ECONOMIC UPDATE: WHEN PROFITS COME FIRST

Summary

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Economic Update with Richard D. Wolff

Episode Title: When Profits Come First
Date: November 1, 2015
Host: Richard D. Wolff
Podcast by: Democracy at Work

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Episode Overview

In this episode, Professor Richard D. Wolff explores how the relentless prioritization of profit in capitalist systems leads to critical social and economic issues. He examines examples from technology, sports, and politics, and unpacks recent economic developments, systemic inequalities, and the resurgence of socialism as a viable alternative. The episode is rich with economic analysis, real-world cases, and listener questions—all with Wolff’s signature clarity and directness.

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Key Discussion Points & Insights

1. Extreme Poverty in America

• Book Recommendation: $2 a Day: Living on Almost Nothing in America (Katherine Edin)
  • Highlights that “millions of people in the United States, particularly children, [are] living on less than $2 a day.” (04:07)
  • $2/day is the World Bank’s standard for “extreme poverty,” making this revelation in the U.S. especially shocking.
  • Insight: Poverty is not relegated to “other places;” it’s systemic and persistent in the U.S., affecting millions.
  • [04:07] Wolff: “The idea that there are any such folks condemned to such a life in the United States, let alone that they number in the millions, makes this book an important milestone to note.”

2. Corporate Collusion in Tech Industries

• Legal Case: Engineers v. Apple, Google, Intel, Adobe (2011–2015)
  • Companies colluded to avoid “poaching” each other’s engineers, suppressing wages and restricting worker mobility.
  • Major executives (Steve Jobs, Eric Schmidt) directly implicated via email evidence.
  • Settlement of $415 million is negligible for these corporations, but revelatory.
  • [06:14] Wolff: “That’s how a profit driven corporation works… My guess from everything I have studied is that it happens a lot. But these fellows got caught.”

3. Profit Motive in Sports: NFL and Concussion Cover-up

• Film: Concussion (Sony Pictures) and corresponding New York Times exposé
  • NFL worked to have “unflattering” depictions cut from the film—attempting to control the narrative on player health.
  • The league paid hundreds of millions to settle with affected players but continues profit-driven behavior.
  • [10:48] Wolff: “If you allow your sports activities that millions of Americans enjoy to be run as profit driven corporate businesses, you really can’t be surprised if … profits, overcome, overwhelms, subordinates and neglects anything that might interfere with profits, like the injury and death of players.”

4. The Rise of Donald Trump: Economic Anger and Scapegoating

• Analysis of Trump’s Appeal:
  • Trump, a billionaire, criticizes other candidates as “controlled by rich donors” and positions himself as independent.
  • Social Security & Medicare/Medicaid: Contrasts other Republicans by supporting social programs, appealing to broad public support.
  • Tea Party Dynamics: Many in the Tea Party shift to Trump, revealing that their opposition is less to government itself than to who receives government benefits.
  • Anti-Immigrant Rhetoric: Trump capitalizes on economic frustrations, redirecting anger at immigrants as scapegoats.
  • [17:02] Wolff: “The Tea Party folks are angry about who gets government support, not about the support itself. They want more support for themselves, even if it’s at the expense of others.”
  • [18:04] Wolff: “The evidence for that [immigrants causing economic problems], slim to none, but it’s a very popular way to unload some steam, to find a bad guy, a scapegoat. Blame it on the immigrant.”

5. Policy Spotlight: Oakland and Worker Co-ops

• Oakland City Council’s resolution supports worker cooperatives.
  • Moves beyond "jobs" to quality, empowerment, and dignity of work.
  • “A job is not what most people want. A decent job, one that they can believe in, one that pays a decent salary, one that recognizes the dignity of work.” (20:35)
  • [21:09] Wolff: “Oakland is committing itself to worker co-ops—jobs where workers themselves have the power to make sure they get treated properly. Hats off to Oakland, California.”

6. Q&A: Who Paid for the Crisis?

• Did “we all tighten our belts” post-2008 crisis?
  • Answer: “No. Of course we have not.” (21:55)
  • The top 20% have seen their real wages rise; the bottom 80% saw theirs fall (Economic Policy Institute data).
  • Poorest suffered most; wealthy saw gains.
  • Taxation: U.S. Federal, State, and Local tax systems together are flat or regressive—lower-income Americans pay a higher share of income.
  • [27:15] Wolff: “The poorest 20% of Americans pay 11% of their income in state and local tax. The top 1%, the richest pay 5.4%.”

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Major Segments & Timestamps

• [04:07] – U.S. Extreme Poverty highlighted via new book
• [05:05] – Silicon Valley wage-fixing/collusion case summary
• [09:01] – NFL concussion controversy and profit in sports
• [13:02] – Trump and the economics of political appeal
• [17:02] – Tea Party and shifting politics over government support
• [18:04] – Trump, immigration, and scapegoating
• [19:49] – Oakland’s pro-worker-co-op resolution
• [21:35] – Listener Q&A on post-recession “shared sacrifice”
• [23:47] – Data on wage inequality after 2008
• [27:12] – Tax policy: Poorest pay highest effective rates

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Second Half: Markets in Turmoil & Systemic Instability

1. Stock Market Volatility Explained

• Recent wild swings on Wall Street, large up/down days—mirrored globally.
• Six Key “Anxieties”:
  1. China slowdown: Overcapacity from uncoordinated capitalist competition, leading to factory closures and global ripple effects.
     • “Overbuilt in China. That’s right. Overcapacity… They created factories to produce more cars than there is a market for in the world.”
     • [38:21]
  2. Oil glut: U.S. fracking led to oversupply, crashed prices, harming oil-producing countries and U.S. regions (Dakotas, Texas).
     • “If the supply of something goes sharply up, but the demand for it doesn’t, then all of the extra supply is going to have a hard time finding anyone to buy it.”
     • [42:20]
  3. Federal Reserve Uncertainty: Will the Fed raise rates? Would that undermine any recovery or tank global economies?
  4. Stagnant Europe/Japan: No recovery, becoming more of a drag.
  5. U.S. Inequality: Shrinking middle class and weakened consumption dampen growth prospects.
  6. Instability as a Defining Feature of Capitalism:
     • [48:01] Wolff: “This is a system whose innate instability stares us in the face as a screaming illustration of its inefficiency, its waste and its failures.”
     • Recurrent cycles no one wants or benefits from except a tiny minority.
  • Conclusion: “A rational society would begin to question a system that works that way. We don’t want unemployment, we don’t want jobs disappearing… But that’s what market instabilities produce.” (34:09)

2. Why Capitalism Remains Unquestioned—And Shouldn’t

• Despite instability, people accept the system as “the best we can do.”
• Wolff pushes listeners to challenge this notion and look to alternatives.

