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Sam. Saint. 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 and those looming down the road as we try to plan for and figure out our own economic futures. 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. Well, the early part of August 2016 is full of things for us to talk about, kind of more than we can possibly manage. So bear with me as I go through, perhaps a bit more quickly, some of the major items. But before I do, I wanted to invite all of you that might be in the New York City area on Wednesday, August 10th at 7:30 in the evening. That's when I will be doing my monthly economic lecture. We call it the Monthly Economic Update. It always takes place the second Wednesday of every month at the very historic Judson Memorial Church in downtown Washington Square, a very famous part of New York City. So if you're a person from the New York City area or if you're a visitor to New York City this summer and you're around on the 10th of August, 7:30 in the evening, come join us at the Judson Memorial Church, Washington Square, and it'll be a chance for me to meet you and vice versa and have a bit more time to explore these kinds of issues than we can manage here on the radio. Also, I wanted to respond to many of you asking about a recent book that I published. Yes, it's true, I did. It is a book of essays on the economic crisis of our times. It's called Capitalism's Crisis Deepens. It was released in May of this year. And of course, I would love you to take a look at it and see whether it amplifies and extends some of the things we discuss on this program. And finally, as I often do, let me invite you again to follow us on Facebook, Twitter, Instagram, to take a look at the extra work we do that we post up on our websites. The interviews I do, the talks that I and my associates now do. It's not just me at all anymore, I'm happy to say. All of that is available 247 without a charge on our websites rdwolf, with two Fs.com and democracyatwork.info once again, all one word, democracyatwork.info. well, I want to begin with another story. Yes, indeed, about Volkswagen, the major German automobile company, one of whose subsidiaries is the luxury car brand Audi. And Audi was in the headlines last week. Not this time. For what has been in the headlines for months now. Namely the deliberate producing in millions of automobiles, mostly diesel cars produced by vw, of a device that systematically under reports to the government how much pollution each of these diesel cars is dumping into our environment. VW got caught thanks to some American engineers who checked it, having produced a device that tells the regulators of pollution that the thing is really dumping little bit of pollution in the air. But when you actually take a VW diesel out on the road, it turns out to be dumping toxic amounts of pollution in the air, giving uncounted thousands of people lung problems, asthma problems, perhaps killing some people along the way. We don't have a way of tracking that sort of thing, but it was a disaster. And Volkswagen has been shelling out billions of dollars in partial payment as fines for having done this global deception to make more profits. Well, poor vw, if your heart is bleeding for them. They got into trouble now doing something else. What was it this time? Well, one of their executives, Audi chief executive Rupert Stadler, spent $13,980, well let's make it rounded out. $14,000 on a party for some top managers, 30 of them. And the party was called this is Germany after all, a beer contest. And so the Audi company wrote it off as an expense of doing business. This beer party for 30 people, which if you understand how taxes work, if Audi can call that an expense, it'll save them on their taxes paid in this case to the German government to pay for all the schools and hospitals and roads that the German government is responsible for. Well, I did the arithmetic. 30 top managers, $14,000 for a beer contest, that works out to $466 per manager. Folks, that's not a quantity of beer that you drink, that's a quantity of beer that you bathe in. So we have to wonder yet again about what a profit making automobile company is doing. Antisocial behavior by dumping pollution into the world. Antisocial behavior by phony expenses that reduce the taxes you pay for the services governments provide. Next, economic update. Three senior Irish bankers are going to jail. They are the first senior bankers anywhere in the world to go to jail for what they did in the collapse of global banking and capitalism. Capitalism. In 2008, Dennis Casey, former chief executive of Irish Life, is going to for two years and nine months. This follows a 74 day criminal trial, the longest criminal trial in Irish history. In addition, Willie McAteer, former finance director at the failed Anglo Irish bank and John Bowe or Bowie, the executive head of that bank, Bank's capital markets, they're going to jail for 42 months and 24 months respectively. In the conviction of these three senior bankers, the following three words were the summary that the judge and others used to describe what they had. Dishonest, deceitful and