Transcript
Dr. Harriet Fraad (0:00)
Sam.
Richard Wolff (0:29)
Saint gonna change. Welcome friends, to edition of Economic Update, a weekly hour long program devoted to the economic dimensions of our lives, our jobs, our debts, our hopes for the incomes we need to sustain our families and ourselves. 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 jumping into this July Economic Update, I wanted to invite you to take a look at a new project that we have. We call it Econominute. These are very short videos, three to five minutes in length, devoted to a condensed analysis of a topic in the news. They're posted up on YouTube, you can find them on our channel. You can go to our website, Democracy at work, all one word democracyatwork.info info and you can find it there. The latest Econominute just posted is about Brexit, this remarkable event in which the people of Great Britain thumb their nose at their government in order to change their lives. In this case by thinking that getting out of the European Union will solve that problem for them. And it is explained in the Econominute why their understandable anger has focused on a target that can't do for them what they had hoped for. Anyway, these Econom minutes are going to be produced regularly and I think you may find them of interest. Well, let's begin with what's Good news. On the 1st of July just passed a number of minimum wage changes. Laws went into effect in 14 US cities, states and counties. New higher minimum wages were put into effect. And I wanted to congratulate the places that did it by listing them quickly for you. Two states raised their minimum wage, Maryland and Oregon. Then there were the following. Washington, D.C. the county, Los Angeles County, California, and even more cities that include Chicago, eight cities in California and two in Kentucky. Now, what's interesting is that for many of these, the new minimum wage will be in the range of $10.50, 12, even $15 an hour, some quite away, others folded in over the next two or three years. In contrast, compare that with the federal minimum wage, the one coming out of Washington. That is for $7.25, folks. That works out to $290 a week if you work a full 40 hours. And, and that's before the money they take out for your income tax and your Social Security and so on. It's $14,500 a year if you work 50 out of the 52 weeks of the year at 40 hours. In other words, it's a minimum wage that lands anybody who gets it right in the middle of serious poverty. That's what the states and cities with the courage to go forward, or to be more accurate, not so much the courage as the pressure from below the workers who are earning below those amounts of money, even if it's above the federal minimum wage of 725 who have been agitating now for several years to do something about this. But I don't want to take away from the leadership of those states and cities that have responded to this pressure and raised the minimum wage. By the way, the federal minimum wage of $7.25 an hour, which is, to be blunt, a scandal and a shame, hasn't been changed since 2009. Every year since 2009, the cost of living has gone up every single year. But the federal government, run these days by conservatives in the Republican Party, together with the conservatives in the Democratic Party, has fit to respond to the rising cost of living by not increasing the federal minimum wage, not even by a small amount that would just allow those at the bottom of the economic scale to keep up with rising prices. It's a scandal. It's a shame. And to not have raised it over the last seven years is a worse scandal and a bigger scandal. Shame. And it's a sign that the movement for rising wages having been stonewalled by the federal government, and that, I'm afraid, includes our president too, since he hasn't done very much to overcome the roadblock of the conservatives. But however you want to apportion the blame, one thing is that the movement for higher minimum wages has refocused itself on cities and state governments because it can't get anywhere with a federal government that isn't interested. Let me turn next to this issue of prisons. A number of you have asked me to talk a little bit about the economics of prisons. Well, let me be again, short and sweet. I hope about it, according to the folks who keep track of it, costs roughly $31,000 a year per prisoner to house the number of people that we keep in jail in this country, which, as I'm sure most of you know, is a larger number as a percentage of our total population than any other country on this planet. So we imprison more people, which means we spend a fortune of money, 31,000 on average. And by the way, states vary. Some spend a good bit less, other states spend a good bit more. The $31,000 per person per year in prison average gets us. What result? Well, there's a word called recidivism. It's a word that basically says what proportion of the people you put in jail when you let them out after they serve their sentence? What proportion of them are back in jail for committing yet another crime within the year, two, three years after you let them out? In our country, the recidivism rate is between 2/3 and 3/4. That's right, 2/3 and 3/4 of the prisoners that we put in jail. Our jails are so ineffective in dealing with the problems that bring those people there that they're back in there for another stint in a short time. Finally, the horrible treatment of people in jail by one another, by the guards, by the whole establishment is so much a fixture of our culture that late night television comedians make a regular habit of joking about what happens to you in jail. And the jokes are not funny when you realize what they are referring to. You might think a program this expensive and this unsuccessful and this terrible for the people involved would have long ago become subject to the withering criticism and the demands for change that. That it obviously deserves. But if you thought that, you're incorrect. It hasn't. The people who are involved in it. Hold on. The bureaucrats who run it. Hold on. The government that