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Sam. Saint gonna change. Welcome, friends, to 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 and those looming down the road, either to frighten us or to comfort us, depending on where we stand in this complicated and troubled economy. I'm your host, Richard Wolff. I've been a professor of economics all my adult life, and I currently teach at the New School University here in New York City. We have many things to go over today, so I'm going to jump right into them and wait a little bit for some of the announcements, and I do want to whet your appetite for an interview coming in the second half of the program. This last week or two were a couple of really interesting events, and I want to start with one that happened at the university where I taught most of my life and the University of Massachusetts in Amherst. A few weeks ago, students there staged a sit in and indeed a number of them were arrested back in April. They were demanding that the university's endowment, which by the way is quite modest, stop being invested in fossil fuel production here in the United States and around the world. Their view was that the university, using money that is either donated or paid into it by students and family in and around Massachusetts and beyond, shouldn't be used to pollute the earth and to destroy the earth for all of us, which is what fossil fuel companies spend a lot of their time and money doing. And they didn't want the university to be any part of it, and so they demanded that. And the university made the usual lame excuses for not doing it or it can't do it, even though the amount of money involved was very small, five or six million dollars, which in the scope of these sorts of things is very small. But interestingly, the students persevered. And now the university has in fact agreed with the students and agreed to divest itself. Indeed, I believe that process has already happened, or will very shortly. It will no longer have $5 million roughly invested in companies that are polluting the earth by exploiting fossil fuels. Why is this interesting beyond the initiative of the students, beyond the economic signal that it sends? Because, of course, this is something students in many other universities are thinking about and working on, as are people outside of the university. And I am interested in the economics of it and the broader economic implications. Let me explain. What the students were saying is that a university that invests money ought to have a much wider, broader perspective upon the question of how to invest money than simply getting the biggest bang for your Buck getting back the most money. That that's a narrow, inappropriate calculus. Because what is being done when you invest in fossil fuels is not only making money out of the production and distribution of the fuels, but having very serious repercussions on the air, the soil, the earth and the very survivability of the human race. And that that ough factor in in a way that people who focus on investment returns rarely do. Now this is an interesting principle because it applies all over the place. For example, why should someone pay workers a minimum wage in this country, currently federal minimum wage $7.25 an hour. It is obvious to anyone who isn't deaf or blind, or even if they are, that $7.25 an hour does not allow you to live a reasonable life, to have the health care you need, the education you need, the recreation you need to live a proper life. If a society doesn't want to condemn millions of its people to a substandard living, then they shouldn't pay what the market might allow. What might be the most profitable thing to pay a human being, but isn't the kind of society we want, isn't the kind of relationship among people we want to foster and which we will get if some are very rich and others are living on $7.25 an hour. In other words, what the students in their modest way at the University of Massachusetts did is question the logic of profit as a calculus and a standard by which to judge what we should be doing. They were questioning the market which would dictate that the University of Massachusetts only invest its endowment where the rate of return is the largest. They were saying no, those are not the proper standards. We do not want to be governed by the logic of profit and a market. We have wider, broader concerns that we share with other human beings and they ought to be part of investment wage all economic decisions. And that's a very powerful message which in their way, those noble, courageous students at the University of Massachusetts have put on this nation's agenda. I want to turn next to an age old economic problem, but that now has a modern twist. Here's the problem. Economic inequality. A situation in which some people have a great deal of wealth and an awful lot of other people have little or nothing. Which is the situation here in the United States and in much of the world. We've documented that countless times on this program. I'm not going to do that again. To get at are what the consequences are and the most important consequence I want to stress this morning or this afternoon, depending on when you hear this program is the inequality in the end comes back to haunt and undo the very rich who make it happen. In other words, they constantly believe the folks