← Economic Update with Richard D. Wolff
Economic Update with Richard D. Wolff
Europe Declines Faster than the United States
00:30:33
On this week’s episode of Economic Update, Professor Wolff delivers updates on U.S. vs Chinese wheelbarrows, the Cold War error against China, the lasting effects of terminated U.S. federal workers, how tariffs alone won't bring manufacturing back...
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Richard Wolff
Welcome, friends, to another edition of Economic Update, a weekly program devoted to the economic dimensions of our lives and those of our children. I'm your host, Richard Wolff. I want to quickly remind you to keep sending us your suggestions and ideas. They go to charlie.info438mail.com and again, a reminder that a companion volume to this program is our book Understanding Capitalism, which I urge you to take a look at. If you're interested in a more developed argument about the capitalist system, then we can put into each of the segments that comprise these programs. Today, we're going to talk about the US Trade war with China. It's an overwhelmingly important economic reality of our times. We're going to be talking about the layoff of government workers, another important reality of our times. We're going to talk about a real serious decline in the McDonald hamburger business, which is part of what's happening to retail across America and needs to be understood. And finally, the relationship changing between the United States and Europe, speaking economically. So let's begin. I'm going to start with a very short segment. It's a story of something that began eight years ago in 2017. At that time, it was President Trump's first term as president and he hit China, as we all remember, with tariffs. And about the time he hit them with tariffs, they were, of course, much less then than he is doing now. But when he did it, it was remarkable enough, since other countries weren't behaving this way. He also made a point of touring a factory in Pennsylvania, Harrisburg, I believe, in Pennsylvania, and he went in particular to the Ames True Temperature plant, which it turned out made 85% of all the wheelbarrows, excuse me, sold in the United States. So he went to the manufacturing center for wheelbarrows, which every gardener and every farmer needs and uses all the time. And as I say, it was the Ames True Temper plant. Well, a few years later, a venture, or maybe they should be called vulture Capitalist, came, swooped in and bought that company from its original owners, the venture capitalist Griffon Corporation. 2023 bought it. They then did what venture and vulture capitalists often do, sold it for parts, broke it up as a corporation and sold the different parts of it for more money than it was worth as a wheelbarrow company today, just so you know, the overwhelming majority of wheelbarrows, which still carry the name True True Temper, like in the old days of Ames, but they now have, under the word True Temper, made in China. That's how it's done, friends and all the statements to the opposite, all the camera Pictures taken of Mr. Trump at the Ames True Temperament factory was all window dressing for an underlying reality that is exactly the opposite. That has not stopped. That's why I'm telling you the story now. Some people justify the United States behavior towards China by using the word Cold War. That is, we are entering or already in a cold war against China, by which those folks mean we're about to do to China what the Cold War did to our enemy, then the Soviet Union. Now, true enough, the Cold War did eventually contribute to the collapse of the Soviet Union. I don't think there's much doubt about that. And so you can see a kind of logic. The Cold War in which we surrounded the Soviet Union with military bases, we didn't do much trade with them, we badmouthed them every chance we got, et cetera, et cetera, et cetera, seem to work to help bring the end of the Soviet Union. So there's a kind of crude logic, gee, let's do it again, this time to our current enemy, the People's Republic of China. But this crude logic runs up against a problem. The conditions are very different, and I want to go through them because I think it'll show you why. A strategy of Cold War. And once again, we have bases around the People's Republic of China. The 7th Fleet of the US Navy sits in the South China Sea right offshore. We continue to talk about Taiwan, which has been part of China for hundreds of years, as something that we might not allow the Chinese to take and integrate into their country, even though for most of the last 50 years the US has agreed that there's only one China, not two of them, and that therefore Taiwan is part of China. But nonetheless, saber rattling happens and we have alliances directed against China and so forth and so on. Why, nonetheless, do I want you to think about this argument? After World War I, after the Russian Revolution that established the Soviet Union in 1917, and really again after World War II, Russia, the Soviet Union was alone. No other countries had a successful revolution. Other countries had these revolutions in 1917, like the one in the Soviet Union, they often called themselves Soviet Revolutions. They happened in Budapest, Hungary, and Munich, Germany, in Hamburg, Germany, and so on. But Russia emerged as the only place where such a communist socialist revolution succeeded. And even after World War II, when they did acquire the Eastern European cordon, from Poland in the north to Bulgaria in the south, it was a very small group of nations isolated in a bigger world. I'm afraid you don't. You can't make the same claim today. China is not alone. China is not the only place where this kind of a revolution has succeeded. North Korea is one, Vietnam is another. Cuba is another. And not only that, the Chinese have worked in a way the Russians either didn't or couldn't to create an enormous alliance. The brics B R I C s a reality that gets way too little attention in the United States, perhaps because our alliances are in such bad shape given Canada and Mexico and Europe, that it's painful to recognize how much better shape the Chinese are with their BRICS alliance. Then over the last 40 years, as we've talked about in other programs, the United States lost its manufacturing