3. Socialism: The Taboo Returns to the Mainstream

• Resurgence of Socialist Ideas:
  • “Socialism is everywhere. Only the desire to pretend otherwise has kept this understanding from the American people.” (52:42)
  • Context: Bernie Sanders’ presidential run, Socialists in European governments
• Core Critique: Capitalism promised liberty, equality, democracy—but has not delivered.
  • Corporate workplaces function undemocratically: “Your job is to work there… But you are excluded from participating in deciding anything of importance in that business. That’s not democratic, friends, that’s undemocratic. And that’s how capitalism works.” (55:49)
• Social Inequality: Decades of deepening inequality—contrary to capitalist promises.

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Notable Quotes

• On Tech Collusion:
  “What these folks often celebrated for their entrepreneurship actually do when it comes to working and succeeding in this economic system… They got caught.” (06:14)
• On the NFL Concussion Case:
  “If you have private enterprise in sports, this is what you are going to get.” (11:36)
• On Economic Scapegoating:
  “It’s a very popular way to unload some steam, to find a bad guy, a scapegoat. Blame it on the immigrant. That’s what’s going on here.” (18:04)
• On Wage Inequality:
  “Capitalism has not only subjected us to another one of its unstable downturns, but in an exercise of the opposite of justice, it has cost those at the top the least and imposed the highest costs on those at the bottom. Capitalism is an unjust economic system.” (25:03)
• On Systemic Instability:
  “This is a system whose innate instability stares us in the face as a screaming illustration of its inefficiency, its waste and its failures.” (48:01)
• On Workplace Democracy:
  “Your job is to help produce the profits. But you are excluded from participating in deciding anything of importance in that business. That’s not democratic, friends, that’s undemocratic. And that’s how capitalism works.” (55:49)

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Episode Highlights and Memorable Moments

• Wolff’s clear indignation at the hypocrisy in tech industry practices ([06:14])
• Dissection of Trump’s appeal—not just as bluster but an economic phenomenon ([13:16]–[19:08])
• Listener Q&A giving concrete data on recession recovery realities ([21:47]–[25:23])
• Systemic critique of recurring market volatility, refusing to excuse it as ‘natural’ ([34:09]–[49:36])
• Articulation of how socialism is no longer a forbidden word, and why it’s reemerging ([49:41]–[56:22])

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Summary Takeaways

• Profit Above All: When profits come first, worker rights, public health, and economic stability often come last—even in celebrated industries.
• Inequality Is Structural: The richest faced the fewest losses and quickest recoveries after the 2008 crisis, while the vast majority are left further behind.
• Systemic Instability: Recurrent crises are not aberrations but features of capitalism—yet widely tolerated or treated as inevitable.
• Alternatives Exist: Worker co-ops and socialist ideas deserve a place in mainstream discussion, especially when longstanding systems fail to deliver justice or stability.

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Additional Resources

• democracyatwork.info
• rdwolff.com
• truthout.org
• Economic Policy Institute (EPI)
• Institute on Taxation and Economic Policy (ITEP)

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For listeners:
This episode is a powerful, accessible look at how prioritizing corporate profit permeates every aspect of economic and social life, and why questioning those priorities—with real data and historical perspective—isn’t just useful, but vital.

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Transcript

[Sam]

Sam. Saint.

[Richard Wolff]

Welcome friends, to another another edition of Economic Update weekly program devoted to the economic dimensions of our lives, our incomes, our jobs, our debts, the futures for our kids, all of that. 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 Today's program, opening September.

[Richard Wolff (Assistant or Co-host)]

2015, I want to make a couple of announcements.

[Richard Wolff]

The first one is basically an invitation.

[Richard Wolff (Assistant or Co-host)]

To everyone hearing this.

[Richard Wolff]

If you happen to be in New York City at any time during this coming year, please note that we do a monthly economic update in person at the historic Judson Memorial Church, downtown New York City and Washington Square. Very famous and beautiful church. The second Wednesday of every month I'm there starting at 7:30 to present an economic update in more detail than we have time for on this program, a chance for me to meet you and vice versa. The next one is this coming Wednesday, September 9, 7:30pm Judson Memorial Church, Washington Square, Manhattan. You are invited. And I also want to remind you that we have redecorated and reinaugurated our website, rdwolf with two Fs.com, but even more democracyatwork.info it's to that latter one in particular that I would draw your attention. And if you do go and take a look at it, think about signing.

[Richard Wolff (Assistant or Co-host)]

Up for our newsletter.

[Richard Wolff]

It's free, it's available to you all the time, more regularly in the months ahead than we have in the past. And so it's a way to keep up with everything that we do on this program, plus a good bit more. Okay, let's jump right in. I want to first mention a book that was released this last week, literally on September 1st by the Houghton Mifflin Harcourt Publishing Company. It's called $2 a Day Living on Almost Nothing in America. The author is a professor, indeed a very distinguished professor at Johns Hopkins University in Baltimore. Her name is Katherine Edin, E D I N. And what she shows there is the stunning, well as depressing reality that we have millions. Let me underscore that millions of people in the United States, particularly children, living on less than $2 a day. Now, the reason we pick $2,000 a.

[Richard Wolff (Assistant or Co-host)]

Day and Professor Eden does as well.

[Richard Wolff]

Is it because is because it's the global standard for extreme poverty was developed by the World bank to be used across the world. The idea that there are any such folks condemned to such a life in the United States, let alone that they number in the millions, makes this book an important milestone to note and a resource for those of you seriously interested in the problem of growing poverty in this economic system. The second short update I want to go over with you was the decision also this last week by a US Judge in a case brought by engineers against four high tech companies in the United States. This case was filed back in 2011. We have commented upon it in this.

[Richard Wolff (Assistant or Co-host)]

Case program on occasion.

