's the background to everything having to do with the advance of technology, being critical of the way things are done, so that you begin to think about better ways of doing them. The United States prides itself on being critical and technologically dynamic, but it seems to be frightened of being economically dynamic and changing. And that just changed this last week. And I would be remiss if I did not bring that to your attention on a program called Economic Update. One last comment on that. The polls were able to identify how people voted according to their ages. And this, for me, was the most remarkable result. On the Democratic side, people between the ages of 18 and 29 voted for Mr. Sanders, 84% and for Mrs. Clinton, 14%. I'm going to say that again. 84% of young people were not intimidated by the socialist label. Not turned off? Not at all. What does that mean? That is a sea change in the consciousness of the American people and suggests going forward, big changes politically, ideologically, in terms of the consciousness, the culture of our country. And it is clear to me, as the questions given to these young people also discovered, that the single most important factor driving them forward into the voting for Bernie Sanders is the economic problems of the capitalism we're living in. It really is less about an interest in socialism than it is an interest in doing something other and better than. Than the capitalism we have. The irony is, therefore, that the interest in Bernie Sanders the socialist is the result of capitalism itself. Staying with this topic in a little indirect way, I want to do also a moment of history. We don't do enough history about economics in this program. Some of you have criticized me about that, and you've been right. So here's a chance for me to draw a lesson for today from some criticism. In order to do this, I want to read to you two sentences. They are the two sentences of the letter written by John Maynard Keynes in December of 1933 to the new president then of the United States, Franklin Delano Roosevelt. This is the depths of the depression, December 1933. We have a quarter of the American workforce unemployed. Every single American family is touched. Mother, father, cousin, uncle, somebody's unemployed and turning to the rest of the family for help. Because remember, at that time, there was no unemployment compensation yet, there was no Social Security system yet, et cetera. So Mr. Keynes, terrified by what is happening to capitalism in his country, Britain as well as the United States, turns for hope to the President of the United States and says to him an amazing thing that I want to read to you. Sentence number one. You have made. This is Mr. Keynes to Mr. Have made yourself the trustee for those in every country who seek to mend the evils of our condition. Let me break in here. He means the failure, the collapse of capitalism around the world. You have made yourself the trustee for those in every country who seek to mend the evils of our condition by. By reasoned experiment within the framework of the existing social system. This is very clear. Mr. Keynes is saying to Mr. Roosevelt, please fix this broken capitalism while holding on to capitalism. That's what the phrase within the framework of the existing social system means. Now, the second sentence of this long letter. If you fail, rational change will be gravely prejudiced throughout the world, leaving orthodoxy and revolution to fight it out. Hmm. The two real winners in Iowa were Mr. Cruz might call that orthodoxy, and Mr. Sanders, who refers to his campaign as a revolution. Mr. Keynes, writing to Mr. Roosevelt, understood really clearly that when capitalism begins to break down, you have the polarization into those on the far right and to those on the far left. And that is scary because when the middle collapses, the security, the stability of the system itself, is called into question. August 11, 2015, on an electronic site that I think some of you know, salon s a l o n.com a wonderful article appeared about conservative billionaires in the United States becoming very, very worried. And they look to history about what's happening to the United States and One piece of history this article goes over is late in 1938. The depression had been going on for a decade. The suffering was enormous. But the efforts of the New Deal angered conservatives, and so they had a backlash. And they were pressing Roosevelt, president at the time, to cut back on New Deal programs that were helping people, like the public employment program, like a whole host of other steps. And Roosevelt feared that if he gave in to the conservatives, there would be a revolution. Let me read to you from Roosevelt's private journal that was only made public many years later. If I do as the conservatives want, the President wrote, this would mean calling out the troops to preserve order. It might even mean a revolution or an attempted revolution. Wow. A final piece of history. Joseph Kennedy, the millionaire father of John F. Kennedy, who would eventually be President of the United States, wrote during the Depression in those days, I felt, and I said that I would be willing to part with half of what I had if I could be sure of keeping under law and order the other half millionaire. I'll give up half if I can hold on to the other half. That's how scared they were at the top. He later told Joe Kennedy. He later told Senator Joseph McCarthy, the famous anti communist warrior. I knew that big, drastic changes had to be made in our economic system. I wanted him, Roosevelt in the White House for