at the top that they're just going to have a wonderful ride being the rich ones and everybody else is just going to have to get by on what crumbs fall from the table. The mistake they always make is not to see that if masses of people are left to live on crumbs, there will be consequences of that situation and they will come back to hurt and haunt the rich. They constantly forget it. Let me give you the biggest example these days. We have been very loathe to raise wages in this country. The real wage, that is the money you get adjusted for the prices you pay, has not changed much in the United States in the last 40 years. Meanwhile, the rich have gotten much, much richer. So the gap has gotten much wider. But this is a problem for the rich too, because if you don't raise the wages of the mass of people for a long time, they don't have the wherewithal to buy back the goods that the rich people have invested their money in producing. There's a problem for a time in this country, we kind of papered over the problem by plunging the mass of people into huge levels of debt that they could spend borrowed money to keep going. The rich people who were producing the goods that otherwise they couldn't have sold. And then the rich people got so excited about the debts everybody was carrying that they began a big speculation in those debts. And that all blew up in 2008. And when that blew up, it savaged some of the wealthiest people's holdings of stocks and bonds that they had speculated with on the debts of the people whose wages they didn't allow to go up. You see the point? When you squeeze the mass of people, in the end it comes back to undo you as well. Why am I telling this story? Because we have a modern version of it. It's called the Zika virus, the mosquito. Why do I tell you this? Well, we've done two very remarkable things recently in the United States. The Affordable Care act excludes undocumented people in the United States from access to medical care the way it is allowed for American citizens. And those undocumented immigrants are among the poorer folk. America. And the idea behind this was to save money on the poorer folk, to discourage immigration of poor people, which always forgets that the major driver of immigration is the conditions in the countries from which people flee. But put that aside. We also, we also Have a situation in which we are loath to provide health care for people who are not only poor and immigrant and undocumented, but we conveniently forget why they're here and what they're doing. They're working here, most of them. They're working in restaurants, they're working in the fields, they're working in all kinds of areas where if they are carriers of disease, the disease will spread. And if you don't give them the health care that a decent human being wants for everybody else, just as they want it for themselves, then you are condemning them to an illness which they will pass on to everyone else. It is not smart, it is not humane, and it is not safe to treat people in these unequal ways. In New York City just a few days ago, the first case of a baby born with microcephaly that is a head that's much smaller than normal and that will condemn this child to suffering, not to speak of the parents. We just had our first case here in New York City. So the story of the spread from the poor in Latin America where this virus started here is an age old story with a modern twist. Next item. This one has to do with something called the Consumer Products Safety Commission, A relatively new member of the government regulatory apparatus whose job it actually has many jobs, but one of whose job is to find if products produced by capitalist corporations might be dangerous for our safety, for our health, for our well being. And there is an interesting recent story that was in much of the media about how these days this commission is very Busy, they announce one recall per day. Wow. That would be 365 examples of unsafe products that we are bombarded with by companies who are trying to make a profit off of doing this. Well, I'm going to be very generous, much more than I think is justified. But I want to make a point. I'm going to be generous by assuming that when there are defective products, something goes wrong, something in a medicine is unsafe, something in a food is unsafe, something in an automobile is unsafe or dangerous. I'm going to assume that it was a mistake, an honest error of human beings otherwise trying to do their job. I'm going to assume that. But I want to stress that the recalls that are catching these things are not the solution to the problem. Why? Because we have enormous evidence, enormous evidence of many, many examples of companies who respond to a recall. And then when the newspapers get involved and government commissions start looking, it turns out that the company in question, even when it corresponds to when it accepts a recall in Many cases knew about the. The deficiency, the defect months or years ago, not that many weeks ago on this program. I went through that with the Takata airbags that are in the automobiles across America, with the ignition problems that General Motors had with the faulty. I'm again being polite here. Emissions control mechanisms that VW and other companies put in their cars. Just like with the cigarette companies, just like with today. Exxon in