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A
Welcome, friends, to another edition of Economic Update, a weekly program devoted to the economic dimensions of our lives. Debts, jobs, incomes, hours, our children's and the whole world of the economy on which we depend on. I'm your host, Richard Wolff. I've been a professor of economics all my adult life. And that has prepared me, I hope, to offer you these economic updates. I want to begin by talking about a small country in Europe named Luxembourg because it has taken a big step and it's one that I think will have reverberations around the world. Luxembourg just became the first country in the world to make all public transportation free. Up until recently, they had already taken the step of making it free for everybody 20 years of age and younger, but they have now decided to extend the free ride on all public transportation to everybody. End of story. The government in Luxembourg that made this decision is a coalition. And because Americans tend not to hear about coalitions that govern European countries when they are of the left wing variety, I wanted to let you know it was one of those in Luxembourg. It is governed right now, that country by a coalition of the Democratic Party, the Socialist Workers Party and, and the Green Party. Let me remind you that Portugal is a country that is currently governed by a similar coalition, the Socialist Party of Portugal, together with the Communist Party of Portugal, together with the Green Party of Portugal, now the party in Luxembourg. This coalition government has also decided that it is now going to consider legalizing cannabis and adding two more holidays. Now, the interesting thing, public holidays, the interesting thing is, of course, these steps don't change the basic distribution of wealth and income, but they are things that left wing governments can and are now increasingly doing, that at least improve the situation, particularly of people at the bottom half of society. For them, the cost of public transportation is a real expense, whereas for wealthy people it isn't. So making it free is a bigger gift to folks at the bottom than it is to folks at the top. That already is a different direction than European governments have been taking for most of the last 30 or 40 years. And that's why it's an important straw in the wind of economic change. There's also something else going on in Europe that I think is important for us all to understand. The Trump administration made a decision to withdraw from the treaty with Iran that got them to stop their nuclear program in exchange for lifting sanctions against them. The United States withdrew, the Europeans did not. The United States reimposed sanctions, the Europeans did not. And then the United States took a further step. It threatened, and it apparently means it that any business anywhere in the world that does business with Iran will also be sanctioned by the United States, even if that business is French or German or Japanese, even if the shareholders are from those countries. In other words, the United States is jurisdiction seems to trump every other country, pardon the double entendre. Turns out that other countries don't like this. I can imagine the American reaction if some other country said they would punish American companies if we did something they don't like. And so the Europeans are now working on what they call special purpose vehicles. Because it turns out that the way the United States can track other companies doing business with Iran in other countries is by means of the international payment systems that have been dollar denominated for a long time, giving the United States all kinds of economic advantages. The Europeans, not wanting to be controlled by the United States, surprise, surprise, are developing new mechanisms of international payments that won't use the dollar and therefore can't be monitored by the United States so that their companies can freely do what the United States thinks threatens them if they dare to do it. And this is part of a larger process. It's called nationalism. It's the United States demanding its way, having other countries demand that way. It's the falling apart of capitalist world economic system into its parts, into its national parts against the unity of what was the capitalist world. We now have the disunity of the capitalist world. And that's going to change the dynamic in struggles between workers and capitalists in each country and between and among the different blocs, China, Japan, Russia, Europe, because it's a fractured, splintered capitalist world. And these special vehicles to get around American sanctions to Iranian business partners is part of that process. Here's a small one, but. Well, it is so seedy that I had to tell you about it Shortly after the 2016 election, it turns out. And this is all taken from the Washington Post, which documented everything the country of Saudi Arabia paid its Washington D.C. lobbyist to buy get ready 500 rooms at Trump's Washington D.C. hotel. Why did the Saudi Arabians buy 500 rooms? There aren't that many Saudi Arabian diplomats or lobbyists. They don't need them. The lobbyists live anyway in Washington and the diplomats aren't that many and don't come that often. What's 500 rooms for? And by the way, average nightly rate in the hotel at that time per room ready, 768 bucks. So 500 rooms is a nice piece of change. Well, it turns out that the rooms weren't for Saudi Arabians. The rooms were for American veterans. They were being brought to Washington by another firm that the Saudi Arabian lobbyist hired. They were being brought to Washington to lobby against a law which was presented to them as a law that might make individual American soldiers liable for damage or injury they caused abroad when they were serving in the military. The veterans didn't want to have that kind of liability attached, so they were coming to Washington to push against the law. Well, the law happened to have another clause to it, namely that it entitled Americans who lost loved ones to sue Saudi Arabia