← Economic Update with Richard D. Wolff
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Sam. Saint gonna change. 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, those looming down the road. 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, New York City. Well, you can probably tell that something has caught me some bug, so I bear your request. I should say better your indulgence if I sound a little bit under the weather. I just came back from a trip to Los Angeles, which was really rousing in every way. I want to take my hat off to the folks in Los Angeles. On 20 April, there was a fundraising evening at the Emanuel Presbyterian Church in Los Angeles. 700 people came and was extremely good vibrations in that room, talking about the things we talk about on this program, but in a bit more detail and in a very personal way, because I'm right there looking at all the folks that are listening. It's a tremendous encouragement and literally inspiration. The next day, I met with members of the Los Angeles Democracy at Work Action Group, a group of people who want to take what we do on this program and begin to change the world. So starting in their own city, Los Angeles, in line with what we do, that is even more gratifying, if that's possible. And on the Evening of the 21st, we did another fundraiser, this time for the ACLU of Southern California at the Occidental College in Los Angeles. 300 people sold out auditorium in two days. Over a thousand people listening to a different way of understanding what's going on. It's an amazing experience for someone like me. I'm deeply grateful and I wanted to share that with all of you since in a sense, we're all part of a project. And when that project has some wonderful outcomes, it's good to share them. I also want to remind you before we jump into our updates for today, that next week will be the first monthly economic update for the month of May. And that means Dr. Harriet Fraad, whom I know many of you look forward to listening to and to viewing. She will be with me next week, this time, this place. So I look forward to speaking with you and with Dr. Fraad at that time. Okay, let's go over the events of the last week or so. There are, as is often the case, way too many that scream for our attention. But let's give a few. On 25 April, a federal judge in San Francisco ruled that Donald Trump's executive order threatening to pull funding from sanctuary jurisdictions is unconstitutional. The judge sided with two Northern California communities. And in an order granting a request for a preliminary injunction by San Francisco and Santa Clara County, U.S. district Judge William Oreck says the jurisdiction successfully proved that they are likely to face immediate irreparable harm absent court action. Judge Orich says the executive order likely violates the constitutional separation of powers. It violates as well the Fifth Amendment right to due process. And it violates also the 10th amendment prohibition on commandeering local jurisdictions to carry out federal law. It is very important to understand that one of the many motivations leading cities and states around the country to reject cooperation with the deportation orders and expulsion orders coming from the Trump administration. One of the many reasons there are moral and ethical and humanitarian ones that we all know, but one of the economic reasons is that serious harm will come to many, many communities if these deportations are carried out, and that harm spread throughout the entire communities is something that cannot and should not be done without due process. And all the other arguments that have been made. This is an economic issue as well, and this is a defeat for the Trump administration, at least at this stage. As more and more American industries are controlled by huge pools of capital of money, all kinds of old industries and companies die, new ones get born. And it is all a part of an elaborate chess game in which all kinds of money can be made by the dealers in money. Here are some of them that are in the news this week. Cerberus Capital Management. They have names like this. Here's another one, Jana Partners, an activist investor. And here's another one, Evercore, an advisor on strategic investing. Okay, what do all these have in common? Cerberus Capital Management is the money group that owns and controls the third largest supermarket chain in the United States. It's called Albertsons. It's number three after the number one and two who are Walmart. That's right, it's the largest supermarket chain. And Kroger, which is the second largest, Albertsons, or rather the Cerberus Capital Management company that owns and operates it, wants to expand in the supermarket business, thinks it can make all kinds of money doing that because that's what it's there to do, use its money to make more money. That's how you win in that game. It's all about the money. And this last week, what emerged was the determination of Cerberus Capital Management to buy, to take over the Whole Foods Corporation. Now, I suspect many of you know Whole Foods for all kinds of reasons. Some of you including the old joke that it should be called the whole paycheck because its prices were high over the last six quarters, its sales have been declining. It's a company in some trouble, and that is an opportunity for the financial sharks to get involved. And