Transcript
Richard Wolff (0:00)
Sam. Saint gonna change. Welcome, friends, to edition of Economic Update, a weekly program devoted to the economic dimensions of our lives, our jobs, our incomes, our debts, those looming down the road, those facing our children. 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 in New York City. I want to begin today by talking about what I expect most of you want me to talk about, given the emails I've already gotten. So let me jump right in before making any announcements whatsoever and talk about what's on everyone's mind. It is, of course, the election, and even more importantly, the result of that election, which is the four years of presidency that will begin in a couple of months for Donald Trump. And I want to address, since this is a program about economics, some of the economic reasons why Mr. Trump won that race and what it presages or suggests in terms of where we are going as an economy and indeed as a nation. So let me cut right to the bone here of what I think the problem is. The name of the problem is capitalism, the economic system that governs the United States, that shapes so profoundly our politics, our culture, our very daily life. I believe that that capitalism over the last 40 years has created a syndrome, a pattern, a behavior that culminates in the victory, surprising to so many, of Donald Trump. Let me explain. Over the last half century, or at least the last 40 years, capitalism in the United States has functioned in a particular way. It isn't unusual capitalism has functioned that way before, but it has done so with a kind of gusto, a kind of intensity, and a kind of relentless that has really shocked particularly the American people. What do I mean? Well, there are two basic syndromes, two basic behaviors of capitalism in the United States that I want to put in everyone's mind at the forefront. The first we tend to call automation. It is the desire of capitalists to increase their profits by replacing people with machines, computers, robots, those are the fancy names. But it's an old process. But it really heated up starting in the 1970s in a massive way that has changed every workplace in this country and indeed around the world. But it has meant very starkly that capitalists, who had the greatest incentive, of course, to replace the most expensive workers first with machines and then work on down as the machines, machines proved more profitable than paying those workers. So it was the workers who did the best, who had the highest salaries, who had won the highest wages, often with enormous struggles of strikes for a hundred years that were the Targets, automation whacked them, but good for the last 40 years. The second way capitalists thought to make more profits over the last 40 years that is stunning, was by what we can call relocation. Moving production facilities, manufacturing, but now also services out of the United States to other parts of the world where wages are much lower. Lower, in fact, in good part because of the earlier history of capitalism when it relied on colonialism and imperialism to fashion the rest of the world as providers of raw materials, providers of food, and providers of other necessary things for the capitalism to thrive in its center. Western Europe, North America and Japan. Over the last 40 years, capitalists have left the United States in stunning numbers, decimating jobs, decimating the communities which used to live on those jobs. I often talk here about Detroit or Cleveland or Camden, New Jersey, or my hometown, Youngstown, Ohio, as examples of what capitalism has done again, getting rid of good jobs, high paying jobs, unionized jobs in the process. So over the last 40 years, capitalism has delivered a body blow to the working classes of the United States, men and women, white and non white, skilled and unskilled. It's been a very hard time. The gap between rich and poor has grown back to the proportions it had at the end of the 19th century. It is an ugly economic landscape. Not surprisingly, the American people are agitated about this. They're suffering. They want to know why. But even more important, they want it to stop. They want this relentless damaging of their jobs, they want damaging of their wages, damaging of their job security, cutting off of their benefits, reducing the public services which might have offset what was happening to them in their wages. They want that to stop for a while. They had the illusion it may have stopped when they became pioneers in the way of borrowing more money than any working class had ever borrowed before. And Indeed, from the 70s into the early part of this century, the blow was softened as workers accumulated more and more debt to keep themselves going when their jobs didn't provide them with rising income. Debt for their car purchase, debt for their home purchase, debt using their credit card, and then the new one of the last 20 years, debt to send their kids to to get a college degree, even as the value of that degree for getting a job shrank in direct proportion with the rising indebtedness of working class families seeking to do well by their children. Of course, in this scenario, the masses wanted change and we began to see a pattern. Everyone running for president, Republican and Democrat alike, promised that he, since we only recently had had a she, he would be different. He would bring hope. For what? For Change. Let's recall eight years ago how Barack Obama decided on a slogan for his campaign called Hope and Change. Exactly. Every candidate had to try to appeal to the people suffering by saying, vote for me, I'm different. I'll make changes. I'll do something to stop or reverse what has happened to all of you. Every candidate tried it. I'm an outsider, they would say, I'm different, they would say with each one that was elected, because he might be different, we have the same. The promise betrayed. The different candidate turned out not to be so different at all. And that was true of Republicans and it was true of Democrats. We were surprised eight years ago that an African American could become the president. But in a peculiar way, he exemplified the same thing. He had an easier time making the point that he was different. His skin color spoke volumes. In a country as beset by a history of racism as ours is, the very idea of a young black man running for president let us know something different was happening, something new was happening. When that new, different