[Richard Wolff]

So with the final judge's decision this last week, I wanted to summarize it for you. The engineers worked for four companies. You've heard of them, Apple, Google, intel and Adobe Systems Incorporated. The judge found these companies and their chief executives guilty. Of what? Of conspiring with one another not to hire each other's engineers away effectively. Meaning that those engineers could not leave one company for a better paying job in another company because the companies had colluded. And that by the way, is against the law to prevent that because it benefited all of those companies because it kept the salaries they paid to their engineers much lower than they would otherwise have been had those engineers been free to go for the highest pay they could find for the skills that they have. In particular in this case, the really damning evidence was based largely on emails in which Apple co founder Steve Jobs, former Google chief Eric Schmidt and some of their rivals worked together to the damage of their engineers. That's how a profit driven corporation works. This happens from time to time. My guess from everything I have studied is that it happens a lot. But these fellows got caught. Now true, the $415 million settlement is not enough to make any difference to companies of the size of Apple and Google. It is a proverbial bump in the road, but it at least allows to us to see what these folks often celebrated for their entrepreneurship, what they actually do when it comes to working and quote unquote, succeeding in this economic system. As if this were a theme. Let me go on to my next short update. It has to do with a movie, the trailer for which was released this last week. The movie itself will not be released for a while.

[Richard Wolff (Assistant or Co-host)]

The movie's name is Concussion.

[Richard Wolff]

It stars the actor Will Smith. It got an unwelcome front page story in the New York Times on September 2nd when the reporter there, Ken Belson, basically unearthed a treasure trove of emails thanks to WikiLeaks hackers who had gotten into the, what shall we call it, Mail of the Sony Corporation. The Sony Corporation is the producer and releaser of this film called Concussion. And here's what the story back and forth communications between the National Football League and Sony Pictures High executives in both of them. And the point and purpose of their exchange was to remove from the film Unflattering, that's the word of Mr. Belson in the New York Times. Unflattering moments for the NFL that were.

[Richard Wolff (Assistant or Co-host)]

And I love their use of this elaborate language.

[Richard Wolff]

Deleted, cut, out, removed. What was the issue? The film is about a scientist who discovered that the NFL, in its regular football games was subjecting its players to repeated concussions. That's a kind of brain injury. And that these had led to the development of a disease. It's called degenerative brain disease. Known by the initials cte. These are now known to cause death, often by suicide, dementia and other extremely serious brain dysfunctions and diseases. The NFL has been involved in a long struggle with its players because, as the players alleged in a famous lawsuit, the league knew long time ago of this problem of concussions, dementia, suicide, death, but hid it in the interest of keeping up a highly profitable football franchise.

[Richard Wolff (Assistant or Co-host)]

In the United States.

[Richard Wolff]

Indeed, according to the New York Times story, the NFL is on schedule now to pay, quote, hundreds of millions of dollars to about 5,000 NFL players past and present who brought suit against the NFL. Once again, it's a bump in the.

[Richard Wolff (Assistant or Co-host)]

Road for the kinds of billions that.

[Richard Wolff]

These companies, and that's what they are, companies that run football games and football teams for profit. What's the message here? I'm not interested in the details of the case. We don't have the time for it anyway. But I'm interested in the punchline and here it goes. If you allow your sports activities that millions of Americans enjoy the and like to be run as profit driven corporate businesses, you really can't be surprised if the primary goal of the people running this operation, namely profits, overcomes, overwhelms, subordinates and neglects anything that might interfere with profits, like the injury and death of players. If you have private enterprise in sports, this is what you are going to get. It happens over and over again. Absent the profit motive, you might have seen an alarm bell go up long ago trying to rework the game so that it does not involve such horrific consequences to its champion players.

[Richard Wolff (Assistant or Co-host)]

But profit is what makes capitalism go around.

[Richard Wolff]

And if you don't want the results, you've got to question the system. Next, I want to spend a few minutes with you talking about Donald Trump. Now, of course, we do not endorse.

[Richard Wolff (Assistant or Co-host)]

Any candidate in this program.

[Richard Wolff]

We do not do it and we.

[Richard Wolff (Assistant or Co-host)]

Will not do it.

[Richard Wolff]

But we are interested in the economics that are involved in one or another campaign. And when the economics are broadly interesting.

[Richard Wolff (Assistant or Co-host)]

We want to talk about them.

[Richard Wolff]

And they are interesting in the case of Mr. Trump.

[Richard Wolff (Assistant or Co-host)]

So let's talk a little bit about.

[Richard Wolff]

That with a focus on answering the interesting why is he as popular as he is? Why is he the frontrunner among the.

[Richard Wolff (Assistant or Co-host)]

Candidates of a major party in this country? And so on.

[Richard Wolff]

Let's go through it. Interesting economic aspects. First, Mr. Trump is a billionaire. You might imagine that all kinds of people who are not billionaires, who have a hard time making ends meet would have a gut level disinclination to support somebody so different from themselves, but that's clearly not the case. Large numbers of the supporters of Mr. Trump are clearly and obviously not rich people. But it goes beyond that. Mr. Trump regularly denounces his competitors, chief among them Jeb Bush, for being controlled and dominated by rich donors to to their campaign. Mr. Trump gleefully explains that he's so rich he doesn't have to depend on donors and be slavish toward them. This is an interesting comment by a billionaire on how the American political system works. You might expect that kind of critique from folks on the left.

[Richard Wolff (Assistant or Co-host)]

You might expect it from critics of the system.

[Richard Wolff]

But here's someone who loves the system.

[Richard Wolff (Assistant or Co-host)]

Clearly because he says so and his.

[Richard Wolff]

Life clearly illustrates it, but one who's able, willing and determined to denounce major candidates of other political parties for being slavishly dependent on the rich donors that keep their campaigns alive. Interesting economic comment from Mr. Trump. Next. Mr. Trump has made absolutely unambiguous. He supports Social Security. He will continue or expand Medicare and Medicaid, something the other Republican candidates don't do. In fact, most of them are talking.

[Richard Wolff (Assistant or Co-host)]

About cutting Social Security benefits, limiting or.

[Richard Wolff]

Cutting Medicare or Medicaid or both of them. He is therefore appealing to the fact that the majority of Americans support Social Security, want to continue its benefits, ditto.