that's what's going on. They may destroy Whole Foods, they may swallow it, so it becomes part of Albertsons. What's interesting to understand is that what happens in your supermarket or in the range of supermarkets you can choose among is being decided by a tiny number of financial executives who are figuring out how to make money and will do that in such a way that suits them, and we will be left with the results, whatever they turn out to be. So that's an example of how things work in a capitalist economy, run as it is more and more by big pools of capital. I'm going to turn next to another phenomena of a capitalist economy, where what I can show and what I want to underscore is what isn't being done while a capitalist economy doesn't take care of. So here's a statistic for you to think about. Between 2000 and 2017, the number of employees in US department stores dropped from 1.8 million to 1.2 million. That's a loss of a third of all the jobs in department stores. When you put that together with a statistic we talked about last week, namely the wave of bankruptcies afflicting malls across the United States, some of which are anchored by department stores, you can begin to see that we have been watching now for almost 17 years the steady collapse of an entire industry that gave income jobs to millions of our fellow citizens. Between the shock of the 2008 crisis, which hurt the purchasing power of most Americans, as it still does, and the technological shift from buying in a department store to buying online, which of course is itself a product of the inability to afford what is sold in a department store at department store prices. Department stores had to provide some personnel. They had to provide some service online. No such requirement. So you get less service, but you pay less for the object. It was clear that people went to department stores in part for this service. So they've just been denied that as they are forced to economize. But that's not my point. My point is if you're watching an industry lose a third of its employees over 17 years, with every sign that this will continue for a good longer period of time, destroying yet more hundreds of thousands of jobs, I ask a simple why is there no concerted effort, no community effort, no Government effort, no private effort to deal with this problem, to locate other jobs where the skill set might be similar to what a person in a department store tends to know and do. Help with getting new jobs, help with training for jobs that are out there and are not disappearing. This is a system that uses you up and spits you out. It takes over Whole Foods to make a killing on the capital games that they play, and it ignores a genuine social crisis involving millions of workers and their families. This is a system that isn't working real well. But then you know that a big story this last week were the French elections, or rather the first round of the French elections. They had 11 parties running in the French presidential election. It seems the French, and this is similar to other countries in Europe, they really like freedom of choice. You know, they want a wide choice among candidates for high offices. The idea of reducing it down to two strikes them as insufficient, undemocratic, closed, undesirable. So the way they compromise things is they run two rounds. If any candidate gets more than 50% in the first round, he or she wins. If no candidate gets 50 or more percent of the vote in the first round, then the two highest vote getters go to a second round, which will happen early in May. The two winners, as you probably know, were Emmanuel Macron and the famous Ms. Le Pen, Marina Le Pen. And much has been said about it. The pundits, those who were scared by the Brexit vote, by the Trump election, by all the signs of that sort of thing, by what has come to be called the populist revolt, and we'll come back to that a little later in the program. They all breathe the collective sigh of relief that Mr. Macron got the highest number of votes and that he will run against Marine Le Pen and is expected to win. Well, let's take a look at this. First, let me clarify a little bit about Emmanuel Macron. Something left out of the media attention because he has to be positioned now as the good guy, the centrist, all of that. Mr. Macron has never held elected political office in that way. He's an outsider, rather like Donald Trump. He was a minister in the last government, the government that is being replaced by this election. That means he was a minister in the Socialist government. Let me say this again. Mr. Macron was minister of the Economy in the Socialist government of Francois Hollande When Mr. Hollande's Socialist Party committed political suicide by winning elections on the basis of no more austerity for France, and then, once elected, administered austerity to France. By so literally thumbing your nose at the French electorate, Mr. Francois Hollande's popularity dropped like a stone into the single digits. At that point, Mr. Macron's political antenna said, better get out from under the collapse of the Socialist President Hollande. So he quit the government of the Socialists and struck out on his own as an independent political force. He was also a banker in his previous life. This is a man who was a banker and a socialist politician who says he's going to save France from the populists, those