person, Mr. Obama, said he would make changes, millions of people swept him into office. The harbinger they hoped for change. Well, the fact is, he didn't bring it. He couldn't, he said. But in any case, he didn't. You can blame many things for that. You always can. A recalcitrant Congress, insufficient pressure from below, bad advisors. You all know the drill. But I'm an economist, so I look for the economic dimension. And the economic dimension was that capitalism is a system. And as a system, it has a momentum, a structure, a way of posing and solving problems for itself. The president by himself cannot change that. Even if the presidents who've been elected, if we give them the benefit of the doubt and we say the they tried to make change and we're being generous, the reality is they failed. They didn't do it. We'll never know how hard they tried, but we do know they didn't make the change. Because wages remain stagnant over the 40 years, decline of job situations continue, Loss of public services is only worse. The instability of capitalism got worse, culminating in the crash of 2008. The system dictates to the politicians, not the other way around. Why is this important? Because Mr. Trump, therefore had a problem. The problem was he had to be different. He had to make a case that people have become very cynical about, and for good reason. Oh, another politician who says he's different. Mrs. Clinton was different. She was a woman. Her problem was that she was so stuck in the establishment of the Democratic Party. And of the government for so many years that the claim to be really different was a tough one for her to manage. She didn't do that very well. And I'm being as kind as I know how to be. Mr. Trump, therefore, could capture, if he did it right, the mantle of I'm really different. And that's what he did, and he did it well. I am different in every way. I'm not a politician, I'm a businessman. I'm not a politician trying to become wealthy. I already am wealthier than any of them get. And I'm vulgar and I say outrageous things and I act outrageous and I shoot from the hip. And my Twitter account is full of things no other politician would dare be caught saying. That's a good way to suggest I'm really different. And I'm really going to talk about the suffering of the mass of people, and I'm going to speak against the globalization, the immigration that I can plausibly blame for the problems that the American working class has suffered. Not a good argument, doesn't deal with the reality, but at least it pretends to care. So here we have another candidate promising change, giving hope to the mass of the working class that maybe, just maybe, change is coming. And looking at the alternative Mrs. Clinton, you couldn't think that, at least not if you were paying attention even a little bit over the last 20 years. That's why Mr. Trump won, because he had more to say to a population that is jaded about all this, doesn't really believe he will bring change either. And I'll come back to that in a minute. But there's more hope, maybe there than there would have been of a Mrs. Clinton who is too deep in the same old, same old establishment. And notice that Trump first savaged the establishment of the Republican Party. That's what the primary was about. That was his denigration of Bush. And then when he was done, he turned to Mrs. Clinton. He might have had a much harder time with Bernie Sanders, because Bernie Sanders, bona fides as different, are captured by his willingness to take the word socialist as a description of himself. That sure makes you different, since every other politician who dared do that in the last 50 years thereby committed political suicide. So he was different, all right. He might have sustained it, but the establishment killed off that different candidate, as we now know. But that only established even more that she was the establishment who was hostile to the kind of talk that a Bernie Sanders put forward. And so that made it easier for Mr. Trump yet again, to stick her with the label same old, same old, and him with the prospect of change, I think that shaped the election. I think those many counties in the Midwest of the United States that are white, overwhelmingly white counties, but that voted in sizable majorities for Barack Obama eight years ago. Those same counties went for Trump this time. Racism is not the explanation here, nor is the sexism. Yes, there are people who are racist and sexist who love Mr. Trump. That's not the basic shift that brought him into power. That's an old part of the Republican constituency. The new part, the part we have to think about, is the part that changed. Once again, not thinking there's much in it. But if you have to choose between these two, you give it to the weird Trump, the guy whose followers Clinton referred to as deplorables. That move, that move of making them all wrong headed backward, that was a disrespect that cost her and cost her a lot. Their anger isn't about their support for either racism or sexism. Their anger is about a capitalist system that has not served them well for nearly half a century. And it isn't surprising that they're angry and bitter and determined to try anything else. Since they didn't have a left wing criticism, establishment politics to respond to, they went and tried something else. Now, let me tell you where this analysis goes. There is very little reason to believe that a billionaire real estate dealer, which is what Mr. Trump is, is a likely candidate to change this economic system. He's done very well in it. He's done very well by it. He has not done anything in his life or history to suggest that he is up to even understanding how capitalism is the root problem he's just cashed in on, let alone changing it. But even if he did try, and we will see soon enough, the chances of his being able to change this capitalist system when all of his predecessors failedat least those who tried, there's even less reason to believe in that. So my guess is that Mr. Trump will recapitulate exactly what happened to Mr. Obama and to those who came before Mr. Obama, who promised hope and change in one word or another. That's what I think we're likely to see. And let me drive the point home. These days there are folks, particularly on the left, who use the word fascism to describe Mr. Trump, or at least where they fear Mr. Trump may go. Let's take a brief look at German and Italian fascisms. Hitler and Mussolini, when they came to