[Richard Wolff (Assistant or Co-host)]

With Medicare and Medicaid.

[Richard Wolff]

And he shows that that's the winning position, not just in the population as a whole, but among the more conservatives.

[Richard Wolff (Assistant or Co-host)]

Who make up the bulk of the Republican Party party.

[Richard Wolff]

And here's an Interesting comment. Mr. Trump is now winning the majority of support from Tea Party folks. Now, the Tea Party has been proclaimed as a group that's against the government, that is libertarian in that sense. But it isn't, is it because it's switching over to a Mr. Trump who is celebrating the importance of, of the.

[Richard Wolff (Assistant or Co-host)]

Government in, for example, providing health care for everybody, providing Social Security benefits, and so on.

[Richard Wolff]

Tea Party folks swinging over to a candidate who distinguishes himself by being pro government on a whole host of issues. How interesting. What's that about?

[Richard Wolff (Assistant or Co-host)]

Well.

[Richard Wolff]

Well, it suggests that large parts of.

[Richard Wolff (Assistant or Co-host)]

The Tea Party are really not against the government. Whatever the media has made of what some of their comments suggest, the reality.

[Richard Wolff]

As many of us suspected, is that the Tea Party folks are angry about who gets government support, not about the support itself. They want more support for themselves, even if it's at the expense of others.

[Richard Wolff (Assistant or Co-host)]

And as if to make the point.

[Richard Wolff]

Most powerfully, let's talk finally about Mr. Trump and immigration. He has gotten probably more press on this than anything else. His determination to send the immigrants back.

[Richard Wolff (Assistant or Co-host)]

Mostly to Latin America seems to have picked on that particular part of the immigrant population. What is that about? Well, that's the same issue, isn't it?

[Richard Wolff]

It's pandering to those people in America who want to believe that their economic.

[Richard Wolff (Assistant or Co-host)]

Problems at work, at the bank, in their homes, are somehow attributable to immigrants in this country.

[Richard Wolff]

The evidence for that, slim to none, but it's a very popular way to unload some steam to find a bad guy, a scapegoat. Blame it on the immigrant. That's what's going on here. It's Mr. Trump realizing he's talking to very angry people who want more, not.

[Richard Wolff (Assistant or Co-host)]

Less, in the way of jobs, income.

[Richard Wolff]

And, yes, government services.

[Richard Wolff (Assistant or Co-host)]

But because it's hard to say that in this culture, they twist it around.

[Richard Wolff]

With Mr. Trump's help and make it an anti immigrant. The government shouldn't be helping them, it.

[Richard Wolff (Assistant or Co-host)]

Should be helping Tea Party folks instead. That's Mr. Trump's argument, and that's why he's succeeding, because no one else is.

[Richard Wolff]

Providing those people that he appeals to with an alternative solution to the problems they face. So they go with his for the.

[Richard Wolff (Assistant or Co-host)]

Lack of something better.

[Richard Wolff]

And you see exactly the same displacement of people's upset and anger about their deteriorating economic situation being deflected into an anti immigrant scapegoatism.

[Richard Wolff (Assistant or Co-host)]

You see it in virtually every European.

[Richard Wolff]

Country, just as you have seen it.

[Richard Wolff (Assistant or Co-host)]

Historically in the past, when the standards of living, the jobs security of masses of people become attacked and diminished. That's the wave Mr. Trump is riding. That's the economics of his campaign.

[Richard Wolff]

Finally, and quickly, on September 8, an historic event in Oakland, California. The City Council there will pass a resolution actively supporting, endorsing and helping worker.

[Richard Wolff (Assistant or Co-host)]

Co ops to be developed in that very large and important California city.

[Richard Wolff]

I want to salute what the folks in Oakland are doing, but also to underscore the importance most Cities and towns, if they do anything called quote, economic development, talk endlessly about jobs. What they don't talk about is what kind of jobs.

[Richard Wolff (Assistant or Co-host)]

But a job is not what most people want. A decent job, one that they can.

[Richard Wolff]

Believe in, one that pays a decent salary, one that recognizes the dignity of work. That's what people want. And economic development should never have been just about jobs. We're learning that bitterly as a unionized.

[Richard Wolff (Assistant or Co-host)]

Job with benefits and in a factory gives way to a non unionized job with no benefits and haphazard hours in a fast food joint or a Walmart.

[Richard Wolff]

Oakland is committing itself to worker co ops jobs where workers themselves have the.

[Richard Wolff (Assistant or Co-host)]

Power to make sure they get treated properly. Hats off to Oakland, California.

[Richard Wolff]

Let me respond in the time we.

[Richard Wolff (Assistant or Co-host)]

Have left in the first half of our program to some of your questions.

[Richard Wolff]

First one very well put. Thank you. This is a fellow from Idaho. You ask We've all been told that.

[Richard Wolff (Assistant or Co-host)]

We should tighten our belts since the Great recession began in 2008.

[Richard Wolff]

Could you tell us whether we have indeed all tightened our belts? Have we indeed all shared in our economic problems? Have we indeed all recovered?

[Richard Wolff (Assistant or Co-host)]

Well, let me answer it as bluntly as I know how. It's a good question. It demands a straight answer.

[Richard Wolff]

The answer is no.

[Richard Wolff (Assistant or Co-host)]

Of course we have not.

[Richard Wolff]

Those at the top, those who are the richest, those who had the most to do with bringing us the crisis, they have recovered.

[Richard Wolff (Assistant or Co-host)]

They haven't had to tighten their belts or maybe a little in 2009 and 10, but not since. They've done fine.

[Richard Wolff]

Here's the statistic. In fact, I'll give you two statistics.

[Richard Wolff (Assistant or Co-host)]

That drive the point home.

[Richard Wolff]

I take the first one from the Economic Policy Institute and you can find out all about their research.

[Richard Wolff (Assistant or Co-host)]

They do a lot in questions like.

[Richard Wolff]

This at their website epi.org I use their material from time to time.

[Richard Wolff (Assistant or Co-host)]

It's been reliable. I have no reason to doubt it.

[Richard Wolff]

Here's their the bottom 80% 80 80% 4/5 of American workers have seen their wages fall in the period 2007 to 2014. In other words, when everybody's belt needed to be tightened. The bottom 80% actually saw their belt tighten. They saw their real wages. That's the amount of money they got.