on the right, those on the left. He is in a way a kind of Hillary Clinton character on the left end of the center of French politics. Yes, but more center than left. The only other center character in the French election, Mr. Fillon, he came in third. He would have been the classic George Bush type of leader. He had the bad taste to get caught in a scandal months earlier in which it turned out that he had given no show jobs to both his wife and his children to the happy tune of a million euros, which is over a million dollars. This did not endear him to many French voters, although it's important to note that 20% of the French electorate who suffer under austerity didn't find the fact that the leader preaching the necessity of austerity, and that's what Mr. Fillon did, who was busily handing out government money to his relatives that did not bother them even enough to shift their vote. Well, let's continue. Let's look at the populists, as they're now called. First on the right, Marina Le pen. She got 21% roughly of the vote, just enough to qualify her as the number two. And so she's in the runoff. Her program is very Trump, like lots of rhetorical flagellation against immigrants, lots of flag waving invocations of French civilization, French character, and so on. Little thin on the analysis against staying in the European Union because it's a mongrelization of the French. You know the rest of this. And finally the left, which, as you might suspect, I find the most interesting. First, the collapse of the Socialist Party, its literal suicide, meant that when Mr. Hollande decided not to run again and basically gave up his position as leader, a struggle happened in what was left of the Socialist Party and they elected a leftist, a Bernie Sanders variation, Mr. Hamon, he got about 7% of the vote. But to everyone's surprise, although they shouldn't have been the most left wing of the major candidates, and there were five major candidates, the most left wing of them, Jean Luc Melanchon exploded in the final months of the campaign and ended up with over 19% of the vote, a very few percentage points less than Le Pen. If you put the left wing socialist Hamon together with the more left wing Melanchon, had those two been able to get together and agree on one of them as the candidate, they would have come in first and the runoff would be very different from what it is today. This election was a resounding, crunching defeat for the establishment of French politics. Just like Mr. Trump's bashing of the Republican Party in the primaries and then defeating Hillary Clinton in the general election was a pretty severe blow to the self satisfied establishment of US politics. Half of the French electorate, half voted either for a former socialist economy minister or a left wing socialist Socialist party leader or an even more leftist Melanchon. And that means France remains split roughly 50, 50 but between conservatives and right wingers on one end and a solid left on the other. The difference is those distinctions now matter. In the voting, everybody doesn't gather around slightly to the left of center versus slightly to the right of center. No endless choices between a Republican and a Democrat who don't look that different, between a Gaullist and a Socialist who don't look that different, between a conservative and a laborer who don't look that different. Now they're looking more and more different. The center isn't holding capitalism's decline, its evolution into more and more inequality. This is a feature of our time and it is reflected in the politics as well. In the last short update for this segment of the program, I wanted to bring to your attention a winner of this year's Queen's Award in England. It struck me as I read about this that the Queen awards enterprises in Britain who are doing a wonderful job. Good for themselves, good for the British economy, just outstanding enterprises. And why would I bring this to your attention? Because one of the winners, this year's Queen's award is the Summa vegetarian products producer and distributor. And why would I bring that to your attention? Because Summa is a very well known British workers cooperative. The Summa company, which employs about 150 people, is entirely owned and operated by its employees who do all the work and make all the decisions. Interestingly, they have decided that everybody is to be paid exactly the same. This is not a decision that all co ops make, probably most don't. But it is a decision this worker co op made and they've been around for many decades and they've been growing more successful over time. Here's what they pay everybody £16 an hour, which works out at the current exchange rate to $20.50. It's an hourly rate, so if you want to earn more, you do more hours of work, but the pay per hour is the same. The story is in the Financial times on Friday, 21st of April if you're interested. Let me hammer home. England has 6700 worker co ops. That's considerably more than the United States. These worker co ops employ 222,000 workers. It's not so surprising that an economy with a worker co op sector like this could then become a model both for Jeremy Corbyn's Labor Party and for the rest of the world in how and why to build a worker co op sector within a capitalist economy is a viable and politically powerful strategy. We, we've come to the end of the first half of this program. Please stay with me. We will be right back with a number of I think very interesting comments on economics in the news over the last week. Stay with us. We'll be right back.