my own security. The billionaires wanted Franklin Roosevelt in office to protect them from the breakdown of society they feared their capitalist system was leading them to. Bernie Sanders refers to himself as being not that different in what he wants to do from what Roosevelt set out to do. So for those of you who imagine that because Mr. Sanders calls himself a socialist, he can't be a relevant player in the political life of the United States. This history might give you a pause and make you realize that things may be changing even more than you thought. My next update has to do with the ongoing economic drama of the oil market. It is so stunning and so scary that it really requires an analysis to keep going. Even though I've done it occasionally in past weeks, I want to keep up. First, the new news. Oil companies have been announcing profits in the last few weeks and the profits have plunged. Imperial Oil in Canada down 84. The major oil companies, ExxonMobil and so on, all down, stocks down. I mean, serious problems for the mass of people. I'll just give you two numbers. First is British Petroleum, one of the biggest oil companies in the world, announces cutting 7,000 jobs. Its rival Royal Dutch Shell merging with the British gas producer BG Group, announces China 10,000 people will lose their jobs. So we're seeing a collapse all across Texas, Louisiana, the middle section of the United States, all the way up and across into Canada. Huge unemployment, oil companies shutting down, oil companies laying off workers, and it's spreading. Billions were lent by American bankers to the oil men and women to finance the fracking, the bringing of the shale oil out of the ground. Those banks are now in trouble. They can't collect on the debts because the oil companies that went and did all of that have to sell their oil at $30 a barrel, not the hundred dollars a barrel that it was when they undertook the investment. And then finally, we have seen something happen in China that affects the oil market. Over the last 30 years, the Chinese built up and industrialized their country. They built factory after factory, producing all those goods that you find in your neighborhood, Walmart and every other place where you go to shop. Millions of companies from around the world partnered with China. A good half of the goods that come into the United States from China are made by subsidiaries of American corporations. Corporations that closed their facilities in Cincinnati or Dallas or Denver and moved instead to Shanghai, to China, all over China. Why am I telling you this? Well, when capitalists, people driven by profit, see an advantage moving to cheap labor areas like China, they don't do that in an orderly way. Every little company thinks it's going to make a killing. Everyone opens up a factory with brand new machineries in China. Everyone thinks they're going to succeed. But the problem is, if a lot of companies do it at the same time, they end up with what we in economics call excess capacity. There's too much capability. The additional industrial capability built in China sits side by side with the old but still serviceable capability. In much of the rest of the world, there's too much capability. We can produce way more cars than we can sell as a nation. That's how capitalism works. That's how the market works. So suddenly the Chinese discover, as do all the companies involved, that they built up a capacity way ahead of what they can sell profitably. So China slows down. Of course China slows down because everybody else slows down. If you ask the Chinese, why are you slowing down? They will answer, because we can't sell all the stuff we've been producing. And why can't you do that? Because working class people in Europe and America have been losing income, have been suffering unemployment, and they can't afford to buy the way they used to. China's slowdown is a reflection of economic changes everywhere else in the world. Remember, China depends on exporting goods and services to the rest of the world. It will do as well as its export markets permit it to. And when China can't produce, it doesn't need oil. Aha. It needs a lot less oil than it used to. Meanwhile, the United States, by bringing up that shale oil with the fracking that does such damage to the soil and to our ecology, the United States is producing much more oil at the same time that China and the rest of the world are slowing down in their need for oil. And there you have it. That's why the price of oil has collapsed. The US added more supply, the rest of the world slowed down. That's why tens of thousands of people are losing their jobs. That's why the economies of Louisiana, Texas, the Dakotas are in such deep trouble. That's why so many banks are on the edge of failure. And indeed a few have started to fail. We as a people depend on oil. But that means in a capitalist system that we depend on the profit driven calculations of a handful of couple of hundred companies, couple of hundred banks, that's it. You put all those people together, a few thousand individuals are making decisions about what's profitable for their companies. And we, the millions, the billions on this planet, live with the results. And right now we're living with a disaster. They made one blunder after another. Did the oil companies in the Midwest of the United States really think that they could enormously increase the supply of oil and that wouldn't have a depressing effect on the price? Did they forget the first lesson of supply and demand every student learns in school? Looks like it did. The bankers who lent them billions, they