[Richard Wolff (Assistant or Co-host)]

Adjusted for the prices they had to.

[Richard Wolff]

Pay for the goods they bought with the money they earned. In other words, what they really could.

[Richard Wolff (Assistant or Co-host)]

Do in the way of consumption with their incomes.

[Richard Wolff]

The bottom 80% saw their wage and salaries drop. But the upper 20%, the minority, the small minority of workers at the top they didn't have to tighten their belt.

[Richard Wolff (Assistant or Co-host)]

They've seen their real wages and salaries go up. But now it's even worse.

[Richard Wolff]

In a New York Times article, September 3, it shows that the workers at the bottom, the workers who get paid.

[Richard Wolff (Assistant or Co-host)]

The least in our system, and there are tens of millions of them, are the ones who were required to tighten their belts, you guessed it, the most, those who earned dividends and interest people with wealth and property that brings them income. They did the best.

[Richard Wolff]

The top 20% of wage earners have.

[Richard Wolff (Assistant or Co-host)]

Come out of the Great Recession, and they are no longer tightening their belts. They're loosening them. They're doing better. But the 80%, the vast majority, have seen their wages rise, and the poorest.

[Richard Wolff]

Among them, excuse me, have seen their.

[Richard Wolff (Assistant or Co-host)]

Wages fall, and the poorest among them have seen their wages fall the most.

[Richard Wolff]

Capitalism has not only subjected us to.

[Richard Wolff (Assistant or Co-host)]

Another one of its unstable downturns, but.

[Richard Wolff]

In an exercise of the opposite of justice, it has cost those at the top the least and imposed the highest.

[Richard Wolff (Assistant or Co-host)]

Costs on those at the bottom. Capitalism is an unjust economic system, and.

[Richard Wolff]

Never more so than in the aftermath.

[Richard Wolff (Assistant or Co-host)]

Of the crisis of 2008. Last question that we will have time for.

[Richard Wolff]

A few weeks ago, we spoke about.

[Richard Wolff (Assistant or Co-host)]

The federal income tax and how it.

[Richard Wolff]

Now depends chiefly on a progressive income tax. And by progressive, we simply mean the higher your income, the higher the percentage.

[Richard Wolff (Assistant or Co-host)]

Of it you have to pay. Little less than half of the federal government's money comes that way.

[Richard Wolff]

The other half comes from a payroll.

[Richard Wolff (Assistant or Co-host)]

Tax, which is not progressive. Everybody pays the same percentage all the way up to about 120,000 a year. And then it becomes downright opposite of progressive, namely regressive. Because if you earn more than 120,000.

[Richard Wolff]

A year, all of the money you earn beyond that pays no Social Security.

[Richard Wolff (Assistant or Co-host)]

Or payroll tax whatsoever.

[Richard Wolff]

So if you put all that together and you add a little bit of excise tax and corporate tax, it turns.

[Richard Wolff (Assistant or Co-host)]

Out our federal tax system is not progressive at all. It basically taxes everybody more or less at the same rate.

[Richard Wolff]

So people have said to me, well, what about state and local taxes? Because Americans are affected not just by.

[Richard Wolff (Assistant or Co-host)]

The federal tax we pay to Uncle.

[Richard Wolff]

Sam, but likewise by the taxes we pay to the state governments tax, sales.

[Richard Wolff (Assistant or Co-host)]

Taxes, excise taxes, and so on.

[Richard Wolff]

And the taxes we pay to local.

[Richard Wolff (Assistant or Co-host)]

Governments, property taxes above all.

[Richard Wolff]

Well, something called the Institute on Taxation and Public Policy, itep. And I urge you to look at their website called itep.org they do the research. And in their recent research up to date for this year. Here's what they showed to answer this.

[Richard Wolff (Assistant or Co-host)]

Question once and for all, the poorest.

[Richard Wolff]

20% of Americans pay 11% of their income in state and local tax. The top 1%, the richest pay 5.4%.

[Richard Wolff (Assistant or Co-host)]

Of their income in state and local taxes. Less than half.

[Richard Wolff]

You put federal, state and local taxes together and here's what you the richer you are, the lower the the percentage.

[Richard Wolff (Assistant or Co-host)]

Of your income you pay in taxes.

[Richard Wolff]

This is a tax system rigged against the middle and the poor and in favor of the rich. No two ways about it. We've reached the end of the first half of our program. Please stay with us. I think you'll find the second half an exciting foray into two major topics that will be of interest.

[Richard Wolff (Assistant or Co-host)]

We will be back in a very short number of seconds.

[Sam]

Put your hand down boy welcome to my zoo Put your head inside my big black wild wild I can still help you see the snake baboon funky she can't smooth honey can you spy the divine hip swine cuz he can't see you.

[Richard Wolff (Assistant or Co-host)]

Welcome back friends, to the second half of economic update for this first week in the month of September 2015. In welcoming you back, I want to remind you that if this program is of interest to you, there's a great deal more of this kind of material available at the two websites that we.

[Richard Wolff]

Maintain, rdwolf with two Fs com and.

[Richard Wolff (Assistant or Co-host)]

Democracyatwork.Info all one word, democracyatwork.info both of.

[Richard Wolff]

Those websites contain materials including whole classes.

[Richard Wolff (Assistant or Co-host)]

In various topics, interviews on television and radio that I do, materials, articles written, all kinds of things that I think those interested in this program will find available. And of course both websites are available at your convenience 24, 7 no charge whatsoever.

[Richard Wolff]

Let me invite you particularly to [e-mail].

[Richard Wolff (Assistant or Co-host)]

It has just been renovated and is new in its appearance, and to ask you to sign up there for our free newsletter. It will be going out now much.

[Richard Wolff]

More often than it did in the past, a way for you to keep.

[Richard Wolff (Assistant or Co-host)]

Up in whatever degree you want with the activities we are engaged in. With my travels around the country, I want to remind you and correct the.

[Richard Wolff]

List I gave you last week.

[Richard Wolff (Assistant or Co-host)]

I inadvertently left out Houston, Texas, and I apologize for that.

[Richard Wolff]

But everything in the next two to.

[Richard Wolff (Assistant or Co-host)]

Three months, including the Tampa, Florida region.