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Well I heard you were trouble and you heard I was trouble but your name is a wave washing over me no game's just a slave to you totally. Cause I don't care what they say about you Virgo and you don't care what they say about me Virgo but you know what they say about trouble? Calm me down if you want to and I hope that you want to Cause I don't wanna be your man and I wanna say it loud you can show me where trouble goes. Tell me secrets.
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Welcome back friends, to the second half of Economic Update. For this, the final days of April and the beginning of May. In this section of the program, I want to take a little more time to go into some topics that have become news in the last week, but that need a more in depth treatment. In a famous speech overseas, the chairman of the Chinese equivalent of Google, a man named Jack Ma, whose company is called Alibaba, said that he foresees three decades of pain from technology. In other words, he forecasts that what he and his company are doing developing new kinds of information processing for applications in all kinds of work, that there will be millions and millions of displaced workers denied work, what he refers to as three decades of pain. And to hear him say it, it's as if this was all out of our hands. It was a technical matter. It was just all about the technology, you see, Nobody can stop it. It's just a juggernaut carrying all before us. But, but we can stop, as Mr. Ma did, with a bit of a frown on his face, to acknowledge the pain that technological advance of this sort produces. Well, I want to make a comment on that and go to another aspect of the same issue. This issue keeps arising and it bespeaks a fundamental mistake, analytical mistake. It's not the technology that is our enemy. It's how the technology is used. If you have a technical change that saves half the work people need to perform to get some output, then give everybody half the time in their work week off. You don't need that anymore. Because with the new technology, everybody working half time gets the same output. If the output you deliver to the rest of the community is what's important about your work, then here is a way for technology to immediately benefit working people by reducing the amount of work they have to do without reducing their income. If you did that with technology, working people wouldn't have the pain Mr. Ma refers to. They wouldn't have the dread about their jobs. They wouldn't have the anxiety, the illnesses, the upsets. If technology were handled in a socially responsible way, the needs of the people for a comfortable, decent job and life would be the bottom line of how you use technology. But that's not how capitalism works. In capitalism, technology is a tool, and it always has been, to enable capitalists to get more profit out of their business. That's what they're interested in technology for. That's why we've had three centuries at least, in which capitalists tell us that the new technologies are labor saving. The new technologies will make our lives fuller, richer. The new technology will save on the drudgery of work. And Here we are 300 years later and Americans are working longer hours at more drudgery filled jobs than ever. Capitalism's promise was false. Because capitalism does not pursue technology for its social benefits. It pursues it for its private profits. And there, technology has paid off. Oh boy, has it made the companies that could control it more profitable. But that's not necessary. That's not the only way to do it. And the problem again is not technology, but how a society is handles technology. On a closely related matter, statistics became available this last week from both the International Labor Organization in Europe and the World Bank. And this information had to do with the flow of new entrants into the labor market. New young people reaching adulthood, finishing their educations, if they get any, and entering a labor force. According to the ILO, it's going to be 40 million people looking for work, 40 additional million people looking for work every year to 2030 according to the World bank, something on the order of 600 million to 1 billion people entering the job market between now and 2030. Okay, well, why are we hearing this? Well, there are two reasons. One, because of technology and how capitalists make use of it, and because of how capitalists concentrate wealth in the hands of very few people who can or cannot choose to make it available as income and jobs for the mass of people. It's crystal clear that the economists at the ILO and at the World bank know, they literally say so that it doesn't look like the world is in any way adequate to meeting the challenge of these new entrants into the labor force. And this has some implications that I want to draw out with you. First, the UN had some ambitious Sustainable Development Goals over the last couple of years. And number eight among them has to do with providing everyone with a meaningful, decently paid job. The world is committed to that. But the ILO and the World bank are telling us that commitment will not be met and they