because the vast majority of people who did the deed, 9, 11, blowing up the World Trade center, etc. Were Saudi citizens. And they want the right to sue Saudi Arabia. This law might have given them the right. So Saudi Arabia bought 500 rooms in Trump's hotel to put up veterans coming to Washington who thought they were doing something completely different that had nothing to do with Saudi Arabia. I told you it was sleazy. That's pretty sleazy. And now another story, whichand maybe I should have called this program today sleazy. Economic update. Who knows? This is about the Deutsche Bank. Deutsche for many of you is the German word for German. Okay, The Deutsche bank is the biggest bank in Germany, been around a long time, got itself into trouble recently. That is really coming back to haunt it. To tell you about this, I have to explain. It begins with a small branch bank in Estonia, that little country in the north on the North Sea, surrounded in part by Russia. A small bank in Estonia. A branch bank would normally not do much business, but this was an exception. This was a branch of a Danish bank called Danske Bank. Okay, so much for Danske bank, which is a significant Danish bank handling the transactions. For Danske bank, since it's a relatively small bank, was the huge Deutsche Bank. Now here comes the interesting part. Over the last eight years, something on the order. Get ready now. Of $180 billion was funneled through the little branch bank in Estonia, a tiny country with a tiny population and no need for for a bank to do anything big. An enormous amount of money went to the Estonian bank, which was a branch of the Danske bank, which moved the money from Estonia to Denmark, which in turn process it through the Deutsche Bank. And of course each bank took a cut of all of this mass money. What was the money answer? It was wealthy people in Eastern Europe moving their wealth out of Eastern Europe where they felt it was in danger and moving it to the west. Much of this money was criminal or illegal money, either illegally sourced in terms of it coming out of criminal activity or being illegally moved contrary to laws and conventions. And it now turns out Deutsche bank processed most of this money. No way. It couldn't have known, no way. It couldn't have expected to look with a raised eyebrow at a tiny branch in a tiny country doing quantities of business that would be remarkable for the biggest countries in the world to funnel through one bank. But you know, there's a lesson here. If you allow something as important as money, the thing that makes the world go around pretty much everywhere, to be controlled by private companies, we call them banks, whose goal is to make money for themselves and their shareholders. Here's what you can they will do it to make money. They won't do it in order to keep the world safe, to observe laws, to be socially responsible. That's not their job. Their job is to make money for the company they work for. And if they don't, they lose their job. So we have allowed a system to develop that produces these crises and these illegal, immoral, unethical activities by banks over and over again. The last 10 years have seen every major bank in the United States being hauled up in and fined often significant amounts of money for money laundering, for false fees, for manipulating interest rates, for manipulating foreign exchange rates, for overcharging people who have mortgages. It never stops. They do with money what's profitable for them. And we all live with the costly social consequences. The system is the problem. Punishing this or that banker, which is likely what's going to happen with the Deutsche bank to changes nothing. Because the banker who is punished, fired, maybe even imprisoned, will be replaced by another banker who will have the same objectives, the same goals, the same rewards and punishments as the one we are punishing. The system is the problem, not the individual who occupies the position within it. And now the last update for today, which has to do with secretary of state, U.S. secretary of state Mike Pompeo. He gave a speech a few weeks ago in Brussels which was very remarkable. On the one hand, he said, the great problem is Russia and China. On the other hand, he said, we all have to go it alone. The nationalism again. The United States is going to go it alone. Well, here's a joke. The best bet if you want to fight Russia and China is terms of economic development, is to have a unified capitalist world. What Mr. Pompeo is doing is breaking that unity up. That's going to make it harder, not easier. The contradiction is obvious. Mr. Pompeo's awareness of it and that of his speechwriters is not We've come to the end of the first half of Economic Update. I want to remind you please to become a subscriber on our YouTube channel for economic Update to make use of our websites democracyatwork.info where you can follow us on Facebook, Twitter and Instagram. And I want to particularly thank our Patreon community because of its support, its enthusiasm and its solidarity. Stay with us. We'll be right back. Welcome back, friends, to the second half of Economic Update. I want to welcome you to my guest and my guest to you. He's been on the program before. His name is Bob Henley and I want to formally introduce him by telling you about some of the things he's done. He's an award winning print and broadcast investigative journalist. We don't have too many of those left in the United States. And he's one of the best. He's a staff reporter with the New York City based Chief Leader newspaper, which has been covering public unions and the civil service since 1897. He is a regular contributor to Salon, where he writes on the economy and labor. He has been published in the Guardian, the New York Times, cbs, Money Watch, and dozens of other websites and publications. His Broadcast credits include CBS's 60 Minutes, the PBS NewsHour, NPR, C SPAN and the BBC. With all of that behind him, we are lucky to have him. Welcome, Bob.
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Thanks for having me.