corrupt. So at least in Ireland, there's some punishment for the people who ran the big banks. But it also requires me as an economist to remind everybody, putting the chief bankers in jail leaves in place the system with the rewards it offers to bankers that will lead their replacements to. To face very many of the same temptations and the same sets of decisions that they did. Will they be little less likely to follow suit because their predecessors went to jail? Maybe, but it's a big maybe. We've seen elsewhere that wave after wave of executives in these banks end up behaving pretty much like one another. The way to solve this problem, therefore, whatever you think of putting top bankers in jail, is to change the system that puts them in a position and induces them to do what occasionally they get caught doing. Next item. Kind of like the story about bankers. Every now and then I like to give examples of what we call the revolving door and at the top of a capitalist system, the peculiar way in which the very top executives in the banks and the big corporations end up being the top political decision makers. And they kind of go back and forth, hence the term revolving door. For a few years they're wearing one hat, a political one, and then they go back to the business hat, and then maybe they go back to the political hat, and it gets a little confusing as to where they are. So in the wake of the Brexit vote, the vote in England for Britain to leave the European Union, there's been a whole spate of reports and stories in the press showing us that the British working people may have voted to get Britain out of the European Union, but the cozy revolving door at the top, both in England and in Europe, is alive and well and spinning as it always has. Let me give you a few examples. The president of the European Commission, one of the key bodies of the unified Europe, a man named Jose Manuel Barroso, is no longer the president of the European Commission. He has left that job and has signed up to be, yeah, you guessed it, a banker at Goldman Sachs Group. Another example, the former bank of England governor Mervyn King, who was reported a few years ago railing against, quote, incompetent and greedy bankers, has become a senior advisor to Citigroup Inc. One of the largest banks here in the United States. The recently departed Prime Minister of Britain, David Cameron used a little known mechanism of Queen Elizabeth's to provide honors to some of the people around him. And these include Isabel Spearman, a former aide to Cameron's wife who has no position in the British government and never did, as well as his media advisors and two of the former drivers of his car. Does kind of look like you're giving governmental favors to your friends as well as the revolving door, but I'm not done. Let's remember former British Prime Minister Tony Blair is currently an advisor to the JP Morgan Chase Company. His predecessor as Prime Minister of England, John Major, now works for the Credit Credit Suisse Group. And the person who came after Blair, the Labour Party leader, Gordon Brown, now works for the Pacific Investment Management Company, the largest bond trader and dealer in the world. And while we're talking about the Pacific Investment Management Company, otherwise known as Pimco, you might be excited to know that who works for them these days is former Federal Reserve Chair Ben Bernanke. So what the British are doing and what the European are doing is just following what the Americans are doing too. The current Secretary of the Treasury, Jacob Lew, used to work for the Citigroup before he returned to the government, while his predecessor, Robert Rubin, Secretary of the treasury under Bill Clinton, went the other way and now works again for Citigroup. If you get the feeling that the people at the top are busy taking care of themselves while you have an ever harder time economically, well then you figured it out. Next item, pensions. They're going to be getting a lot of attention in the years ahead. And so I need from time to time to explain them and catch you up on them. Cities and states and the federal government too have pensions for public employees. That's part of how public jobs work. You get a salary, of course, and you get some benefits. And among the benefits that public employees get are pensions. And when public employees sit down with their employer, the city of this, the police department over here, the fire department over there, the state employees over there, when they sit down each year or every three years to work out a contract to govern their employment, they debate or they negotiate not just over salaries, but over benefits like pensions. So it is very common for union members, workers to accept little or no wage increase because the employer gives them an improved pension benefit. So you don't get more now, but you get more in the future when you retire to take account of the fact that your work is harder or that you're better at it or all the usual things that happen in unemployment. But the thing that tempts politicians, of course, is to press unions to forego wage increases now, because if they give them, the workers, a