want us to worry about it. And indeed we do. But I want to talk again about what this means in relationship to the economic system we labor under. One of the ways you test, you, measure, you, you evaluate an economic system. For example, capitalism is how it delivers when it comes to the jobs and incomes of the people who live in capitalist societies. Since capitalism today is a global economic system present literally everywhere in one or another form, evaluating capitalism means asking the question, is it generating the jobs for millions and millions of people? And the answer is no. That's a failure of capitalism. What else would it be a failure of? It's a failure of capitalism because it hasn't matched the supply of labor to the demand for, hasn't reduced the hours of work per day, making room for more workers. It hasn't educated and trained young people to be able to fill all kinds of jobs. The failures are everywhere, but they are failures of a system. And it reminds me of what we did in the first half when I pointed out we've been watching the collapse of department store employment in the United States for 20 years and done nothing to manage it as a social crisis. We're doing nothing other than issuing dire warnings about the crisis of unmet job needs for millions of people in the years ahead. And make no mistake, friends, this will affect everyone listening, everyone watching this program. Because when millions and millions of people are not provided with a job, they get upset, they get bitter, they become available for demagogues to scapegoat somebody and these desperate people without work will push down the wages. They'll work for less than you might. And that might be the way your job gets moved to where they are to take advantage of paying them less than you. And you can try to get angry at those people, but it's not their fault. The system works that way. And for the capitalists to have millions of people without work and having that pressed down the wages in general around the world, that's just another profit enhancing opportunity. At least that's how many of them see it, which is why they're in no rush to spend any of their their money figuring out any kind of adequate program to deal with the whole problem of a labor force without work. I could say more about the socially explosive implications of the mass unemployment that they're talking about here, but I won't. I don't think you need it. And history is teaching it to us every day. Anyway, as I promised in the first half, I want to come back to populism. This is a bizarre term. It's almost as if in a Freudian slip, the people who have been running the society kind of understand they are a small elite. They are the leaders subservient to the capitalist system, who allow us to choose amongst them in each election. And by calling everybody who's out of the club a populist, they're kind of saying it's the elite versus the people. And that's not so bad, is it? There is something popular about Marine Le Pen and Jean Luc Melanchon, who got roughly the same amount of votes in France. Although Marine le Pen gets 50 times the exposure in the American media than Mr. Melanchon ever did or ever will. But they are outsiders, they are disruptors, at least for the election. Whether they will be disruptors beyond that, who knows. As I will point out In a minute, Mr. Trump looks more and more like a disruptor from the outside. But that that's all a mere theater. The reality he's another loyal, trusted servant of the same capitalist system that others, like the very folks he displaced, were busy serving. So let's then turn to tax reform. This last week, Donald Trump announced he wants to cut the corporate income tax on from 35% to 15%. The point being to save American corporations some more of the tax dollars they've mostly avoided paying anyway. So let's take a look at what this means. Economists ear around the world and of all persuasions make a distinction between the corporate rate that a government imposes on corporations, the 35% in the United States and what's called the effective rate. The effective rate takes into account how each country differs in what exemptions it allows corporations to take, what deductions from taxable income it allows them to take, whether it allows them to hide their money in a foreign tax haven, all of that. And the oecd, which is one of the world's best agencies for keeping track of these things, has wonderful statistics which are accessible on Google at any time to show you what the effective tax rate on corporations in the United States is. And there are simply two statistics. One, the effective tax rate in the United States is way below 35%. So saying to the American public 35% is higher than it is in other countries is really irrelevant. Nobody cares about the technical rate. It's all about the effective rate. The effective rate is much, much lower. And if you compare the effective rate of taxation on corporations in the United States to other industrialized countries, we're at the very low end. We're well below the average for all OECD countries. So we are not taxing our corporations at a high level in comparison to anyone else. We are not taxing them at 35%. So all of that is just noise, which is a polite way of saying lies. But here's something else I thought I would bring to your attention. You can make a chart in the United States of