base. Yeah, but China got one. China built up its manufacturing base, so it's now the largest manufacturing base anywhere in the world. No comparison with anybody. They got it, we lost it. That was never the situation between the United States and the Soviet Union Union. And not only that, because of their size and because of the fact that over the last 10 years China has worked very hard to develop its internal market, raising the wages of its workers so they could afford to buy all that their manufacturers can sell. You now have a China that is much less dependent on the outer world than it was, whereas the United States has become more dependent on the outer world than it was. So in all these ways, waging a Cold War against China is a large mistake. It draws on an equivalence to between the Soviet Union before 1990 and China after. And that's not correct in a crucial set of economic variables. And let me summarize it with what ought to be the clincher statistic of them all. The United States, rich country that it is, is home for 4.5% of the people on this planet. 4.5%. That's what our 330 million fellow Americans amount to. China and the BRICs China and the carefully cultivated alliance it has includes more than 55 0. More than 50% of the people on this planet are gathered in the alliance of the Chinese. Even if you add Europe and North America, Canada, Mexico, the United States doesn't come close. And I want to remind you Russia and China together have a nuclear arsenal equivalent to that of the United States. The world has radically altered. The Cold War that the United States could and did wage effectively is not available now. And to try to proceed as if it were, well, here's the kind of mistake you'll make. In February of 2022, Russia invaded Ukraine. The United States said, we're going to hit you with the mother of all sanctions. We won't allow you to sell your oil and gas in Europe. We will hamper you with your shipping and your money and we'll take 3 billion of your assets and freeze them. And what did they say this would do? Bring Russia to its knees. That's a quote. Turn the ruble into rubble. Another quote. Did any of that happen? No. None of it. Ruble's worth more now than was then. Russia's economic growth over the last year is the envy of all of Europe. No one in Europe has done as well as the Russians while they fight a war. You know what the mistake was? Didn't understand that Russia was part of brics when they couldn't sell their oil and gas to Europe. Instead of that being a punishment, they just pivoted and sold their oil and gas to India and China, thereby paying for the war which they are winning. We're going to make similar mistakes in the future if we wage a cold war when that's no longer the situation where we can win anything. Stay with us. We'll be right back. Before we jump into the second half of today's show, I wanted to thank you for your very generous response to our fundraising efforts this year and in particular in the last couple of months. And in part responding to that, we are extending the availability of our limited edition, linen covered hardcover version of Understanding Capitalism, the book I wrote and that we have been making available now for quite a while. If you are interested, I will be signing copies of that hardcover and they will be available to you as they have been over the last few weeks. Just simply send an email to us@infoocracyatwork.info and put in the subject line limited edition. We will send you all the information you need to order and receive your copy signed copy of Understanding Capitalism in its hardback. And thank you again for your kind attention to the fundraising dimension of what we do. Welcome back, friends, to the second half of today's economic update. I want to turn now to another signal program of the Trump administration and to give you an update about that. As of May 1st, 121,000 federal workers were laid off their jobs. 121,000. That does not include those who took voluntary early retirement and those, and I quote, now placed on administrative leave. So those two categories are thousands more. So 121,000 straight out laid off and x thousands because I can't get the numbers more. Most agencies of the government were subject to a demand from Elon Musk, supported by Mr. Trump, to cut 10% of their workforce. Some entire agencies were either ended or deprived of all their workers. Here, things like Agency for International Development Aid and the Department of Education, a cabinet post. The largest government agency, which, in case you didn't know it, was the Veterans Administration. We have fought many wars in our country's history targeted to lose 15% of its employees, which is alone 70,000 people. They haven't been laid off yet, but that's the plan. One program that got cut caught my eye, and I think it's a wonderful example of what happens when you have this kind of broad based, massive slashing of jobs, which we haven't seen before by any administration. There is a program, I'm sure many of you didn't ever heard of it in the Veterans Administration, to provide mortgage support for veterans threatened by foreclosure if they haven't been able to make two or three consecutive mortgage payments. There was a program where, if and when that happened, veterans could apply to the Veterans Administration for special help if their circumstances merited it. Well, they can't anymore because that program is cut. I don't know what to tell you about this, but if you thought that government existed to help people get through difficulties, and if you thought that veterans had a kind of particular claim on some such support occasionally in their lives, well, you would be wrong. I want to go back to Trump's tariff program because again, even though we've talked about it before, the claim that it's going to bring jobs back, the claim that it's going to bring manufacturing back, these are all empty claims. Mentioning a company doesn't mean it's doing that. Mentioning a company that has told the president it plans to invest billions is not yet a company doing that. And I can assure you, if you're wondering, are there companies who make those plans and make those commitments publicly, who then never do it, the answer is the loads of them. There's nothing unusual about