power, they came to power on mass movements that were deeply loyal to them, that they had worked to build. Yet they too had to come and make their peace with the capitalist establishment of those two countries. They could not have done it alone and they could not have done it against those capitalist interests. So they cut a deal with those capitalist interests. Study the history, you will see it. They proved that they would be good supporters for capitalist enterprises profits and that capitalist enterprises in return agreed to support them. They were afraid of a left, which was powerful at that time. Mr. Trump, having no movement of his own, will have to make peace with the capitalist system he now presides over. And they're not afraid of a left, at least not yet in the United States. So they're ready to bargain, but not to Mr. Trump's convenience. He's got his work cut out for him. The economics of this situation don't bode well. No matter what he does to placate his right wing supporters along the way. We are in for rough times. What Mr. Trump has said he would do will damage the lives of millions and millions of American people, from the decimation of the health care act to the kinds of people he's likely to put with the Republican Party control of Congress, onto the Supreme Court and. And all the rest. Suffering for sure, but able to change the capitalist system? I don't think so. And therefore able to escape what has dogged every other president in the last 40 years, the rage and anger by the end of his term or terms, because he has betrayed once again the demand of the people, which is, even though they're not yet ready to say so, for a different system that will not treat them in the same way. Because lying beneath all of these events, political and otherwise, is a rage against the machine, to borrow from Tom Morello, a rage against the capitalist system that is working in a way to make the 1% very well off indeed. And pretty much everybody else worrying, if not already in the deep trough or trough of economic decline and of economic difficulty. We are in for hard times. And no one says it better than the amazing winner of this year's Nobel Prize in Literature, Bob Dylan. So let me read to you one stanza of one of his songs. And what'll you do now, my blue eyed son? And what'll you do now, my darling young one? I'm a going back out fore the rain starts a falling. I'll walk to the depths of the deepest black forest where the people are many and their hands are all empty. Where the pellets of poison are flooding their waters, where the home in the valley meets the damp dirty prison and the executioner's face is always well hidden where the hunger is ugly, where souls are forgotten, where black is the color, where none is the number and I'll tell and speak it, and think it and breathe it and reflect from the mountain so all souls can see it and I'll stand on the ocean Until I start singing But I'll know my song well before I start singing and it's a hard, It's a hard, It's a hard It's a hard rain that's going to fall. So much for the election. By the way, Bob Dylan wrote that song in the 1960s and he could have written it yesterday. That's usually a sign of having your finger on what's going on. The only update I normally have time for, given this stage in the program, I'm going to do in a minute. But before I do, I want to remind you all this is a partnership. This radio program, Economic Update is what I produce. 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Use the websites as a way to communicate and a way to share and a way to partner with what we're democracyatwork.info and rdwolf.com well here then, the one economic update we have time left for and here I rely on the work of Wolf Richter R I C H T E R. He's a San Francisco based executive entrepreneur, startup specialist and author and he has a blog called Wolf street, spelled W O L F and he did a fine job recently debunking a silly idea. You're going to hear a lot about Both Clinton and Trump support a lowering of the corporate profits tax in the United States. The argument they give is that it is higher than comparable profits taxes in other advanced industrial countries. The fakery involved in that claim is shown simply because here in the United States, we give corporations exemptions and deductions that reduce the tax. They actually pay what we call the effective tax rate, way below the nominal tax rate. So it's officially 35%. But when in practice, we work it out, most companies pay much closer to 26 and 27, and that's pretty much what they pay in other advanced countries. So that argument is shown to be a fake. Here comes the second argument that both Trump and Clinton pointed to as reasons why they were going to lower the corporate profits tax. They didn't agree on how much to lower it. Typically, Trump wanted to lower it more than Mrs. Clinton. But that's the difference how much, not whether. Well, here's the second argument. Corporations have squirreled money abroad and they'll bring it home if they don't have to pay the high tax, because that's why they've kept it abroad, because you don't have to pay it if you keep it overseas. It's true that corporations have kept their money overseas, lots of it. What's not true is to think that if you lower the tax, it'll come home. And the reason, as Mr. Richter points out so nicely, is it's already here because foreign subsidiaries of American companies keep that money abroad for tax purposes. Therefore, it's not come home. But those foreign subsidiaries can open an account in New York, put the money in that account and invest it any way they wish, which they've been doing. That's why the last time we lowered corporate taxes to bring the money home back in 2004 and five, promising it would galvanize the economy. It did nothing of the sort. It was mostly used to pay higher salaries to top corporate executives and dividends to shareholders. You don't change capitalism by changing the rules and regulations. You got to change the system. We've come to the end of the first half of today's show. I hope you have found it interesting. I hope you have found it useful in working through, as we are all doing, the meaning and the implications of, of the election just completed. Please stay with us. We will be back in a very short time for an interview that I believe you will find extraordinarily informative and pointing a direction for where we go next in the wake of this election. Stay with us. We'll be right back.