the three major sources of federal revenue tax revenue going to the federal government. And the three major sources are, number one, individual income tax, what we all have to pay in April of each year, if not before the corporate income tax and the payroll tax over the last 50 years. Let me just drive this home, folks. The individual income tax has pretty much stayed the same as, as a share of what Washington gets from us. Meanwhile, the corporate income tax has gone down and down and down over 50 years. And here's the kicker. Compensating for the decline in the corporate tax payments is a soaring payroll tax take of the federal government. In other words, over the last 50 years, the burden of federal taxation on corporations has gone down, down, down. That's why it's at the low end of what other countries have. That's why the effective rate is Nowhere near the 35%. And what's worse is that the payroll tax, the thing that has made up for what the corporate tax doesn't bring in, is one of the most regressive taxes we have in the United States. Everybody pays the same rate on the first roughly $120,000 a year in income. If you earn more than that. In other words, if you're the rich, the additional income you earn over the 120,000 has no payroll tax attached to it. That's a free ride, a taxless gift to the rich. Wow. You'd think after 50 years of sticking it to the mass of people in a payroll tax, keeping the level of income tax on individuals constant and dropping the tax on corporations, the first thing a president would do, who was an outsider, who, who wasn't a corporate what tool, the first thing he would do is not to cut corporate taxes some more. That is just an attempt to curry the favor of the very same corporations that make all of these decisions in the end anyway. If you are interested in getting some of the deals clear in your mind, seeing literally how swarms of lobbyists from the largest corporations in the United States are busily working to shape the tax reform so it makes money for them, Oxfam, that wonderful institution in England that keeps track of all these things, earlier this month, earlier in April issued a report on tax reform in the United States. It's available online. Go take a look. It'll open your eyes to the very detailed process of what's going on here in the United States as we see a president basically shedding step by step, the so called outsider veneer, the outsider posture, the outsider pretense to become the dutiful servant of, thank you very much, of the interests that have been uppermost in his mind all his life. Anyway, it is remarkable. It's beginning to look as though you could say of Mr. Trump's administration, he gives the real goodies, the dollar and cents goodies to the corporations for the masses. He has theater, he has tweets, he has brash behavior of the sort that the old stodgy establishment would not have done. Theater for the masses, hard bucks for those in control. It's a sobering understanding of how the world is shaping Mr. Trump's adjusted Persona. Last thing for today, the director of Mr. Trump's budget, Mick Mulvaney, delivered himself this last week of some lines about ssdi, Social Security, disability insurance that were so out of line, so simply stone cold wrong, that they really force you to roll your eyes, but also to say something back. He said that the growth of people claiming injuries that they need compensation from Social Security for has been exploding. It hasn't been grew fantastically under Obama. It didn't. Isn't really what Social Security was about. It is, it was really interesting. It's an attempt of the Trump administration, obviously, to set the groundwork for gutting this part of Social Security. So let's just be clear. When Social Security was set up, it was set up not only to provide people who reached the age of 65, more or less, with a decent retirement after a lifetime of work, but it was also there to be a support to people who, through no fault of their own, suffered the kind of injury that would prevent them from working or suffered a death in their family that would make it impossible for them to be taken care of until they reach maturity. This was the idea of the people who founded it. It's what they believed in. It's what was established. 4 out of 10 people who apply to SSDI get turned down. They have a spectacular record of monitoring and carefully controlling who gets this. Portrayals of people gaming the system are pure efforts to destroy a valuable social service program. Don't be taken in. It's just more Trump revealing what's really there. We've come to the end of our time, folks. I appreciate that you stayed with me despite my flu symptoms. I want to thank all of you who partner with us. I want to remind you to make use of our websites, rdwolf.com and democracyatwork.info where all the ways of partnering with us are laid out for you. Follow us on Facebook, Twitter, Instagram, subscribe to our YouTube channel, all of those things. Email us with your thoughts. I saw in Los Angeles partnership that is as moving as I tried to explain at the beginning of today's show. I also want to thank truthout, a long term partner, an independent source of news and analysis that many, many Americans turn to all the time. Thanks for being here and I look forward to speaking with you again next week when my guest will be Dr. Harriet Fraud. Thank you, Sam.