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Welcome, friends, to another edition of Economic Update, a weekly program devoted to the economic dimensions of our lives. Incomes, jobs, debts, the future for our kids, all of that. I'm your host, Richard Wolff. I've been a professor of economics all my adult life, and so I hope I've learned something also about how to present it that can make sense of the economic events we depend on and live through week to week, year to year. I want to begin by a closing chapter, if you like, on something we've been discussing for a while on this program. This has to do with the initiative taken by the people of California, which reached a peak this last week when Governor Jerry Brown signed into law AB249. A new law goes into effect on January 1, 2018. It will require that all paid advertisements for political candidates, for parties, for ballot measures have to identify who the major donors were that made those paid advertisements possible. The whole logic of it is that the people who vote should know who's paying for the advertisements that flood our airwaves in the weeks before our elections. It's a basic piece of information. The other 49 states are behind California on this. And it is the hope of all of us who've watched this struggle over the years that it took to recognize that the rest of the country should follow and to recognize that this is only the first step. There should be many more constraints on and exposures of the enormous influence that money has in the politics of the United States and that too little has been known about it. So this is an important step. Several of the updates I'm going to be talking with you about today have to do with corporate misdeeds. Why am I talking about them? Well, there are three reasons. First, there's more of them than I remember seeing crammed into short periods of time. Number two, they're really big. They affect millions of people in dangerous ways. But the third reason is the one I'm most concerned about. We take for granted that the things we need and depend on are going to be managed in an honorable, safe and useful way by the entity we call the capitalist corporation. And in recent weeks and months, we have been given evidence after evidence that putting trust in those institutions is a mistake. They are not trustworthy, not all of them, of course, but enough of them to raise a fundamental question about whether we ought to organize the production of goods and services in the capitalist form. Small groups of people, major shareholders, boards of directors, making all the key decisions, being driven by profit maximization as the famous bottom line. Are they making decisions about Profits that also happen to be good for the rest of us? Or are they making decisions about profits even when they are bad for the rest of us? I'm now going to give you in the course of the next few minutes several examples that ought to make all of us stop and think about the economic system we live in. I'm going to begin with an obscure example, but an important one. This has to do with something called Monarch Airlines, a British airline company that abruptly announced a couple of weeks ago that it was bankrupt. Did the executives, did the board of directors know that they were in financial trouble? Of course. Did they make that clear to the public? Of course not. If they had done so, the hundred thousand people stranded when they simply stopped running their airplanes would of course gone elsewhere for their air travel. So they didn't do that. That was good for them to profit another few months and weeks. But of course it wasn't good for the stranded travelers. Hundreds of thousands of people inconvenience, stranded, separated from God knows what kind of family emergencies and business requirements for the convenience of the profits of an airline company. And that means its major shareholders and its top executives. 300,000 people were holders of tickets on Monarch Airlines in the months ahead, on top of the hundred thousand that were stranded. Where's the capitalist efficiency in this story? There isn't any. This is an example of the dangers that we face as a people. If we allow something like air travel to be operated by a private company seeking to make money, and if and when that company can't or won't take take the steps we need because they conflict with what's good for them, it's clear which way they go. Let me offer you another example. This one in the United States, one of the most important credit companies in the country, a company whose job it is to keep track of how credit worthy you and I are. Do we pay our debts, do we pay on time, what is the record of our payments and so forth. And that's very useful to the business community because it lets them know to whom they should issue a credit card, to whom they should not, how much credit to allow the person, how much not. You get the picture. The name of the company, Equifax. Very important to put names on this. It's one of the biggest three credit card companies in the world. Well, here's what they did. They found out earlier this year that they had a problem with their system of record keeping their computer files. There was a way for a hacker to get into them. They could have, and they should have patched that problem to avoid a hacker getting in. There were at least some weeks or months between the time they found out and the time they did anything about it. And in that interval, when it wasn't yet a profit driven decision to fix things, a hacker got in. What did the hacker or hackers get ready? 153. In that neighborhood, million of our accounts, our names, our Social Security numbers, our credit histories are now public knowledge. 153 million, ladies and gentlemen, that's half the population of the United States has been compromised. By what? By a private capitalist corporation whose board of directors, 15, 20 people didn't see fit to fix the problem immediately. Maybe it's expensive, maybe they were looking for a cheaper offer. I really don't care and neither should you. Private profit companies did something that compromised the credit, the privacy, the very identity of half the people in the United States. Leaving our business, leaving our affairs in the hands of private companies, Not a good idea. And that reminds me of another companyyahoo. Yahoo. They admitted that their records were hacked. When they first admitted it some time ago, they said 1 billion people's accounts had been hacked. In other words, Yahoo didn't spend the money. Hire the people to make sure this didn't happen. Would have cost them a bundle. So they didn't do it. And they announced over the last few weeks that there had been an error. It wasn't 1 billion, it was 3 