[Richard Wolff]

Houston, Texas, Ames, Iowa, Kansas City, Missouri.

[Richard Wolff (Assistant or Co-host)]

Fresno, California Seattle, Washington, Berkeley, California and no doubt others that I will be reminded I did not mention and should have once this program is over. I also want you to go to our websites because with a simple click, you can follow us on Facebook and Twitter. This is another way to keep up with the work we do, including a.

[Richard Wolff]

Good bit of it that does not.

[Richard Wolff (Assistant or Co-host)]

Have time to be aired on this program. And finally, a reminder that the second Wednesday of most months, I do a public talk at the Historic Judson Memorial Church in New York City at Washington Square, a famous part of downtown New York City, and you are invited. The church is open. The church welcomes people to come to these monthly talks. I have more of an opportunity there to develop the kinds of arguments you hear here. It's a chance also for you to meet me and for me to meet you. When we have time. We do a little bit of Q and A back and forth. So if you're interested, the next one is Wednesday, September 9, 2015, 7:30pm Historic Judson Memorial Church on Washington Square in Manhattan.

[Richard Wolff]

Well, this last week, one item has.

[Richard Wolff (Assistant or Co-host)]

Dominated the economic news, and so we're going to spend some time talking about it. We've had some wild days on Wall Street. The stock markets of the United States, the New York Stock Exchange, the NASDAQ and so on have bounced around with extreme 500 point movements in a single day, sometimes in the matter of an hour or two. And this followed gyrations in the Chinese stock markets and indeed similar extreme volatility in many other markets around the world. So the question is, what's going on? Why would suddenly investors, including hedge funds, big banks, wealthy individuals and corporations be dumping stocks for fear, obviously, that, that the companies they've invested in are going belly up or going to lose money or going to collapse, who knows, and then changing their mind a day or two later and then rechanging it three days later. It's chaotic, it's disorganized, it's a mess. And the very volatility bouncing up and down has its effects. So let's see what is going on.

[Richard Wolff]

Well, I came up with a list.

[Richard Wolff (Assistant or Co-host)]

Just to give you an idea of six distinct anxieties in the world, any one of which could spook stock markets.

[Richard Wolff]

But the combination of all six is.

[Richard Wolff (Assistant or Co-host)]

Certain to create serious downturns.

[Richard Wolff]

And we're going to discuss them briefly.

[Richard Wolff (Assistant or Co-host)]

And, and then I'm going to draw the conclusions about an economic system that heads into this kind of chaotic volatility.

[Richard Wolff]

But before I do, keep the following.

[Richard Wolff (Assistant or Co-host)]

In Nobody wants economies to collapse, not just the mass of people who suffer the most. In the first half of this program, we showed that.

[Richard Wolff]

But even the people in the middle and even the people running this System.

[Richard Wolff (Assistant or Co-host)]

Don'T want collapse, don't want this crazy volatility, are very afraid. Sure, there are a few market hustlers who play the volatility itself. They like it. But they are a tiny, tiny, tiny minority. Most everybody else is frightened. And if you read the financial press, you'll see it right away. So what do you say about a system where nobody wants what the system keeps delivering to all the people who don't want it? A rational society would begin to question a system that works that way. We don't want unemployment, we don't want jobs disappearing, we don't want bankruptcies, we don't want companies cutting back. But that's what market instabilities produce. So a rational society would have to question a system that produces what the vast, vast majority of people don't want and keeps doing it over and over again. And we will return to that when we're done with this discussion. First, there's the issue of China. What is going on in China? Well, the world knows that the Chinese economy is slowing down. We know it from the statistical studies done both by Chinese and non Chinese specialists. We know it because the Chinese government admits it. And we know it because everybody else who watches and studies China sees the same thing. China has been growing at a great rate for 20 years and it is now slowing down. And why? Well, the answer is, again, the way our system works. China developed industrially when it opened itself up, or let me put it differently, China's growth, economic growth, sped up. It was doing quite nicely before this, but it went faster when it opened itself up to multinational capitalist corporations from Japan, from Europe, from the United States and so on could go into China, welcomed by the Chinese government and provided with all kinds of supports and subsidies, and above all, a relatively cheap labor force of Chinese workers. So what happened was company after company closed its factories, its offices, its stores in Western Europe, North America and Japan and move to the more profitable locations inside China.

[Richard Wolff]

When they did that, they didn't know.

[Richard Wolff (Assistant or Co-host)]

Exactly what other companies were going to be doing that. In the same way, they wanted to capture as much of the world market for themselves as they could. So they didn't just set up factories in China to replace those they closed at home, but because it was cheaper and because they had high hopes to capture markets, they expanded the capacity to produce goods and services in China. So they were much larger than what had been the case in the Western Europe, North America and Japan, areas from which these companies moved. End result was, and this is so classic for capitalism, they Overbuilt in China. That's right. Overcapacity. They built the ability, they created factories to produce more cars than there is a market for in the world. More radios, more televisions, more watches, more.

[Richard Wolff]

Appliances, you name it.

[Richard Wolff (Assistant or Co-host)]

There's overcapacity in it, particularly in China.

[Richard Wolff]

But secondarily in a lot of the.

[Richard Wolff (Assistant or Co-host)]

Other low wage countries to which capitalist enterprises moved, the end result is that.

[Richard Wolff]

China moved hundreds of millions of its.

[Richard Wolff (Assistant or Co-host)]

People off of the countryside, away from agriculture and the rural areas, into the urban industrial parts of China, telling them that great jobs awaited them in the industries that were being created. And boy, they were impressive in the new cities springing up. And boy they were and are impressive because they could produce for the world market. What no one explained is because they like to forget it. Capitalism's constantly repeated experience, because it isn't planned, because it isn't coordinated, because each capitalist makes his or her own calculations for what they think is good for their own enterprise without regard for how it all fits together. They ended up producing more capacity than the Chinese have a market for. So guess what? They're having to close factories to reduce factory hours, to lay workers off. And they're not therefore buying the raw materials the way they once did. Which means that the Chinese economy is slowing down. Chinese workers have less of an income with which to buy things. Even more interesting and scary, the raw materials that China was buying everywhere, iron ore, oil, gas, raw cotton, you name.