trouble because it knew all about global warming and the problems of fossil fuels decades ago. Just like the cigarette companies had evidence of the link of smoking with lung cancer. That's not a problem of a human mistake. That's a problem of the profit system. It's profitable to companies when they know about a product defect that it would be expensive to admit that it would be expensive to correct. That's profit that drives their not telling that to the public. Being able to continue to produce and sell dangerous, defective products that they know to be such that they have had internal memorandum and emails proving it. It all comes to the surface. So please, when you hear that there are mistakes being made and perhaps you think to yourself, well, mistakes are part of the human experience, which indeed they. Mistakes are not the problem. Honest mistakes. That's what we have a product safety commission for, to catch honest mistakes. What we have to worry about is that we have an economic system. Capitalism. The profit motive that drives it, which we now have evidence, leads company after company from one industry to another to hide, to delay, to postpone acknowledging defects that they've known about in many cases, not just for months and years, but for decades. That's a system problem. That's a problem with how capitalism works. In the time that I have left, I want to talk a little bit about yet another economic difficulty that has to be faced. And here I'm going to rely with appreciation on the New York times story of June 2. It has to do with an old problem. There's a little bit of breathlessness in the New York Times story as if this was a hot new issue. This has been an issue for many, many years. What am I referring to? They're called payday loans. Payday loans. And for those of you who may not have needed these things, let me make sure you understand what they are. All across America, there are human beings who live paycheck to paycheck. Next to them are human beings who can't make it from one paycheck to another. As they used to say in the famous old country and western song, there's too much month at the end of the money okay, what do those folks do? Well, in the United States, they often go to a payday lender and this is an institution, a small, usually small lender stuck in a shopping mall somewhere or in a poorer part of the neighborhood, in a strip mall, whatever. And this company, this little outfit, will give you a loan that is guaranteed by your paycheck. In other words, they're giving you your paycheck in advance of your actually getting your paycheck, so that when you do get your paycheck a week or two or so later, you have to bring it to the lender and give it to them, because that's the payback to them. And of course, they charge you for the kindness of giving you your money a week or two before. Most payday loans come due in two weeks. So you getting it about halfway through the month to get you through the second half of the month till you get your paycheck. The fees then are payable and it averages out to in the neighborhood of $15 per hundred dollars that you borrow. Well, if you do the arithmetic of what this works out to as an annual rate of interest, it's just shy of 400%. And the truth of it is, many people are paying that. Why? Because when they get their paycheck, they have to spend it for some basics like food and so they really can't pay back. And that's alright with the payday lender, he simply rolls it over for another two weeks. So you've paid $15 for your $100 loan for the first two weeks, then another 15 in the second. You do the arithmetic. This is the most expensive way to borrow money on this planet right now. Well, is it important? Let me give you an idea. In the United States, according to that article in the New York Times on June 2, 19 million of our fellow citizens rely on payday loans. The amount of fees taken in by payday lenders. 7 billion with a B. $7 billion a year. Okay, there's no nice way to put this. This is going to people who are on the edge of economic crisis in their own lives and ripping them off big time. It's taking advantage of people who can't make it to the next payday by charging them an outlandish amount of interest to squeeze them in their moment of need, in their moment of difficulty. Well, you might be interested in how the three presidential candidates that still remain in the race have chosen to deal with this. Mr. Trump is in favor of getting rid of the Consumer Finance Protection Bureau. That's the bureau considering doing something about this horror right now. So Mr. Trump's response is not to deal with the horror, but to get rid of the commission that's trying to deal with the horror. On the other hand, there's Bernie Sanders. He has a very strong proposal that there be a 15% per year cap on all consumer loans. Well, that would basically put the payday lending business out of business. And in between the two, Hillary Clinton, who thinks that the consumer protection agency shouldn't be eliminated the way Mr. Trump says and that something should be done about this problem. Beyond that, not much from Mrs. Clinton that probably fairly describes the range of opinions in the United States on this subject. Meanwhile, here are some facts to keep in mind about all of this. One, this problem has existed for many years. So where has been the action