enforces it, holds on. Let me suggest something. And here I'm borrowing from a famous law in Italy called the Marcora Law. This law is about unemployment. I'm going to explain it in a moment. But it could apply to prisoners as well as to convicts as well, to incarcerated people as well. The Marcora law says to a person, if you become unemployed, you have a choice. Yes, you can get a check every week for a couple of years. We help you out. Or if you get at least nine other unemployed people like yourself together, we'll give you the whole two years worth of weekly unemployment checks as a lump sum. Right now, you and all the nine or more other unemployed. So together you're going to have a nice bundle of money. We will do that. If you use the money to set up a cooperative workplace and commit yourself to make it succeed, to have a job that way, because you're giving a job to yourself, it won't cost the government any more than it would have paid you per week. But it can make a much better result than having you on the dole for two years with all that does to your self esteem and all that does to your skills, et cetera, et cetera. It's worked beautifully in Italy since 1985. Well, let's now apply it to the jails of our society. The biggest Single problem for incarcerated people is what happens to them, or rather what doesn't happen to them after they are released. With a record, a criminal record of having been in the jails, it becomes hard, well, impossible for many to get a job. You have to work in a poor job with poor pay. In other words, you have two strikes against you because you're in the prison system and then you find out you have another strike when you get out. Moreover, the jails don't work that we spend less money on jailing people and more money on providing them with the training and the capital to become their own bosses when they come out. Set up cooperative enterprises where they will hire themselves themselves, thereby avoiding the whole problem of finding an employer who's willing to hire formerly incarcerated people. Making them able to run and be in charge of their own businesses will show the rest of American society what this model can do. And my guess is many fewer of these people will find their way back into jail because we've come up with a better way of helping them re enter and function in society than the one that in place now. Let me continue. I want to drive home in yet another way the fact that the so called economic recovery we were supposed to have over the last five years is a myth. It is something that applies only to the top 3 or 4% of the people who designed the recovery to take care of themselves. Just like they designed the money making deals that got us into the collapse in 2008 in the first place. Very quickly, three big signs. This last week, the Italian banking system told the world that it was in the worst imaginable shape. Things haven't gotten better since the downturn in 2008. In Italy, just like other poorer parts of Europe, Greece, Portugal, Ireland, Spain, it now turns out that Italy is in trouble. It turns out that nearly 20% of the outstanding borrowers from Italian banks can't make enough money to pay back their loans, putting the banks themselves into desperate circumstances. And the Italian banks are demanding money from Europe to do another bailout, which the Italian people will not tolerate politically, or to take the money of the depositor and give it instead to the bank to bail the bank out. They tried that back in December in Italy. It caused an uproar. My point is we are seeing sign after sign that the so called recovery isn't there and has been hidden by gimmicks and is now coming to the surface. Another example, in a few weeks the Olympics will start in Rio de Janeiro, Brazil. I learned over the last week and a half that, that the Brazilian government has to devote. Get ready for this number 85,000 police and army personnel who are already engaged in running gunfights with the gangs that dominate society in a number of Brazilian cities, including Rio de Janeiro. This is a sign that an economy is in serious trouble when so many people can't get work, when so many people have to work in the illegal economy, that it has to have pitched battles with the army, that a global activity like the Olympics has to be guarded by 85,000 police and troops. What a sign of a global capitalism that cannot function very well for most people anymore. And a little detail that caught my attention so bad is the situation in Rio de Janeiro that the government there said it can't pay for finishing the construction and taking care of paying all these cops and soldiers. So the United States has made an emergency loan of $850 million, according to the website that I have used for this, which is called insightcrime.org if you want to pursue it. The third sign that the economic recovery is a myth and not a reality has to do with the affordability of automobiles. Here in the United States, a website called Bankrate.com did a recent study of the affordability of buying a car. And as an item that will not surprise many of you, it is turning out that the price of cars keeps going up, partly because of all the additional doodads that are put in each car. But the ability of the American family to buy the car hasn't gone up anywhere near as much. In short, it is becoming difficult for the average American family to buy a car. How is the family reacting to that? And by the way, there's the sign that a recovery hasn't happened. Because this is a new scary problem for Americans, most of whom live in places where there either is no public transportation or very inadequate public transportation, leaving them with no choice but to have a private car. Nor is that an accident. But in any case, what are Americans doing? Well, here it's interesting to see they're borrowing more money and they're stretching out their car loans. Car loans used to be three and four years. Now they are five to seven years in length. Well, when you lengthen the loan period, when you pay back over a longer period of time, the