[Richard Wolff]

It, from many, many third world countries.

[Richard Wolff (Assistant or Co-host)]

In the world, in Asia, Africa and Latin America. The Chinese aren't ordering the quantities. They did as little as two and three and four years ago.

[Richard Wolff]

So the whole world economy is slowing.

[Richard Wolff (Assistant or Co-host)]

Down because of over investment and over capacity creation, above all by private capitalist enterprises in China, above all else and in other parts of the world. And that destabilizes stock markets and economies around the world. Number two, chaos in the oil markets. The United States is the culprit.

[Richard Wolff]

Here in the United States, vast amounts.

[Richard Wolff (Assistant or Co-host)]

Of money have been provided in kind by the US Government permitting fracking and other mechanisms of bringing shale oil to the surface. Canada participating in this as well.

[Richard Wolff]

Hundreds of billions have been lent to.

[Richard Wolff (Assistant or Co-host)]

Companies bringing the oil up, with the.

[Richard Wolff]

End result that the United States is now a major provider, producer, supplier of.

[Richard Wolff (Assistant or Co-host)]

Of oil in the world. The demand for oil in the world hasn't shot up. It's held fairly steady. And with the economic downturn coming from the overcapacity in China that I just expressed, the demand for oil is going nowhere. But the supply went through the Roof above all because of the United States. States. If the supply of something goes sharply up, but the demand for it doesn't, then all of the extra supply is.

[Richard Wolff]

Going to have a hard time finding.

[Richard Wolff (Assistant or Co-host)]

Anyone to buy it. And when that happens, the suppliers start competing with one another by dropping the price. That's why oil has dropped by more.

[Richard Wolff]

Than half of in its price per barrel over the last year. And what that does is destroy the economies that depend on oil.

[Richard Wolff (Assistant or Co-host)]

What are they? Russia, Venezuela, Nigeria, Iraq, Saudi Arabia.

[Richard Wolff]

Each of them is having troublesome more.

[Richard Wolff (Assistant or Co-host)]

Some less, depending on how urgent their dependency was. But we don't stop with countries.

[Richard Wolff]

The whole middle part of the United States, including Canada in the north, but all the way through the Dakotas on down to Texas, they're in trouble too.

[Richard Wolff (Assistant or Co-host)]

Because that's where the new oil dumped on the world market by the United States comes from there, tens of thousands have lost their jobs in the oil fields. Banks are in serious difficulty laying off people because the loans they made for this oil business are going bad. Here is a system that doesn't work very well, does it? In the midst of producing chaotic swings in oil. And that upsets all kinds of people. Countries that made tons of money off high oil prices and invested in the.

[Richard Wolff]

Stock market, they're not making that money. They're not investing in the stock market.

[Richard Wolff (Assistant or Co-host)]

They're pulling back. They're selling stocks and in order to take care of expenses because the money they earn from oil isn't there. That's roiling the stock markets, as we say. You see the problem.

[Richard Wolff]

Third, again, the United States.

[Richard Wolff (Assistant or Co-host)]

This time, the Federal Reserve. Ever since the crash of 2000, and especially the crash of 2008, the Federal Reserve has tried to support the United States economy, to bring it out of its severe downturn that nobody wanted by doing two bringing interest rates down to nearly zero and pumping vast new amounts of money into the system. They're now afraid, of course, that that money, if at some point it starts to run after goods and services, will drive up prices. They're afraid of an inflation.

[Richard Wolff]

And so to forestall an inflation, they're.

[Richard Wolff (Assistant or Co-host)]

Thinking of raising interest rates maybe as.

[Richard Wolff]

Soon as this month of September. But everybody knows that if they raise interest rates, it'll make it harder for people to borrow the money needed to buy cars, harder for people to borrow.

[Richard Wolff (Assistant or Co-host)]

The money needed to buy homes. And that may downturn the economy even more. And it may make it very hard.

[Richard Wolff]

For countries around the world who borrowed lots of dollars in, in the United.

[Richard Wolff (Assistant or Co-host)]

States because the interest rates were so Low. So if the Federal Reserve raises them, the fear is other things could go really bad in the economy.

[Richard Wolff]

So people already get out of the stock market, anticipate, you get the picture.

[Richard Wolff (Assistant or Co-host)]

Slowing in China, chaos in the oil markets, and anxiety over what the Fed will do.

[Richard Wolff]

But now Europe and Japan are places that the economic crisis has not been.

[Richard Wolff (Assistant or Co-host)]

Even a little bit overcome the way it has in the United States.

[Richard Wolff]

Japan has in another recession. Europe never got out of it, so they're not going to help.

[Richard Wolff (Assistant or Co-host)]

They are in fact troubled areas.

[Richard Wolff]

And finally the sixth one is the.

[Richard Wolff (Assistant or Co-host)]

Inequality in the United States. Economists are worried that American companies, like.

[Richard Wolff]

Foreign companies, are going to discover in the months and years ahead Americans cannot.

[Richard Wolff (Assistant or Co-host)]

Afford to buy the way they used to. The United States was once the engine of the world.

[Richard Wolff]

Consumers here buying so much, having so much expendable money that they could spend that they kept the world humming.

[Richard Wolff (Assistant or Co-host)]

The Americans have been reduced, the middle class is gone, the working class is hemmed in at every turn. We've talked about this over and over again. The Americans can't drive the system, we with consumption. And so people are getting out of the stock market or very afraid and anxious because they wonder when the axe will fall, of the lack of purchasing power as masses of Americans lose the ability to spend the way they once did.

[Richard Wolff]

You put all these things together, China.

[Richard Wolff (Assistant or Co-host)]

The Fed, oil, Europe and Japan, stagnation and, and U.S. inequality. And you have more than enough explanations for a stock market that is going crazy as it worries itself sick. About what? About how capitalism can and always has.

[Richard Wolff]

Experienced major downturns, meaning companies cut back.