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All right, Bob, I want to start, given that's your area to say, to ask you a question. Mr. Trump and the Republicans swept into power in 2016 promising to dramatically reverse the working conditions of millions of Americans who had by that time become pretty depressed about 30 to 40 years of decline in the United States, decline of wages, decline of the benefits that go with jobs, decline of the security that goes with a job. Promises might even say that Trump borrowed hope and change from Mr. Obama kind of the way Melania borrowed. Well, I won't go into that. So tell me, what's the report card after two years, what do you think?
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It's got to be an F. And I think just look at this latest GM announcement, General Motors, you know, the president had gone through the Rust Belt making a promise that his presidency would be a post layoff paradise. And we've seen that capital is continuing to do what it's always done. And irrespective of the fact that between Canada and the United states, taxpayers gave $89 billion to bail them out, what we're seeing is they're back to their old tricks, laying off thousands of workers. You know, one in four of the supervisory workforce, thousands of workers in Canada and the United States with a reckless disregard for the consequences. You have look at Harley Davidson. The. They were an iconic company based in Wisconsin. One of the places that the Trump twister successfully flipped districts that had gone twice for Obama. Because Trump was in touch with his discontent you so rightfully described. He wins them. Well, what happened was after the tax cut, the $1.5 trillion wet kiss to multinationals, Harley announced that they gave its stock buyback. They handed out money to the top people in the company and announced they were going to do layoffs and open up a plant in Thailand. So what you see is really the continuation, and in fact, it's actually accelerated. There's data that shows us that the wealth concentration is continuing to accelerate. So everything that he manipulated and identified as an issue is worse today than it was when he took the oath of office.
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I remember being struck with the Harley Davidson that when Trump initiated these tariffs. And I think it's important to remind people he's focusing on tariffs because it's one of the few areas where the President can do something all by himself and doesn't have to go to Congress. Something which may be corrected now in view of what he's done with it. But he puts a tariff against the Chinese as part of his theater. And the Chinese put a tariff against Harley Davidson.
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B
Right.
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So Harley Davidson discovers, uh, oh, this great leader of ours just killed our market in China, which is probably the fastest growing market for motorcycles in the world, as it is the fastest growing market for cars. And so suddenly they have to leave the United States, otherwise they can't sell into that market. So opening a plant in nearby Thailand, which is a short distance from China, is a large. I mean, but half a dozen people could have told everybody, including Trump, the absurdity of what he was doing. So my next question is, given what you've just said, given the fact that nothing really has changed, do you think, as a reporter, while running around, are people getting a sense, do you think, in America of the gap between the reality of what's continuing and all of the promises?
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B
That's a heavy question. Particular particularly because I think that Trump benefited from the media blind spot which we talked about. The east and west coast social ecologies are so different than what's happening in the heartland. And that contrast has only grown. One of the reasons why the President succeeded in winning the election was that the Obama recovery, that hope and change, had grown moldy, because, as we've identified before, 6,000 empty homes in Cleveland, it just wasn't happening. And the deterioration continued. In point of fact, the media hasn't corrected itself for a brief period when it got involved with discussing how did they miss this? Because remember, all the pundits that Trump, with the exception of you and I perhaps were saying, we couldn't see a path for Trump's victory, yet he won. So what they've been focusing on is not so much how did they miss it, but trying to shift blame to the discussion of Russia, which may have also been true. But what they have not addressed is the blind spot they have on what's happening in America. So what is really happening on the ground still isn't being discussed. We've had for the third year in a row a decline in the average life expectancy in the United States. This has not happened since the First World War. This is cataclysmic. We judge other nations by this singular standard as whether or not they're deserving foreign aid based on that criteria. That's one of the top things. And we're going backward. We see household formation continuing to suffer. An entire generation with a $1.5 trillion yoke debt, which are the 20s, something stuck in their parents basement and not even capable of being in orbit and procreating, which is going to have profound impact as we approach this tremendous challenge of funding our retirement, right? And so the country on all counts is on the verge of a failure that's catastrophic. But we're not seeing it on television because there's this constant phony narrative. Well, the unemployment rate is down and buying into and trying to give Trump credit for a totally full recovery, which if you just scratch the bit of the veneer, go to any real city, you'll see doesn't exist.
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And you know, even in the areas they boast of, if you look just a millimeter below the surface, you can see the problem. Take the stock market, right? In the last several weeks, we have seen incredible volatility. Mammoth drops 6, 7, 800 points in a day. This is because the people involved, who have made a lot of money, understand that the massive introduction of new money into the economy by the Federal Reserve to prevent the collapse that started in 2008, all that money did not create lots of jobs, did not bring back manufacturing. Most of it went into the stock market, inflated all those prices. This is a very nice story, but the minute you get even the faintest whiff that this kind of crutch might be pulled away, right?