can't now recover. Did they do due diligence? Did they check whether this was a reasonable investment? Did they make sure the people they lent money to could pay them back? Evidently not. They didn't do it well. Wow. You mean the collapse of the oil price, the millions of people whose economic futures is damaged, the tens of thousands that have lost their jobs. This is all the result of how a capitalist profit driven market system works. Yes, that's right. Here's an you plan what the needs of the next 5, 10, 15, 20 years is you make a rational plan. Chinese people, American people, British people, French people, all of the players in the world, those who consume oil, those who produce oil, and you work out a plan and you produce oil, growing as the demand seems reasonable to grow, you reevaluate it. Every two months you adjust. That's how you do it. You don't allow 200 companies, each with its own profit profile, to make a decision about what's good for it and hope that it all works works out. That's the equivalent in economics of what we call a Hail Mary pass in a football game. It's when you've given up on your game plan and you just hope the world's energy needs are far too important to leave to this the ecological damage of misusing fossil fuels and abusing our energy needs that way are much too important to leave to private profit calculations. The critique of capitalism that is deepening and spreading, that underlies everything that happened to Bernie Sanders and what happened in Iowa this last week are driven by the same deepening recognition that there's something terribly wrong in the capitalist economic Let me conclude this first half of the program by responding to a question that some of you have sent me regarding the whole problem which comes right out of what we've been talking about about money and politics, the ability of very wealthy people and large corporations to get away with what they're getting away with because they can use their wealth to shape politics. What party wins, what candidate wins, what ideas get into the minds of legislators and which ones don't, etc. And your question was, is there now a serious fight back against the role of money in our capitalist economic system? And the answer is yes. And as I have reported once before and as often happens, California is on the cutting edge of this effort. And for those of you that are interested, I wanted to bring your attention to a website maintained in California that goes into the complicated struggle to get money, if not out of politics, at least to reduce its role. This is an effort, interestingly, supported increasingly by by both Republicans and Democrats as well as critics of capitalism. So there's a growing consensus, and that might be of interest to all of you, no matter what state you're in or outside the United States. Since this is an issue that is global. The website that I would direct your attention to is called yes, fair elections. That's all one word. Yes fair elections.org O R G. So if you're interested, go there. You'll learn a great deal about the efforts in the great state of California to deal with this problem. And it will demonstrate to you that there is a growing awareness that it is impossible to have a genuine democracy of one person, one vote, one person having the same weight in his or her opinions that anybody else does. You can't have that if one person with one vote has $100 million to spread the idea around and the other person has 14 cents. This is not a fair fight. This is not an equal democratic participation. This is the use of unequally distributed wealth to undercut the whole principle, the whole idea and the whole purpose of democracy. Well, we've come to the end of the first half of our program, but as I promised, I want to appeal to you today before signing off this first half. Everything we do on this program is designed to reach to inform the people of the United States and beyond that, everybody else in the world who, who listens. The best way we can succeed is if you are a partner to us. That is take what we do on this program, share it with others. You can do that literally by going to our website, democracyatwork.info every one of these programs is archived in its complete run on that website. You can go back by using any date you want and listen to the program again, give it to someone else to listen to, share a part of it, all of it, with people through Facebook, Twitter and all the other social media. We are asking you to be a partner with us because it'll double, triple, quadruple the effectiveness that this program seeks to have. It's a very important service. I want also to remind you that the same websites, democracyatwork.info that's one, and rdwolff with two Fs com, that's the other. Democracyatwork.info rdwolf.com these websites are available to you 24 7. They are absolutely free in every way. They allow you to make use of classes, lectures, interviews, articles, you name it. Audio files, video files, written material. It's all there by clicking. You can follow us on Facebook and Twitter, where we are very, very active. We upload onto this website every day. We send out Facebook and Twitter announcements and messages all the time. Both of those websites, again, also allow you to communicate to us what you like and don't like about the program. We maintain these institutions for your use and we invite you and encourage you to make use of them. We will be right back. Stay with us. We have a very, very interesting and important interview coming right out of what we've been talking about in the second half of today's.