[Richard Wolff (Assistant or Co-host)]

Companies go out of business, masses of people are laid off. Those people want jobs but they lose them. We want our industries humming, but they don't. We need the output to solve our social problems, but we don't get together to produce what we have the materials and the capacity to produce. This is a system whose innate instability stares us in the face as a screaming illustration of its inefficiency, its waste and its failures. For the 250 years that capitalism has become the dominant system in the world, it has delivered to the people in it this regularly recurring instability called the business cycle, called crises, called upturns, downturns, recessions, depressions, inflations, booms, busts. We have a lot of words for this thing because we never have been able to shake it. Every effort has been made by economists, political leaders, you name it, to come to some solution that would prevent these kinds of downturns. All efforts have failed. That's why we had another doozy in 2008. And that's why I could list all the kinds of crisis I just did. This is a system who delivers to us instability that nobody wants, that the majority suffer from one way or another. And the only really interesting question is.

[Richard Wolff]

Why do we accept?

[Richard Wolff (Assistant or Co-host)]

Why do we admit a system as unstable as this as somehow.

[Richard Wolff]

The only.

[Richard Wolff (Assistant or Co-host)]

One we can have, when that's clearly not true, but even more amazing as the best we can do? What a nasty comment on ourselves from people who say such things.

[Richard Wolff]

The other big topic is socialism.

[Richard Wolff (Assistant or Co-host)]

I wanted to talk about socialism because it is becoming more and more of an issue. It's kind of coming out from the taboo that made it almost impossible to talk about, let alone to talk sanely about for so many years in this country. That was, if you like, a casualty of the Cold War. Since our enemy, the Soviet Union, defined itself as the Union of Soviet Socialist Republics. That's what USSR means because they called themselves socialists. It became impossible for Americans to say the word without meaning something horrible, awful, evil and barely mentionable. Well, all that's changing now and I wanted to talk to you about it There. First of all, is no reason to be surprised by the resurgence of interest in socialism that has happened many times in the history of capitalism and shouldn't surprise anyone. Typically it happens when capitalism stumbles, when capitalism doesn't deliver the goods, when capitalism looks increasingly to people to be a system that if it ever served human society, has stopped doing so. When it looks as though capitalism is something we could and should do better than, and we live in such a period, capitalism has really done terrible things to masses of people. That's what all this disappearing middle class and so on is all about. That's what the first half of this program documented yet again. So it isn't surprising at all that people begin to think of alternatives to a system that isn't working very well.

[Richard Wolff]

And when you start thinking about that.

[Richard Wolff (Assistant or Co-host)]

You'Re going to hit socialism because it's the biggest collection of criticisms of capitalism and of notions of an alternative to capitalism that we have. So the minute an open minded, intelligent person begins to look for alternatives to capitalism, socialism is just a step away. So let's talk briefly about socialism. First, let me remind we now have a candidate for president, Bernie Sanders, who is by self definition and by general agreement a socialist and has been all his adult political life. So here we are. The world hasn't caved in, nobody has horns here. He is a socialist. We are an ally, pretty close ally of the French government in France. The French government. The president is the head of the Socialist Party of France, the national assembly, which is like our House of Representatives. The dominant political party in the French House of Representatives is the Socialist Party.

[Richard Wolff]

And the number one party in the.

[Richard Wolff (Assistant or Co-host)]

Senate of France, you guessed it, the Socialist Party. The government of Germany is in effect a coalition between the conservatives and, and the Socialists. And that has been the case for a while. The Socialist Party in Germany was the government before Merkel. And on and on and on. Socialism is everywhere. Only the desire to pretend otherwise has kept this understanding from the American people. Number two. Capitalism came into this world, for example, in the French Revolution of 1789, making a promise it would get rid of the slavery and the serfdoms that preceded it. Slavery and feudalism would be pushed aside for a new society in which employers and employees contracted together to produce goods and services as free men and women.

[Richard Wolff]

Freedom. Indeed, the slogans of the French Revolution.

[Richard Wolff (Assistant or Co-host)]

Let'S remember liberty, equality, fraternity. Slogans picked up in various adjustments by Thomas Jefferson and the founders of the United States and indeed of many other countries. The idea was that capitalism would replace the previous economic systems and that that would mean and that that would guarantee that equality, democracy, liberty, freedom, and so on.

[Richard Wolff]

The problem has been from day one.

[Richard Wolff (Assistant or Co-host)]

And by day one I mean the 19th century and the 20th century, that wherever capitalism came, whatever it did, and.

[Richard Wolff]

It did many things, some of which were good, some of which were not.

[Richard Wolff (Assistant or Co-host)]

So good, but what it did not do was bring equality and democracy. If by democracy you mean that everybody has an equal, say an equal power, if you like to make the decisions for community life, if that's what you.

[Richard Wolff]

Understand democracy to mean, and I believe.

[Richard Wolff (Assistant or Co-host)]

That'S how it's defined, then capitalism didn't produce that. We don't have that in the United States. And we can argue that we've gone further in democracy than many other countries. We don't have that in the places where people work. Let me remind. Go to work in a company, a corporation, where a tiny group of people, major shareholders, owners, select a board of directors, 10, 20 people. They make all the decisions what to produce, how to produce, where to produce, and and what to do with the profits. Your job is to work there. Your job is to help produce the profits. But you are excluded from participating in deciding anything of importance in that business. That's not democratic, friends, that's undemocratic. And that's how capitalism works.

[Richard Wolff]

So it brought a lot of things.

[Richard Wolff (Assistant or Co-host)]

Good and bad, but democracy it didn't bring, and I don't need to remind you that equality is not something capitalism brings. The last 30 years have been capitalism in America for sure, and deepening inequality without hindrance. So why are we surprised if a system that comes into being as the.

[Richard Wolff]

Guarantor and the deliverer of equality and.

[Richard Wolff (Assistant or Co-host)]

Democracy can't deliver what it promised and therefore invites people to think about alternative economic systems that might be better equipped to deliver the democracy and equality that capitalism couldn't deliver? That's why socialism is on the agenda again, and we will have opportunity to come back and talk about that in future programs We've come to the end of our time. I want to thank you for listening. I want to thank truthout.org that remarkable independent source of news and analysis every day, producing wonderful things to teach us about what's going on. Check them [e-mail] again.

[Richard Wolff]

Take a look at our websites.

[Richard Wolff (Assistant or Co-host)]

They are there for your help, for your service, for your use, anytime and every time at no charge. That's why we keep them up to date with new items added every single day. It's been a pleasure preparing and delivering this program and I look forward to talking with you again next week.

[Richard Wolff]

Change. Fame on the.

[Sam]

Sam.