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It's the key moment. Two seconds before, in the wizard of Oz where Dorothy and her cohorts pull the curtain back and reveal this is really, and I can't overemphasize that this is part and parcel of that tax cut. And I questioned Trump about this when he rolled this out in the primary. I had a chance to engage him at a press conference. This business of a massive tax cut for multinationals to repatriate the money has been tried, tried back in 2004 in the bush years, resulted in surprise, surprise, increased pay for CEOs and stock buybacks. Stock buybacks are the kind of elite three card Monty or pyramid scheme. You don't create any change in behavior. No new product, nothing new to market, no new technology. You just keep buying it back and spinning it and spinning it until it builds up in value. That's where we are. Meanwhile, the underlying dynamic in terms of infrastructure, investment in the social capital has all been in decline and it's paying off, as I say, in this decline of life expectancy, which is being driven by the increased opioid addiction and suicide, which are reported as discrete things that are happening, like meteorological conditions. Well, in other news, by the way, more people are killing themselves. And then we talk about the financial markets. We never bring holistically together the way that people are bearing this pressure in a very tangible way, which is creating all kinds of collateral damage. This is an echo of the decision in 2008 that Barack Obama made in consult with Geithner and Summers to preserve at all costs the Wall street and the ability to make money with money and to cut adrift. I mean, like the Titanic, the depriving people of lifeboats, working class in Main Street America. And that's what we're living with now. And nothing has changed.
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Yeah. I'm also struck in recent weeks the arrest of the executive from the Chinese technology company in Canada. This effort, we're going to punish them. We're not going to buy their stuff. They're investing in high tech stuff. They are building up their universities for the last 40 years. Ours are declining. We give less money to higher education. They give mountains of money. We're not going to stop them by not letting them sell their stuff, whether it's to Iran or anybody else. That's a primitive way. It isn't going to change the catching up and surpassing us. It's a head in the sand kind of behavior. If you don't shift gears, even in their own sense of themselves, they're shooting themselves in the foot. It's remarkable. Okay, I want to shift gears You're a reporter based here in New York City, and we've had an example of public private partnership that's a ripoff. And I want your take on it. Tell us your version of this story, which we've reported on this program. The search by Amazon for two new headquarters or one new headquarters building that became two buildings, one one in Virginia, one in New York, one in a suburb of D.C. one in a suburb of New York with billions of dollars of subsidy and tax forgiveness built in. What is that all about and what do you draw as a lesson?
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Well, this is really a profound test of what the term progressive means, because in the form of Andrew Cuomo, a man who has presidential ambitions, and Bill de Blasio, who certainly is upwardly mobile political ambitions will. What we see is they've embraced this. This was a national competition. Some $3 billion is what we're talking about in grant aid and programs to go to Amazon. And at the same time, inside New York City, one of the big challenges if you walk around the West Village or other places, is the death of the serendipity of local shops, right? The thing that has been bringing people to cities since the beginning of civilization, that's waning. So now in New York, we have this kind of sad repeat pattern of cvs, a bank cvs, a bank cvs. And then they can storefront. This is part of the downside of Amazon having this huge amount of leverage. The other piece of this is that people like de Blasio and Cuomo keep bemoaning the concentration of wealth and income disparity. Meanwhile, they're handing $3 billion of public subsidy to a trillion dollar company. What's bad about this is that it takes the resources gathered by small entrepreneurs, partners and individual taxpayers and takes that and gives it and transfers it to their competitor. It is crony capitalism at its worst. And I might say there's been a positive response against it in the sense that there's someone Min Kim and the new crop of state senators getting elected under the socialist banner are pushing for a new approach which would say take that money and forgive student debt. Instead, that would be real economic defense, right?
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Or do something about the filthiest subway on the planet, you know, which moves a million people every day in its inadequate way. It's extraordinary, this shift. And again, this inability to see that a community's life, for example, built around small shops and the personal interaction is being transformed by a big corporation that's doing it for profit, which is with the result that we're all going to be living in our little isolated houses waiting for the delivery truck with a person we'll never see again. Bob, as always, your insights are wonderful. Then the program is too short to handle them. This conversation, this interview will continue as we continue many of these interviews on Economic Update Extra. The way you go to that is to go to our Patreon community, patreon.com economicupdate, which is where you can follow the continuation of this interview. It is our way of thanking the Patreon community for their support, and it is our hope that you will have found this contribution and this conversation valuable and that you might consider pursuing it through Patreon. In any case, I'm happy to have brought this interview to you, and I look forward to speaking with you again next week.