billion. There's nothing I can say other than to remind you that leaving important issues in the hands of private profit driven capitalists is not the best idea for how to proceed. But I don't mind pushing the envelope a little with you. So let's continue and talk about more examples. The next one is Johnson and Johnson, one of the largest pharmaceutical and and medical device companies in the world. It produced something a while ago, or rather its subsidiary with the wonderful name Ethicon, playing on the word ethical, which is real close. Ethicon, a subsidiary produced something called a vaginal mesh implant. And it turns out that this device was a more modern, a newer version of older devices that were really working pretty well. But the advertisement was that here's a new product that works better than the old one, even though the evidence now suggests it doesn't. But it is very common for pharmaceutical companies to come up every few years with a better version because everyone goes out and buys that and they can price it accordingly and make more money. The problem here was that the newer version hurt people, hurt women, because it was made for women. And one of them went to court and there was a trial. And when there's a trial, there's a record. And I can bring you the results of the record. First, the plaintiff, the woman hurt by this profit driven maneuver won a $57 million award because the jury and the judge found that the damage was severe. And that. I'm quoting now from one of the news reports, the product was less effective, had a higher failure rate than earlier products. Wow. They could have, they should have known. You're supposed to test these things, you're supposed to be honest and test them widely before you introduce them, because this sort of story can happen. Johnson and Johnson is a very profitable big pharmaceutical company and it proved to be an untrustworthy producer of these devices. Let's go back to England for yet another example. The largest supplier of supermarket chicken in Britain is called the Two Sisters Food Group. And they were, unfortunately, the object of an effort by newspaper and media reporters to film what goes on inside the chicken processing plants operated by the Two Sisters Food Group. And there they made video recordings of 2:1 pieces of chicken falling off the assembly line onto the dirty floor, being lifted up by the workers and put right back on the assembly line. The second I found even more distressing, they have videos of workers changing what are called the kill dates. The, the dates upon which the chickens in question were. What's the polite way to say this? Killed. That's why it's called a kill date. They made the kill dates later so that they could sell to the public older chickens. And that's why, of course, kill dates are mandated by law. Okay, what does this story tell us? 2 Sisters Food Group is a capitalist corporation seeking to maximize profits. That's what all these corporations do. That's what they learned how to do at business school. The top executives, that's what they're paid to do. That's what they get bonuses for doing. So that's what they do. They maximize profits. It would hurt profits if the piece of chicken that fell on the floor was. Was thrown out. It would hurt profits if they couldn't sell parts of chickens or whole chickens because they were too old. Too much time had elapsed since they were killed, so they fixed it. It's good for profits, not good for your tummy. Last example I want to stress today has to do with a literal epidemic. This one is the epidemic of people overdosing on opioids. It's very famous. It's getting a lot of attention now, even from our president. 64,000 people last year died in America in one year of overdoses of these drugs. Most of these people get these drugs through prescriptions. In other words, there are drug companies that are producing these drugs and then through intermediaries, distributing them to pharmacies, to doctors, to clinics and so on in the normal way this business is done. But this isn't a normal problem. The drugs in question, OxyContin is a famous example. And the other variations on that drug, these drugs are the ones being used by people to overdose, wounding themselves, damaging their brains, killing themselves. The state of Washington has been so affected by this crisis as have many states, that the state of Washington went a little bit further and over the last couple of weeks initiated publicly a lawsuit against a number of of pharmaceutical companies, in particular Purdue Pharma, one of the largest ones, that produces and distributes. This is not the only lawsuit. I'm going to read you a list of other states that have also initiated lawsuits against pharmaceutical companies. Louisiana, West Virginia, New Mexico, Oklahoma, Mississippi, Ohio, Ohio, Missouri, New Hampshire and South Carolina, and I might add several cities and counties have also initiated lawsuits. And the lawsuits all have variations on the following assertion. One, that the pharmaceutical companies under reported under advertised the addictive nature of what was marketed as a painkiller. It's one thing to want to kill your pain. Understandable. It's another thing not to be told that the mechanism, the medicine you're using to kill the pain risks giving you a bigger problem than the pain was that you were trying to kill. Number two, it was asserted in various ones of these law cases that these companies were clearly aware when a particular doctor or a particular clinic or a particular drugstore suddenly went from ordering 5,000 pills per month to distribute to their customers to doing five times that or ten times that or some other explosive that should have been a red flag. It would be for any normal, reasonably honest human being. It's a sign somebody should be checking into, making sure that this is not becoming an illegal way of distributing these drugs. And the argument in these lawsuits is these companies therefore knew that they were selling these drugs in ways that would be damaging to people. Did they do what they could have and should have? No. That's why they're being sued by all these states and cities and counties. Well, why didn't they? Well, let's be honest. They were selling at a profit pills. That's what they do. And they didn't want to hurt their profits. Their profits were exploding as millions and millions of Americans in difficulty for the very reasons of the economic crisis. We talk about on this program, trying to cope with poor wages, with jobs that are insecure, with jobs that don't have the benefits they once have, trying to manage that, they become dependent on these drugs that are highly addictive. Well, it was profitable to sell the drugs. It may have killed a