interest charges are much larger because you have a loan for a longer period of time, and interest accrues for you per period of time. So actually, what people are doing by stretching out their loans is to end up paying more for the car than they did when the loan lasted a shorter Time. The end result is that even though Americans can't afford a car, the strategy they've turned to to be able to manage the situation in the long run means they'll be paying even more for their car than they already do. This is a dead end situation that can't last. This is an unsustainable arrangement. And what's likely to show up in the years ahead are people who two years, three years, four years, five years into their car loan are going to discover two things that are very interesting. One, they're going to reach a point where the amount of money they own on their car is more than the car is worth at that time. They're going to be what in the real estate business is called underwater owing more than the thing you're paying off in is worth. And the second thing that's going to happen is an increasing number of people having economic difficulties, two years, four years, six years down the road are going to be unable to repay the car loan. And we're then going to hear discussions about subprime car loan crisis, just like we heard back in 2007 and eight about the subprime mortgage crisis. It's the same problem. It's an economic system that can't deliver jobs, incomes to the mass of people to do what they are required to do to live in this society. And that's when an economic system has lost its claim on anybody's loyalty, except for the few at the top who continue to make an awful lot of money and buy very expensive houses and apartments and etc. Etc. We are witnessing, and partly this program documents it to you, the disintegration, the dysfunction of an economic system that cannot provide the goods and the services to the mass of people that it once did and that those people have come to expect and that it does continue to provide. But to a shrinking group of people at the top, that's not a politically, morally or economically sustainable arrangement. And much of what I tell you week after week is documentation of the many ways that that's happening. Next, we have a little time for this. The United States Senate passed a genetically modified organism bill this last week. What do I mean? Well, the federal government, after years of people trying to, finally is beginning to pass a bill whose basic purpose is to require that the food we eat, all of those objects that we put into our bodies to survive, if they use genetically modified organisms, a part of nature that human beings have changed around, that they have to tell you that it's a labeling law, it's a law that says when you buy something, you have the right to be told whether genetically modified organisms are part of what you are going to be eating. Is the government doing this because it sees the obvious appropriateness of this? An informed consumer is something we have the right to demand. We now demand that the producers of food tell us what's in there. The calories, the salt, and the other things we need and have every right to be informed about. We're often given the information where this food comes from, etc. And now we're struggling to be told whether there's GMO, since there's an enormous controversy around the world and many parts of the world which forbid all of that because it may be unsafe. Okay. The industry, the food industry has been fighting in the state houses of our states and in the federal government to not have to do that. Why? Because it costs them money. Because people may decide they don't want to buy food that is gmo. And that means the food producers, from the farmers to the packagers to the processors, will have to have, for example, two kinds of food. The kind of food that does have GMO in it, or the kinds of food that doesn't. Maybe side by side on the shelf, so you have freedom of choice. Or maybe GMOs will become outlawed and they'll have to redo their production. They don't want to spend the money, they don't want to lose the profits. They don't want to take the risks. So to keep their profits and to minimize their risks, they are risking our lives. And it's important to understand that we live in an economic system in which this happens every day. They don't want to have to do it. Well, then why did they do it in the Senate? The answer is obvious in a number of states and here, Hats off to the state of Vermont. The state of Vermont passed a law saying you must do it. And if you do not label your food about, you cannot sell it to the people of Vermont. And the terrible fear in the food companies was, oh, my goodness, Vermont is going to be a model. They already know. There's a big movement in California and elsewhere to do exactly the same as Vermont has done, to demand that the consumer can know what he or she is buying and eating. So what this bill is, is an attempt to have the federal government do a namby pamby law so that the kind of law passed in Vermont is superseded by the federal law. The federal law takes precedent. The Vermont law doesn't apply, and they can forestall any of the Other states going in that direction to show you what I mean by namby pamby law. Real simple. There's no punishment if you violate it. This bill has no punishment. It's basically a voluntary arrangement since there's no penalty if you violate it. Beyond that, I could give you more details. It's a pathetic example of private private profits trumping public health. And that's a result of the economic system we have. We've come to the end of this program's first first half. Please stay with us. After a short interlude, we'll be back with a remarkable discussion between myself and Dr. Harriet Fraad, a practicing mental health counselor trying to analyze what happened in Orlando, Florida, when a deranged man killed 49 people in a nightclub. This is an issue that psychology and economics have much to say about. If you find that interesting, stay with us. We'll be right back.