all the time? Why is this a hot issue now if it even really is? Number two, if the Consumer Product Safety Commission is going to issue some new rulings to actually do something, it's kind of strange because a this commission can do that at any time. It does not need the president. That's the law. And it does not need congressional approval. The authority given to this commission allows it to do this, to change the rules of lending this way. And so the interesting question is why now? Why not last month, last year, years ago? What is the delay here? Is there a moral issue? Does someone really think this kind of thing should be allowed? Whoa. Number if it's just a commission, well then we're about to have an election. And whoever the new president is, whichever one of the three currently still running, they may or may not keep the commission. They may or may not change who's on the commission. In other words, whatever is done now is on shaky ground in terms of any long run effect since a whole new regime will come in with a whole new way of dealing with this problem. At least that's how it looks. So then how do the people who defend this sort of situation, I find their defenses even more interesting in some ways than the horror itself. Here they are. One defense. Gee, this will put people out of work. People who work in those little lending stores that you can go to often with bars, because people are desperate and the people who work there are scared about the rip off they're performing on the folks who come in for the payday loan. But it's right, you know it's correct. If you put the lenders out of business, there will be some jobs lost. I always find this kind of argument remarkable. Yes, there will be some jobs lost, but let's be careful now. Let's just be logical, just a little. The $7 billion that poor people are now forced to to pay over to these folks, they won't have to anymore if there's no payday loan, will they? They will have that money to use for something else and that will create that spending of the 7 billion other jobs, won't it? In other words, if you're really concerned about jobs, which clearly these folks are not, then you would have to weigh the jobs lost if there's no payday lender versus the jobs gained in all the other spending that people will be able to do for goods and services because they're not being ripped off. Excuse me, charged for the payday loans at 400%. Here's the second defense, and this one I find even more remarkable. Poor people, the association that speaks for the payday lenders tells us poor people have too few options and they shouldn't be taken deprived of another option. Oh, I see. Poor people who already suffer because they're poor, who already get ripped off because they are poor, shouldn't be denied another rip off because they're already with too few options. You really have to take your hat off to people who invent arguments like this. But we're not done. What I liked most was how the institution that represents payday lenders refers to its goal. And here it is, quote, we want to provide a wide choice of short term credit options. Oh, wonderful. Doesn't that sound charming? They want to provide a credit option. It's true enough, you know, let's grant them that. Poor people are desperate in our society. They're not paid properly. That's why there's a struggle for $15 an hour, even though that isn't enough either. But nonetheless, everybody knows, everybody knows that. The problem is that we have some people who have an immense amount of money, billionaires, et cetera, et cetera, and a vast number of people who don't have enough to get by, whose options are so weak, whose jobs are so poor, whose income is so low that they become bait for these kinds of bottom fishers, as they're known in the economic lingo of this industry. This is a systemic problem too. People shouldn't be in the position of needing such a thing. There shouldn't be the need that this rapacious industry fills at an enormous cost to the society as a whole and to the lives of millions and millions of the American people. Well, folks, I hope I haven't depressed you. I have felt that it's necessary to look hard into some of the realities around us. We did begin with the heroic action of the students at the University of Massachusetts Amherst and the very important economic questions they brought up. If these kinds of topics interest you, then let me, as strongly as I know how, urge you to make use of the websites that we maintain that are an integral part of this program. Those websites contain elaborations of the arguments we make here. They are also ways for you to communicate to us. If you like the program, if you want to see changes, if you have questions you'd like me to respond to, this is the way these websites provide you with an immediate way of communicating with us. We read and respond to every single one of them. 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If any of this interests you, make use of the websites. Let us know and let us work together. Please stay with us for a very short break now. When we come back, I will introduce you to my interviewee for today. And I think you will find her an attorney and someone with years of experience in the fight for our environment particularly, I think you'll find it very interesting. We will be right back to have that interview.