benefit now, they have to raise taxes on people now to pay for it. Much better not to give the workers more now, to promise them more in the future when they retire, because that will leave to your successor, the politician who comes after you, the problem of raising the money then to make good on the promise you made now. So that's a clever politician who gives more in pensions than in wage increases because it makes him able to go to the public and say, I didn't raise your taxes. It's not honest, because what he did is raise the commitment to the future of these workers. Well, then, how does it work? Money is taken out of a public employee's check every week. A fireperson, a police officer, a teacher, a clerk, whatever money is taken out every week and set aside and invested. So it hopefully will grow to the point where when that worker retires at age 65, the money will be there to make good on the promise that he or she will get a pension for the rest of their lives. Okay, that means the money set aside has to grow in order to do it. Is there enough money? Have the governments of our cities and states set aside enough money so that it will grow at a good enough rate so that we will be able to pay the pensions that workers have accepted in place of wage increases over the years of their work for cities and states? And the answer is not at all. Here's the issue, if you can stay with me on this. Number one, the assumption of cities and states in this country is that the investments will grow, currently 7.6% a year. That's very generous. That's very ambitious. Things have not been growing at that rate in recent times. There's no guarantee that they will. But let's assume, just for simplicity, that it turns out that investments grow. Does that mean that there's enough there, if they grow at this very ambitious rate, to pay off the pensions? And the answer is not at all. Even if things grow at the 7.6% year in and year out average, the current rate of pension is 75%. That is, it's only enough money if it grows at this point ambitious rate to cover three quarters of the current obligations to public employees. Which means that if everything goes according to plan, as these people reach retirement age, the governments that they've been working for, the police departments, the school systems, the state agencies that they have worked a lifetime for are either going to say to them, we're very sorry. We made you a promise which we're not going to keep. For every dollar you thought you were going to get and where you accepted to forego wages in the past, we're going to give you 75 cents. Have a nice day. And if the politicians don't do that, they'll have to go to the public and say, in order for us to keep the promises we made to generations of public employees, you're going to have to up your taxes now, otherwise we can't be making good on it. That's called a pension crisis. The people who have noticed it, and they are many, have decided that the way to handle this is to blame politicians and workers, the ones to get the pensions, as if they've done something inappropriate by agreeing to pensions which are now unfunded or only funded to 75%, as if they pulled some sort of stunt. Not at all. The first and important reason why there isn't enough money in these pension funds is because politicians were unwilling to tax corporations and the rich to raise the money to put aside for the pensions so that there would be the sums there to honor the contracts and promises you made to the workers. If you weren't prepared to raise taxes on corporations and the rich to pay for it, you had no business making those promises to the workers who would then have had to get wage increases if they weren't going to get pension improvements. The fundamental problem here is that politicians in our capitalist system are in an absurd position. They're supposed to not raise taxes because that's what the business wants and that's what the rich people want, and that's what the average people want. At the same time, they're supposed to deliver services, schools, fire departments, and clean roads and public parks and all the rest of it. Well, that costs money. How are you going to do that? And you have to pay the workers who want to get a decent income for doing all that work. You got to work that out. But they found a clever way out. Corporations and the rich don't want to pay taxes and have 50 different ways of escaping them. That means that the politicians can't do it. They don't want to go to the mass of people who are already overtaxed. So they resort to borrowing, they build up debts, and they also resort to not funding the pensions for the workers to whom they've promised those pensions. That's what they've done to cope with this crazy system. And the end result is to confront masses of Americans with a real danger. Let me end this by giving you a list of some of the public employee funds that have not only noted funded fully their commitments, but haven't even come close. What I said before, about 75%. That's an average. Here's some examples of funds that are way below that that may strike you as remarkable. The Chicago Police Department has funded its