it. Making a big pronouncement is a PR stunt. If they're opening, shoveling the ground and building, then we have a different situation. You know, alongside of the manufacturing he's bringing back. Mr. Trump made a point of looking for and in fact, getting the votes of coal miners in America, the few that are left, because we don't mine coal in the United States very much. The mining of coal has been declining basically since the beginning of this century. So I'm going to give you a statistic. In 2008, US coal production was twice what it was in 2023. In 2023, it was 578 million short tons. So roughly from 2008 to 2023, the vast bulk of the century so far, coal not only declined, it declined by half. Coal is over in large parts. Every president mumbled or bumbled about, I'm going to do something about the decline of coal. They didn't do anything. Or to put it the same way, whatever they did didn't matter. Mr. Trump is continuing in that dubious tradition. I want to turn next to McDonald's hamburgers. The CEO at McDonald's says they've suffered the worst drop in the hamburger business since the pandemic hit in early 2020. So we have a five year disaster at McDonald's. If I had time, I would tell you about the current disaster at Starbucks Coffee and a whole bunch of other big chains. What did the CEO say to explain how do they account for the drop in their business? The pandemic jacked up prices and, and that drove away his, quote, lower income customers by the millions. Oh, this is a polite way of saying we have impoverished Americans to the point that they cannot go to McDonald's with their children the way they once did. Did. Let me offer to the CEO another explanation. Not that what he says is wrong. I don't think so. It's part of the story. But here's another part. Americans feel in their gut that hard economic times are coming, and this time. They felt that way at the last year of Mr. Biden's term, too. And the Biden administration ridiculed people's feelings. Kept asking, and I talked about it on the show here, kept asking, why do the people not understand how good our economy is? What's the matter with them? Turned out they understood real well. They also voted that way. The Democrats should have paid attention. They didn't. Well, let me give some advice to Democrats and Republicans this time. The economics profession thinks the mass of people are right. The Wall Street Journal, the economic times, the financial papers, they all see a recession. That's another polite word for joblessness coming down the pike. No one knows in advance how bad this will be, how long it will last. But cutting back on your expenses, going to a restaurant less often, making your own coffee at home, these are all the behaviors of smart working people who sense what's coming and don't want to be caught not having prepared for it. The last economic update I have time for, and I've tried to leave enough time, is to bring to your attention a very profound reality. It's about Europe. And you might think, well, Europe's far away. It's closer than ever. Here's the reality. At the beginning of this century, early 2003, 4, Europe had a bigger economy than the United States. Now, on one hand, that should surprise no one, because if you add up the entire population of Europe, it's double, more than double what the population of the United States was and is then. So the fact which it is, that their economy was a trillion and a half dollars bigger than the American should surprise no one. It's actually a testimony to how well the United States is. But because it's only half their population and yet it's a lot closer than half to their economics. But here's what I want you to think about most interestingly. If you move forward and take a look. Today, the European economy is not only not a trillion and a half bigger than the US but it trails the United States and by a lot. Seven and a half. Excuse me, $9.5 trillion. The US economy is $9.5 trillion larger than the European. Now, what is going on here? Well, the United States has grown, but not that much faster than it did before. No, no. The real explanation is not so much the growth of the United States as it is an economic disaster in Europe. I cannot overstate this. For example, right now, what was always considered, at least for the last 40 years, the engine powering the European economy, namely Germany, is currently in a recession. What we fear here is already there. They're not only not growing, they're shrinking. The German economy is a disaster. The British economy is a disaster. The working classes in both those countries are very upset. They're turning against the conventional politicians, left and right. Mr. Farage in great Britain won the local elections a few weeks ago. And who was defeated? The Conservatives and Labor. The old standard establishment parties, rather like Mr. Trump, defeated first the Republican establishment and then the Democratic one in the United States. In Germany, the extreme right wing alternative fer Deutschland is doing very, very well, gets the endorsement of Vice President Vance and and threatens and is rejected by all the traditional parties in Germany who turn against it the way the conservatives and the liberals turned against the Reform Party, as Farage's party is known. The handwriting is on the wall. The European economies are doing again what I point out empires do. The rich and the economically powerful, the CEOs react to the decline of their economies wrapped up with the decline of their empires by holding on to the wealth they've accumulated. So the costs, the pain of a declining empire is offloaded onto the middle and the bottom, the working class and the poor. And they're angry and they're bitter. What did you expect? And you're not doing anything about it. The Europeans keep screaming at the Russians. The Russians control the energy, which is the only hope you have of avoiding a dissent that will make Europe not the center of the modern world, as it kind of has been for a long time, but an unimportant sideshow. Wow. When I say the world economy is changing, it is changing more and faster than any of us foresaw. We've come to the end of the show. I hope you found interesting the segments we presented, and as always, I look forward to speaking with you again next week.