lot of people, but it was profit. There's no nice way of saying this when you weigh killing people on the one hand and the profits of your own company on the other. These companies made a choice. The city of Seattle is suing. And it's not just suing Purdue. It is suing Teva Pharmaceuticals, Johnson and Johnson again, Endo International and Allergan. It's important that you know the names because every one of those is is a large capitalist corporation making money off of something that isn't only not so good for the rest of us. It's deadly. And if there's a clash between profits and deadly, do we really want to leave the decision in the hands of those who earn their profits off of this? No. What other answer could we have? I'm still not done. And if it's taking all of our time today, the point is important enough. Over this last week, a Japanese steel company, one of the largest steel producers in the world, been around for many decades. It's called Kobe Steel, K O B E. They have now revealed and admitted that they falsified information about a number of the metals that they produce and sell. Now here comes the part that should scare you. To whom did Kobe Steel sell the steel and the copper and the other metals? To railroad companies, to airline companies, and to automobile companies, among others, Raising the question, which is a very hot topic in Japan right now, are we riding in cars and trains and airplanes whose metal isn't up to snuff? Because what the Kobe Steel Company has admitted to doing is falsifying the data about the strength and quality and components of of the metals they were selling. Wow. New York Times. Last week we made a report that Nissan Motors also falsified data about its cars and had to recall 1.2 million vehicles. These stories never stop, friends. And therefore, there's a larger message. Something is wrong. Putting our confidence and faith in capitalist enterprises driven by profits as their bottom is a really bad idea. And the time has come to face it. Before I complete today's first half of our program, I want to remind you we maintain two websites that I invite you to make use of, to partner with us, to use as a way of talking with other folks about what this program teaches and what this program hopefully means to you. The first is rdwolf with two Fs.com and the second one is democracyatwork.info. that's all one word, democracyatwork.info to my listeners. Let me also remind you that you can see a televised version of this program simply by going to patreon.com P A T R E O-N patreon.com economicupdate Let me urge you to make use of of our websites, of our program as a way to partner with us, to spread the word, to make more people aware of the very things we're trying to articulate and clarify on this program. So let me go back with a couple more examples to drive the point home. Edward Lampert, a former Goldman Sachs banker, became the owner a few years ago of what was left of the Sears Roebuck Company, a company which has been iconic in the American countryside for many, many decades. It has come upon hard times and Mr. Lampert, an ex banker, saw an opportunity. He bought it cheaply and quickly thereafter merged it with another giant retailer that has had trouble, Kmart, the former Kresge. If you go back far enough this last couple of weeks, he announced he's closing all the remaining Sears stores in Canada, making 12,000 people unemployed in Canada. The shares of stock went from a high of $170 a share to the current price, which is below $8 a share. It is a disaster. Mr. Lampert has made all kinds of money along the way because Sears was owner of land where it was located that had become valuable. It had other properties. It could be dismantled in a profitable way. Along the way, of course, tens of thousands of Sears employees lose their jobs. The 12,000 in Canada, just the latest installment. But there's worse. Many Sears Roebucks were the anchor of a downtown shopping center. They were the anchor of a mall located somewhere. They were the reason people went to the mall. And then they were customers of the little restaurant, the little card shop and the other things that were in the mall. If you lose the Sears, if the Sears goes down, it takes the other stores and it takes the whole community down with it. Should this decision to destroy this enterprise have been made by a few individuals with Mr. Lampert profitable for them, a disaster for others? This is not the way to organize matters. Leaving empty malls, leaving destroyed communities. This could have and should have been handled in a better way. Maybe not so profitable, but. But better for the mass of people that were injured. Again, it's the same story. My last example that I'll have time for. This has to do with the endowments of rich universities. This time of year they announce how well their endowment is. Let me be clear that you all know what an endowment is, fancy word for wealth. It's the stocks and bonds in real estate a university accumulates over years that it exists. Donations from alumni, fundraising efforts they have and so on. They accumulate wealth and that makes income which they use to run the university. Over the last year, here's how well these endowment funds did. They pay huge bucks to professionals to make money with the money they've accumulated. Dartmouth College leads the pack. This last year their endowment went up 14.6%. Yale was disappointed, its only went up 11.3%. And Harvard did the worst. Even though it's got the biggest endowment, it only went up 8.1%. Why do I tell you this? Because this is money making money. The people of this country who work did not enjoy increases in their wages and salaries over the last year anything like 14% or 11% or 8%. You only got that kind of return if you have enough money to make investments which the vast majority of Americans don't have. So we have to face the reality. Over the last year when we were told there's a great recovery, the people who were the richest, the institutions that were the richest, like those universities I just named, they became much richer than the rest of us. The gap between rich and poor is getting much larger. No one is preventing that. Nothing is stopping it. A capitalist system that works as untrustworthy a set of results as I've reported to you, and that we conclude is making inequality worse is a system that could be questioned, challenged and debated. It's long past time that we do that and make that part of the national conversation about our present and even more about our future. We've come to the end of the first half of Economic Update for today. Please stay with us. After a short interlude, we will be back and we will have an interview that I think you will find very interesting and important.