pension at 27% of what is promised to police officers when they retire. When you hear politicians in Chicago talking about the importance of being behind our police forces, keep in mind that its words when it comes to deeds, those same politicians haven't put their money where their big mouths are. Let me give you another example. The whole state of Kentucky, the Kentucky Employee Retirement System, 22 the Philadelphia Municipal Retirement System, 44% funded. The Arizona Public Safety Personnel, 49% funded. And I could go on. Pensions are a volcano about to blow in this country. Let me come now to the last that we have time for today. A story caught my eye having to do with something that happened in New Haven. In the New Haven, Connecticut economy, a worker was fired for breaking a window. That's what I read. And then I saw that a huge hue and cry arose in the community, including the mayor of New Haven, a city of 125,000, one of the two major cities in the state of Connecticut. A hullabaloo arose, including the mayor demanding that this worker be reinstated. And he was. And the employer who reinstated him kind of halfway apologized and put him back to work. Well, this is not a story you encounter very often a worker who does something clearly inappropriate, breaking a window, getting fired. That's a bit of an overreaction of an employer. But in our system, an employer can fire people for things like that, whether or not it's a reasonable response to an infraction. But even more amazing is that there's a public outcry and the employer is forced to recant and rehire the worker. So I looked into it and I thought you might be interested because this story became very much richer and bigger as I looked into it. Who's the worker? 38 year old Corey Menefee, who works in a Yale dining hall. That's in a dining hall located in one of the Yale dormitories. Yale being what it is, doesn't like to call dormitories dormitories. So it wants to call them something else. It calls them colleges. And the particular dormitory dining hall in which Corey Menefee worked is called the Calhoun college dormitory or dining hall. And what did Mr. Menefee do? He broke a window that depicts slaves in the American south carrying cotton. Turns out Mr. Corey Menifee is himself an African American. And it turned out that he was angry at that picture because he referred to it as a racist, discriminatory image. He was offended, in other words. So he broke this relatively small window and got himself fired. Well, it struck an awful lot of students as outrageous. You know why? It turns out that students at Yale University, white, black and Hispanic, had been demonstrating in front of Calhoun College's dining hall for months, demanding that the name of the college of this dining hall dormitory be changed, and making the point that Calhoun College was named after John Calhoun, a famous early senator here in the United States, indeed a vice president, but whose fame is that? Not only was he the owner of many slaves in the south in the early part of the United States, but he was a fervent supporter of slavery, a man who disagreed with those in the south who sometimes said, it's a necessary evil. He didn't like hearing that, and he was famous for saying, it's not evil, it's good. Slavery is the best thing that could happen, especially to the black African population who was put in that situation. Turns out these students didn't think that was an appropriate name to be adorning their college, where many of them lived and ate and where they had come to school at Yale to learn. So they had been demonstrating to have the name changed. And of course, Mr. Menefee, as a worker in that college, an African American worker, was affected by these demonstrations, don't you know. So the mayor of Yalexcuse me, the mayor of New Haven, herself an African American, and others prevailed on Yale to hire him back, and they did. They won that. He got his job back and he's working there now. Last point. Did they change the name? Absolutely not. Peter Salovey, the president of Yale, refused to change the name, but the reasoning he gave is so stunning, I have to end this first half of the program with it. He said, look, we want to keep the name because it's important to confront the problem of slavery in America, and that's why we're keeping the name. You know, it takes your breath away. Maybe the next thing we can expect at Yale is that we'll have a school of journalism renamed Roger Ailes School of Journalism to celebrate needing to keep an eye on sex discrimination on the job, since Mr. Ailes is associated with that. Or maybe we will change the name of the gymnasium at Yale to the Hitler Gymnasium, lest we forget the Holocaust and all that it represents. You can remember slavery and Yale's relationship to it 27 different ways. How about a course? How about an instructional video, but keeping the name of a big supporter of slavery? You must be kidding. President of Yale. We've come to the end of the first half of this program. Please stay with me. I think we will have a fascinating second half. We will be back very shortly, and I look forward to speaking with you again in a matter of seconds.